Study Guide

The final exam will consists of three large questions. Below are a list of potential questions that will appear on the final exam. I will choose three questions from the list below. You need to be prepared to answer each of the questions below. Each question will be worth 33.3 points. 

List of Questions: 

1.) Discuss the opportunity cost of holding money. Differentiate between short-term and long-term interest rates, and provide an example for each. Discuss why the money demand curve is downward-sloping. Discuss the factors that cause the money demand curve to shift. Discuss why the money supply curve is vertical in the liquidity preference model. Graphically illustrate the liquidity preference model, and label fully. 

2.) Discuss the market for loanable funds. Discuss the relationship between the quantity of loanable funds demanded and the interest rate. Discuss the factors that cause the demand for loanable funds to shift and the factors that cause the supply of loanable funds to shift. Discuss what can cause both the demand and supply of loanable funds to shift. Graphically illustrate the market for loanable funds, and label fully. 

3.) Define the short-run phillips curve, and graphically illustrate. Define the NAIRU or nonaccelerating inflation rate of unemployment. What is the NAIRU equal to? Define the long-run phillips curve, and graphically illustrate. Why is the long-run phillips curve vertical in the long-run as opposed to downward-sloping in the short-run? Discuss. 

4.) Discuss the modern consensus among economists and policy makers today. Discuss the four schools of thought in detail. What are the five key questions about macroeconomic policy? 

5.) Discuss ways to measure long-run economic growth. Discuss the formula for the Rule of 70, and provide an example of how it is used. Discuss in detail the sources of long-run economic growth. Discuss economic growth around the world in terms of successes, disappointments, and failures. Define the convergence hypothesis. Graphically illustrate adding technology and human capital to the aggregate production function. Discuss diminishing returns to physical capital. Discuss reasons why real GDP per capita differs among countries around the world.