Review for Unit 4 Test

Economics Review for Unit 4 Test: Ch. 12 and 13

Review all vocab, notes, and handouts for this unit!

ANSWER ON A SEPARATE SHEET OF PAPER

1. What is the equation for GDP? 2. What does each letter in the GDP formula stand for? 3. Which part of the formula is the largest? 4. Which part of the formula benefits the economy most if it increases? 5. Why is (X-M) such a problem for the USA? Explain what happens to GDP as this part of the equation changes. 6. If foreign incomes rise, what happens to GDP? Why? 7. What is GDP? Why is it important? 8. What factors can affect GDP? 9. What things are included in GDP? (You will need to identify if something is included) 10. What things are not included in GDP? (You will need to identify if something is included) 11. What is the difference between a durable good and non-durable good? 12. What is capital deepening? 13. How does technological progress lead to economic growth? 14. What is the difference between real and nominal GDP? 15. What is disposable personal income? 16. Draw the business cycle. Label all parts. Know what they mean and what they are. 17. What economic variables affect the Business Cycle? 18. What is the difference between an intermediate good and a final good? 19. What happens to aggregate demand when the price levels fall? 20. How would aggregate supply be affected if people stopped spending? 21. How do fears of future economic problems affect GDP? 22. What is an example of depreciation? 23. What is an external shock? 24. What is the difference between recession and depression? 25. Why does increased saving lead to a higher GDP? 26. Explain the differences between the 4 types of Unemployment. (You will need to identify the type with situations) 27. When the economy is working well, what is the unemployment rate? 28. What type of goods make up the “market basket” of goods? 29. How has the distribution of income changed over the last 20 years? 30. What does it mean when someone is underemployed? 31. According to the demand-pull theory, what causes inflation? 32. According to the cost-push theory, what causes inflation? 33. What would cause a sharp increase in inflation? 34. In addition to cost-push and demand-pull, what is another cause for inflation? 35. Describe someone who is classified as “working poor”. 36. What part of the population worries about inflation more than others? 37. Why does the Wage-Price spiral say that price levels will keep increasing? 38. If we expect a recession, what will the typical consumer do? What might this do to the economy? 39. What is the purpose of a price index? 40. How do economists find the CPI? What does the CPI show? 41. List all the effects of inflation. 42. Who has the Highest GDP in the world?