Example SWOT Analysis: Sedibeng Breweri Sedibeng Breweries is a medium-scale brewery located in the growing industrial centre of Selebi Phikwe, Botswana. Their product is traditionally-brewed craft beer, targeted at white collar and working class Batswana alike. Sedibeng’s primary market advantages are their company culture, consistent “quality” branding, traditional brew recipes, and commitment to rural distribution. SWOT Analysis for Sedibeng Breweries Potential Strategies for Growth Two important things for Sedibeng Breweries to focus on in the coming year, identified in the “Weaknesses” column, are: building and learning how to manage an informational website, and developing an efficient employee onboarding process and training program. Use of the internet is only growing, so ignoring this weakness for too long could have disastrous consequences. A potential business opportunity for Sedibeng Breweries is a government-subsidized export operation, ideally to target markets in neighboring countries that are very similar to Sedibeng’s target markets in Botswana so that Sedibeng’s strong marketing campaign can remain consistent. This is one area in which being a small local firm could be a major advantage for Sedibeng, but international market research and more information about the government export initiatives are required. Example SWOT Analysis: Botanical Bounty About the Company Botanical Bounty is an Oregon-based perennial farm that grows a variety of botanical, medicinal plants. This family-owned farm has been in existence for two years, initially operating as a hobby for the owners—who have training in plant biology—rather than as a profit-producing business. SWOT Analysis for Botanical Bounty Potential Strategies for Growth Botantical Bounty needs to establish its reputation as a highly-efficient, high-potency medicinal herb grower, and one effective and inexpensive way to do that would be to lean on loyal customer testimonials in the company’s marketing strategy. Botanical Bounty also needs to establish a strong sales channel with herbal supplement manufacturers, and should invest plenty of energy into building those relationships and establishing Botanical Bounty as a reliable vendor. Example SWOT Analysis: UPer Crust Pies About the Company UPer Crust Pies is a specialty meat and fruit pie cafe in Michigan’s Upper Peninsula that sells hot, ready-to-go pies and frozen take-home options, as well as an assortment of fresh salads and beverages. The company is planning to open its first location in downtown Yubetchatown, and is very focused on developing a business model that will make it easy to expand quickly and that opens up the possibility of franchising. SWOT Analysis for UPer Crust Pies Potential Strategies for Growth UPer Crust Pies needs to investigate its options for obtaining capital. Funding a new business can take time, and the sooner UPer Crust Pies gets started on this process, the better. Because UPer Crust Pies ...

1. Example SWOT Analysis: Sedibeng Breweri
Sedibeng Breweries is a medium-scale brewery located in the
growing industrial centre of Selebi Phikwe, Botswana. Their
product is traditionally-brewed craft beer, targeted at white
collar and working class Batswana alike. Sedibeng’s primary
market advantages are their company culture, consistent
“quality” branding, traditional brew recipes, and commitment to
rural distribution.
SWOT Analysis for Sedibeng Breweries
Potential Strategies for Growth
Two important things for Sedibeng Breweries to focus on in the
coming year, identified in the “Weaknesses” column, are:
building and learning how to manage an informational website,
and developing an efficient employee onboarding process and
training program. Use of the internet is only growing, so
ignoring this weakness for too long could have disastrous
consequences.
A potential business opportunity for Sedibeng Breweries is a
government-subsidized export operation, ideally to target
markets in neighboring countries that are very similar to
Sedibeng’s target markets in Botswana so that Sedibeng’s
strong marketing campaign can remain consistent. This is one
area in which being a small local firm could be a major
advantage for Sedibeng, but international market research and
more information about the government export initiatives are
required.
Example SWOT Analysis: Botanical Bounty
About the Company
Botanical Bounty is an Oregon-based perennial farm that grows
a variety of botanical, medicinal plants. This family-owned
farm has been in existence for two years, initially operating as a

2. hobby for the owners—who have training in plant biology—
rather than as a profit-producing business.
SWOT Analysis for Botanical Bounty
Potential Strategies for Growth
Botantical Bounty needs to establish its reputation as a highly-
efficient, high-potency medicinal herb grower, and one effective
and inexpensive way to do that would be to lean on loyal
customer testimonials in the company’s marketing strategy.
Botanical Bounty also needs to establish a strong sales channel
with herbal supplement manufacturers, and should invest plenty
of energy into building those relationships and establishing
Botanical Bounty as a reliable vendor.
Example SWOT Analysis: UPer Crust Pies
About the Company
UPer Crust Pies is a specialty meat and fruit pie cafe in
Michigan’s Upper Peninsula that sells hot, ready-to-go pies and
frozen take-home options, as well as an assortment of fresh
salads and beverages. The company is planning to open its first
location in downtown Yubetchatown, and is very focused on
developing a business model that will make it easy to expand
quickly and that opens up the possibility of franchising.
SWOT Analysis for UPer Crust Pies
Potential Strategies for Growth
UPer Crust Pies needs to investigate its options for obtaining
capital. Funding a new business can take time, and the sooner
UPer Crust Pies gets started on this process, the better.
Because UPer Crust Pies wants to implement such a specific
marketing strategy—targeting working families by emphasizing
that their dinner option is both healthy and convenient—the

