### Econ100b Macroeconomics Mid-Term-2 Review

 For True/False Questions – keep in mind that being correct in the “true/false/uncertain” sense will only buy you one or two points out of the five possible. Graders are instructed that [paraphrasing] “four points may be fully correct, but not quite excellent work” in terms of one's explanation as to why the answer is true/false/uncertain. Thus, my advice to you: study for over the top, fully correct & comprehensive & non-rambling answers. I do my best to give you solid examples of those below. If output is below potential, unemployment will be higher than its natural rate.     See page 228+  Okun’s Law. Unemployment and short-run output are negatively related.     See page 228+  Okun’s Law. If output is above potential, then inflation will fall over time.     See page 224+  Phillips curve.     Solution (Phillips curve) The Phillips Curve predicts a negative relationship between output fluctuations and the change in inflation.     See page 224+  Phillips curve. In the IS equation, if   then short-run output       See page 246 (of Jones Macro Econ) Suppose that initially . Then there is a demand shock to consumption where and the Then short-run output will rise by 1%    See page 246-247 (of Jones Macro Econ)  The fiscal stimulus packages shifts the AD curve up.    See the AS/AD chapter. If income in the UK increases, this would cause the AS curve in the US to shift to the right.     See Chapter on AS/AD Framework. Example 3 “A Positive AD Shock”.     Solutions (AS Query) If consumption increases by a constant share of short-run output, economic shocks cause larger output fluctuations.    See the IS Curve chapter. Multiplier effects.    Solution (Consumption Multiplier) Long Problems - each 'long problem' usually accounts for a quarter of the test's points. Worth about five true/false problems in total. Long problems center around one of the major topics in the class (the Solow Model worked through and applied, the Romer model worked through & applied, so on). Dec 9 2009 Final Long Problem 1Nov 8, 2010 Practice Mid-Term 3 - Long Problem 1Nov 22 2010 Practice Mid-Term 4 - Long Problem 2March 17 2010 Final. Long Problem 1