The three midterm multiple-choice exams will consist of between 30 and 50 questions.The multiple choice questions on these exams will be directly correlated to the essay questions/learning objectives listed below and will also contain questions from the Chapter Reading Quizzes.

This exam will cover material from chapters 10, 11, 12, and maybe 13

 
30. The Keynesian Framework of Analysis I: The Keynesian Consumption Function I (Chapter 10)
    1. What are the basic characteristics of the Keynesian consumption function?
    2. What is meant by "autonomous consumption"?
    3. What are the definitions of:
       1. Marginal Propensity to Consume,
       2. and Marginal Propensity to Save?
    4. How are MPC and MPS related?
    
    
31. The Keynesian Framework of Analysis II: The Keynesian Consumption Function II (Chapter 10)
    To show your understanding of the Consumption function, build a table with at least six income levels showing the following information:
    1. Disposable Income,
    2. Change in Disposable Income,
    3. Consumption,
    4. Change in Consumption,
    5. Marginal Propensity to Consume,
    6. Saving,
    7. Change in Saving,
    8. Marginal Propensity to Save.
       
    
    
32. (Chapter 10) The Keynesian Framework of Analysis III: The Total Expenditures/Total Production Model
    1. List and Explain the three simplifying assumptions made by the Simple Keynesian Model.
    2. Show on a 45⁰ graph how to derive a Total Expenditures Curve.
    3. Using TE/TP graphs, show on separate graphs:
       1. The economy at Full Employment equilibrium.
       2. The economy at equilibrium with a Recessionary Gap.
       3. The economy at equilibrium with a Inflationary Gap.
    
    
33. (Chapter 10) The Multiplier Effect.
    Define what the multiplier is AND explain how and why it works.
    Use a table with rounds of spending and a graph with a 45⁰ Reference Line to help illustrate your answer.
    
    
34. (Chapter 11) Fiscal Policy
    1. What is fiscal policy?
    2. What is expansionary fiscal policy?
    3. What is automatic fiscal policy?
    4. What is discretionary fiscal policy?
    5. What is a budget surplus?
    6. What is a budget deficit? How are budget deficits related to the national debt?
       http://www.usgovernmentdebt.us/index.php
    
    
35. (Chapter 11) With the use of the Aggregate Demand and the Short Run and Long Run Aggregate Supply curves, explain and illustrate how policymakers can use fiscal policy to
    1. get the economy out of a recession.
    2. stop inflation.
    
    
36. (Chapter 11) Often a rather long period of time elapses between the start of a macroeconomic problem and the point in time when fiscal policy starts affecting the economy to hopefully correct the problem. There are a number of time lags involved here. Explain what these time lags are explain how these lags might in turn cause macroeconomic problems themselves.
    
    
37. (Chapter 11) Negative Effects of Fiscal Policy
    1. Explain in detail the three types of Crowding Out discussed in class:
       1. Direct Spending Crowding Out;
       2. Indirect Crowding Out (interest rate, I, and X-M);
       3. Price Level Crowding Out.
    2. How big is the Keynesian Fiscal Multiplier in reality then?
    
    
38. Discuss in some detail what the proximate cause of the severity of the Great Depression was according to Milton Friedman in the video  “Anatomy of a Crisis,” which is available on YouTube. Explain how this cause confirms or contradicts the cause Keyens pointed to (Topic # 28). Also discuss how a banking panic can create problems for a nation that has a fractional reserve banking system.
    a: video: https://www.youtube.com/watch?v=SWVoPrntBso;
    b: transcript: http://www.austincc.edu/sondg/handouts/macro/TranscriptFriedmanAnatomyofaCrisis.docx;
    c: handout: http://www.austincc.edu/sondg/handouts/macro/anatomyofcrisis2.pdf.

    A classical liberal explanation of the 2008 financial crisis can be found here: http://www.austincc.edu/sondg/handouts/macro/ClassicalLiberlExplanationof08FinCrisis.html.

    A very interesting podcast, The Giant Pool of Money, from National Public Radio's This American Life explaining what caused the financial/real estate crisis can be found here: https://www.thisamericanlife.org/355/the-giant-pool-of-money. This podcast lasts about 60 minutes and is amazing in that it was broadcast (5/9/08) before the real crisis hit 10/13/08.)

    Learn Liberty's explanation of the 2008 crisis starts here: https://www.youtube.com/watch?v=HO_BMxny34U&list=PL0sTE8TdlKTW4MD7OsbJFoOpNkIyjicDx.
    

