Assignment:
You should be able to explain and apply the following concepts:
What role is played by the concept of scarcity in the study of economics?
How does society face a "trade off" between equity and efficiency? How might government programs designed to address one problem exacerbate others?
What is the role of absolute and comparative advantage in understanding trade patterns between nations?
How does one use year-to-year changes in the Consumer Price Index to measure changes in real earnings? [Example: if your salary rose 3% this year (as compared to last), but prices rose by 5%, are you better off?]
You should be able to explain the various components of GDP and calculate the numerical value of GDP from data provided.
You should be able to explain the limitations of the use of the Consumer Price Index as a measure of changes in the true cost-of-living. Mankiw mentions three problems associated with the CPI: substitution bias, the introduction of new goods, and unmeasured quality changes. You should be able to name and explain these problems.
You should be able to explain the difference between the major price indexes discussed in the text (Consumer Price Index, Producer Price Index, GDP Deflator).
You should be able to explain the role played by productivity gains in increases in a nation's economic welfare over time.
You should be able to explain the difference between positive and normative statements regarding the economy, and you should be able to identify statements regarding the economy as being positive or normative.
You should understand and be able to explain different federal government budget outcomes - deficit, balance, surplus - and the relationship between the federal budget outcome and the resultant level of aggregate Investment spending (at full employment).
You should be able to explain why (in the simple macro model of Chapter 8 - without foreign trade) Investment spending equals Savings.
You should be able to explain the loanable funds approach to the determination of interest rates and the level of Investment spending.
You should be able to explain the "crowding out" theory of how government deficits are said to reduce private investment spending (at full employment). Could one argue, for example, that the current fiscal deficit at the federal level have/had "crowding out" consequences for the economy as a whole? What role does the proximity of the economy to full employment (or full capacity) play in the crowding out debate?
You should be able to explain the relationship between formal education achieved and average earnings levels. How does the relationship between education and earnings vary by gender (if at all)? Does the gender/earnings relationship change when we compare only full-time, year round workers, and if so, why?
You should be able to describe (in general terms) the current state of the U.S. economy. What stage of the business cycle (expansion or contraction) are we in now? What are the central economic problems facing the American economy at present, and what actions (if any) have been taken (within the last five years) by the Congress, the Federal Reserve, the U.S. Treasury, and Central Banks around the world to deal with the economic challenges of the last five years?
You should be able to describe the general employment/unemployment situation in the American economy at present. What has happened to the total number of jobs and the national unemployment rate in the last 12 months? Have changes in the "labor-force participation rate" (over the last few years) had an impact on our national unemployment rate? Does the unemployment rate vary by gender, age, and occupation? Explain (in general terms) what these differences are.
You should be able to explain the current overall budget outcome for the federal government (deficit, surplus, or balance) in the United States. Explain how the eventssince January 2008 have pushed the budget outcome in one direction or another?