Week 8 · Study guide

Midterm Study Guide · Weeks 1–7 (Objectives 1–6)

Principles of Macroeconomics · ECON 2 Fall 2026 · Prof. Ashford Fictional sample

Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
This is a student-facing review page. Work through it before you run the Exam-Prep Tutorial and take the Practice Exam. (This guide points to both — it does not repeat them.)

Integrity note. Every practice item on this page is a fresh variant — a new scenario and wording — with a vetted answer. None of these are the live midterm questions. Working them builds the skill the midterm tests, honestly.

What the midterm covers (read this first)


Exam	Midterm — cumulative, Weeks 1–7, Objectives 1–6
Format	20 items, 100 points (5 each). Mixed item types: mostly multiple-choice (single answer), plus a few matching items (one-to-one), true/false, and one multiple-answer (select all that apply). Scenario-based — most items give you a described economy and ask you to compute, classify, or predict. AI is not permitted on the midterm.
Coverage (where the points are)	Obj 1 ≈ 3 items (the macro perspective, the PPF, positive/normative) · Obj 2 ≈ 3 items (GDP, real vs. nominal, the deflator) · Obj 3 ≈ 4 items (the CPI, inflation, unemployment, LFPR) · Obj 4 ≈ 2 items (growth rates, the rule of 70) · Obj 5 ≈ 5 items (AD–AS comparative statics, output gaps — the biggest slice) · Obj 6 ≈ 3 items (fiscal policy, the multiplier, deficits & debt). Study Objectives 5 and 3 hardest — they carry the most items.
Weight	The midterm is 20% of your course grade.
When it opens / where	Opens in the Week 8 module (the review-and-exam week); window opens at module start and is due 6 days later; one attempt. No weekly quiz, assignment, or workshop in Week 8 — the midterm replaces them. Discussion 8 (the midterm debrief) still runs.
What to bring	A solid grasp of six arithmetic/graphical moves: (1) the expenditure-approach GDP sum and the deflator formula; (2) the CPI-from-a-basket formula and the unemployment-rate/LFPR formulas; (3) the growth-rate formula and the rule of 70; (4) reading an AD–AS comparative-statics result off a described shift; (5) diagnosing a recessionary vs. inflationary gap; (6) the spending-multiplier formula and the deficit-vs-debt distinction. Make them all automatic.

Objective 1 — The Macro Perspective, the PPF & Positive vs. Normative (Week 1) · ≈3 items

(A) Key ideas, plain language

Macroeconomics studies the whole economy — growth, inflation, unemployment, and the policies that steer them — as distinct from microeconomics, which studies individual choosers (one household, firm, or market). Scarcity forces choice at any scale; the opportunity cost of a choice is the value of the next-best alternative given up. The PPF makes this graphical for a whole economy: any point on the frontier is efficient; inside is inefficient — and at the scale of an entire economy, an interior point means idle labor and capital: the macro preview of unemployment/a recession; outside is unattainable. Finally, positive economics states testable facts about what is; normative economics states value judgments about what ought to be.

(B) Definitions, terms, procedures

Macroeconomics vs. microeconomics: macro = the whole economy (aggregate output, the price level, the job market, national policy); micro = individual choosers.
Opportunity cost: the value of the next-best alternative foregone — not the sum of all alternatives.
PPF (production possibilities frontier): the maximum combinations of two goods an ECONOMY can produce with given resources and technology. Slope = the opportunity cost of the horizontal-axis good, in units of the vertical-axis good = (max of the OTHER good) ÷ (max of THIS good).
Efficient (on) vs. inefficient/idle (inside — the macro read is unemployment) vs. unattainable (outside).
Bowed-out shape: real PPFs reflect increasing opportunity cost because resources are specialized, not equally suited to both uses.
Positive vs. normative: positive = testable ("unemployment is 5% this quarter"); normative = value judgment ("the government should prioritize jobs over inflation-fighting"). The test: can data settle it? If yes → positive.

