# Econ exam 2 | business economics | Houston Community College

1.GDP is a key concept in Macroeconomics.  Please review the material covered in the topic called Measuring Domestic Output and National Income.

a.What is the definition of GDP?

b.Tell me the level of real GDPand real GDP per capitafor the past 5 yearsand tell me how you think we were doing in each of those years.

c.Go to topic called Economic Growth and look at slide 3 and tell me if the falling trend line is a good or bad thing for the nation andwhy.  Please be thorough!

d.List and explain in detail,the 3 different approaches to calculating GDP.

i.List and explain the approaches and how you would use each to calculate GDP.

e.List and explain 4 types of transactions that would not be included in GDPand why they should be omitted.

i.Look in the notes and find 4types of transactions that are excluded from the computation of GDP and write them down along with the explanation of each and why they are not included.

f.Thoroughly explain the 4 components ofGDP and relate each of those components to the Circular Flow modelwith government and international trade.

g.Nominal versus real GDP.

i.Explain the difference between nominal and real GDP.

ii.Explain in detail, howto calculate real GDP, including the factors used in the calculation.

1.Look in the notes to find this –very straight forward.

iii.Explain in detail the CPI since it is used to make the conversion.The following url should help -https://www.bls.gov/cpi/

iv.Explain what you can do with real GDP that you cannot do with nominal GDP and explain why that is important.

h.GDP and GDP per-capita.

i.Explain the difference between GDP and Per CapitaGDP;

ii.Explain how to calculate Per CapitaGDP, and how Per CapitaGDP canbe used.

2.Economic growth. Two key sources of economic growth have been increases in resources and increases in productivity.   Please review the topic calledIntroduction to Economic Growth and Instability.

a.Please list 5 factors that might contribute to falling U.S. GDP growth ratesand explain how each factor might cause falling GDP growth rates.

b.Explain in detail, what we could do to prevent each of those 5 factors causing our GDP growth rates to fall.

c.Please list 5 factors that might contribute to rising U.S. GDP growth rates and explain how each factor might lead to rising U.S.GDP growth rates.

d.Explain in detail, what we could do to make each of the 5 factors cause our GDP growth rate to increase.

3.The Business Cycle and Built in stabilizers.

a.What can the business cycle tell you about the status of our economy today and what we might experience over the next 6 months. (please providedetail)?

b.Given what you have learned about the U.S. Business cycle over the past 60 years, please explain 4 ways you can use that information to enhance your odds of achieving future personal success.Please do not talk about your financial portfolio or playing around with the stock market.

c.Explain in some detail the 4 phases of the business cycle, including the characteristics of each. Please don’t include Depression as one of them. Be thorough! You should have at least 4 characteristics for each phase! Include in your discussion how each phase of the business cycle might impact your life and what you should do to minimize the negative impacts on your future.

d.Explain in detail, 5 possible causes of change in the direction of the business cycle. You are looking for things that are out of the control of the government. Do not talk about fiscal or monetary policy tools here. Don’t say inflation or recession!

e.Built-in Stability

1.Explain the difference between discretionary and non-discretionary fiscal policy. Include in your explanation the differences in the roles of the three branches of government in each case.

2.Explain the key relationships that supports the built-in stabilizer which were provided in the slides and lecture.

3.Explain thoroughly how the built-in stabilizer works to reduce inflation. Need to see the step by step of what happens.

4.Explain thoroughly how the built-in stabilizer works to reduce recession. Need to see the step by step of what happens.

5.Explain why the presence of the built-in-stabilizer is important to managing the macro economy.

4.Unemployment and Recession Please review the topic called Introduction to Economic Growth and Instability.

a.Explain in detail, how the unemployment rate is calculated.

b.Explain in detail, how we define the employed, the unemployed, and who is in the labor force?

i.The link BLS website should help -http://www.bls.gov/news.release/empsit.t15.htm

c.List and explain (don’t just copy and paste)the various unemployment rates used by the BLS, and indicate which one of the 6 is the official unemployment rate.

i.This link to the BLS website should help -http://www.bls.gov/news.release/empsit.t15.htm

d.There has been a historic disparity between unemployment rates for Black, Hispanic, and White workers.

i.Please provide detailed explanations of 5 reasons the Black and Hispanic unemployment rates are always significantly higher than the unemployment rate for Whites.

ii.Explain in detail, 1 thing that should be done to correct each of the things that cause the problem. Be sure you explain how each recommendation would actually lead to solution of the problem. Please be very thorough with this.

e.The 3 types of unemployment.

i.List and explain the 3 types of unemployment that we discussed. Include the characteristics of each and the role of skills for each.

ii.Explain how each type contributes to growing income and wealth inequality.

1.You would want to list and explain the 3 types.  You will find everything on the 2 or 3 slides plus the audio provides additional insight.

f.List and explain thoroughly, 3 examples of significant economic costs of unemployment and what we might do to reduce those costs.

g.Unemployment and how to use Fiscal Policy to address Recession. Please review the topics called Fiscal Policy and The Aggregate Demand and Aggregate Supply Model

Background for this question:

The US economy is currently experiencing recession according to the Federal Government. You can use only Fiscal Policy and the AD–AS model.

i.List and explain the 3 Fiscal Policy tools covered in the slides that apply to fixing recession, and indicate the one tool that you want to use to attack the recession problem?

(Please note that transfer payments would come under the heading of government spending! So don’t use it as one of your 3 tools of fiscal policy.)

ii.Explain why you selected the tool and not the others. Refer to your decision criteria.

