Econ 502 (Masters-Level Macro Theory)
Midterm Exam Review Guide
Last Updated: 30 September 2017
Latest Course Offering: Fall 2017
- Course Instructor:
Professor Leigh Tesfatsion
- Econ 502 Web Site Home Page Address:
BASIC MIDTERM EXAM INFORMATION:
The midterm exam for Econ 502 (Fall 2017) will be held in the regular class meeting room (Heady 272) during regular class hours 11-1 on Thursday, October 5, 2017.
The exam will be closed-book and comprehensive,
covering all required materials (readings, exercises, and in-class discussions) up to the date of the exam.
THESE REQUIRED MIDTERM EXAM MATERIALS INCLUDE THE FOLLOWING:
- All in-class lectures/discussions (including class hand-outs identified as supplementary required ** materials);
- All assigned take-home exercises due prior to the date of the midterm exam (i.e., Exercises 1 through 4);
- All required syllabus readings (i.e., those marked with TWO asterisks ** ) for:
- Syllabus Section I;
- Syllabus Section II;
- Syllabus Section III.A;
- Syllabus Section III.B;
- Syllabus Section III.C.
- NOTE: Be sure to check the
on-line Econ 502 Syllabus
for a detailed up-to-date listing of these required readings.
The midterm exam will consist of a selection of questions designed to test ability to think through macroeconomic issues using basic economic tools and concepts as aids. The mastery of three skills will be stressed:
- Understanding of key concepts and definitions studied in required class materials;
- The ability to interpret, compare, and contrast the various macroeconomic models studied in required class materials with regard to structural assumptions, economic meaning, and empirical relevance;
- The ability to apply modeling and analysis tools studied in class to the modeling and analysis of new problem situations, related to (but not necessarily identical with) the problem situations covered in class lectures (including hand-outs of supplementary required ** materials), assigned take-home exercises, and required (**) syllabus readings.
The exam questions will be closely tailored to the
"Key Questions for In-Class Discussion" appearing on the Econ 502 syllabus. Students will be expected to make use of class lecture materials (discussions, hand-outs), assigned take-home exercises, and required ** syllabus readings in answering these questions.
Students can access practice midterm exams posted in the
Midterm and Final Exam Review Materials
section of the on-line Econ 502 syllabus.
Test booklets will be provided at
the exam, so students do not need to bring paper or blue books to the exam.
Use of any electronic or mechanical device (e.g. calculators)
during the course of the midterm exam will not be needed and is not permitted.
Absence from the midterm exam will result in a grade of zero for the exam unless the instructor agrees there are verified extenuating circumstances such as a major medical emergency. In this case the course grade will be determined on the basis of other work completed; no make-up exams will be scheduled.
Cheating will not be tolerated and will result in a grade of F for the midterm exam at a minimum. Other sanctions might also be applied in accordance with ISU policy.
FORMAT OF MIDTERM EXAM QUESTIONS:
The midterm exam will consist of a mix of short-answer and
longer-answer questions. Short-answer questions will pose some stand-alone question that is designed to be answerable in about 10 or 15 minutes. Longer-answer questions will consist of several closely related parts (e.g., Parts A, B, C) and will generally be designed to be answerable in about 30 or 40 minutes.
Examples of Possible Short-Answer Questions:
- Discuss the meaning and economic implications of some key macroeconomics concept, hypothesis, or assumption covered in class lectures and/or required readings, such as: inflation rate; gross domestic product (GDP); GDP growth rate; trend line; business cycle; government budget constraint; monetary policy; fiscal policy; recession; systemic risk; microfoundations of macroeconomics; circular flow; productive efficiency; Pareto efficiency; utilitarian social welfare function; variable classification; model solution; price-setting versus price-taking behavior; sticky versus flexible prices; and adaptive expectations.