3. company should develop a marketing plan. A key piece of that
marketing plan will be the store’s grand opening, and the
promotional strategies necessary to get UPer Crust Pies’ target
market in the door. A strong grand opening will help establish
the store’s reputation, so it is essential that the UPer Crust Pies
team feels ready for its first day. If the management team feels
unprepared for the potential large crowds, a “soft” opening
(such as an invite-only trial opening that offers free meals in
exchange for feedback) may be a smart choice.
Example SWOT Analysis: Haley’s Vintage Hats
About the Company
Haley’s Vintage Hats is an online-only business that sells
unique and affordable replicas of vintage designer hats.
Although the business is new, owner Haley Truit has been a
milliner for many years. She operates Haley’s Vintage Hats
through an Etsy storefront and hopes that it will become
successful enough that she can quit her other job and run her
dream company full-time.
View the complete pitch for Haley’s Vintage Hats.
SWOT Analysis for Haley’s Vintage Hats
Potential Strategies for Growth
Haley’s Vintage Hats should take full advantage of the
opportunities available to it as an Etsy seller; those
opportunities are part of what the company is paying Etsy to
provide. Partnering with other vintage fashion vendors on Etsy
could help Haley address her lack of a marketing background,
which she’s identified as a major company weakness—she could
piggyback on partners’ marketing efforts, or learn from a
partner who is willing to mentor her. Haley can also teach
herself by exploring free online marketing resources on Etsy,
Bplans, and elsewhere.
Haley’s expertise as a milliner makes her a great candidate for
hiring an apprentice, or intern, and developing an

4. apprenticeship program could help the company cheaply expand
its production capacity and support the increase in sales that
would come with its expanded marketing efforts.
Example SWOT Analysis: Replay Plastics
About the Company
Replay Plastics recycles plastic waste into commercially viable
products, using environmentally-friendly methods. The
company wants to capitalize on one of the recycling industry’s
highest-growth products—polyethylene terephthalate (“PET”),
which is found in post-consumer beverage and water bottles—
by establishing the western United States’ first PET recycling
plant. The recycled material from the PET plant will then be
channeled into a brand-new Replay Plastics Packaging Division,
which will produce extruded sheet plastic to sell to
manufacturers.
Read the complete business plan for Replay Plastics.
SWOT Analysis for Replay Plastics
Potential Strategies for Growth
Replay Plastics needs to investigate its options for obtaining
capital. Funding a new venture can take time, and because it’s
the step one of the long road to revenue—they must secure
funding before they begin construction, and they must complete
construction before they can begin revenue-generating recycling
operations and packaging material production—time is of the
essence. Luckily they have already written their business plan,
which is often required by prospective lenders and investors.
Replay Plastics may want to consider adding a Research &
Development team, to investigate new product possibilities and
keep the company’s operations well prepared for any changes in
state or federal environmental regulations.
Example SWOT Analysis: NovOculi
About the Company
NovOculi, Inc. is a start-up company that has designed—and

5. plans to develop and market–ophthalmological surgical tools
and a unique method of incisionless refractive correction
dubbed NICS (Non-Invasive Corneal Sculpting). Current
refractive techniques, like LASIK, require destruction of a
portion of the protective epithelial layer overlying the cornea of
the eye and are accompanied by complications resulting from
this loss of protection. NovOculi employs a method involving
iontophoresis, an ionic dye, and a wavelength-specific laser to
accomplish effective refraction without the troublesome
destruction of epithelium.
Read the complete business plan for NovOculi.
SWOT Analysis for NovOculi
Potential Strategies for Growth
NovOculi needs to investigate its options for obtaining capital.
Specifically, because NovOculi is seeking equity investments,
the company needs to look into venture capital funding and
angel investments.
A weakness that may deter investors is NovOculi’s lack of
relationship with the medical device distribution community. A
great idea is worth nothing if it can’t be implemented well, and
a key to implementation in this case is a strong sales and
distribution channel. NovOculi is going to have to figure out
how to build relationships with medical device distributors,
whether that means attending expensive industry conferences,
leveraging research relationship with institutions like Stanford
University, or developing incentives for the distributors.
Microeconomics/Macroeconomics Instructor: C. Speranzo
EXTRA CREDIT RUBRIC
For extra credit, you must follow these instructions exactly. If
done correctly, you may do up to 10 units, for which you could

