Required reading:

Ch 1,2: all, pp. 1-48

Review Session: Quiz 1

ch.1 ~ 3, 6 ~ 8
Econ 201C, Winter 2018

1
 General Tips
1. READ the QUESTION carefully!!!
2. SHOW your work! Explain your REASONING!!!
- Do NOT just write down the answer.
- You are graded by what you actually write down!
3. Remember the DEFINITION
and Make use of the CONCEPT!
4. FULLY LABEL the graph!!!
- x-axis, y-axis, name of the curve
- Initial equilibrium price and quantity,
New equilibrium price and quantity.
※ Review for the Midterm 2

1. Long-run economic growth

- Real GDP per capita as a measure of long-run economic growth
* Why not real GDP or nominal GDP per capita?
- The aggregate production function
* Physical capital, human capital, technology
* Which portion is from the change in physical capital
and which portions from the technological progress?
- Diminishing returns to physical capital
- Change in physical capital → Movement along the productivity curve
Technological progress → Shift of the productivity curve
- Convergence hypothesis
* Definition
* When holds, when does not?
※ Review for the Midterm 2
2. Savings, investment spending and financial system
- The savings-investment spending identity
* S = I,
S = (Y-T-C) + (T-G), National savings = Private savings + Public saving
* S = I + NX or S+NCI = I
NX = -NCI
- The loanable funds market
* Which factors shift demand curve
and which factors shift supply curve?
- Crowding-out effect, crowding-in effect, Fisher effect
* Definition
* Graphical analysis
- Financial system: definitions!
* Liquidity, Primary tasks of financial system, Liability and asset
※ Review for the Midterm 2
3. Income-Expenditure model
- Autonomous spending
- MPC, MPS, Multiplier = 1/(1-MPC)
- Consumption function: Which factors shift consumption curve.
- Permanent income hypothesis: Definition, Implication
- Investment spending
* Planned/unplanned investment, Inventory investment
* Accelerator principle
- Income-expenditure model and Keynesian cross
* AEplanned = C + Iplanned = A + MPC * Y + Iplanned
* Income-expenditure eqm. GDP: Y = A + MPC * Y + Iplanned
* Iunplanned = GDP – AEplanned
* Which factors shift AE curve?
- Multiplier process
* ΔY = Multiplier * ΔAEplanned = 1/(1-MPC) * ΔAEplanned
- Paradox of Thrift
 All the Best!

6 9/6/2011