The final examination is Wednesday, December 17 at 3 pm.  The final is NOT comprehensive.  It will cover all lectures from Wednesday, November 12 through the end of the semester as well as Chapters 13, 14, 15, and 17 in the text, the Real Estate reading, and Detecting a Housing Bubble reading, and all handouts that I distributed.  As always, everything is "fair game" for the exam. However, the materials I cover in class and on the problem sets are the topics that I feel are most important.

The test format will include essay/problem questions and some short-answer questions.  You should be prepared to answer questions similar to those you've seen on the homeworks and what we've gone over in class. You should bring a calculator and pen to the exam.  I'll provide the paper.

MP Rule
AD/AS curves
Taylor Rule
MP with risk premium
Fundamental Housing Price as a Present Value
Consumer intertemporal budget constraint
Lifetime utility function
Euler equation
Budget Surplus (Deficit) Government intertemporal budget constraint

Here are the in class AS, AD/AS and consumption handouts. Here are the Real Estate Economics and Detecting a Housing Bubble readings.

As added help, you might want to think about the following questions:

1. What is the monetary policy rule?
2. How do you derive the aggregate demand curve from the IS/MP diagram and Phillips curve?
3. What shifts the AD curve? What changes the slope?
4. What assumption about inflation expectations are used to derive the aggregate supply curve? What shifts the curve?
5. Can you explain equilibrium or steady state in AD/AS? What types of shocks can hit the economy?
6. What is the dynamic adjustment that takes place if acutal inflation is not equal to expected inflation? Can you demonstrate this numerically and graphically?
7. How can temporary AD shocks lead to counterclockwise loops?
8. What is the Taylor rule? How do rational expectations change the way in which the Fed conducts policy?
9. How is time inconsistency related to Fed credibility? What is the Lucas critique? 
10. How does a risk premium affect that IS/MP and AD/AS diagrams?
11. What is the zero lower bound and how can this lead to a liquidity trap? What is a deflationary spiral?
12. Can you give basic details about the financial crisis and recent recession?
13. How do you interpret the financial crisis and recent recession in terms of our AD/AS model?
14. What are some of the conventional and unconventional policies pursued by the Fed and government? What is moral hazard and "too big to fail"?
15. In the asset price theory of housing (Housing Price Fundamentals), how does rent affect the price of housing?  What should happen to the price of housing when interest rates rise?
16. Are we currently in a housing bubble?  How would one tell?
17. Explain how changes in the price of housinig may affect residential investment and the economy.
18. Explain some of the issues surrounding the tax treatment of housing.
19. What is the wealth effect in regards to housing?
20. What are the main assumptions of the intertemporal budget constraint in the modern neoclassical model of consumption? 
21. What are the assumptions of the lifetime utility function? What utility function have we assumed in order to simplify the math?
22. What is the intuition of the Euler equation? How do changes in the subjective discount rate and interest rate affect consumption growth?
23. What is the marginal propensity to consume? In our model, approximately how is the MPC affected by the number of years remaining in life?
24. Why does our model of consumption predict Ricardian equivalence holds? How does a binding borrowing or liquidity constraint affect this prediction?
25. Why does the Permanent Income hypothesis predict that consumption follows a random walk?
26. Why do people engage in precautionary savings?
27. Empirically, how do the standard Permanent Income hypothesis predictions differ for high and low wealth individuals? Why?
28. What is the recent history of federal budget deficits/surpluses? 
29. What is the difference between deficits and debt? What is the primary deficit? What is publically held debt?
30. What determines how much a government can borrow?
31. What are the ways that government can pay for expenditures? Can you derive the government intertemporal budget constraint?
32. Explain why if Ricardian Equivalence holds, government borrowing will not crowd out saving.

1. What is the difference between official debit and implicit long run liabilities?  What is the main program responsible for the US government fiscal imbalance?
2. What are generational accounts, and what can they be used for?  Why are generational accounts typically negative for the elderly?
3. How might a cohort's generational account affect its consumption?
4. Can you determine generational accounts in a simple example?