6. add 10 extra credit points to your final grade
Choose an article that is at least three pages long and discusses
a concept presented in the economics’ class. This should be
only ONE page.
1. Explain the economic concept the article discusses – one or
two sentences
2. List the players involved and impacted – one or two
sentences
3. Explain your opinion on the impact the article’s concept
could/would have on the US economy
One or two paragraphs - - be very accurate and concise
Be particular in your choice of article
Use a journal/site that has intellectual quality (no Wikipedia,
etc.)
Address the important concept
Be concise
No personal articles (I, Me, my, our)
Make certain your opinion is relevant to US
economics
This gives you the opportunity to demonstrate your
understanding of economic concepts.
***All extra credit submissions are due by December 5th.
No late submissions will be accepted.
Example SWOT Analysis: Sedibeng Breweri
Sedibeng Breweries is a medium-scale brewery located in the
growing industrial centre of Selebi Phikwe, Botswana. Their
product is traditionally-brewed craft beer, targeted at white
collar and working class Batswana alike. Sedibeng’s primary

7. market advantages are their company culture, consistent
“quality” branding, traditional brew recipes, and commitment to
rural distribution.
SWOT Analysis for Sedibeng Breweries
Potential Strategies for Growth
Two important things for Sedibeng Breweries to focus on in the
coming year, identified in the “Weaknesses” column, are:
building and learning how to manage an informational website,
and developing an efficient employee onboarding process and
training program. Use of the internet is only growing, so
ignoring this weakness for too long could have disastrous
consequences.
A potential business opportunity for Sedibeng Breweries is a
government-subsidized export operation, ideally to target
markets in neighboring countries that are very similar to
Sedibeng’s target markets in Botswana so that Sedibeng’s
strong marketing campaign can remain consistent. This is one
area in which being a small local firm could be a major
advantage for Sedibeng, but international market research and
more information about the government export initiatives are
required.
Example SWOT Analysis: Botanical Bounty
About the Company
Botanical Bounty is an Oregon-based perennial farm that grows
a variety of botanical, medicinal plants. This family-owned
farm has been in existence for two years, initially operating as a
hobby for the owners—who have training in plant biology—
rather than as a profit-producing business.
SWOT Analysis for Botanical Bounty
Potential Strategies for Growth
Botantical Bounty needs to establish its reputation as a highly-
efficient, high-potency medicinal herb grower, and one effective

8. and inexpensive way to do that would be to lean on loyal
customer testimonials in the company’s marketing strategy.
Botanical Bounty also needs to establish a strong sales channel
with herbal supplement manufacturers, and should invest plenty
of energy into building those relationships and establishing
Botanical Bounty as a reliable vendor.
Example SWOT Analysis: UPer Crust Pies
About the Company
UPer Crust Pies is a specialty meat and fruit pie cafe in
Michigan’s Upper Peninsula that sells hot, ready-to-go pies and
frozen take-home options, as well as an assortment of fresh
salads and beverages. The company is planning to open its first
location in downtown Yubetchatown, and is very focused on
developing a business model that will make it easy to expand
quickly and that opens up the possibility of franchising.
SWOT Analysis for UPer Crust Pies
Potential Strategies for Growth
UPer Crust Pies needs to investigate its options for obtaining
capital. Funding a new business can take time, and the sooner
UPer Crust Pies gets started on this process, the better.
Because UPer Crust Pies wants to implement such a specific
marketing strategy—targeting working families by emphasizing
that their dinner option is both healthy and convenient—the
company should develop a marketing plan. A key piece of that
marketing plan will be the store’s grand opening, and the
promotional strategies necessary to get UPer Crust Pies’ target
market in the door. A strong grand opening will help establish
the store’s reputation, so it is essential that the UPer Crust Pies
team feels ready for its first day. If the management team feels
unprepared for the potential large crowds, a “soft” opening

