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Macroeconomics Study List Chapters 1, 2, 3, 4, 10, 11, 12, and 13 Chapter 1: Ten Principles of Economics Scarcity Economics Efficiency

Equity Opportunity cost Marginal decision making Market economy Firms, Households make decisions guided by prices Central Planning Chapter 2: Thinking Like an Economist Circular Flow Diagram Participants Markets Flow of products (inner loop) Flow of dollars (outer loop) How each participant interacts in each market Production Possibilities Frontier (PPF) Definition Assumptions Efficiency, Inefficiency, Not feasible outcomes Opportunity cost Economic growth Advance in 1 good, the other, or both Microeconomics v. macroeconomics Positive v. normative statements and economics Chapter 3: Interdependence and Gains from Trade Absolute advantage Definition Importance Determining who has absolute advantage Opportunity Cost Solving for opportunity cost Comparative advantage Definition Importance Determining who has comparative advantage Link to gains from trade Imports v. Exports Tariffs, quotas, embargo Chapter 4: Supply and Demand Demand Law of Demand Factors Price Income Normal goods/inferior goods

Prices of Related Goods Substitutes/Complements Tastes and Preferences Expectations Number of Buyers Change in Quantity Demanded v. Change in Demand (movement v. shift) Supply Schedule Curve Factors Price Input/Factor Prices Technology Expectations Taxes and Subsidies Number of Sellers Change in Quantity Supplied v. Change in Supply (movement v. shift) Supply and Demand Equilibrium Shortage Surplus Adjustment to equilibrium Analysis Comparative Statics Chapter 10: Measuring a Nations Income GDP measures income, expenditure, and total output of the economy Measurement of GDP Definition Items that are included and excluded GDP v. GNP Reporting of GDP as an annualized rate Components of GDP Consumption Investment Government Spending Net Exports Nominal and Real GDP Nominal GDP Definition Formula Calculation What it measures Real GDP Definition Formula Calculation What it measures Growth rate in Real GDP

GDP deflator Definition Formula Calculation What it measures Growth rate in the deflator U.S. History Long run average rate of growth for GDP (2-2.5% in real GDP per year) Business cycles Recession Expansion GDP and well-being

Chapter 11: Measuring the cost of Living Consumer Price Index Definition Steps for construction How the goods are weighted CPI is current basket / base year basket * 100 Using growth formula to find inflation Other price Indices Problems with Measuring the cost if living Substitution bias Introduction of new goods Unmeasured quality changes Dollar figures from different times/areas Formula Method for converting Comparison Indexation Nominal and real interest rates

Chapter 12: Production and Growth Economic growth around the world Importance of small differences in growth Productivity Definition Why it is important Determinants of Productivity Physical capital Human capital Natural resources Technical knowledge Policies Promote saving and investment Diminishing returns and catch up effect Investment from abroad Foreign direct investment Foreign portfolio investment Education Free trade

Political stability and property rights Research and development

Chapter 13: Saving, Investment, and the Financial System Financial system Financial markets Bonds Stocks Financial intermediaries Banks Mutual funds Saving, Investment, and GDP Identities GDP S=I Private saving Public saving National saving Supply and demand for loanable funds Source of supply Relation to interest rate Source of demand Relation to interest rate Equilibrium Interest rates adjust so S=I Level of S and I Analysis of Policies Saving Incentives Investment Incentives Government budget Surplus Balanced budget Deficit Debt Crowding out Effect in interest rates and level of S and I for each policy Importance of higher S and I

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