Exam Review for Chapter 4
Learning Objective: 27-01 Describe the business cycle and its primary phases.
Learning Objective: 2702 Illustrate how unemployment is measured and explain the different types of unemployment.
Learning Objective: 27-03 Explain how inflation is measured and distinguish between costpush inflation and demand-pull inflation.
Learning Objective: 27-05 Discuss how inflation may affect the economys level of real output.
Learning Objective: 28-01 Describe how changes in income affect consumption (and saving).
Learning Objective: 2802 List and explain factors other than income that can affect consumption.
Learning Objective: 28-03 Explain how changes in real interest rates affect investment.
Learning Objective: 2805 Illustrate how changes in investment (or one of the other components of total spending) can in
crease or decrease real GDP by a multiple amount.
Learning Objective: 29-01 Explain how sticky prices relate to the aggregate expenditures model.
Learning Objective: 2902 Explain how an economys investment schedule is derived from the investment demand curve
and an interest rate.
Learning Objective: 2903 Illustrate how economists combine consumption and investment to depict an aggregate expen
ditures schedule for a private closed economy and how that schedule can be used to demonstrate
the economys equilibrium level of output (where the total quantity of goods produced equals the
total quantity of goods purchased).
Learning Objective: 2904 Discuss the two other ways to characterize the equilibrium level of real GDP in a private clos
ed economy: saving = investment; and no unplanned changes in inventories.
Learning Objective: 2906 Explain how economists integrate the international sector (exports and imports) into the aggre
gate expenditures model.
Learning Objective: 2907 Explain how economists integrate the public sector (government expenditures and taxes) into
the aggregate expenditures model.
Learning Objective: 29-08 Differentiate between equilibrium GDP and fullemployment GDP and identify and describe the nature and causes of "recessionary expenditure g
aps" and "inflationary expenditure gaps."
Review the assigned problems given in class and the articles in the textbook