9. (such as an invite-only trial opening that offers free meals in
exchange for feedback) may be a smart choice.
Example SWOT Analysis: Haley’s Vintage Hats
About the Company
Haley’s Vintage Hats is an online-only business that sells
unique and affordable replicas of vintage designer hats.
Although the business is new, owner Haley Truit has been a
milliner for many years. She operates Haley’s Vintage Hats
through an Etsy storefront and hopes that it will become
successful enough that she can quit her other job and run her
dream company full-time.
View the complete pitch for Haley’s Vintage Hats.
SWOT Analysis for Haley’s Vintage Hats
Potential Strategies for Growth
Haley’s Vintage Hats should take full advantage of the
opportunities available to it as an Etsy seller; those
opportunities are part of what the company is paying Etsy to
provide. Partnering with other vintage fashion vendors on Etsy
could help Haley address her lack of a marketing background,
which she’s identified as a major company weakness—she could
piggyback on partners’ marketing efforts, or learn from a
partner who is willing to mentor her. Haley can also teach
herself by exploring free online marketing resources on Etsy,
Bplans, and elsewhere.
Haley’s expertise as a milliner makes her a great candidate for
hiring an apprentice, or intern, and developing an
apprenticeship program could help the company cheaply expand
its production capacity and support the increase in sales that
would come with its expanded marketing efforts.
Example SWOT Analysis: Replay Plastics
About the Company

10. Replay Plastics recycles plastic waste into commercially viable
products, using environmentally-friendly methods. The
company wants to capitalize on one of the recycling industry’s
highest-growth products—polyethylene terephthalate (“PET”),
which is found in post-consumer beverage and water bottles—
by establishing the western United States’ first PET recycling
plant. The recycled material from the PET plant will then be
channeled into a brand-new Replay Plastics Packaging Division,
which will produce extruded sheet plastic to sell to
manufacturers.
Read the complete business plan for Replay Plastics.
SWOT Analysis for Replay Plastics
Potential Strategies for Growth
Replay Plastics needs to investigate its options for obtaining
capital. Funding a new venture can take time, and because it’s
the step one of the long road to revenue—they must secure
funding before they begin construction, and they must complete
construction before they can begin revenue-generating recycling
operations and packaging material production—time is of the
essence. Luckily they have already written their business plan,
which is often required by prospective lenders and investors.
Replay Plastics may want to consider adding a Research &
Development team, to investigate new product possibilities and
keep the company’s operations well prepared for any changes in
state or federal environmental regulations.
Example SWOT Analysis: NovOculi
About the Company
NovOculi, Inc. is a start-up company that has designed—and
plans to develop and market–ophthalmological surgical tools
and a unique method of incisionless refractive correction
dubbed NICS (Non-Invasive Corneal Sculpting). Current
refractive techniques, like LASIK, require destruction of a
portion of the protective epithelial layer overlying the cornea of
the eye and are accompanied by complications resulting from
this loss of protection. NovOculi employs a method involving

11. iontophoresis, an ionic dye, and a wavelength-specific laser to
accomplish effective refraction without the troublesome
destruction of epithelium.
Read the complete business plan for NovOculi.
SWOT Analysis for NovOculi
Potential Strategies for Growth
NovOculi needs to investigate its options for obtaining capital.
Specifically, because NovOculi is seeking equity investments,
the company needs to look into venture capital funding and
angel investments.
A weakness that may deter investors is NovOculi’s lack of
relationship with the medical device distribution community. A
great idea is worth nothing if it can’t be implemented well, and
a key to implementation in this case is a strong sales and
distribution channel. NovOculi is going to have to figure out
how to build relationships with medical device distributors,
whether that means attending expensive industry conferences,
leveraging research relationship with institutions like Stanford
University, or developing incentives for the distributors.
Macroeconomics Chapter 17: Growth and Productivity:
Long-Run Possibilities Instructor: C. Speranzo
Chapter 17: Growth and Productivity: Long-Run Possibilities
LO 1: The principal sources of economic growth
LO 2: The policy tools for accelerating growth
LO 3: The pros and cons of continued growth
The Nature of Growth
Production possibilities - the alternative combinations of final
goods/services that could ne produced in a given time period
with all available resources and technology

12. Economic Growth – an increase in output (real GDP); an
expansion of production possibilities
Real GDP – the value of final output produced in a given period
adjusted for changing process
Base year – the year used for comparative analysis; the basis for
indexing price changes
Growth rate - % change in real output from one period to
another
Exponential process – the cumulative process, whereby interest
or growth is compounded from one year to the next
GDP per capita - total GDP divided by total population; average
GDP
Growth in GDP per capita is attained only when the growth
of output exceeds population growth.
Labor force- all persons over age 16 who are either working for
pay or actively seeking paid employment
Employment rate – the % of the adult population that is
employed
Productivity – output per unit of input – for example, output per
labor – hour
Sources of Growth
Growth rate of total output = growth rate of labor force +
growth rate of productivity
The sources of productivity gains include:
· Higher skills – an increase in labor skills
· More capital – an increase in the ratio of capital to labor
· Technological advance – the development and use of better
capital equipment and products
· Improved management – better use of available resources in
the production process
Human Capital - the knowledge and skills possessed by the

