This midterm will be held in person

  • You are allowed a pencil or pen and are allowed to write on the exam.
  • You will be required to use a pencil to bubble in your answers.
  • A calculator will be required but you cannot use your phone or computer.
  • No headphones allowed.
  • No outside paper allowed.

Some materials to study

  • Go back through readings & terms for all chapters related to modules and video lectures 1-3 (lecture 0 is not specifically on exam)
  • Review CQ1, CQ2, and CQ3 paying close attention to the problems listed below:
    • CQ1: #1, 7, 11, 13
    • CQ2: #8, 10, 20, 24, 27, 28, 29, 30, 31, 32, 33, 34
    • CQ3: #5, 10, 11, 15, 17
    • Review FW0-4 and VQ2 for more help. Yes, please review FW4, as some questions may show up on the test based on what is covered on Tuesday.
  • Get a good grasp on the big questions. The exam is not limited to this, but these are the major point value questions.
    • Opportunity cost, comparative and absolute advantage
    • Cost benefit & decisionmaking
    • Factors of production
    • Listen to podcast related to motivation for trade
    • Watch video “Planet Money Makes a T-Shirt”.
    • Rate of change equation: $\%\Delta=\frac{New-Old}{Old}\times 100$
      • Same as $\%\Delta=\left(\frac{New}{Old}-1\right)\times 100$
    • Compound growth (a.k.a. present value or future value) equation: $PV=\frac{FV}{(1+i)^n}$
    • Rule of 70 (or 72) $\frac{70}{g\text{ in percent}} = \text{Approximate time to double}$
    • Inequality within & between countries over time
    • Phases of business cycle
    • Fiscal v. Monetary policy
    • Labor market statistics: unemployment rate (U-3 or official): $\frac{\text{unemployed}}{\text{unemployed+employed}}$
    • Labor market statistics: unemployment rate (U-6): $\frac{\text{unemployed+involuntary part time+discouraged & marginally attached}}{\text{unemployed+employed+discouraged & marginally attached}}$
    • Labor market statistics: labor force participation rate: $\frac{\text{unemployed+employed}}{\text{working-age population}}$
    • Labor market statistics: employment to population ratio: $\frac{\text{employed}}{\text{working-age population}}$
    • Types of unemployment: frictional, structural, & cyclical
    • Natural rate of unemployment
    • Okun’s Law: $\frac{Y-Y^*}{Y^*}=-2(u-u^*)$
    • Price level, inflation, deflation, disinflation, accelerating inflation (and how to calculate given data)
    • Fisher equation: $r=i-\pi$
    • Money’s functions
    • Assets & wealth v. income, net income, & savings: which are stocks & flows?
    • Monetary aggregates: $\text{M0}=\text{Reserves}+\text{Currency & coins in circulation}$
    • Monetary aggregates: $\text{M1}=\text{Currency & coins in circulation}+\text{Deposits}+\text{Travelers Checks}$
    • Monetary aggregates: $\text{M2}=\text{M1}+\text{Savings (MMDA)}+\text{MMMF}+\text{Small-denominated time deposits (CDs)}$
    • What happens to M1/M2 if we change Savings (MMDA) to M1?
    • Balance sheets: $\text{assets}=\text{liabilities}+\text{net worth}$
    • Importance of capital requirements & reserve requirements
    • Leverage ratio
    • Fed & its structure (who is chair?) and the FOMC structure
    • Central bank tools, targets, & goals
    • Review and practice problems calculating unemployment rates, inflation rates, interest rates and GDP growth rates
    • New Chapter for banking please read!!!
      • Firm structure & information issues (principal-agent, asymmetric information)
    • Moral hazard & adverse selection
    • Gini coefficients & Lorenz curves - can you draw and solve???
    • Still to be discussed in class on Tuesday, prepare for:
    • Stock pricing and returns,
      • $\frac{Div_1}{i-g}$ or
      • $P=\frac{\text{Future Price}+\text{Dividends}}{(1+i)}$
    • $\text{Div Yield}=100\times \frac{\text{Div}}{\text{Price}}$
    • Bond pricing and returns
      • $\frac{C_1}{(1+i)^1}+\frac{C_2}{(1+i)^2}+\ldots+\frac{C_n}{(1+i)^n}+\frac{F}{(1+i)^n}$
    • Relationship between interest rates and bond/stock prices

HELP on Compound Growth Equations (i.e., the Present Value Formula) and Gini Coefficients

HELP on Capital & Labor Markets and Unemployment

HELP on Banks and Lending