APE Unit 3 UGRP: Intro to Macroeconomics

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1 /40 UGRP Score: /10 UEQ Score: Name Date Period Time: 2.5 Weeks APE Unit 3 UGRP: Intro to Macroeconomics /50 Total Score Anchor Text and Video: Please visit: and answer the following questions: 1. What is the goal of macroeconomics? 2. What do macroeconomists study? Why? 3. How is the field of macroeconomics connected to government? UEQ: Answer this on a separate sheet of paper and staple it to the back of this packet. Answers must have a thesis, a piece of evidence and a conclusion Macro-what-economics! Explain all of the components to macroeconomics and how those components are used to create and measure the U.S. economy. Objectives: These are the key concepts that you must be able to answer after Unit 3. These are also your review topics for our online study guide. They are also the guided reading questions. Have at it TeamAP! Chapter 20 An Introduction to Macroeconomics 20.1 Explain why economists focus on GDP, inflation, and unemployment when assessing the health of an entire economy 20.2 Discuss why sustained increases in living standards are a historically recent phenomenon 20.3 Identify why saving and investment are key factors in promoting rising living standards 20.4 Describe why economists believe that shocks and sticky prices are responsible for short-run fluctuations in output and employment 20.5 Characterize the degree to which various prices in the economy are sticky 20.6 Explain why the greater flexibility of prices as time passes causes economists to utilize different macroeconomic models for different time horizons Chapter 21 Measuring Domestic Output and National Income 21.1 Explain how GDP is defined and measure 21.2 Describe how expenditures on goods/services can be summed to determine GDP 21.3 Explain how GDP can be determined by summing up all of the incomes that were derived from producing the economy s output of goods/services 21.4 Describe the relationships among GDP, net domestic product, national income, personal income, and disposable income 21.5 Discuss the nature and function of a GDP price index and describe the difference between nominal GDP and real GDP 21.6 List and explain some limitations of the GDP measure Chapter 22 Economic Growth 22.1 List two ways that economic growth is measured 22.2 Define modern economic growth and explain the institutional structures needed for an economy to experience it 22.3 Identify the general supply, demand, and efficiency forces that give rise to economic growth 22.4 Describe growth accounting and the specific factors accounting for economic growth in the United States 22.5 Explain how the average rate of U.S. productivity growth has fluctuated since Discuss differing perspectives as to whether growth is desirable and sustainable 1

2 Chapter 23 Business Cycles, Unemployment and Inflation 23.1 Describe the business cycle and its primary phases 23.2 Illustrate how unemployment is measured and explain the different types of unemployment 23.3 Explain how inflation is measured and distinguish between cost-push inflation and demand-pull inflation 23.4 Relate how unanticipated inflation can redistribute real income 23.5 Discuss how inflation may affect the economy s level of real output Vocabulary: Complete these on a 3x5 notecard. The front has the term, the back has the definition and a personal sentence with the term used in its proper context. Chapter 20: Business cycle, recession, Real GDP (GDPr), Nominal GDP (GDPn), unemployment, inflation, savings, investment, inflexible prices (sticky prices), flexible prices, demand shock, supply shock (12) Chapter 21: National income accounting, intermediate goods, final goods, multiple counting, expenditures approach, income approach, personal consumption expenditures (C), gross private domestic investment (I), government purchases (G), net exports (Xn) (10) Chapter 22: Labor productivity, labor-force participation rate, infrastructure, economies of scale (4) Chapter 23: Labor force, unemployment rate, discouraged workers, frictional unemployment, structural unemployment, cyclical unemployment, full-employment rate of unemployment, natural rate of unemployment (NRU), GDP gap, Okun s Law, consumer price index (CPI), deflation, demand-pull inflation, cost-push inflation, nominal income, real income, unanticipated inflation, anticipated inflation, cost-of-loving-adjustment (COLA), real interest rate, nominal interest rate, hyperinflation (23) Homework Assignments Chapter Assignment/Topic Due Date/Stamp 20 Read Chapter 20 An Introduction to Macroeconomics (pp ) and answer UGRP Q s Complete Chapter 20 VNC and quiz 21 Read Chapter 21 Measuring Domestic Output and National Income (pp ) and answer UGRP Q s Complete Chapter 21 VNC and quiz 22 Read Chapter 22 Economic Growth (pp ) and answer UGRP Q s Complete Chapter 22 VNC and quiz 23 Read Chapter 23 Business Cycles, Unemployment and Inflation (pp ) and answer UGRP Q s Complete Chapter 23 VNC and quiz Extra Unit 3 Practice: Jacob Clifford Macroecomics Videos Unit 2 Youtube, Economic Review Graphing App Unit 3 Test: 2

3 Chapter 20: An Introduction to Macroeconomics. Answer below or on a separate sheet of paper only if noted Explain why economists focus on GDP, inflation, and unemployment when assessing the health of an entire economy 1. Why do you think macroeconomists focus on just a few key statistics when trying to understand the health and trajectory of an economy? Would it be better to try to examine all possible data? Explain 20.2 Discuss why sustained increases in living standards are a historically recent phenomenon 1. Did economic output start growing faster than population from the beginning of the human inhabitation of the earth? When did modern economic growth begin? Have all of the world s nations experienced the same extent of modern economic growth? Explain Identify why saving and investment are key factors in promoting rising living standards 1. Why is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can t people enjoy more of both? 2. How does saving relate to investment ant thus to economic growth? 3. What role do banks and other financial institutions play in aiding the growth process? 20.4 Describe why economists believe that shocks and sticky prices are responsible for short-run fluctuations in output and employment 1. Why, in general, do shocks force people to make changes? Give two examples from your own experiences Characterize the degree to which various prices in the economy are sticky 1. Are all prices in the economy equally inflexible? Which ones show large amounts of short-run flexibility? Which ones show a great deal of inflexibility even over months and years? 20.6 Explain why the greater flexibility of prices as time passes causes economists to utilize different macroeconomic models for different time horizons 1. Do prices tend to become more or less flexible as time passes? a. If there is a trend, how does it affect macroeconomists choice of models? 3

