Economics Dr.

Sauer

ECO 1040 Exam 2 Information

Time and Place Exam 2 will be given during our regular class on Wednesday March 28th. You have until the end of our regular class period to finish. If you arrive late to class, you will not be given additional time to complete the exam. If you receive exam accommodations through the Access Center, youll need to bring your exam information form to class or office hours for me to sign. Please do this in a timely manner so I can make sure the Access Center receives a copy of your exam in a timely manner. If you miss this exam, Exam 3 will be weighted to compensate.

What to Bring Please bring the following to the exam: - #2 pencil and eraser - Scantron bubble sheet (available for purchase at the bookstore)

What to Expect This exam is closed book, closed notes, and closed neighbor. You may not use any resources other than your brain. You may ask Professor Kate clarification questions during the exam depending on the nature of your question, she may reserve the right not to answer.

Exam Format The exam will consist of 50 multiple choice problems. Exam Content The exam covers material from chapters 7 - 13. The number of questions coming from each will be approximately equal. Exam Purpose: Assess your ability to meet the following course learning objectives

Describe the interpretation of fundamental macroeconomic variables. (ch 9) Describe the mechanics behind the USs monetary policy and fiscal policy. (ch 9, ch 10) Identify/define fundamental concepts of international trade and international finance. (chs 11-13)

Primary Concepts This is a list of concepts from the reading and from lectures. These are the concepts that you are expected to have learned and you will be tested on. Familiarity with these concepts would be commensurate with a C grade. If you are targeting a higher grade, then youll also want to review all of your course materials in greater detail. Chapter 7: Financial Markets - describe the four financial needs that financial instruments meet - explain terms like futures contracts, mutual funds and credit default swaps - explain the efficient markets theory - describe some of the financial market insights from behavioral economics - apply basic economic principles to financial strategies to identify sound strategies - explain stocks and bonds, including how they are priced - use the present value and future value formulas correctly

Chapter 8: The Power of Organized Interests - explain why a policy with economic consensus might not be politically pursued - identify some examples of narrow interests / special interests - describe some of the costs and benefits of subsidies and regulations - explain why we are all part of a narrow interest of some type - describe earmarks - explain why voters may be rationally ignorant - describe the different types of voting systems and their pros and cons - perform a Borda Count - explain and demonstrate the median voter theorem

Chapter 9: Keeping Score - describe measures of economic well-being - describe why GDP is used as an economic indicator and some of its drawbacks - identify some common causes of recessions - describe the causes and consequences of the 2007 recession - explain how fiscal policy works in theory and practice - describe key economic indicators (e.g. unemployment, poverty, income inequality) - identify parts of the business cycle - calculate inflation and unemployment

Chapter 10: The Federal Reserve - describe the purpose, structure, responsibilities and tools of the Federal Reserve - explain how the Fed directly controls the money supply - explain how the Fed indirectly controls interest rates in the economy - identify several costs of inflation and the problems of deflation - identify the functions of money - explain the importance of a politically independent central bank - explain a monetary system vs a barter system

Chapter 11: International Economics - describe the types of exchange rate systems as well as their pros and cons - describe the typical pattern of a currency crisis - explain the relationship between the current account and national saving - describe the nature and consequences of exchange rate fluctuations - explain the theory of Purchasing Power Parity - convert prices from one currency into another currency - identify appreciating vs depreciating currency - explain how a pegged currency works

Chapter 12: Trade and Globalization - explain how economic principles dont change just because a political border is crossed - describe the benefits and costs of trade - identify the difference between absolute advantage and comparative advantage - explain the various viewpoints on sweatshops - describe the relationship between income and the environment - describe the trade pattern and trade balance - explain the different arguments regarding the significance of the trade balance - explain trade barriers - describe the WTO - identify fair trade vs free trade

Chapter 13: Development Economics - describe the role democracy and effective government institutions and public policy play in economic growth - explain the benefits and problems associated with building human capital - explain the role of geography and natural resources in economic growth - describe the impacts of trade and the participation of women on the economy - identify some ways rich nations can help developing nations as well as some of the problems - describe the cycle of poverty - explain the relationship between hunger and poverty - identify the stages of economic development - describe the goals of sustainable development - explain foreign aid and how it matters (or not) for development