TOPICS FOR MIDTERM REVIEW

Basic Refs: HT2 through HT7
(NOTE: HT2-HT6 will be stressed on midterm exam)

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    HT2: MEASURING ECONOMIC PERFORMANCE: OUTPUT AND INCOME



1. THE ECONOMY AS A CIRCULAR FLOW


2. AGGREGATE DEMAND AND AGGREGATE SUPPLY

     A. Review of Supply and Demand Curves for an Individual Market

     B. Macro Extension of Demand and Supply Curve Analysis:
         Rough Definitions


3. BRIEF REVIEW OF NATIONAL INCOME ACCOUNTING MEASURES

     A. Gross National and Domestic Product

         A.1 Gross National Product

         A.2 Gross Domestic Product

         A.3 Constituent Parts of GDP

     B. Nominal vs. Real Gross Domestic Product

     C. Saving and Investment

     D. The Balance of Payments and the Exchange Rate



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      HT3: #MEASURING THE COST OF LIVING AND INFLATION#


A. THE CONSUMER PRICE INDEX (CPI)

B.  THE PRODUCER PRICE INDEX (PPI):

C.  PRICE DEFLATORS FOR GDP AND ITS COMPONENTS

D.  MEASURING INFLATION

E.  MEASURING EMPLOYMENT, UNEMPLOYMENT, AND WAGES


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                HT4. THE LONG-RUN GROWTH MODEL

A.  OVERVIEW

B.  SOME PRELIMINARY SUPPLY-SIDE CONCEPTS (POTENTIAL OUTPUT,
     EMPLOYMENT, AND REAL WAGE)

C.  MARKET EQUILIBRIUM INTERPRETATION FOR
     POTENTIAL EMPLOYMENT AND OUTPUT

D.  THE ECONOMIC GROWTH FORMULA

E.  REAL BUSINESS CYCLE THEORY

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     HT5: INTRODUCTION TO U.S. MONETARY AND FISCAL POLICY


A. THE DEFINITION OF MONEY

B. THE GOVERNMENT BUDGET IDENTITY

C. MONETARY AND FISCAL POLICY OPTIONS FOR GOVERNMENT

D. RATES OF RETURN AND INTEREST RATES

E. THE DEMAND FOR MONEY


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       HT6: SHORT-RUN FLUCTUATIONS AND SPENDING BALANCE


A. OVERVIEW OF THE HT SHORT-RUN FLUCTUATION MODEL

B. CONSTRUCTING THE IS (INCOME-SAVING) RELATION

   B.1 Determinants of Planned Consumption

   B.2 Spending Balance for the Simple Case of Exogenously Given
        Investment, Government Expenditure, and Net Exports

       B.2.a Basic Spending Balance Equations

       B.2.b Spending balance solution for real income

       B.2.c Spending balance solution for real consumption

       B.2.d Investment, Government, and Tax multipliers


   B.3 Spending Balance when Net Exports Depend on Income

       B.3.a Spending balance solution

       B.3.b Multipliers


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               HT7: THE IS-LM MODEL (SECTIONS COVERED TO DATE)


A. INTRODUCTION


B. INVESTMENT AND THE INTEREST RATE


C. NET EXPORTS AND THE INTEREST RATE


D. THE IS-LM MODEL: ALGEBRAIC FORMULATION


E. THE IS-LM MODEL: GRAPHICAL REPRESENTATION