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College of Business and Economics

Macroeconomics Review

(Revised April 25, 2008)

You are going to take a multiple choice exam in macreconomics. The following material should help you prepare for the exam.

Click on a topic to download a .pdf file of notes on that topic. 

1. Define and calculate GDP. Understand the difference between real and nominal variables (e.g. GDP, wages, interest rates) and know how to construct a price index.
2. Explain the role of capital investment, education and technology in determining economic growth.
3. Explain the importance of institutions, including private property rights, in long-run economic growth.
4. Explain that interest rates are determined in a market for loanable funds.
5. Explain what factors determine the level of unemployment.
6. Explain how the Federal Reserve and the banking system create money (i.e., the supply of money).  Explain the factors that affect the demand for money.
7. Know the equation of exchange and the connection between money and inflation.
8. Explain how slow price adjustments might affect the short-run response of the economy to economic shocks.
9. Explain the strategy behind government policies to stabilize the economy and the specific role of the Federal Reserve.
10. Explain why a merchandise trade deficit is offset by capital flows and investment in debtor countries.

• There is also video material available in Macroeconomics.

Important Notices:

• Students should be prepared to bring proof of pre-requisites to the first day of class.
• Please be sure to register for both BUS 302 and BUS 302L.