13. workforce
Net investment – gross investment less depreciation
A steady stream of inventions and innovations advances worker
productivity, raising the potential for continued economic
growth.
High levels of national debt may raise interest rates and
crowd out investments that promote economic growth.
Malthusian Formula for Destruction – 18th century warnings of
Rev. Thomas Malthus – argued that continued growth was
impossible because food production couldn’t keep pace with
population growth. His dire projections earned the economics
profession is characterization as the “dismal science.”
With population increasing at geometric rate, food supplies at
arithmetic rate outcome inevitable
Geometric growth – an increase in quantity by a constant
proportion each year,
Arithmetic growth - an increase in quantity by a constant
amount each year.
1
Macroeconomics Chapter 16 Supply Side Policy: Short Run
Options Instructor: C. Speranzo
Chapter 16: Supply Side Policy
LO 1: Why the short-run AS curve sloped upward
LO 2: How an unemployment – inflation trade-off arises
LO 3: The tools of supply-side policy
Aggregate supply: the total quantity of output producers are

14. willing and able to supply at alternative prices levels in a given
time period, ceteris paribus
Stagflation: the simultaneous occurrence of substantial
unemployment and inflation
Keynesian: concerned with unemployment; did not think risk of
inflation in depths of recession
Monetarist: real output remains at natural state regardless of
fiscal or monetary interventions; prices rise but do not entice
producers to increase output; rather based decision on
technology and market size
Hybrid: the closer to capacity, the greater risk that fiscal or
monetary stimulus will spill over into price inflation.
The inflation-unemployment trade – off
Because both prices and output respond to demand side-shifts,
the economy cannot reduce both unemployment and inflation at
the same time – at least not with fiscal and monetary policies
Demand stimulus – fiscal and monetary efforts to reduce
unemployment will also cause some inflation
Demand restraint – monetary and fiscal efforts to reduce
inflation will also increase unemployment
The Phillips curve – a historical (inverse) relationship between
the rate of unemployment and the rate of inflation, commonly
expresses a trade-off between the two.
Developed by New Zealand economist, Alban Phillips
Inflationary flashpoint – the rate of output at which inflationary
pressures intensity; the point on the AS curve where slope
increases rapidly
Misery Index (Arthur Okum) a simple sum of the inflation and
unemployment rates – measure of stagflation
Combines both problems into a single measure of macro
performance
Policy Tools – how to shift AS – look at clues among forces

15. that influence supply side response to changes in demand
· Tax incentives for saving, investment, work
· Human capital investment
· Deregulation
· Trade liberalization
· Infrastructure development
Supply – side theory Keynesian
demand – side theory
Cut tax rates to boost incentives to work and invest cut tax
rates to put more disposable income in people’s
Hands
Firms invest more and try new ventures; jobs are created;
People use increased income to buy more goods and
AS increases services – AD
increases
New investment and labor bring increased output To
meet new demand, co’s expand output
both
Employment rises; new plants go up,
The whole economy expands
In Keynesian economics, tax cuts are used to increase AD
Taxes not only alter disposable income but also change
incentives to work and produce.
The direct effects of taxes on supply of goods are the concern of
supply-side economists.
Marginal tax rate – the tax rate imposed on the last (marginal)
dollar of income
If marginal tax rate is high, there’s less incentive to work
more – since most would go to US taxes
Discourages entrepreneurship since taxes as personal

16. Investment – expenditures on (production of) new plants,
equipment, and structures (capital) in a given time period, plus
changes in business inventories
If high tax rates discourage investment, AS will be
constrained
Tax rebate- a lump sum refund of taxes paid
Tax elasticity of supply – the % change in quantity supplied
divided by the % change in tax rates
Tax elasticity of supply = % change in quantity
supplied/ % change in tax rate
Saving – that part of disposable income not spent on current
consumption;; disposable income less consumption
Supply – side economists favor tax incentives that encourage
saving as well as greater tax incentives for investment
Human Capital Investment
Human capital – the knowledge and skills possessed by the
workforce
Structural unemployment – unemployment caused by a
mismatch between the skills (or location) of job seekers and the
requirements (or location) of available jobs
Investment in human capital reduces structural unemployment
and shift the AS curve rightward.
Labor productivity – amount output produced by a worker in a
given period of time; output per hour
Transfer payments – payments to individuals for which no
current goods or services are exchanged, like Social Security,
welfare, and unemployment benefits
Deregulation- raise production costs, est cost over $700B/yr