39. (Chapter 12) Money
    Define money:
    1. generally.
    2. functionally,
    3. empirically (i.e., how it is measured, see HERE also),
    
    
40. (Chapter 12 and Lecture) Discuss the evolution of money from the earliest days of barter to the present day. Be specific as to what problems or technological advances led to an advancement from one stage to the next in this evolution.
    
    
41. (Chapter 12) Banking
    1. Explain how banking developed.
    2. Explain how early banks came to create money.
    
    
42. (Chapter 12) Money Creation and Destruction Process (See handout --http://www.austincc.edu/sondg/handouts/macro/moneycreation.pdf)-
    1. Explain how one bank creates money.
    2. Explain how the banking system creates money.
    3. Define the simple deposit multiplier and explain why the multiplier is not at the maximum in the real world.
    
    
43. (Chapter 13) The Federal Reserve
    1. Describe the structure of the Federal Reserve System.
    2. List and explain the functions of the Federal Reserve System.
    
    
44. (Chapter 13) Monetary Policy
    1. List the major tools of monetary policy in the Federal Reserve System's possession.
    2. Explain how they work and which one is the most important one. (Hint: use an inverted pyramid graph like the one discussed in class to explain how the tools work.)
    
    
45. (Chapter 14) The Equation of Exchange
    1. Explain in detail how we can derive the equation of exchange from the definition of the income velocity of money.
    2. Explain the simple quantity theory of money using the equation of exchange.
    3. Also illustrate the conclusions of the simple quantity of money in an AD-AS framework.
    
    
46. (Chapter 14) Monetarism
    1. What is “Monetarism”?
    2. How do monetarists derive the demand for money?
    3. In the AD-AS framework, illustrate and discuss what the monetarists think would happen if there were an increase in the supply of money.
    
    
47. (Chapter 14) In the context of the AD-AS framework, illustrate and discuss:
    1. One-Shot Demand-Side induced inflation.
    2. One-Shot Supply-Side induced inflation.
    3. Continued and accelerating Demand-Side induced inflation.
    
    
48. (Chapter 15 and Lecture) The Keynesian Demand for Money
    Discuss the Keynesian demand for money.
    1. Why does it slope downward and to the right?
    2. Using supply and demand curves for both the money market and the bond market explain how interest rates can be changed by monetary policy.
    
    
49. (Chapter 15) The Keynesian Transmission Mechanism
    • Illustrate and explain the Keynesian transmission mechanism whereby increases in the money supply can affect AD and hence Real GDP.
    
    
50. (Chapter 15) Illustrate with graphs and explain two reasons Keynesians believed monetary policy might have little effect on AD and hence Real GDP.
    
    
51. (Chapter 15) Monetary Policy and the Removal of Recessionary or Inflationary Gaps
    1. Explain what Monetary Policy is and how it is carried out by the Federal Reserve System.
    2. Explain what the Fed should do to remove a recessionary gap. Illustrate the effect of its policy with an AD/SRAS/LRAS graph.
    3. Explain what the Fed should do to remove an inflationary gap. Illustrate the effect of its policy with an AD/SRAS/LRAS graph.
    
    
52. (Chapter 15) The Effects of Monetary Policy
    1. State the cases for and against activist monetary policy.
    2. What do the non-activists mean when they speak of a monetary rule?
     
53. (Chapter 11) Government Revenues and Expenditures
    1. Describe the major sources of Federal tax revenues and list the portion (percentage) of total tax revenues each tax brings in to the Federal Government.
    2. Define what is meant by each of the following income tax regimes:
       1. progressive income tax
       2. proportional income tax
       3. regressive income tax
    3. Figure out the tax liabilities of the following people and their average and marginal tax:
       1. a single person earning $10,000 a year.
       2. a single person earning $20,000 a year.
       3. a single person earning $30,000 a year.
       4. a married couple filing jointly earning $30,000 a year.
       5. a married couple filing jointly earning $80,000 a year.
       6. a married couple filing jointly earning $150,000 a year.
    4. What are the major Federal Government spending programs?
       1. Describe them and state what percentage of total spending each represents.
       2. What percentage of the budget is spent on defense (military) programs of all types?
       3. What percentage of the budget is spent on income transfer programs of all types?
    
    
54. (Lecture and links) Who bears the burden to the national debt: the current generation or future generations? Discuss each case. (For more on the U.S. Natioanl Debt, see also: a) Just Facts: U.S. Natiional Debt; and b) Who owns the U.S. National Debt?)