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Production Possibilities Curve (PPC)

  • Full employment output, inefficient output, trade-offs, opportunity costs.

  • Absolute advantage: More production capacity.

  • Comparative advantage: Lowest opportunity cost in production.

  • Terms of trade based on comparative advantages.

Market Model (Supply and Demand)

  • Distinguish between sliding along a curve vs. shifts in curves.

  • Factors causing shifts and equilibrium changes (including indeterminate cases).

GDP Calculation

  • Expenditures approach: Y=C+I+G+NXY = C + I + G + NX.

  • Income approach: Y=w+I+r+pY = w + I + r + p.

Circular Flow Model

  • Factors of production; flow of money and goods/services.

  • Role of government and imports/exports in GDP.

Business Cycle

  • Positive/negative output gaps; potential output line related to natural rate of unemployment.

  • Cyclical unemployment and ADAS curve implications.

Employment

  • Workforce = Employed + Unemployed.

  • Workforce participation rate and unemployment rate formulas.

Inflation Measures

  • Inflation rate: extInflationRate=rac(extPLyear2−extPLyear1)extPLyear1imes100ext%ext{Inflation Rate} = rac{( ext{PL year2} - ext{PL year1})}{ ext{PL year1}} imes 100 ext{\%}.

  • Consumer and Producer Price Index calculations.

  • GDP Deflator: extGDPDeflator=racextNominalGDPextRealGDPimes100ext{GDP Deflator} = rac{ ext{Nominal GDP}}{ ext{Real GDP}} imes 100.

Marginal Propensities

  • Marginal propensity to consume (MPC) and save (MPS) with relationship MPC+MPS=1MPC + MPS = 1.

Aggregate Demand – Aggregate Supply (ADAS)

  • Short-run vs. long-run dynamics; role of shocks.

  • Expansionary and contractionary fiscal policy; multipliers for expenditures and taxes.

Money Market

  • Components of money base and supply (M1).

  • Money multiplier calculations: extMoneyMultiplier=rac1extReserveRatioext{Money Multiplier} = rac{1}{ ext{Reserve Ratio}}.

Market for Loanable Funds

  • Fed actions such as bond purchases and their effects.

Monetary Policy and AD-AS Curve

  • Expansionary vs. contractionary monetary policy.

  • Effects of bond transactions, discount rates, and reserve ratios.

Phillips Curve

  • Inverse relationship between unemployment and inflation; crowding out effect.

Velocity of Money

  • Relationship: extMSimesextV=extPLimesextYext{MS} imes ext{V} = ext{PL} imes ext{Y} (real GDP).

Current Account

  • Measures of trade in goods/services vs. capital/financial accounts.

  • Factors affecting capital account: interest rates, investment spending, government budgets.

Exchange Rates

  • Currency purchases; demand/supply shifts influenced by foreign demand and regulations.

  • TIPSY acronym for exchange rate influences: Tastes, Interest rates, Price level, Speculation.