17. Factor markets – raise cost of production
Minimum wages – make more difficult to achieve full
employment with stable prices
Mandatory benefits – FMLA – incur costs of absences and
incur costs of replacements
Occupational Health and Safety - congress rescinded new
ergonomics rules
Product Markets - regulation of factor markets raise production
costs and inhibit supply
Transportation costs – increase shipping costs
Food and Drug Standards – cause fewer new drugs and
increase costs of those reach market
The basic contention of supply-side economics is that
regulatory costs are now too high.
Reducing Costs – balance safety and economic costs
Easing trade Barriers
Factor markets – restriction of foreign inputs make US AS
expensive e.g. import sugar high, candy, cookies high
Product Markets – nontariff barriers constrain AS e.g. Mexican
truckers and US
Immigration - skill shortages in US helped out by skilled visas
Infrastructure Development
Infrastructure – the transportation, communications, education,
judicial, and other institutional systems that facilitate market
exchanges; spending on infrastructure not only creates fiscal
stimulus (AD) but also increases the capacity to produce (AS).
Because investment is always a bet on future economic
conditions, expectations directly affect the shape of the AS
curve.

18. 1
Macroeconomics Chapter 15: Monetary Policy
Instructor: C. Speranzo
Chapter 15: Monetary Policy
LO 1: Howe interest rates are set in the money market
LO 2: How monetary policy affects macro outcomes
LO 3: The constraints on monetary policy impact
Lo 4: The differences between Keynesian and monetarist
monetary theories
Monetary policy: the use of money and credit controls to
influence macroeconomic outcomes
Interest rate: the price paid for use of money
Money Supply (M1): currency held by the public, plus balances
in transactions accounts
Money Supply (M2): M1 plus balances in most savings accounts
and money market mutual funds
The forgone interest if the opportunity cost (price) of
money people choose to hold.
Demand fort money: the quantities of money people are willing
and able to hold at alternative interest rates, ceteris paribus
Portfolio decision: the choice of how(where) to hold idle funds
Transaction demand for money: money held for the purpose of
making everyday market purchases
Precautionary demand for money: money held for unexpected
market transactions or for emergencies
Speculative demand for money: money held for speculative
purposes, for later financial opportunities
Equilibrium rate of interest: the interest rate at which the
quantity of money demanded in a given time period equals the

19. quantity of money supplied
THE FED CAN ALTER THE EQUILIBRIUM RATE OF
INTEREST;
By increasing the money supply, the Fed tends to lower the
equilibrium rate of interest
Federal funds rate: the interest rate for interbank reserve loans
The ultimate goal of monetary stimulus is to increase aggregate
demand. By reducing the cost of money for banks, the Fed
expects banks to reduce interest rates for consumers.
Aggregate demand: the total quantity of output demanded at
alternative price levels in a given time period, ceteris paribus
The fed’s goal of stimulating the economy is achieved in three
distinct steps:
· An increase in the money supply
· A reduction in interest rates
· An increase in aggregate demand
Bernanke’s policy guide in 2009: ¼ POINT REDUCTION in
long-term interest rate = $50B fiscal stimulus
Monetary restraint is achieved with:
· A decrease in money supply
· An increase in interest rates
· A decrease in aggregate demand
The success of Fed intervention depends in part on how well
changes in long-term interest rates mirror changes in short-term
interest rates
Liquidity trap: the portion of the money demand curve that is
horizontal; people are willing to hold unlimited amounts of
money at some (low) interest rate; possibility that interest rates
may not respond to changes in the money supply (Keynes); low
expectations
Strong expectations and rising incomes may fuel continued
spending even when interest rates are rising

20. The Monetarist perspective:
In the Keynesian model, changes in the money supply affect
macro outcomes primarily through changes in interest rates;
three step sequence: 1. Money supply change; 2. Interest rate
movement; 3. Aggregate demand shift makes monetary policy
subject to several potential uncertainties.
Monetarists asset that monetary policy isn’t an effective tool for
fighting short-run business cycles, but is a powerful took for
managing inflation.
Equation of exchange: money supply (M) times velocity of
circulation (V) = level of aggregate spending (PxQ)
Velocity of money (V) : the # of times per year, on average, a
dollar is used to purchase final goods and services; PQ/M
The quantity of money in circulations and the velocity with
which it travels (changes hands) in product markets will always
be equal to the value of total spending and income (nominal
GDP)
Total spending must rise if the money supply (M) grows and V
is stable
As monetarist see it, changes in the money supply must later
total spending, regardless of how interest rates move.
Natural rate of unemployment: long-term rate of unemployment
determined by structural forces in labor and product markets
The most extreme monetarist’s perspective concludes that
changes in the money supply affect prices only
Real interest rate: the nominal rate of interest minus the
anticipated inflation rate
Real interest rate = nominal interest rate – anticipated
inflation rate.

