ECO 212 does have a comprehensive final exam. There will be 80
multiple choice questions and NO extra credit essay. Students always
ask me for suggestions on how to study for the final. Hopefully, you
have been preparing for the final throughout the semester.
Here is some information to help you study for the final
exam:
LESSONS
webpage or the MACWEBAPP
- The best place to find out what you need to know.
FINAL
EXAM REVIEW CLICKER QUIZ (49 Questions)
THERE ARE SOME CHAPTERS THAT ARE MORE IMPORTANT
THAN OTHERS.
These are usually the chapters with the new models (i.e. graphs) and
concepts. You can probably figure out yourself which chapters they
are, but here is a list:
- chapter 1: production possibilities graph
- chapter 3: supply and demand graph
- chapter 20: using the production possibilities graphs to
determine comparative advantage
- chapter 12: AD/AS graph
- chapter 7: calculating GDP,
- chapter 10 and 13: calculating and using the multipliers
- chapters 14, 15, 16: showing how monetary policy works on the
set of 3 graphs
THE TEXTBOOK DOES HAVE A VERY GOOD REVIEW
SECTION at the end of each chapter that you may want to look
at.
YOUTUBE FINAL EXAM REVIEW VIDEOS
DO PROBLEMS:
TOPICS BY CHAPTER
Anything covered during the semester can be on the
final exam, but there are some topics that are more likely to appear
there. Note that the chapters listed below may include pages from
other chapters. For the exact reading LESSONS see the LESSONS
webpage or the MACWEBAPP
Chapter 1
- What is structural adjustment, what are its policies, and why
are countries doing it?
- What is economics? What role does scarcity play?
- What are the "5 Es" of economics and how does each one reduce
scarcity?
- What are the 4 factors of production (types of
resources)?
- What is the production possibilities table/graph (PPC)? What
does it show?
- What are the assumptions behind the PPC?
- How can we demonstrate the following using the PPC?
- the necessity of choice
- opportunity costs
- law of increasing costs
- unemployment
- productive inefficiency
- economic growth (EG)
- present choices, future possibilities
- optimum product mix?
- Give two definitions of EG
- Understand the simple circular flow model
Chapter 2
- Compare command and market economies
- What is the "coordinating problem" and the "incentive problem"
found in command economies?
- What are the characteristics of market (capitalist)
economies?
- What is the "invisible hand" and how does it promote
efficiency?
- What is “consumer sovereignty”?
- Understand the important role of prices in a market
economy
- Understand the connection between the market economy and the
5Es
- Government Finance
Chapter 3
- THIS CHAPTER IS IMPORTANT
- Be able to define and graph demand and supply.
- Know
- the law of demand
- the law of supply
- market demand
- market supply
- determinants of demand
- determinants of supply
- Know the difference between a change in quantity demanded and
a change in demand itself
- Know the difference between a change in quantity supplied and
a change in supply) itself
- AND MOST IMPORTANTLY, Be able to use the demand and supply
graph , AND THEIR DETERMINANTS, to analyze why equilibrium prices
and quantities change
Chapter 5
- negative externalities and allocative inefficiency
- positive externalities and allocative inefficiency
- public goods and allocative inefficiency
- free rider problem
- exclusion principle
- indivisible goods / nonrival
- Have a general understanding of federal, state, and local
government's sources of revenue and expenditures
- Be able to calculate the marginal income tax rate and the
average income tax rate
Chapter 20
- Know the advantages and disadvantage of trade
- Be able to find which country has a comparative advantage
using the production possibilities table and graph
- Be able to calculate the gains from trade when countries
specialize 100%
- What are the types of trade barriers?
- Know that the costs of trade barriers are greater then their
benefits
- Know that free trade reduces scarcity
- Understand the arguments used to support the use of trade
barriers AND the problems associated with each argument
- Be able to use the determinants of foreign exchange to
determine whether the value of a currency will appreciate or
depreciate
Chapter 12
- THIS CHAPTER IS IMPORTANT
- Know the business cycle and what happens to UE, IN, and EG in
each stage
- Define AD, know why is it downward sloping, and know the
determinants
- Define AS, know why is it has the shape that it does, and know
the determinants
- Be able to use the AD and AS graph , AND THEIR DETERMINANTS,
to analyze why equilibrium real national output and the price
level change, AND relate those change to UE, IN and EG.