Illustrate the concept, hypothesis, or assumption using a simple analytical or graphical example. Discuss what role the concept, hypothesis, or assumption has played in macroeconomics. Provide a brief critique of the concept, hypothesis, or assumption with regard to its theoretical soundness and/or empirical validity.
- Discuss carefully (in words) the economic meaning of some key concept, hypothesis, or assumption associated specifically with variants of the Walrasian general equilibrium model developed in
class, such as: defining structural assumptions; Walrasian Auctioneer; Walrasian general equilibrium; Walras Law; the First Welfare Theorem; and so forth. This would be followed by some type of request to demonstrate understanding of this concept, hypothesis, or assumption. For example, you might be asked to present a graphical depiction of the Walrasian general equilibrium model that highlights its key structural assumptions and its conception of an equilibrium.
- Discuss carefully (in words) the economic meaning of some key concept, hypothesis, or assumption associated specifically with variants of the sticky-price and/or flexible price dynamic IS-LM models developed in
class, such as: the national income accounting identity;
the IS equation; the LM equation; potential real GDP; involuntary unemployment; the real GDP gap; expectations augmented Phillip's curve; consumption function;
IS-LM equilibrium; internal balance; the Keynes' ex ante effect; and so forth.
This would be followed by some type of request to
demonstrate understanding of this concept, hypothesis, or assumption. For example, you might be asked to derive the IS curve for a specifically given model, or to illustrate graphically what would be an internal balance point for a specific model, and so forth.
- Discuss carefully (in words) the economic meaning of some key concept, hypothesis, or assumption associated specifically with variants of the Solow-Swan descriptive growth model developed in class, such as: stylized facts of growth; aggregate production function; total factor productivity; constant returns to scale; steady-state growth rate; basic causal system; per-capita representation; stationary solution; phase diagram; local stability; global stability; growth accounting equation; and so forth. This would be followed by some type of request to demonstrate understanding of this concept, hypothesis, or assumption.
For example, you might be asked to define constant returns to scale for a production function, to provide an analytical example of a production function that exhibits constant returns to scale, and to justify carefully your constant returns to scale claim by proving that this production function satisfies the definition of constant returns to scale.
- Compare and contrast some particular aspect or aspects of the different modeling approaches covered in class to date: namely, Walrasian general equilibrium models, dynamic IS-LM models, and Solow-Swan descriptive growth models. These aspects might include purpose, structural assumptions, microfoundations, scope of questions permitted, policy implications, theoretical advantages/limitations, empirical advantages/limitations, and so forth.
Examples of Possible Longer Questions:
- Consider a particular specified dynamic IS-LM model for an economy (either sticky-price or flexible-price). Provide an economic interpretation for the model equations and the model as a whole. Suppose there is a sudden shock to the system at the beginning of period 1 (e.g., a policy shock, a technology shock, etc.). Determine the effects of this period-1 shock on the solution values for certain specified endogenous variables in period 1 and in period 2. Provide an economic interpretation for your findings. Provide a critique of your findings -- that is, discuss the degree to which you have confidence in the predictions of the model, given the strengths and weaknesses of the model from a theoretical and/or empirical point of view.
- Consider a particular specified growth model in level form, a version of the basic Solow-Swan descriptive growth model in level form presented and covered in class. Provide an economic interpretion of the model. Translate the model into per-capita form, and perform some type of analysis of the model. For example, does a stationary solution exist?
If so, is it necessarily unique? Is it necessarily stable in either a local or global sense? If a change is made in a particular parameter value or in the specified initial conditions, how will this change affect the model solution (i.e., the outcomes predicted by the model)? Provide a careful economic interpretation for your findings.
- Consider a quotation that makes certain claims about the workings of the U.S. macroeconomy. Using simple analytical and/or graphical arguments to support your assertions, discuss under what conditions (if any) the quoted claims are necessarily true for an economy. For example, are such claims supported by the dynamic IS-LM model (with either sticky or flexible prices) as presented and covered in class? By the basic Solow-Swan descriptive growth model as presented and covered in class?