FUNDAMENTALS OF BUSINESS ECONOMICS

Study Guide for Final

I'll formulate the study guide in terms of learning objectives for the second part of the class:

1.  Know what happens at the macroeconomic equilibrium

2.  Understand how the circular flow model can be used to explain recessions, along with the impact on various variables

3.  Be able to show the various parts of the business cycle

4.  Understand the difference between procyclical, countercyclical, and acyclical variables

5.  Understand how the checking deposit multiplier is calculated and used

6.  Know how other factors affect the magnitude of the checking deposit multiplier

7.  Be able to show how open market operations can be used to affect the money supply

8.  Know how changing the discount rate can be used to affect the money supply

9.  Know how changing the reserve requirement can be used to affect the money supply

10.  Understand the impact of monetary policy (both expansionary and contractionary)

11.  Know the impact of the different types of lags in monetary policy

12.  Know the factors affecting the real interest rate

13.  Understand the factors affecting the risk premium part of the real interest rate

14.  Understand what is meant by the term structure of interest rates and the yield curve

15.  Understand the impact of different factors on the supply of real loanable funds

16.  Understand the impact of different factors on the demand for real loanable funds

17.  Be able to show how different events impact the real loanable funds market and the interest rate

18.  Understand and be able to show the different parts of the aggregate supply curve

19.  Understand the impact of different factors on aggregate supply

20.  Understand the impact of different factors on the components of aggregate demand

21.  Understand how the aggregate supply and aggregate demand model can be used to determine the impact of different events on the economy

22.  Understand and be able to represent how a recession may result in an economy

23.  Understand and be able to represent how demand-pull inflation may result in an economy

24.  Understand and be able to show the short-run Phillips curve

25.  Understand and be able to show the relationship between the short-run and the long-run Phillips curve

26.  Understand and be able to represent how cost-push inflation may result in an economy

27.  Understand and be able to represent how deficits may impact interest rates

28.  Know what is meant by crowding out

29.  Understand and be able to represent how deficits impact the real goods market

30.  Understand and be able to represent how fiscal policy can be used to deal with recessions

31.  Understand and be able to represent how fiscal policy can be used to deal with inflationary expansions

32.  Know the different types of lags in fiscal policy

33.  Understand the issues surrounding deficits and the debt

34.  Know how to convert prices in one currency to prices in another

35.  Understand how changes in the exchange rate affect the prices and quantities of imports and exports

36.  Know how to calculate the real exchange rate

37.  Know how to calculate the percentage change in real exchange rates

38.  Be able to show how changes in relative international price levels impact the foreign exchange market

39.  Be able to show how changes in relative international real GDP impact the foreign exchange market

40.  Be able to show how changes in relative international interest rates impact the foreign exchange market

41.  Be able to show how changes in relative international risks, taxes, and expectations impact the foreign exchange market

42.  Be able to show how changes in relative central bank intervention impact the foreign exchange market

43.  Be able to show how a fixed exchange rate is achieved by central bank intervention

44.  Understand the difference between a fixed band exchange rate system, a crawling peg, and a managed float

45.  Know the items included in the current account and those included in the financial / capital account

46.  Know the relationship between the current account, financial / capital account, and reserves account

47.  Know how to calculate the different balance of payments measures and the relationship between each

48.  Be able to analyze the impact of different events in a flexible exchange rate system

.

Recommended problems:

Chapter 7 - 5, 12

Chapter 8 - 2

Chapter 9 - 9

Chapter 10 - 9

Chapter 13 - 3, 8

Chapter 14 - 6

Answers to recommended problems

.