- Know the definition and tools of the following: stabilization
policies"
- demand management policies
- fiscal policy
- expansionary fiscal policy
- contractionary fiscal policy
- monetary policy
- easy money or expansionary monetary policy
- tight money or contractionary monetary policy
- supply-side policies
Chapter 9
- What is unemployment?
- Who is included in the labor force?
- Who is not included in the labor force?
- What is full employment?
- Why is 5-6% unemployment considered to be full
employment?
- What are frictional UE, structural UE, and cyclical UE?
- What is the "full employment rate of unemployment" or the
"natural rate of unemployment"?
- What are the costs of inemployment?
- What is inflation (IN)?
- What is a price index?
- What is the rule of 70?
- Be able to calculate the inflation rate using price index
numbers
- Know demand-pull inflation and cost-push inflation.
- What are the effects of inflation?
Chapter 7
- Define GDP
- What are the problems associated with using GDP as a measure
of economic welfare?
- Be able to calculate:
- GDP using the expenditures approach
- NI using the income approach
- NDP (net domestic product).
- real GDP using a price index
Chapter 8
- Know the difference between the two (or three) types of
economic growth
- increasing our ABILITY to produce or our Potential output
(increasing AS and the PPC)
- increasing real GDP or ACHIEVING our potential output
(increasing AD)
- increasing GDP per capita
- Modern Economic growth and the uneven distribution of economic
growth
- Institutional structures that promote growth
- Have a general understanding of what has accounted for growth
in the United States over the last few decades and the recent
productivity acceleration
Chapter 22W
- Know the characteristics of the less developed countries
(called "developing countries" or "DVCs" in our textbook)
- How does population growth affect the growth in GDP per
capita?
- What is the "vicious cycle" and how does population growth
affect it?
- Understand the "trade vs. aid" issue
Chapter 14
- What is money, liquidity, M1, M2
- What is not money?
- Have a general understanding of the structure of the Federal
reserve system
- What is the FOMC?
- What are the functions of the FED?
Chapter 15
- THIS CHAPTER IS IMPORTANT
- Using the balance sheet of a single bank or the banking system
be able to calculate:
- total reserves
- required (legal) reserves
- excess reserves
- What is fractional reserve banking and how do banks "create"
money?
- Be able to calculate the "money multiplier"
- If $10 cash is deposited into a checking account at a bank and
the RR is 20% how
much can this bank safely loan out and how much money can be
created by the banking system?
- See the study guide problems !!!!
Chapter 16
- Money demand, transactions demand, asset demand?
- Know the money market graph
- Know the "Keynesian Cause-Effect Chain of Monetary Policy":
- First: a change in the Fed tools CAUSES
- Second: a change in excess reserves CAUSES
- Third: a change in the money supply CAUSES
- Fourth: a change in the interest rate CAUSES
- Fifth: a change in investment CAUSES
- Sixth: a change in aggregate demand CAUSES
- Seventh: a change in real GDP and a change in the price
level CAUSES
- Eighth: a change in unemployment and/or inflation
- Know how to use a set of three graphs to illustrate the
effects of monetary policy
- Understand how EACH of the four tools of monetary policy (OMO,
RR, DR, and the term auction facility) can be used to change the
money supply and hence UE, IN, and EG
- What are the strengths and shortcomings of monetary
policy?
- Compare and contrast the New Keynesian (Mainstream) and the
New Classical (Monetarist) views of monetary policy, causes of
instability, self-correction, and rules or discretion.
Chapter 10 / 13
- THIS CHAPTER IS IMPORTANT
- If: equilibrium GDP is $400 billion, the full employment level
of GDP is $500 billion, and MPC is 0.8, what change in government
purchases is needed to achieve full employment?
- be able to define and calculate MPC, MPS, APC, APS using data
from a table or from a graph of consumption and income
- Understand how/why the multiplier effect works (i.e. the
rationale behind how it works)
- What are "built-in stabilizers" and how do they work?
- What is the Standardized Budget?
- What in the timing problem of fiscal policy? Know:
- recognition lag
- administrative lag
- operational lag
- What is "crowding out"?
- Compare and contrast the New Keynesian (Mainstream) and the
New Classical (Monetarist) views of fiscal policy
FINAL NOTE:
Questions may appear on the exam that are not on
this final exam review list, but probably not many, if any.
GOOD LUCK.