1.Consider the pros and cons of each of the 3 tools and tell me why you picked the one you picked and why youdid not pick the other option(s).

iii.Explain how your tool would solve the recession problem and what effects your solution would have on at least five key economic variables. BE SPECIFIC! I WANT TO SEE THE DETAIL. USE THE WHAT HAPPENS NEXT APPROACH!

1.Explain how your choice of tools would work to solve the problem of recession.  Start with the implementation of your tool and then list step by step what happens next, until you arrive at the appropriate impact on GDP. Be sure you provide the detailed step by step flow.

2.Using that approach allows the list the key economic variables and how each would be affected, to pop right out.

5.Inflation Please review the topic called Introduction to Economic Growth and Instability

a.Whatis inflation and how can you use the CPI datato calculate it?

b.List and explain the two types of inflation.

c.Give two examples of who might be hurt by inflation and why.

d.Give two examples of who might be helped by inflation and why.

e.Inflation and how to use Fiscal Policy to address the problem of Inflation.  Please review the topic called Fiscal Policyand The Aggregate Demand and Aggregate Supply Model.

Background for this question:

Assume the US economy is currently experiencing high rates of inflation according to the Federal Reserve. Use only FiscalPolicy and the AD –AS model.

i.List and explain the 3 Fiscal Policy tools covered in the slides and indicate which tool you will use to attack the inflation problem?

1.List the 3 possible choices and then just tell me which of the tools you would select. Just write it down.

ii.Explain why you selected this particular tool and not the others. Refer to your decision criteria.

1.Consider the pros and cons of each of the 3 tools and tell me why you picked the one you picked and why you did not pick the other option(s).

iii.Explain how your solution would work to solve the problem of inflation and what effects your solution would have on at least five key economic Variables? BE SPECIFIC!  I NEED TO SEE THE DETAIL.  USE THE WHAT HAPPENS NEXT APPROACH!

1.Explain how your choice of tools would work to solve the problem of recession.  Start with the implementation of your tool and then list stepby step what happens next, until you arrive at the appropriate impact on GDP.  Be sure you provide the detailed step by step flow.

2.Using that approach allows the list the key economic variables and how each would be affected, to pop right out.

6.Aggregate Demand  Please review the topics called The Aggregate demand and aggregate supply model and the Aggregate Expenditures model.

a.List and thoroughly explain the three reasons the Aggregate Demand curve is downward sloping.

b.List and explain in detail, the components of Aggregate Demand and explain each of their determinants.

i.You studied the 4 components. List and explain them and under each list and explain the determinants of each.

c.Explain how the Aggregate Demand-Aggregate Supply Model differs from the Aggregate Expenditures model

i.Put the two models sideby side, look for the differences and explain them.

7.The basic macroeconomic relationships introduced a number of key concepts. Please review the topic called Basic Macroeconomic Relationships.

a.Please explain in detail the relationships between income, consumption, savings, and GDP.

i.Define each

ii.Explain the relationship between these items.

b.Please explain in detail the relationships between interest rates, expected rates of return, investment, and GDP.  Be specific and be thorough.

i.All of the necessary info is provided in the slides and audio lectures

c.Please explain the concept of the multiplier, including:

1.What information is required to calculate the spending multiplier

a.Refer to the slides, the info is there.  Look closely –don’t miss this!

2.List and explain the 3 different multipliers that we discussed.

a.Again, refer to the slides, it’s all there.

3.Explain in detail how the multiplier works to impact GDP.  Be specific!

a.Use the chart from the slide set as the basis of your explanation.  Start with the injection of money into the economy and then how that affects household income and then spending via the mpc.  Go on to discuss the rounds of spending, etc. and how the ultimate impact on gdp is amplified by the multiplier effect.

8.The Aggregate Supply curve shows the level of real output that the business sector will produce at various possible price levels. Please review the topic called The aggregate demand and aggregate supply model.

a.Explain the Long Run Aggregate Supply curve and the assumptions that support its shapeat full employment.

i.List the assumptions, discuss the shape of the LR AS curve and why it takes that shape.

b.Explain the Short Run Aggregate Supply curve and the assumptions that support its shape.

i.List the assumptions, discuss the shape of the SR AScurve and why it takes that shape.  Discuss the difference in the shape of the curve at levels below full employment GDP and what you see at levels above full employment GDP.

9.Fiscal policy can be called on to correct conditions of recession and inflation. Please review the topic called Fiscal Policy.

a.List and explain the 3 tools of Fiscal Policy that would be appropriate for addressing recession and explain in detail how each would ultimately impact aggregate demand and equilibrium GDP. Be specific! Please consider transfer payments as part of government spending, so don’t claim it is a tool.

i.You would want to list and explain the 3 tools and how each (step by step) would affect AD andequilibrium gdp.

b.List the 3 tools of Fiscal Policy that would be appropriate for addressing inflation and explain in detail how each would ultimately impact aggregate demand and equilibrium GDP. Be specific!

i.You would want to list and explain the 3 tools and how each (step by step) would affect AD and equilibrium gdp.

10. We discussed four problems that complicate the application of fiscal policy. Please review the topic called Fiscal Policy.

a. List and thoroughly explain these 4 problems, including how each would likely impact the overall effectiveness of fiscal policy. Be specific! Be thorough!

i.You should list the 4 problems associated with Fiscal Policy that were listed in the slides and explain the factors associated with each.  And as you address each problem, discuss how each would impact the effectiveness of fiscal policy.