21. Inflation targeting: the use of an inflation ceiling (“target”) to
signal the need for monetary policy adjustments
Keynesians advocate targeting interest rates, not the
money supply
Monetarists favor fixed money supply targets; Keynesians
reject fixed money supply targets
1
Macroeconomics Chapter 14: The Federal
Reserve System Instructor: C.
Speranzo
Chapter 14: The Federal Reserve System
LO 1: How the Federal Reserve is organized
LO 2: The Fed’s major policy tools
LO 3: How open market operations work
Monetary Policy: the use of money and credit controls to
influence macroeconomic outcomes
Pres Wilson, Fed Reserve Act, Dec. 1913
Federal Reserve System: 12 Fed Reserve Banks: each acts as
central banker for private banks in region.
· Clearing checks between private banks
· Hold bank reserves – fraction of deposits in local banks, rest
in fed reserve banks
· Providing currency –
· Providing loans
Fed’s control of money supply is exercised by use of 3 policy
tools:
· Reserve requirements
· Discount rates

22. · Open market operations
Money supply )M1) currency held by public, plus balances in
transactions accounts
Money supply (M2) M1+ balances in most savings accounts
and money market mutual funds
Required reserves: minimum amount of reserves a bank is
required to hold; equal to required reserve rations x transaction
deposits
Excess reserves: bank reserves in excess of required reserves
Money multiplier: # deposit (loan) dollars that banking system
can create from $1 of excess reserves; equal to 1/required
reserve ratio
Lending capacity = excess reserves x money multiplier
By raising the required reserve ration, the Fed can immediately
reduce the lending capacity of the banking system
The discount rate
Federal funds rate: the interest rate for interbank reserve loans
Discounting; Federal Reserve lending of reserves to private
banks
Discount rate: rate of interest the Federal Reserve charges for
lending reserves to private banks
Open market operations – federal Reserve purchases and sales
of government bonds for purpose of altering bank reserves
Open market operations are the principal mechanism for directly
altering the reserves of the banking system
Portfolio decision: the choice of how (where) to hold idle funds
Bond: a certificate acknowledging a debt and the amount of
interest to be paid each year until repayment; an IOU
Yield: the rate of return on a bond; the annual interest payment
divided by the bond’s price.
Bond prices and yields move in opposite directions; If Fed sells
bonds, bond prices fall and yields (interest rates) rise

23. The Fed can Increase the Money Supply by:
· Lower reserve requirements
· Reduce the discount rate
· Buy bonds
The Fed can decrease the money supply by:
· Raise reserve requirements
· Increase discount rate
· Sell bonds
1
Microeconomics/Macroeconomics Instructor: C. Speranzo
EXTRA CREDIT RUBRIC
For extra credit, you must follow these instructions exactly. If
done correctly, you may do up to 10 units, for which you could
add 10 extra credit points to your final grade
Choose an article that is at least three pages long and discusses
a concept presented in the economics’ class. This should be
only ONE page.
1. Explain the economic concept the article discusses – one or
two sentences
2. List the players involved and impacted – one or two
sentences
3. Explain your opinion on the impact the article’s concept
could/would have on the US economy
One or two paragraphs - - be very accurate and concise
Be particular in your choice of article

24. Use a journal/site that has intellectual quality (no Wikipedia,
etc.)
Address the important concept
Be concise
No personal articles (I, Me, my, our)
Make certain your opinion is relevant to US
economics
This gives you the opportunity to demonstrate your
understanding of economic concepts.
***All extra credit submissions are due by December 5th.
No late submissions will be accepted.
ECONOMIC HYBRID COURSE ASSISTANCE
Each week you will have
1. a discussion questions to answer and post through theforum
OR
A self-quiz to do and return (not graded, but for self-direction)
2. An Assignment – brief response to the readings/video
assigned
3. A request for update for your Analytical Paper (every other
week)
Please ensure that you check the QC Portal for these items and
submit them by Sunday evening of that week.
Macroeconomics ECO 202
Instructor: C. Speranzo
MIDTERM Fall 2014
Name ________________________________________
1. An increase in real GDP, an expansion in production
possibilities is called ______________________________

