After reading Chapter 14, you should be able to:
1. Know the differences between a federal budget deficit, a surplus, and a balanced budget.
2. Explain the difference between the federal budget deficit and the national debt.
3. Calculate the effects of spending and taxing on the deficit and debt.
4. Know the historical trend in the U.S. budget deficits and the national debt.
5. Know the difference between the gross national debt and the net national debt.
6. Discuss whether or not the national debt will place a burden on future generations, particularly in reference to the effects of high interest rates and debt owned by foreigners.
7. Explain the relationship between the government budget deficit and the trade deficit.
8. Explain the long-run and short-run effects deficits and the debt have on real GDP.
9. Explain what is necessary for meaningful deficit reduction.
10. Explain what the impact of entitlement spending has had on deficits and the debt.

After reading Chapter 15, you should be able to:
11. Define and explain the four functions of money.
12. Indentify the key properties that any good that functions as money must possess especially in a fiduciary monetary system.
13. Define liquidity. Explain which assets are liquid, which are not, and why not.
14. Define the transactions (M1) and liquidity (M2) approaches to defining money making sure you know which components are in which definition.
15. Explain how financial intermediaries lower transactions costs, and define: "direct financing," "indirect financing," "risk," " "asymmetric information,""adverse selection," "moral hazard," "assets," and "liabilities."
16. Explain how the Fed is organized, who is included on the Board of Governors and the Federal Open Market Committee, and the structure and function of the district banks as well.
17. List and explain the functions of the Fed and who is responsible for each function?
18. Explain the process through which the Federal Reserve controls the money supply in a fractional reserve banking system.
19. Define the money multiplier and specify it in two functional forms.
20. Explain the central features of federal deposit insurance, how it can prevent bank runs, and how its activities can affect asymentric information and moral hazard.

After reading Chapter 16, you should be able to:


21. Explain the three categories of money demand, how money demand responds to changes in interest rates and GDP, and how these changes are depicted on the money demand graph.
22. Explain how the monetary policy pursued by the Fed influences interest rates and hence bond prices.
23. Explain the direct and indirect effects of monetary policy on short run AD. Include both expansionary and contractionary changes and the use of various policy tools.
24. Explain how will monetary policy affect net exports and the foreign exchange rate.
25. Define the equation of exchange. Be able to define all four variables.
26. List the assumptions made to turn the equation of exchange into the quantity theory of money. What does this theory predict?
27. Explain both expansionary and contractionary monetary policy using the three graph transmission mechanism.
28. Explain:
    a. which three interest rates are particularly relevant to carrying out monetary policy;
    b. the role of the FOMC and the Trading Desk in carrying out monetary policy; and
    c. the role of the Taylor Rule in carrying out monetary policy.
29. Explain what "credit policy" is at today's Fed, how it operates, and arguments for and against it.
30. Explain the Keynesian approach to an increase and decrease in the money supply and its effects on the interest rate and the GDP.

After reading Chapter 17, you should be able to:

31. Define active and passive policymaking. Why would policy makers prefer one or the other?
32. Define the natural rate of unemployment, cyclical, structural, frictional.
33. Show how expansionary and contractionary policy changes (either fiscal or monetary) affect the AD-AS graph, including both short run and long run changes and also be able to explain the policy implications of the short run Phillips curve.
34. Explain the importance of expectations as they relate to the Phillips curve and what changes Phelps and Friedman proposed to Phillips work.
35. Define rational expectations and explain the short run and long run policy implications of anticipated vs. unanticipated policy changes.
36. Discuss rational expectations argument about policy irrelevance and explain how this theory views the relationship between expectations and SRAS.
37. Explain the real business cycle theory and supply shocks. Be able to illustrate both harmful and beneficial supply shocks on the AD-AS graph.
38. Discuss the Keynesian justifications for active policymaking: menu costs, sticky prices and wages and bounded rationality.
39. Explain what is meant by the New Keynesian Phillips Curve and distinguish which beliefs about how the economy functions would lead an economist to advocate active or passive policymaking.
40. Explain the three elements of people's decission making process on which behavioral economists focus and what the consequences of this bounded rationality are for macroeconomic policymaking.