SSEMA1 The Student Will Illustrate The Means By Which Economic Activity Is Measured

Economics Study Guide Questions Domain III: Macroeconomics

SSEMA1 The student will illustrate the means by which economic activity is measured. a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand. c. Explain how economic growth, inflation, and unemployment are calculated. d. Identify structural, cyclical, and frictional unemployment. e. Define the stages of the business cycle, include peak, contraction, trough, recovery, expansion as well as recession and depression. f. Describe the difference between the national debt and government deficits.

SSEMA2 The student will explain the role and functions of the Federal Reserve System. a. Describe the organization of the Federal Reserve System. b. Define monetary policy. c. Describe how the Federal Reserve uses the tools of monetary policy to promote price stability, full employment, and economic growth.

SSEMA3 The student will explain how the government uses fiscal policy to promote price stability, full employment, and economic growth. a. Define fiscal policy. b. Explain the government’s taxing and spending decisions.

DIRECTIONS:

1. SIT DOWN 2. CLOSE YOUR MOUTH 3. READ YOUR STUDY GUIDE AND ANSWER ALL QUESTIONS

Worth: ONE QUIZ GRADE, 2 CW Grades and 2 HW Grades

Due: Tomorrow BEFORE CLASS ENDS (All or nothing) No EXCUSES AND IT HAS TO BE CORRECT!

If you decide to waste your time in class today, there will be consequences

-I HAVE ALREADY INSTRUCTED THE SUBSTITUTE TO PUT THE PERSON CAUSING THE DISTRUBANCE (OR SLEEPING) OUT OF CLASS AND TO TAKE UP THEIR PAPER.

-IF YOU ARE PUT OUT OF CLASS FOR CAUSING A DISTURBANCE (OR SLEEPING) YOU WILL COMPLETE THE ALL THE QUESTIONS AFTER SCHOOL WITH ME THE NEXT DAY: FOR AS LONG AS IT TAKES TO FINISH IT!!! - Remember, MA 1 a-f Quiz is tomorrow

______Student Name

PD AND DATE ______Economics Study Guide Questions Domain III: Macroeconomics

1. According to the study guide, what are the four types of Macroeconomic topics that you may find in news paper articles?

2. According to the study guide, Macro economics means

3. Using the study guide, summarize the main difference between microeconomics and macroeconomics

4. According to the study guide, what are the 5 key economic indicators?

5. Which approach is the most common for measuring GDP? What’s the equation?

6. Explain how inflation can distort GDP

7. What is “real GDP”?

8. What is the purpose of the GDP deflator? What is it also known as?

9. Describe the shape of Aggregate Supply and Demand curves

10. What mainly causes aggregate supply to shift?

11. Explain what a shift in aggregate supply or aggregate demand mean in correlation to GDP?

12. Using the graph from the study guide, draw two examples of an increase in GDP caused by aggregate supply and aggregate demand.

13. Explain the difference between a recession and a depression

14. Explain what happens to real GDP when the aggregate demand shifts from AD1 to AD2? (How does this affect unemployment?)

15. Explain what happens to real GDP when the aggregate demand shifts from AD2 to AD3? (How does this affect inflation?)

16. What is stagflation? Draw a graph that represents stagflation.

17. What does it mean to be unemployed?

18. Why would a person be considered a discouraged worker?

19. What are the three major types of unemployment? Define each.

Answer the following and explain the answer Peggy, a recent college graduate, decides to look for a job instead of going to graduate school. If she is unable to find a job that suits her interests right away, what type of unemployment is she MOST likely experiencing? A structural B seasonal C frictional D cyclical

20. Explain how the government tries to eliminate unemployment.

21. What is the difference between a deficit and a debt? Economics Study Guide Questions Domain III: Macroeconomics 22. Draw the 4 phases of the business cycle

23. Give characteristics associated with each phase of the business cycle.

24. What is the main job of the Federal Reserve?

25. Explain the organization of the Federal Reserve System

26. What is the “nickname” given to the Federal Reserve System?

27. What type of policy does the Fed initiate? For what two reasons does the Fed initiate this policy?

28. Explain the difference between Monetary policy and Fiscal policy.

29. What are government securities?

30. In terms of government securities, explain what the Fed have to do in order to increase the money supply. What would the Fed have to do to decrease the money supply?

31. What tools does the Fed use to control inflation? How does this affect bond prices and interest rates? How does high interest rates affect consumer spending and business investments?

32. What is the discount rate?

33. If the Fed wants to increase the money supply what would it do to the discount rate?

34. If the Fed wants to decrease the money supply what would it do to the discount rate?

35. What is the reserve requirement?

36. If the Fed wants to increase the money supply what would it do to the reserve requirement?

37. If the Fed wants to decrease the money supply what would it do to the reserve requirement?

Answer the following and explain the answer

The Federal Reserve wants to reduce the nation’s money supply. This could be accomplished by doing all of the following EXCEPT A decreasing the discount rate B increasing the reserve requirement C selling securities on the open market D making banks hold a reserve for all types of deposits

38. What are the three monetary policy tools the Fed uses to affect the economy?

39. How does the Federal government affect the economy?

40. Define fiscal policy

41. Explain how a reduction in taxes can affect GDP according to the equation

42. How does an increase in government spending increase GDP?

43. What is the danger in reducing taxes and increasing government spending at the same time?

Explain how a national debt is created. Economics Study Guide Questions Domain III: Macroeconomics

Answer the following questions

1 What problem might policymakers be trying to address MOST if they increase funding for training programs covering skills such as computer repair, programming, and networking? A frictional unemployment B structural unemployment C cyclical unemployment D seasonal unemployment

2 Monetary policies the Federal Reserve can adopt include all of the following EXCEPT A raising the discount rate B buying government bonds C lowering the reserve requirement D raising personal income tax rates

3 Over a two-year period, the nation of Parthia experiences a steep decline in unemployment rate, a rise in real GDP, and a stabilized price level. Parthia appears to be A at the start of a recession B in the middle of a depression C stagnating economically D in the middle of a boom period

4 If the unemployment rate is rising and the GDP is falling, the fiscal policy that the federal government should MOST likely follow is A decreasing taxes B decreasing spending C decreasing the money supply D decreasing the reserve requirement