This document provides an overview and review for a macroeconomics final exam covering chapters 17-21. It outlines the exam sections and dates, and recommends ways for students to prepare, including re-reading textbooks, reviewing quizzes and lecture slides. It then briefly summarizes some of the key concepts from each chapter, such as fiscal and monetary policy, government budgets, deficits, debt, taxes, aggregate demand, and international trade.

2. Lecture 25
Macroeconomics

3. Final Exam Review
Chapters 17-21
Sec. 1: Tuesday 11:00am -1:50pm
Sec. 1: Thursday 2:00pm - 4:50pm

4. Final Exam Review
Re-Read the Textbook
Review Quizzes
Review Lecture Slides
Review Notes
Talk with other students

5. Chapter 17
The Government Budget
Taxes and Spending

6. Two Objectives
Unemployment
Inflation

7. Monetary
Central Bank
Tools
Fiscal
Government
Taxes
Spending

8. Deficits and Debt
Government
Spending and
Revenue

9. Deficit
Spending greater
than revenue

10. Balanced Budget
Spending exactly
equals revenues

11. Surplus
Revenue greater
than spending

12. Debt
Accumulated
deficits

13. Why would you want
government to go into
debt?
Don’t have to pay
Future larger economy

14. Debt
Investment
Only if the return is
higher than the
interest rate

15. How to reduce deficits
Higher taxes
Lower spending

16. Solution to Debt
Economic Growth

17. Spending Taxes
Aggregate
Demand
Expand Increase Decrease Right
Contract Decrease Increase Left
Fiscal Policies

18. Chapter 18
Fiscal Policy

19. P2
Price
Level
Real GDP orY
Increase Aggregate Demand
Lower Taxes and/or Increase Spending
18
Long Run
Aggregate
Supply
Short Run
Aggregate
Supply
19
P1
Aggregate
Demand
17
Unemployment

20. P3
Price
Level
Real GDP orY
Decrease Aggregate Demand
Raise Taxes and/or Decrease Spending
18
Long Run
Aggregate
Supply
Short Run
Aggregate
Supply
19
P1 Aggregate
Demand
17
Inflation

21. Where does
government get
money?
Crowding Out

22. More Taxes
Cancel
No effect

23. More Borrowing
Crowding Out
Increase interest
rates

24. Lower Taxes
People may just save
more and not spend

25. More Spending
Now get free stuff.
No new spending

26. Boom-Bust Cycle
Income
Borrow
Pay Back
Spending
Spending
More than
Income
Spending
Less than
Income

27. Tax Rate %
$
Tax
Revenue
Laffer Curve
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Dropped Top Marginal
Income Tax Rate
from 70% to 28%

28. Supply Side Tax
Changes
Lower marginal tax
rates incentivize people
to work more and firms
to create more.

29. P4
Price
Level
Real GDP orY
Fiscal Policy and Negative Supply Shock
18
Long Run
Aggregate
Supply Short Run
Aggregate
Supply
19
P1
Aggregate
Demand
17
P2
P3
Inflation and
Recession
Stagflation

30. P3
Price
Level
Real GDP orY
Increase Long Run Aggregate Supply
Lower Marginal Tax Rates
18
Long Run
Aggregate
Supply
Short Run
Aggregate
Supply
19
P1
Aggregate
Demand
17
Lower Prices
Increase
Output

31. Time Lags
Do you really know?
Congress approve
Effect lag
Take 1- 3 years
Counterproductive

32. Multiplier
May not be as large as
Keynes calculated

33. Multiplier
may not multiply

34. Chapter 19
International
Trade

35. $0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
0 1 2 3 4 5 6 7 8 9 10
Demand
Quantity
Consumer
Surplus
Producer
Surplus
($10 x 5) ÷ 2
= $25
($10 x 5) ÷ 2
= $25
Total Surplus
$50

36. Consumer
Surplus
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
0 1 2 3 4 5 6 7 8 9 10
Demand
Quantity
($14 x 7) ÷ 2
= $49
($6 x 3) ÷ 2
= $9
Total Surplus
= $58
Producer
Surplus
Local 3 Foreign 4

37. $0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
0 1 2 3 4 5 6 7 8 9 10
Demand
Quantity
Pizza Tariff
Local 4 Foreign 2
$2 Tariff
With
Tariff
Consumer
Surplus
Producer
Surplus
($12 x 6) ÷ 2
= $36
($8 x 4) ÷ 2 =
$16
Total Surplus
$52
Tariff $2 x 2 = $4
$1 x 2 = $2

38. Chapter 20
International
Finance

39. 100+ Currencies
https://www.tradingview.com/markets/currencies/cross-rates-overview-prices/

40. Exchange Rates
Two Trades

41. one
unit
of
this
will buy ___ units of that

42. Why buy Dollars?
Buy American Stuff
Invest in America
Hold and Hope

43. Demand
Dollars
Yuan
Per Dollar
Supply
Higher U.S.
Interest
Rate
6.44
6.50
Depreciating
Cost more to
buy a dollar
Losing
Value

44. Demand
Dollars
Yuan
Per Dollar
Supply
Lower U.S.
Interest
Rate
6.44
6.25
Appreciating
Cost Less to
buy a Dollar
Gaining
Value

45. Arbitrage
The Law of One Price

46. Economics
The study of how
human beings create
value for one another

47. The time required to
work to pay for one
hour of light in 1820
will now produce
135,000 hours
or 15.4 years

48. On what basis is it
that having seen
all this progress
that we have
made behind us
we see nothing
but misery in front
of us?
-Thomas
Maccaulay

49. Concluding
Thoughts

52. All Human Beings—male and female
—are created in the image of God.
Each is a beloved spirit son or
daughter of heavenly parents, and, as
such, each has a divine nature and
destiny.
FAMILY - A Proclamation to the
World

53. For the earth is full, and there is enough
and to spare; yea, I prepared all things, and
have given unto the children of men to be
agents unto themselves.
Doctrine and Covenants 104:17
Year: 1834