1. Macroeconomics ECON 2301 Spring 2008 Marilyn Spencer, Ph.D. Professor of Economics Review of Chapters 14, 15 & 16 April 28, 2009

2. Third Exam: April 30 100 points possible Miller’s Chapters 14, 15 & 16  25 multiple choice questions, worth 4 points each (100 points total) Will need to write an bubble in your name & ID# Will need to place answers on Scantron bubble sheet, along with your name, ID#, course & section #’s

3. Test Resources Used Please check any applicable box concerning "fees" for test resources you plan to use DURING the exam:  3x5 card with notes, 5 test points  textbook and notebook, 15 test points  information from others,100 test points  Will NOT use additional resources* * Two (2) points will be added to your score if you choose to NOT use any of these test resources. Name (please print):____________________ ID #:______________________ Signature: ___________________________

4. 14-4 Chapter 14 Learning Objectives: 1.Explain how federal government budget deficits occur 2.Define the public debt and understand alternative measures of the public debt 3.Evaluate circumstances under which the public debt could be a burden to future generations 4.Discuss why the federal budget deficit might be measured incorrectly 5.Analyze the macroeconomic effects of government budget deficits 6.Describe possible ways to reduce the government budget deficit

5. Chapter 14 Exam Question Topics: ÜFederal budget deficit, surplus or balanced budget ÜLargest spending category of the federal budget ÜHow the federal government finances a budget deficit ÜHow a budget deficit can crowd out private spending ÜPublic debt: gross v. net burden to future generations: paying for it ÜHow to reduce the deficit

6. 15-6 Chapter 15 Learning Objectives 1.Define the fundamental functions of money 2.Identify key properties that any goods that function as money must possess 3.Explain official definitions of the quantity of money in circulation 4.Understand why financial intermediaries such as banks exist 5.Describe the basic structure of the Federal Reserve System 6.Discuss the major functions of the Federal Reserve

7. Chapter 15 Exam Question Topics: ÜFour major functions of money ÜIf something acts as money, what properties it must have ÜCommodity money v. fiduciary money ÜImportance and major role of financial intermediaries ÜFederal Reserve System (Fed) The major components Its major responsibilities

8. 16-8 Chapter 16 Learning Objectives 1.Describe how the Federal Reserve assesses reserve requirements on banks and other depository institutions 2.Understand why the money supply is unaffected when someone deposits in a depository institution funds transferred from a transactions account at a another depository institution 3.Explain why the money supply changes when someone deposits in a depository institution funds transferred from the Federal Reserve System

9. 16-9 Ch. 16 Learning Objectives (cont'd) 4.Determine the maximum potential extent to which the money supply will change following a Federal Reserve purchase or sale of government securities 5.Discuss the ways in which the Federal Reserve conducts monetary policy 6.Explain the essential features of federal deposit insurance

10. Chapter 16 Exam Question Topics:  Fractional reserve banking  The effect of a new deposit (or withdrawal) on a single bank  The effect of a new deposit from outside the banking system on the amount of money in the banking system  Formula for the maximum money (deposit expansion) multiplier – and how to use that formula  Three tools of monetary policy  Most often used tool  Least often used tool  How/why the Fed conducts expansionary (or contractionary) monetary policy  Federal Deposit Insurance

11. Good Luck!!!