Test#3 Study Guide-3

Part 1: Will consist of 20 True/False Questions worth 3 points each. (60 points total)

The following are a list of topics to study for the test:

  • Negative demand shocks (examples)
  • Positive supply shocks (examples)
  • Stagflation
  • long-run macroeconomic equilibrium
  • recessionary gap
  • inflationary gap 
  • Fiscal policy 
  • Expansionary vs. Contractionary Fiscal Policy
  • The government spending multiplier vs. the government transfers/taxes multiplier
  • The savings-investment spending identity in a closed economy
  • national savings (formula for GDP in a closed economy)
  • The two main types of assets
  • The M1 vs. M2
  • The three main roles that money plays in the economy
  • A bank's T-account
  • The monetary base vs. the money supply
  • The two main parts of the Federal Reserve System
  • The Federal Open Market Committee
  • The federal funds rate vs. the discount rate
  • Open-market operations

Part 2: Graphical Illustration.  (40 points total)

  • The Short-Run Macroeconomic Equilibrium 
  • The Long-Run Macroeconomic Equilibrium
  • A Recessionary Gap
  • An Inflationary Gap