25. 2. The entire study of aggregate economic behavior as a whole
is _______________________________________
3. The sum of _________________________, investment,
government expenditure, and net exports is one definition for
Gross Domestic Product.
4. When the assumption is that other things remain equal, the
term used is
_____________________________________________________
___________________________________
5. _______________________________ is the use of market
prices and sales to signal desired outputs
6. A high level of ____________________in the US is the result
of an abundance of capital, the use of advanced technology, and
highly educated workers.
7. A high ratio of capital to labor in the production process
makes an industry ____________________________
8. A curve depicting the quantities of a good/service a consumer
is willing and able to buy at alternative prices in a given time,
ceteris paribus is
_____________________________________________________
_____________
9. Goods/services whose consumption does not exclude
consumption by others is _________________________
10. ______________________________________________ is
used to compare the average living standards in one country
versus another @ text.

26. 11. The sum of consumption and saving is
_____________________________________________________
______
12. The law that states 1% more in unemployment results in 2%
less output is _______________________________
13. When unemployment is caused by a mismatch between skills
(or location) of available jobs and the requirements of jobs
available, this is called
_____________________________________________________
__
14. The lowest rate of unemployment compatible with price
stability is ____________________________________
15. Automatic adjustments of nominal income to the rate of
inflation is called _______________________________
16. The theory that supply creates its own demand is called
______________________________________________
17. Externalities are when costs or benefits of a market activity
affects _____________________________________
18. When government intervention fails to improve economic
outcomes, it is called
_____________________________________________________
______________________________________
19. When there is only one producer in an industry
___________________________________________________
20. The legislation used to prevent or break up concentrations
of market power is called _____________________

27. 21. The price at which the quantity demanded equals quantity
supplied of a good
_____________________________________________________
______________________________________
22. Refers to the inverse relationship between price and
quantity _________________________________________
23. Goods frequently used in combination
_____________________________________________________
_______
24. When aggregate quantity supply exceeds aggregate quantity
demand __________________________________
25. The four components of aggregate demand are (must get all
4) _______________________________________
_____________________
_________________________________
____________________________________
26. When consumer spending is not dependent on current
income ________________________________________
27. A tax system in which tax rates fall as income increases
______________________________________________
28. The principle of government nonintervention is called
_______________________________________________
29. When a company has the ability to alter market price of
good/service, it is said to have
_____________________________________________________
______________________________________
30. Goods/services sold to other countries

28. _____________________________________________________
_______
31. The most desired goods/services given up in order to obtain
something else
_____________________________________________________
______________________________________
32. The knowledge and skills possessed by the labor force
_______________________________________________
33. The value of final output produced in a given time period
adjusted for changing prices _____________________
34. GDP minus depreciation equals
_____________________________________________________
____________
35. When the economy is growing, both unemployment rates
and the average duration of unemployment
_____________________________________
36. A measure of changes in the average price of consumer
goods and services __________________________
37. ________________________________ is officially defined
as a rate of inflation less than 3%
38. One who does not pay but still enjoys the benefits
______________________________________________
39. A form of government intervention to address the for whom
questions ____________________________
40. _________________________________ asserted that a
market-driven economy is inherently unstable.

29. 41. Lack of enough resources to satisfy all desired uses of those
resources is called _________________________
42. An economy that uses both market signals and government
directives to allocate goods/resources is called a
_____________________________________________________
________________
43. One-fifth of population ranked by income is
___________________________________________________
44. A decrease in the average level of prices of goods and
services ____________________________________
45. The part of disposable income not spent on current
consumption __________________________________
46. When the amount of aggregate supply at full employment
falls short of full-employment output
_____________________________________________________
___________
47. The two chief concern about macro equilibrium that could
lead to market failure are
_____________________________________________________
___________
48. And
_____________________________________________________
_______
49. An imperfection in the market mechanism that prevents
optimal outcomes
_____________________________________________________
__________________________________

30. 50. Maximum output of goods from resources used in
production _____________________________________
BONUS QUESTIONS
1. What percentage of US population itemizes on taxes
_____________________________________________
2. What are tax expenditures
_____________________________________________________
_____________
3. Explain the term “pump priming” in terms of government
action
_____________________________________________________
____________________________________
4. The growth of government can be attributed to
__________________________________________________
5. The purpose of Simpson Bowles Commission was
_____________________________________________________
_____________________________________________________
_____________________________________________________
_______________________
4