(C) Predictable mistakes → cures

❌ "A point inside the PPF is unattainable." → ✅ Inside = attainable but inefficient/idle (unemployment, at macro scale). Outside = unattainable.
❌ "Positive = a good statement; normative = a biased statement." → ✅ Positive = testable; normative = value-laden. Neither is inherently better.
❌ Flipping the opportunity-cost ratio. → ✅ Always state the cost in the OTHER good — divide (max of the OTHER good) by (max of THIS good).

(D) Review in the module

Week 1 → Lecture Outline, Slides (Deck 1), Lecture Tutorial 1, Workshop 1.

Objective 2 — Measuring Output: GDP, Real vs. Nominal & the Deflator (Week 2) · ≈3 items

(A) Key ideas, plain language

GDP sizes up the whole economy's output using the expenditure approach: GDP = C + I + G + NX (consumption + investment + government spending + net exports). Only new, final goods and services count — used-good sales, purely financial trades, transfer payments, and intermediate goods are all excluded. Real GDP strips out price changes so you can compare actual production across time; nominal GDP uses current prices and blends real output change with price change. The GDP deflator = nominal GDP ÷ real GDP × 100 measures how much of a nominal change was pure inflation.

(B) Definitions, terms, procedures

Expenditure approach: GDP = C + I + G + NX, where NX = exports − imports (can be negative — a trade deficit).
What's NOT counted: used goods (already counted when new), purely financial transactions (stock/bond trades), transfer payments (Social Security, unemployment benefits — no production in exchange), intermediate goods (already embedded in the final good's price).
Real vs. nominal GDP: real = quantities valued at BASE-year (constant) prices; nominal = quantities valued at CURRENT prices.
GDP deflator = (nominal GDP ÷ real GDP) × 100. A deflator above 100 means the price level has risen relative to the base year.

(C) Predictable mistakes → cures

❌ "Nominal GDP tells us how much MORE the economy actually produced." → ✅ Nominal blends real output change WITH price change. Only real GDP isolates the actual production change.
❌ "Transfer payments and used-good sales count toward GDP." → ✅ Neither counts — transfers aren't payment for current production; used goods were already counted when new.
❌ "Deflator = real ÷ nominal × 100." → ✅ Deflator = nominal ÷ real × 100 — flipping it gives a number below 100 when prices actually rose.

(D) Review in the module

Week 2 → Lecture Outline, Slides (Deck 2), Lecture Tutorial 2, Workshop 2.

Objective 3 — Measuring Inflation & Unemployment (Week 3) · ≈4 items — STUDY HARD

(A) Key ideas, plain language

The CPI tracks the cost of a fixed basket of goods over time. The inflation rate is the percentage CHANGE in the CPI between two periods — not the CPI level itself. Comparing a raise to inflation reveals the real (purchasing-power) wage change, which can be negative even with a positive nominal raise. The unemployment rate = unemployed (actively searching) ÷ labor force × 100; the LFPR = labor force ÷ adult population × 100. Discouraged workers (who stop searching) are NOT counted in the labor force at all — a real blind spot in the official rate. Three types of unemployment: frictional (normal job-search churn), structural (skills/location mismatch), cyclical (tied to the business cycle).

(B) Definitions, terms, procedures

CPI = (cost of the fixed basket this year ÷ cost of the same basket in the base year) × 100.
Inflation rate = (new CPI − old CPI) ÷ old CPI × 100 — the PERCENTAGE CHANGE, never the CPI level itself.
Real wage change ≈ nominal wage change − inflation rate (a rough approximation).
Unemployment rate = unemployed (searching) ÷ labor force × 100. Labor force = employed + unemployed (searching).
LFPR = labor force ÷ adult (16+) population × 100.
Discouraged workers: wanted a job, stopped actively searching → OUT of the labor force entirely — not counted as unemployed.
Frictional / structural / cyclical unemployment — see the table below.