4 Chapter 21: Measuring Domestic Output and National Income. Answer below or on a separate sheet of paper only if noted. Definition of Gross Domestic Product (GDP)- Measuring Growth Nominal GDP- GDP = C: Real GDP- I: G: GDP Deflator- X n: Three things not included in GDP: Explain how GDP is defined and measured 21.2 Describe how expenditures on goods/services can be summed to determine GDP 21.3 Explain how GDP can be determined by summing up all of the incomes that were derived from producing the economy s output of goods/services 21.4 Describe the relationships among GDP, net domestic product, national income, personal income, and disposable income 21.5 Discuss the nature and function of a GDP price index and describe the difference between nominal GDP and real GDP 21.6 List and explain some limitations of the GDP measure 4

5 Chapter 22: Economic Growth. Answer below or on a separate sheet of paper only if noted. Helped or Hurt by Unexpected Inflation Assume expected inflation is 2% but actual inflation turns out to be 5%. Who is helped and hurt by inflation? Helped Hurt Real interest rate= Nominal interest rate= Interest Rates and Inflation 1. If the nominal interest rate is 7% and expected inflation is 3%, what is the real interest rate? 2. If the real interest rate is -2% and the nominal interest rate was 3%, what was the inflation rate? 1. Causes of Inflation Quantity Theory of Money Quantity Theory of Money Equation: x = x 2. = = = = 3. Assume the amount of money is $5 and it is being used to buy 10 products with a price of $2 each. 1. How much is the velocity of money? 2. If the velocity and output stay the same, what will happen if the amount of money increases to $10? 22.1 List two ways that economic growth is measured 5

6 22.2 Define modern economic growth and explain the institutional structures needed for an economy to experience it 22.3 Identify the general supply, demand, and efficiency forces that give rise to economic growth 22.4 Describe growth accounting and the specific factors accounting for economic growth in the United States 22.5 Explain how the average rate of U.S. productivity growth has fluctuated since Discuss differing perspectives as to whether growth is desirable and sustainable Chapter 23: Business Cycles, Unemployment and Inflation. Answer below or on a separate sheet of paper only if noted. Measuring Unemployment* 1. Frictional Unemployment Full Employment Natural Rate of Unemployment (NRU) 2. Structural Unemployment Problems With Unemployment Rate Discouraged Job Seekers- 3. Cyclical Unemployment Underemployed (part-time) Workers- 6

7 Business Cycle Label peak, recession/contraction, trough, expansion Real GDP GDP Deflator Practice 1. The Nominal GDP is $100 billion and the Real GDP is $80 billion. Calculate the GDP deflator. 2. The Real GDP is $100 billion and the GDP deflator is 200. Calculate the Nominal GDP. Time 3. The Real GDP is $200 billion and the GDP deflator is 120. Calculate the Nominal GDP. Label: guns, butter, efficiency, underutilization, and growth 4. The Nominal GDP is $300 billion and the GDP deflator is 150. Calculate the Real GDP. 5. The Nominal GDP is $100 billion and the GDP deflator is 125. Calculate the Real GDP Describe the business cycle and its primary phases 23.2 Illustrate how unemployment is measured and explain the different types of unemployment 23.3 Explain how inflation is measured and distinguish between cost-push inflation and demand-pull inflation 7

8 23.4 Relate how unanticipated inflation can redistribute real income 23.5 Discuss how inflation may affect the economy s level of real output APE Unit 3 Concept Reviews Directions: With your partner, write a quick response to each question. We will review as a class. Concept Review #1 Macro and GDP 1. Define Macroeconomics Concept Review #4 Inflation and the CPI 1. Who is helped and hurt by inflation? 2. What are the 3 economic goals that all countries have 3. Identify the 3 key parts of the definition of GDP 4. How do we use GDP 5. Identify what is NOT included in GDP Concept Review #2 GDP and the Business Cycle 1. What is the GDP Deflator? 2. What are the components to the Business Cycle? 3. How is the Business Cycle connected to the PPF? 4. Explain the difference between Nominal and Real GDP. 5. Explain Real GDP per Capita. Concept Review #3 -Employment 1. Name the three types of unemployment. 2. Define Natural Rate of Unemployment. 2. In an economy, Real GDP (base year = 1996) is $100 billion and the Nominal GDP is $150 billion. Calculate the GDP deflator. 3. In an economy, Real GDP (base year = 1996) is $125 billion and the Nominal GDP is $150 billion. Calculate the GDP deflator. 4. In an economy, Real GDP for year 2002 (base year = 1996) is $200 billion and the GDP deflator 2002 (base year = 1996) is 120. Calculate the Nominal GDP for In an economy, Nominal GDP for year 2005 (base year = 1996) is $60 billion and the GDP deflator 2005 (base year = 1996) is 120. Calculate the Real GDP for What are some issues with the CPI? 3. What is the: Unemployment rate formula? Labor force participation rate formula? Name that Concept!