Gallaway
ECO 385

Study Guide Test #2

To prepare for this test, students should study their text, notes, and homework.  Students should also be prepared to answer questions from any additional readings.  To help you get started, here is a list of topics with which you should be familiar.

This study guide may not be fully updated until two days before the test.

Chapter 7
  • Deriving AD from IS-LM model
  • Explaining AD slope and shifts
  • Labor market
    • Labor supply
    • Labor demand
    • Marginal productivity of labor
    • real wages
  • Production function
  • Deriving SRAS from  Labor Demand and Production Function
  • Deriving LRAS
  • Classical vs. Keynesian economics
  • Keynesian arguments for why IS-LM might lead to a vertical AD
  • Liquidity trap
  • r as a transmission mechnaism
  • Pigou and real balance effects
  • Contractionary effects of falling prices
  • Empirical Evidence on  great depression & real wages, prices, etc.

Chapter 8

  • Causes of inflation
  • Short R un Philips Curve
  • Long Run Philips Curve
  • Adaptive Expectations
  • Rational Expectations
  • Sacrifice Ratio

 

Chapter 9
  • Equation of exchange
  • Quantity theory of money
  • Seigniorage
  • Monetizing the debt
  • Fisher Effect
  • Ex post & Ex ante real interest rates
  • Inflation and redistribution
  • Inflation and transactions costs
  • Classical dichotomy
  • Three types of unemployment, causes costs, and cures
  • What makes up the "natural rate" of unemployment
  • What determines the "natural rate" of unemployment
  • Costs of Unemployment

Chapter 10

  • Classical Growth model
  • Per-person production function
  • Steady State
  • Steady state Investment function
  • Cobb-Douglas production function
  • Solow Growth model
  • Labor augmenting technological change
  • neutral technological change
  • effective labor
  • Problems with growth model
  • Convergence
  • Golden Rule
  • Endogenous growth