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Final

ECON 201 Final: Complete and Comprehensive 47 Page Final Exam Study Guide - Fall 2015Premium


Department
Economics
Course Code
ECON 201
Professor
John Neri
Study Guide
Final

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ECON 201 – Principles of
Macroeconomics
Final Exam Study Guide
University of Maryland – Fall 2015

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ECON201-Lecture 1-Introduction to Macroeconomics
Where you are:
Econ 201, Principles of Macroeconomics
Monday and Wednesday from 2:00 to 3:15pm
Discussion – Friday from 1:00pm – 1:50pm
Course website: http://www.terpconnect.umd.edu/~jneri/Econ201
Who am I:
Dr. John Neri
Office Location: 1102B Morrill Hall
Office Hours: Monday and Wednesday 10:30am – 11:30am
Illness of Family Emergency and Exams Steps to Follow
Pre-Notification: If you are sick or have a family emergency and cannot take an
exam, you must contact Professor Neri before the exam. You must fill out the
Request for Excuse form.
Written Verification: Illness or family emergency must be subsequently verified in
writing
If both steps are not followed, you will not be excused from the exam
Students using the DSS facility must meet with me within the first 2 weeks of
classes.
Advice
Course is cumulative.
Important to keep up with the lectures and readings each week
We will have practice quizzes in the Friday discussion and review the answers
The collection of quizzes from the Friday discussion constitutes a practice exam.
I do not post old exams.
What/who is…
The current unemployment rate in the US…is 5.3%
Fiscal policy: government tax policy and government spending policy
The federal government budget deficit… difference between what money taken
in and money spent. For the fiscal year 2016, the budget deficit is estimated to
be $474 billion.
The Federal Reserve System…is the Central Bank; they control the money
supply.
The head of the Federal Reserve System…is Janet Yellen.
Monetary policy… is the actions of the central bank that determines the size and
rate of growth of the money supply which consequently affects interest rate.
Monetary policy is maintained through actions like modifying the interest rate,
buying/selling government bonds, and changing the amount of money banks are
required to keep in the reserves.
A Little Microeconomic History
19th and early 20th century classical theory/classical economics focused on
microeconomics
othey argued that market forces drive economy toward full employment
and that markets clear naturally
oIn Macro speak: “The economy self-corrects”

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oIf unemployment exists, wages would adjust (fall) to move he economy
back to full employment
The Great Depression occurred between 1929 to 1933
oIt was actually a worldwide economic crisis
oTotal amount of goods and services produced in the US fell by >25%
oUnemployment up to 25% for an extended period of time
1936: John Maynard Keynes, “The General Theory of Employment, Interest, and
Money”
oReplaces classical theory with theory based on
Aggregate (total demand)
Wage and price rigidities
Markets don’t clear and it may take long time for the economy to
self-correct
Birth of macroeconomics as a field separate from
microeconomics.
Keynes believed government should intervene in the economy to stimulate the
level of output and employment.
oDuring periods of low private demand, the government should take action
to stimulate aggregate (total) demand to lift economy to full employment.
oKeynes was not a socialist, he felt capitalism could at times be unstable.
Private demand and public demand?
oWhat can the government do to stimulate aggregate total demand to lift
the economy out of recession?
Big Question: Does this stuff work? → The debate rages on to this day.
Chapter 5: An Introduction to Macroeconomics
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