(C) Predictable mistakes → cures

❌ "The CPI number IS the inflation rate." → ✅ CPI is the index level (e.g., 108). The inflation rate is the % CHANGE between two CPI readings (e.g., 8%).
❌ "Discouraged workers count as unemployed." → ✅ Must be actively searching to count as unemployed. Discouraged workers exit the labor force entirely.
❌ "Compute the unemployment rate using the adult population as the denominator." → ✅ The denominator is the labor force (employed + unemployed), NOT the total adult population — that's what the LFPR uses instead.
❌ "A nominal raise is always a real gain." → ✅ Compare it to inflation — a 4% raise with 5% inflation is a real pay CUT (≈ −1%).

(D) Review in the module

Week 3 → Lecture Outline, Slides (Deck 3), Lecture Tutorial 3, Workshop 3.

Objective 4 — Growth & Productivity (Week 4) · ≈2 items

(A) Key ideas, plain language

A growth rate is simple percentage change in real GDP. The rule of 70 estimates years-to-double at a given growth rate: years ≈ 70 ÷ rate. Small differences in growth rates compound into enormous differences over decades. Per-capita growth ≈ total GDP growth − population growth. Long-run growth comes from physical capital, human capital, and technology (the Solow growth model is named factually as the field's workhorse framework, not derived here).

(B) Definitions, terms, procedures

Growth rate = (new GDP − old GDP) ÷ old GDP × 100.
Rule of 70: years to double ≈ 70 ÷ growth rate (%). ALWAYS divide, never multiply.
Per-capita growth ≈ total growth − population growth (approximation).
Sources of growth: physical capital, human capital, technology.

(C) Predictable mistakes → cures

❌ "Rule of 70: multiply the rate by 70." → ✅ DIVIDE 70 by the rate (70 ÷ 5 = 14 years, not 70 × 5).
❌ "5% GDP growth means everyone is 5% richer." → ✅ Subtract population growth to get the per-capita figure that actually tracks living standards.

(D) Review in the module

Week 4 → Lecture Outline, Slides (Deck 4), Lecture Tutorial 4, Workshop 4.

Objective 5 — The AD–AS Model, Comparative Statics & Output Gaps (Weeks 5–6) · ≈5 items — STUDY HARDEST

(A) Key ideas, plain language

Aggregate demand (AD) slopes down via the wealth, interest-rate, and exchange-rate effects. SRAS slopes up (sticky wages/prices in the short run); LRAS is vertical at the economy's potential output. A change in the PRICE LEVEL itself is a movement ALONG a curve — never a shift. Only a change in a curve's DETERMINANTS (C, I, G, NX for AD; input prices/expectations for SRAS; capital/labor/technology for LRAS) causes a shift. A recessionary gap means actual output sits below potential (needs expansionary policy to close); an inflationary gap means actual output sits above potential (needs contractionary policy).

(B) Definitions, terms, procedures — the graph-logic canon (memorize this table)

Shift	Effect on price level (P)	Effect on real output (Y)
AD shifts RIGHT (C↑, I↑, G↑, NX↑, expansionary fiscal/monetary policy)	P↑	Y↑
AD shifts LEFT (any of the above falls, contractionary policy)	P↓	Y↓
SRAS shifts LEFT (input/oil price↑, expected inflation↑)	P↑	Y↓ (stagflation)
SRAS shifts RIGHT (input price↓, favorable supply shock)	P↓	Y↑
LRAS shifts RIGHT (more capital, labor, technology)	— (long-run growth, potential output rises)	—
Price-level change alone	—	— a movement ALONG the existing curve, NOT a shift

Recessionary gap: actual Y < potential Y → the gap size = Y − Y (as a level, and as a % of potential).
Inflationary gap: actual Y > potential Y → the gap size = Y − Y (as a level, and as a % of potential).

(C) Predictable mistakes → cures

❌ "A change in the price level shifts AD." → ✅ Price level is AD's OWN axis variable — a price-level change is a movement along, not a shift.
❌ "SRAS and LRAS always shift together." → ✅ SRAS shifts with SHORT-RUN cost/expectation shocks; LRAS shifts only with a genuine change in the economy's productive capacity — a long-run event, not a short-run shock.
❌ "A recessionary gap calls for contractionary policy." → ✅ Backwards — recessionary (Y below potential) needs expansionary policy (shift AD right); inflationary (Y above potential) needs contractionary policy.
❌ Confusing a demand-side event with a supply-side one. → ✅ Ask: did this change C/I/G/NX (→ AD) or did it change PRODUCTION COSTS (→ SRAS) or did it change PRODUCTIVE CAPACITY (→ LRAS)?

