This is not graded for me. But I would love to read someone else's explanations. I think it makes sense but then when I continue reading the weird book, I get lost as if I read the same thing but in a different meaning.

Thank you!

Ch6

1. Define and measure GDP

A.GDP Definition

1. Definition of GDP

2. What is final good or service? Give example.

3. What is intermediate good? Give example.

4. What is not counted?

B.GDP Measured by Components of Demand

1. Consumption Expenditure, example.

2. Investment, example.

3. Government Expenditure on Goods and Services.

4. Net Exports of Goods and Services.

5.Demand side total Expenditure = C + I + G + (Net Export) = GDP; where I includes physical capital investment, residential investment, and changes in inventory

C. GDP Measured by What is Produced: Durable goods, nondurable goods, services, structures, change in inventories, and their corresponding percentage of total.

2. Distinguish between nominal GDP and real GDP

A.Real GDP vs. Nominal GDP

C.Calculate Real GDP and Nominal GDP by using base year prices and quantities

(review instructor lecture ch.6 powerpoint slides about how to calculate nominal

and real GDP).

3. Tracking Real GDP over Time: The business cycle, identify the peak, recession, trough, and expansion.

Ch8a and 8b

1. Define the unemployment rate and other labor market indicators.

A.Two Main Labor Market Indicators

1. Who's in or out of labor force (review the chart)

2. The Official Unemployment Rate (U3): define and calculate. 3. The Labor Force Participation Rate: define and calculate.

B.How does alternative Measures (Hidden Unemployment) affect Unemployment Rate (lecture note)

1. Discouraged Workers

2. Part-Time Workers (underemployed) due to economic reasons.

2.Describe the sources and types of unemployment, define full employment, and explain the link between natural unemployment and potential real GDP.

A. Define Cyclical Unemployment

B. Structural Unemployment

C. Frictional Unemployment

D. Definition of Natural Rate of Unemployment; Factors affect the NRU (Lecture)

1. Demographic Changes--The Age Distribution of the Population, e.g. young workers, middle age, retiring group.

2. The Pace of Structural Change

3. Social or Institutional change, such as internet and websites; Government Policies, such as minimum wage or unemployment insurance benefit.

E.Unemployment and Real GDP

1. When actual unemployment rate is equal to natural rate of unemployment, real

GDP is equal to potential GDP, and is at full employment.

2. When actual unemployment rate is higher than natural rate of unemployment,

what happens to real GDP as compare to potential GDP?

3. When actual unemployment rate is lower than natural rate of unemployment,

what happens to real GDP as compare to potential GDP?

Ch9

1. Tracking Inflation and Explain what the Consumer Price Index (CPI) is and how it is calculated. (Also Review class work and lecture note)

A.Construct the CPI:

B.Calculate the Cost of the Market Basket of different year

C. Calculate CPI by using the cost of certain year to the cost of base year D. Calculate Inflation rate

2.Explain the limitations of the CPI and describe other measures of the price level.

A.Sources of Bias in the CPI

1. New Goods Bias

2. Quality Change Bias

3. Substitution Bias

B.Consequences of the CPI Bias (lecture note)

1. Distortion of Private Contracts

2. Increases in Government Outlays

C. Alternative Measures of the Price Level and Inflation Rate

1. GDP Deflator (also from ch.6)

2. Personal Consumption Expenditures (PCE) Price Index (lecture)

3. PCE Price Index Excluding Food and Energy (lecture)

4. Producer Price Index

5. Employment Cost Index

3. Adjust money values for inflation and calculate real wage rates and real interest rates.

A.Nominal GDP and Real GDP (also from ch.6)

B.Nominal Interest Rate and Real Interest Rate (lecture)

Ch 4 Financial Market

1. Explain how borrowing and lending decisions are made and how these decisions interact in the financial (loanable funds) market. Section 4.2 and Lecture Notes.

A.Define financial market and the function of it (borrowing and saving funds).

B.The Demand for Loanable Funds; who demands for funds: demand means borrowing funds for credit spending, private investment spending, government

budget deficit, or U.S. investing abroad (i.e. foreigners borrow from U.S.).

1.Demand for Loanable Funds Curve; a quantity change is a movement along

the curve when real interest rate changes.

2.Change (shifting) in the Demand for Loanable Funds; due to expected profit,

economic expansion or contraction, or technology changes.

C.The Supply of Loanable Funds; who supplies funds: supply means savings, investing in stocks or bonds, budget surplus, or foreigners invest stocks or bonds here.

1.The Supply of Loanable Funds Curve; quantity change is a movement along

the curve when real interest rate changes.

2.Change (shifting) in the Supply of Loanable Funds; due to disposal income,

wealth, expected future income, or default risk.

D.Equilibrium in the Loanable Funds Market; analyze the change in real interest

rates as a result of either a change in demand or change in supply of loanable funds (lecture and class work).

Ch7 and Ch19.1 and 19.2

1. Explain the sources of economic growth and labor productivity growth.

A. Rule of Law and Healthy Climate for Economic Growth

B. Labor Productivity and Aggregate Production Function

1. Workforce

2. Capital Deepening: Human capital and Physical capital

3. Discovery of New Technologies

C.Combined Influences Bring Labor Productivity Growth

D. Real GDP per Capita: measure of prosperity and standard of living

E. Labor Productivity or Output per labor hour (real GDP/workers hours)

2. Describe policies that speed economic growth.

A.Preconditions for Economic Growth

1. Economic Freedom

2. Property Rights

3. Markets

B.Policies to Achieve Faster Growth

1. Create Incentive Mechanisms

2. Encourage Saving and Investment

3. Encourage Research and Development

4. Encourage International Trade

5. Improve the Quality of Education

3.Define and calculate the economic growth rate, and explain the implications of sustained growth.

A.Calculate Real GDP Growth Rates, Real GDP per Capita and growth rate

B. Rule of 72

C. Future value

D. Economic convergence