2nd Hourly Results

Mean Score: 77.40 %
Median Score: 79.75 %
Standard Deviation: 13.91 %

A range: 84.5% and above
B range: 60.5 % and above
C range: 50% and above

Well Done guys! I will be returning the exams on Wednesday!

Last Section

Hey guys,

I just wanted to let you know, that the revised syllabus indicates, that on April 25th, we are going to have our last Ec10 section of the year! Prof Mankiw as well as a series of distinguished guest speakers will take over till the end of the semester!

I will be returning your graded 2nd hourlies on that Wednesday too!

Have a great wknd!

PS feel free to reply anonymously to this post with any comments / suggestions about what you think needs to be improved for next year in terms of section heuristics!

Review Material Solutions

Here are the solutions guys: (copy paste the following link)

www.people.hbs.edu/iioannou/ec10/answers.pdf

Review Slides

Here are the review slides from today's section

http://www.people.hbs.edu/iioannou/ec10/review.ppt

a. ** Okun's Law is INCLUDED in the hourly **

b. ** Supply Shocks are *NOT* included

Review Matetial

You can find the questions I plan to go over during Tuesdays review section here

Review Section, Tuesday, April 17th, 7:35pm Sever 310

I will post the solutions to these questions right after the review section. In the mean time, feel free to email me with questions.

2nd Hourly Review Questions

25. What exactly do we mean by “Money Demand”?
26. What are the two principal determinants of Money Demand? Explain each one.
27. What is the shape of the money demand curve?
28. When does the money demand curve shift?
29. What is the effect of monetary policy on the equilibrium in the money market?
30. Why does the Fed use the interest rates instead on the money supply directly?
31. When the Fed raises or lowers the interest rate, what exactly is it that happens?
32. Why are there so many different interest rates in the real world? Explain
33. What is the difference between the nominal and the real exchange rate?
34. When does the real exchange rate change?
35. Define an appreciation/depreciation of the currency.
36. What do exports / imports depend on?
37. Define: Net Exports
38. Be able to explain the change of NX, as each of its determinants change.
39. Define: Trade Balance, Trade Surplus, Trade Deficit, Balanced Trade
40. What is “Net Capital Outflow”?
41. What are the implications of the Purchasing Parity Theory? Its assumptions?
42. How are the real and nominal exchange rates connected? (Formula)
43. Define: Capital Account, Current Account
44. Be able to list the links between changes in real interest rates and changes in NX demand
45. Consider the market of Loanable Funds. What do the supply and demand curve represent?
46. What is the market for foreign-currency exchange? The demand? The supply?
47. Why is NX=NCO?
48. Be able to draw the equilibrium in an open economy.
49. Be able to evaluate the effect of policy changes in the 3-diagram equilib. thoroughly
50. What is a “capital flights”. Show its effect on the above equilibrium.
51. What is aggregate output in the short run according to Keynes?
52. What are the four components of aggregate expenditure?
53. What are the primary determinants of Consumption Demand? Explain the dependence.
54. Define: the marginal propensity to consume
55. Elaborate: Permanent Income Hypothesis, PIH plus Rational Expectations, Life Cycle Hypot.
56. What is Investment and why is it important?
57. What are the principal determinants of Investment demand?
58. Be able to explain how interest rate fluctuations affect borrowing/profitability of projects.
59. When does the Investment demand Curve Shift?
60. Why does the Aggregate Demand curve slope downward?
61. Be able to explain the effect of price level changes on each of AD/AE components
62. When does the AD curve shift? Why?
63. What is long run aggregate supply?
64. What is the shape of the LRAS curve?
65. What is the short run aggregate supply?
66. Draw and explain SRAS under completely fixed prices and completely flexible prices.
67. Why is the SRAS upward sloping?
68. List all the reasons why firms might have difficulty adjusting prices when AD changes.
69. Draw a Macroeconomic Equilibrium.
70. Show and explain an Inflationary and a Recessionary Gap.
71. Thoroughly explain the steps of transition from the short run to the long run after a shift of AD in the macroeconomic equilibrium diagram.

Slides 4/11/2007

Slides 4/9/2007

Slides 4/6/2007

Slides 4/4/2007

Helpful Links and Practice Problems

A Review Test on AS and AD (with answers)
http://www.sparknotes.com/economics/macro/aggregatesupply/problems_2.html
http://www.sparknotes.com/economics/macro/aggregatesupply/quiz.html

Notes on the AS&AD framework and LR Adjustment Mechanism
http://www.sparknotes.com/economics/macro/aggregatesupply/section3.rhtml

Practice Problems (VERY useful!) - with answers
http://www.sparknotes.com/economics/macro/aggregatesupply/problems1.html
http://www.sparknotes.com/economics/macro/aggregatesupply/problems3.rhtml

More on SRAS

Aggregate supply is determined by the supply side performance of the economy. It reflects the productive capacity of the economy and the costs of production in each sector.

Shifts in the SRAS curve can be caused by the following factors:

• changes in size & quality of the labour force available for production

• changes in size & quality of capital stock through investment

• technological progress and the impact of innovation

• changes in factor productivity of both labour and capital

• changes in unit wage costs (wage costs per unit of output)

• changes in producer taxes and subsidies

• changes in inflation expectations - a rise in inflation expectations is likely to boost wage levels and cause AS to shift inwards

Expected Income Theories

Hey Guys,

These are a couple of excellent websites for the theories we talked about in class. Have a look!

Life Cycle Hypothesis:
http://www.ingrimayne.com/econ/FiscalDead/LifeCycle.html

Permanent Income Hypothesis:
http://www.ingrimayne.com/econ/FiscalDead/PermIncome.html

Rational Expectations:
http://en.wikipedia.org/wiki/Rational_expectations