(D) Review in the module

Week 5 → Lecture Outline, Slides (Deck 5), Lecture Tutorial 5, Workshop 5 (AD–AS anchor). Week 6 → Lecture Outline, Slides (Deck 6), Lecture Tutorial 6, Workshop 6 (output gaps).

Objective 6 — Fiscal Policy, the Multiplier & Deficits vs. Debt (Week 7) · ≈3 items

(A) Key ideas, plain language

Fiscal policy is Congress's tool: government spending and taxes (NOT the Fed's tool — that's monetary policy, coming Weeks 9–11). Expansionary fiscal policy (G↑ or T↓) targets a recessionary gap; contractionary (G↓ or T↑) targets an inflationary gap. The spending multiplier = 1/(1 − MPC) captures how an initial dollar of spending re-spends through the economy in rounds. Automatic stabilizers (unemployment benefits, progressive taxes) act without new legislation. The deficit is a flow (this year's spending minus revenue); the debt is a stock (the accumulated total of all past deficits, minus any surpluses) — a deficit ADDS to the debt every year it occurs.

(B) Definitions, terms, procedures

Spending multiplier = 1 ÷ (1 − MPC). ΔY = ΔG × multiplier.
Tax multiplier ≈ −MPC ÷ (1 − MPC) (smaller in magnitude than the spending multiplier, one-line nod).
Expansionary fiscal policy: G↑ or T↓ — targets a recessionary gap. Contractionary: G↓ or T↑ — targets an inflationary gap.
Deficit (a FLOW) = government spending − government revenue in a single year. Debt (a STOCK) = the accumulated total of all past deficits (net of surpluses). A deficit ADDS to the debt; only a surplus reduces it.
Fiscal policy = Congress (spending & taxes). Monetary policy = the Fed (money supply & interest rates) — do not confuse the two institutions or their tools.

(C) Predictable mistakes → cures

❌ "The multiplier is 1/RR." → ✅ That's the money multiplier (banking, Week 9). The spending multiplier is 1/(1 − MPC).
❌ "A deficit and the debt are the same thing." → ✅ Deficit = this year's FLOW; debt = the accumulated STOCK. A deficit adds to the debt.
❌ "Fiscal policy is the Fed's job." → ✅ Fiscal = Congress (spending & taxes). Monetary = the Fed (money supply & rates).

(D) Review in the module

Week 7 → Lecture Outline, Slides (Deck 7), Lecture Tutorial 7, Workshop 7 (the spending multiplier traced round by round).

Representative Practice (all fresh — vetted answers)

None of these are live midterm items. New scenarios, new wording. Each answer is vetted; the one-line why names the idea it tests. Cover the answers, work each one, then check.

Objective 1 practice

Worked example — PPF and opportunity cost.
An economy can produce 30 units of consumer goods or 10 units of capital goods (straight-line PPF).
- (a) What is the opportunity cost of 1 capital good? Of 1 consumer good?
- (b) A production point of (12 consumer goods, 4 capital goods) — is it on, inside, or outside the frontier?

Answer. (a) OC of 1 capital good = 30 ÷ 10 = 3 consumer goods. OC of 1 consumer good = 10 ÷ 30 = 1/3 capital good. (b) Frontier equation: consumer/30 + capital/10 = 1. At (12, 4): 12/30 + 4/10 = 0.4 + 0.4 = 0.8 < 1 → inside the frontier → attainable but inefficient/idle (some labor and capital unused). Why: interior points are attainable; only points ON the frontier are efficient.

Self-check (Obj 1).
1. True/false: a production combination outside a country's PPF is inefficient but attainable. → False — outside = unattainable.
2. "The unemployment rate rose by 2 percentage points last year" — positive or normative? → Positive (testable by data).
3. "We ought to bring the unemployment rate down to 3%" — positive or normative? → Normative (a value judgment).
4. If max output is 40 units of good A or 10 units of good B, what is the opportunity cost of 1 unit of B? → 4 units of A.

