Download Unit 4 Homework Packet Due Friday 4/10 Read pages 306

Unit 4 Homework Packet
Due Friday 4/10
Read pages 306-317
Online video lesson
GDP
Answer questions 1-6
1. Define G.D.P. and Final goods
2. How is G.D.P. calculated?
3. What is the difference between Nominal GDP and Real GDP? Why is real GDP a better
measure when trying to compare two different periods of time?
4. What is GDP per capita and why is it a better measure when trying to compare the
GDPs of different nations?
5. What is the benefit of using G.D.P. as an economic indicator?
6. What are the flaws of using G.D.P. as an economic indicator?
According to economist Frank Shostak . . .
According to economist Milton Friedman . . .
According to Senator Robert F. Kennedy . . .
Due Monday 4/13
Read Pages 318-328
Online video lesson
Unemployment
Answer questions 7- 12
7. How is the unemployment rate calculated?
8. Economist claim that the natural rate of unemployment is about 4.5%. What
unemployed worked fall under this category?
9. Why is the government concerned with cyclical unemployment and how can it lead to
a downward spiral?
10. What are some of the costs of unemployment?
11. If there is an unemployment rate higher than 4.5% does that mean that high
unemployment is a problem throughout the entire nation?
12. Argue how the unemployment rate can simultaneously overestimate and
underestimate the unemployment problem.
Due Tuesday 4/14
Read pages 329- 343
Online video lesson
Money’s role
Inflation
Answer questions 13- 19
13. Provide and explain the three basic reasons why price increases.
14. Using the equation MV=PQ, explain how increasing the money supply while all other
variables stay stay the same, must result in an increase in prices.
15. Why is the Consumer Price Index also considered the Cost of Living Index?
16. Explain why the difference between real wages and nominal wages.
17. Why is time a better measure of value?
18. Assuming you have a job making minimum wage ($7.25) figure out if a 4 lb. chicken
costs you more in 2014 or in 1938.
On your own figure out a way to determine the answer to the question.
19. What types of people are hurt the most by inflation? Why?
Due Wed 4/15
Read pages 344- 347
Online video lesson
The Business cycle
Answer questions 20-23
20. Outline the 4 phases of the business cycle and explain what happens to GDP, Price,
and unemployment rates during these periods.
21. What is a recession?
22. What phase of the business cycle are we currently in? What is your evidence to
support your claim?
23. In the space provided diagram/label the phases of the business cycle.
Due Tuesday 4/21
Read pages 348-377
Online video lessons
The aggregate market
Classical LRAS
Keynesian LRAS
Phases of the LRAS
Answer questions 24- 31
24. In the space provided summarize Henry Hazlitt’s quote in your own words.
25. Nothing in the economy works in isolation. Relate this idea to the quote above.
26.
a. Please label parts of the Aggregate Market
b. Identify the following terms:
Aggregate Demand
Aggregate Supply
Long Run Aggregate Supply
27. Explain the following ideas of John Maynard Keynes
Idea
Drops in aggregate demand cause recessions
Prices and Wages are Sticky
Ind. decisions are based on Animal Spirits
The Paradox of Thrift
Spending and the Multiplier Effect
In the Long Run we are all Dead
Explanation
28. Explain the following ideas of the opponents John Maynard Keynes
Idea
Explanation
Prices and Wages are Flexible (Classical)
Let prices work
Praxeology (Ludwig Von Mises)
Use the internet
Pretence of Knowledge (F.A. Hayek)
Supply creates its own demand (Says)
There is no such thing as a Free Lunch (Friedman)
Fear inflation, it’s the boom that we need to
study not the bust. (Hayek)
Mal-investments
29. Diagram the Long Run Aggregate Supply (LRAS) curve according to Keynes
When AD drops what happens GDP and employment levels?
When AD drops what happens to price level?
30. Diagram the Long Run Aggregate Supply (LRAS) curve according to classical economist.
When AD drops what happens GDP and employment levels?
When AD drops what happens to price level?
31.
Price
C
Level
AD
B
A
Section A
GDP/employment
Name of Phase ___________________________
What happens to price when AD increases?
What happens to employment and GDP when AD increases?
Section B
Name of Phase ___________________________
What happens to price when AD increases?
What happens to employment and GDP when AD increases?
Section C
Name of Phase ___________________________
What happens to price when AD increases?
What happens to employment and GDP when AD increases?
Due Wed. 4/22
Read pages 378-380, Read pages 386-387, 391-393
Online video lessons
Fiscal and Monetary Policy during Recession
Fiscal and Monetary Policy during Expansion
Answer questions 32- 41
Congress and Fiscal Policy
32. What are the two main methods of fiscal policy that Congress uses to impact the
economy?
33. What happens to the demand of consumers of Congress cuts income tax?
34. What happens to the demand of the government if Congress increases spending?
35. According to Keynes what would be the proper fiscal policy during periods of
recession?
36. According to Keynes what would be the proper fiscal policy during inflationary
periods?
The Federal Reserve and Monetary Policy
37. What are some methods that the Federal uses to increase or decrease the money
supply?
38. According to Keynes what is the proper monetary policy during periods of
recession? Easy money or tight money? Why?
39. According to Keynes what is the proper monetary policy during inflationary
periods? Easy money or tight money? Why?
40. Review back to previous pages in this unit and explain what Hayek would say
about artificial interest rates.
41. Explain Milton Friedman’s money supply rule.
Due Friday 4/24
Read pages 394 to 408
Answer questions 42-50
42. What is the biggest difference between Keynesians and Supply-siders?
43. In theory if Aggregate supply increases what will happen to employment levels,
GDP, an price levels?
44. Make a list of methods that they government can use to increase Aggregate
Supply.
45. Identify the different types of taxes
a. Progressive
b. Regressive
c. Flat
46. Using your mind explain how the government could use its power to tax to
accomplish the following goals:
A. Influence behavior
B. Raise Revenue
C. Rearrange income
47. Identify the different types of spending
A. Mandatory
B. Discretionary
C. Earmarks
D. Pork Barrel
48. Identify the following items
A. Budget Surplus
B. Budget Deficits
C. Debt
49. Explain why deficit spending is politically appealing.
50. Explain the Tragedy of the Congress. Think game theory and the tragedy of the
commons.