The final exam is:

Tuesday, December 16 at 3pm (for section 1 which meets TR 2-3:30pm)
Thursday, December 18 at 3pm (for section 2 which meets TR 3:30-5pm)

The final exam will cover lectures from Tuesday, October 21 to the end of the semester and text chapters 11, 12, 13, 14, 15, and 17.  The final exam is "comprehensive" in the sense that you are expected to remember key concepts from before midterm exam as they relate to the recent material.  For instance, you need to know what "opportunity cost" is in order to explain "comparative advantage."

The test format will be short problem/essay questions.  You should bring a calculator.  I will provide paper for you.

Everything is "fair game" for the exam, however, the materials I cover in class are the topics that I feel are most important.  A practice final exam is available on line.

To help prepare, you should try answering the following questions:

1. What shifts the Aggregate Demand and Aggregate Supply curves?
2. How are changes in GDP related to changes in the unemployment rate in the short run? (In other words, as output rises, what happens to the unemployment rate?)
3. Can you show on the Aggregate Demand/Supply diagram what happens to prices and output when different events happen? (Say investment rises, government spending decreases, or the price of energy falls)
4. If the government wanted to reduce inflation, would it have to raise or lower spending?
5. How do taxes on consumer and firm spending (income taxes, sales tax) affect both the AD and AS curves?
6. How do taxes and regulations that affect firm costs (environmental protection, workers compensation) affect the AD/AS curves?
7. What is the effect of expansionary fiscal or monetary policy on inflation, unemployment, and GDP?  What is the effect of contractionary fiscal or monetary policy?
8. What is the marginal propensity to consume?
9. Why does an extra dollar spent (say by the government) lead to more than an extra dollar of income in the economy?
10. What is the formula and definition of the Multiplier?
11. If the MPC=.75 and the government increases spending by $100bil, how much does GDP eventually rise?
12. What is a fiscal policy question that the federal, state, or local government is debating currently?
13. How does fiscal policy differ from monetary policy?
14. What are three functions of money?
15. What is the definition of "money" in this class?
16. What do banks do?
17. What is the difference between required and excess reserves?
18. What is a "fractional reserve" system? What is a "bank run?"
19. What is the money multiplier?
20. How much must a bank hold in reserves if it has $4mil in deposits and minimum reserve ratio is 20%?  (If the bank actually has $1mil in reserves, how much is excess?)
21. Who conducts monetary policy in the U.S.?  What are the three tools at its disposal?
22. How does monetary policy affect the federal funds rate (and other interest rates)?  How does the federal funds rate affect bank reserves and the money supply?
23. What is the tradeoff that policy makers (both fiscal and monetary) face between inflation and unemployment?
24. In what ways has the standard of living increased in the U.S. since 1970?
25. What is the growth rate of real GDP per capita if it is $30,000 one year and $31,000 the next year?
26. Is a 6% growth rate of real GDP per capita low, typical, or high for countries today?
27. Give some examples of countries that have experience large growth rates of GDP per capita over the past forty years.
28. Give some examples of countries that have suffered from a lack of GDP per capita growth in the recent past.
29. If a country's GDP growth rate is 3%, how many years will it take for GDP to double (hint:  What is the rule of 72?)?
30. What is labor productivity?  In the U.S. has labor productivity growth been high or low since 1973?
31. Why is labor productivity important for a country's standard of living?
32. What increases worker productivity?  How can the government help increase worker productivity?
33. What is comparative advantage?  Specialization?  Absolute advantage?  Terms of trade?
34. Say U.S. workers can produce 1 computer for every 2 VCRs, while Thailand can produce 1 computer for every 6 VCRs.  Which country has the comparative advantage in VCRs?  Say the U.S. wanted to sell computers to Thailand at the rate of 1 computer for 4 VCRs.  Should Thailand accept this offer?  Why?
35. Why do economists typically say that trade is good for a country?
36. Who gains/loses from free trade?
37. Does free trade increase the number of jobs?  Explain.
38. What are trade barriers?  What are the costs of trade barriers?