Objective 2 practice

Worked example — GDP via the expenditure approach and the deflator.
An economy reports (in billions): C = 700, I = 300, G = 200, X = 150, M = 130. Nominal GDP is also known to be $1,220 billion this year with real GDP at $1,000 billion.
- (a) Compute NX and GDP via the expenditure approach.
- (b) Compute the GDP deflator.

Answer. (a) NX = 150 − 130 = 20. GDP = 700 + 300 + 200 + 20 = $1,220 billion. (b) Deflator = 1,220 ÷ 1,000 × 100 = 122. Why: GDP sums the four expenditure components (with NX possibly negative); the deflator = nominal ÷ real × 100, confirming the two ways of sizing up the same economy agree.

Self-check (Obj 2).
1. Does a $5,000 stock trade between two private investors count in GDP? → No — a purely financial transaction, no new production.
2. If nominal GDP grows 6% and real GDP grows 2%, roughly how much of that growth was pure inflation? → ≈4 percentage points (nominal growth ≈ real growth + inflation, an approximation).
3. True/false: a $30,000 car built and sold this year by a domestic automaker counts as consumption in GDP. → True (a new, final good purchased by a household).

Objective 3 practice

Worked example — CPI, inflation rate, and the labor market.
A fixed CPI basket costs $150 in the base year. In year 2, the same basket costs $165. Separately, an economy has 90 million employed, 10 million unemployed (searching), and an adult population of 160 million.
- (a) Compute the year-2 CPI and the inflation rate.
- (b) Compute the unemployment rate and the LFPR.

Answer. (a) CPI = 165 ÷ 150 × 100 = 110. Inflation rate = (110 − 100) ÷ 100 × 100 = 10%. (b) Labor force = 90 + 10 = 100 million. Unemployment rate = 10 ÷ 100 × 100 = 10%. LFPR = 100 ÷ 160 × 100 = 62.5%. Why: the CPI tracks a fixed basket's cost; the inflation rate is its percentage change. The unemployment rate divides by the LABOR FORCE, not the total adult population — LFPR is the ratio that uses the population.

Self-check (Obj 3).
1. A worker who is "between jobs" after voluntarily quitting to search for a better fit — which type of unemployment? → Frictional.
2. A worker whose entire industry declined due to automation, requiring retraining — which type? → Structural.
3. True/false: a discouraged worker who stopped searching six months ago is counted in the unemployment rate's numerator. → False — they exit the labor force entirely and aren't in the calculation at all.
4. A worker gets a 3% raise while inflation runs at 6%. What happened to their real wage, approximately? → Fell by about 3% (a real pay cut despite the nominal raise).

Objective 4 practice

Worked example — growth rate and the rule of 70.
Real GDP rises from $400 billion to $432 billion over one year.
- (a) Compute the growth rate.
- (b) Using the rule of 70, how many years would it take to double at that steady rate?

Answer. (a) Growth rate = (432 − 400) ÷ 400 × 100 = 8%. (b) Rule of 70: 70 ÷ 8 = 8.75 years. Why: growth rate is simple percentage change; the rule of 70 divides (never multiplies) 70 by the rate to estimate the doubling time.

Self-check (Obj 4).
1. At a steady 7% growth rate, roughly how many years to double? → 10 years (70 ÷ 7).
2. If total GDP growth is 4% and population growth is 1.5%, what is the approximate per-capita growth rate? → ≈2.5%.
3. True/false: the rule of 70 says you should multiply the growth rate by 70 to get the doubling time. → False — DIVIDE 70 by the rate.

Objective 5 practice

Worked example — AD–AS comparative statics and an output gap.
An economy has AD: P = 22 − Y/200 and SRAS: P = 6 + Y/200, giving equilibrium Y* = 1,600, P* = 14. Potential output for this economy is Y* (potential) = 1,700 billion.
- (a) Government spending falls, shifting AD to P = 20 − Y/200. Find the new equilibrium.
- (b) At the new equilibrium, is there a recessionary or inflationary gap, and how large (in dollars and as a % of potential)?

Answer. (a) Set 20 − Y/200 = 6 + Y/200 → 14 = 2Y/200 → new Y* = 1,400. P* = 20 − 1,400/200 = 13. (b) Compare to potential (1,700): actual Y (1,400) < potential (1,700) → recessionary gap = 1,700 − 1,400 = $300 billion, which is 300 ÷ 1,700 × 100 ≈ 17.6% of potential. Why: a fall in government spending shifts AD LEFT, lowering both P and Y — the classic contractionary-fiscal-policy result; comparing the new actual Y to potential Y diagnoses the gap.

Self-check (Obj 5).
1. A favorable technology shock lowers production costs economy-wide. Which curve shifts, which way, and what happens to P and Y? → SRAS shifts RIGHT → P↓, Y↑.
2. True/false: a fall in the price level, by itself, shifts the AD curve leftward. → False — it's a movement ALONG the existing AD curve (to a higher Y), not a shift.
3. An economy's actual output is ABOVE its potential output. Is this a recessionary or inflationary gap, and what type of fiscal policy would classically be prescribed to close it? → Inflationary gap; contractionary fiscal policy (G↓ or T↑).

Objective 6 practice

Worked example — the spending multiplier and deficit vs. debt.
An economy has MPC = 0.8. Government spending rises by $45 billion. Separately, this year's government revenue is $610 billion and spending is $650 billion; the debt going into the year was $2,000 billion.
- (a) Compute the multiplier and the total change in GDP.
- (b) Compute this year's deficit and the new debt level.

Answer. (a) Multiplier = 1 ÷ (1 − 0.8) = 5. ΔY = 45 × 5 = $225 billion. (b) Deficit = 650 − 610 = $40 billion (a flow). New debt = 2,000 + 40 = $2,040 billion (the accumulated stock). Why: the multiplier formula uses MPC in the denominator (1 − MPC), not MPC alone; the deficit is one year's flow, and it ADDS to the debt, the running stock.

Self-check (Obj 6).
1. True/false: fiscal policy is a tool used by the Federal Reserve. → False — fiscal policy is Congress's tool (spending & taxes); the Fed uses MONETARY policy.
2. At MPC = 0.5, what is the spending multiplier? → 2 (1 ÷ (1 − 0.5) = 1 ÷ 0.5 = 2).
3. If a government runs a SURPLUS this year, what happens to the debt? → The debt FALLS — a surplus is the one condition that reduces the accumulated stock.

Study Plan — a Dated Countdown

Built for the Week 8 midterm. Adjust to your section's exact exam day; the rhythm matters more than the exact dates.

When	Do this (≈45–75 min)
~7 days out (Week 7, after class)	Read this guide's Objectives 1 & 2 sections. Work the Obj 1 and 2 practice. Build your one-page concept sheet (the PPF opportunity-cost rule, the GDP-expenditure sum, the deflator formula, positive vs. normative).
~5 days out	Read Objectives 3 & 4 carefully. Work the Obj 3 and 4 practice — the CPI/inflation formula, the unemployment-rate/LFPR formulas, the rule of 70.
~3 days out	Work all of the Obj 5 & 6 practice (the graph-logic canon table, output-gap diagnosis, the multiplier, deficit vs. debt). Then run the paired Exam-Prep Tutorial (N) in an approved chatbot — it diagnoses weak spots and drills them.
~2 days out	Take the Practice Exam (O) under timed, closed-note conditions. Score it; list every concept you missed.
~1 day out	Re-teach only the topics you missed on the practice exam (use this guide's mistake-cures). Re-do those specific self-checks. Sleep — memory consolidates overnight.
Exam day	Skim your one-page concept sheet and the graph-logic canon table. Arrive early. Read each item twice and answer the question actually asked. AI is not permitted — bring your understanding.

Two paired tools — use both:
- Exam-Prep Tutorial (N) — paste the prompt into an approved chatbot; it diagnoses, re-teaches, and drills you adaptively. Best for active recall and shoring up weak spots.
- Practice Exam (O) — a full, fresh, mirror-format run. Best for pacing and a final readiness check.

How the Midterm Is Graded + Test-Taking Strategy

How it's graded.
- 100 points across 20 items, 5 points each. Coverage tilts toward Objective 5 (AD–AS comparative statics and output gaps) and Objective 3 (the CPI, inflation, and unemployment), which carry the most items.
- The midterm is 20% of your course grade. It replaces Week 8's quiz, assignment, and workshop. One attempt; AI not permitted.

Honest test-taking strategies for this material.
1. Translate each scenario into its concept first. Underline cue words — expenditure approach, deflator, CPI, unemployment rate, rule of 70, AD shift, SRAS shift, output gap, multiplier, deficit vs. debt — then match to the formula or rule.
2. For GDP, always write out C + I + G + NX explicitly, computing NX = X − M first (and remembering it can be negative).
3. For the deflator, remember NOMINAL goes on top: deflator = nominal ÷ real × 100.
4. For the CPI, divide the CURRENT basket cost by the BASE-year basket cost, times 100 — then find the inflation rate as the PERCENTAGE CHANGE between two CPI readings, never the index number itself.
5. For unemployment, divide by the LABOR FORCE (employed + unemployed), not the total population — that denominator is reserved for the LFPR.
6. For the rule of 70, DIVIDE 70 by the growth rate — never multiply.
7. For AD–AS items, first ask: did a determinant of AD change, a short-run cost/expectation shift SRAS, or a long-run capacity change shift LRAS? Then apply the graph-logic canon table above.
8. For output gaps, compare ACTUAL Y to POTENTIAL Y* — below potential is recessionary (needs expansionary policy); above is inflationary (needs contractionary policy).
9. For the multiplier, use 1/(1 − MPC) — not 1/RR (that's the very different money multiplier, coming in Week 9).
10. Watch the deficit/debt trap: the deficit is THIS YEAR'S flow; it ADDS to the debt, the accumulated stock. Only a surplus reduces the debt.
11. On "select all that apply," judge each option independently — the false ones are usually a classic misconception in disguise (often a fiscal/monetary mix-up).
12. Do easy items first, flag hard ones, budget time — 20 items at 5 pts each means a few minutes per item max.

Canvas placement block

canvas_object   = Page
title           = "Midterm Study Guide — Weeks 1–7 (Objectives 1–6)"
module          = "Week 8 — Midterm Review & Exam"
grading_type    = not_graded
available_from  = 2026-10-17    # posts before the Week 8 exam window opens
published       = true
provenance      = "~ Prof. Ashford's edition · Fall 2026 · built with thecoursemaker.com"

Term-update note: each term's $39 update regenerates fresh practice variants from the same scope — the live midterm is never reproduced here.

Quality Gate (self-checked before shipping)

Quantitative gate: PASS — every numeric worked example above re-derived by Python (see _build/logs/week-08-numbers.txt for the L/O item numbers; this guide's own worked examples use additional clean-landing values: 30/10 PPF → 3; NX=20, GDP=1,220, deflator=122; CPI 165/150×100=110, inflation 10%, unemployment 10%, LFPR 62.5%; growth 8%, rule of 70 → 8.75 yrs; AD-AS Y=1,400/P=13 with a 17.6%-of-potential recessionary gap; multiplier 5, ΔY=225; deficit 40, new debt 2,040 — all independently verified with the same formulas as the L/O exam items).

Graph-logic check: PASS — the canon table (AD right→P↑Y↑; AD left→P↓Y↓; SRAS left→P↑Y↓ stagflation; SRAS right→P↓Y↑; LRAS right→long-run growth; price-level change→movement along, not a shift) matches _build/NUMBERS_PACK.md exactly and is applied consistently across every worked example and self-check above.

The per-term $39 update (fresh assessment variants, re-paced to your next calendar) referenced above is on the roadmap — coming soon. Today's download is yours to keep, but it doesn't refresh itself.

~ Prof. Ashford's edition · Fall 2026 · built with thecoursemaker.com