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NAME __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ CLASS __ __ __ __ __ __ __ DATE __ __ __ __ __ __ _ Section 1 : Guided Reading and Review G ross D omestic Product A. As You Read As you read Section 1, answer the following questions about gross domestic product. Possible answers below tne aollar value of all final goods and services produced 1. What is the gross domestic product ? within a country's borders in a given year 2. How is the expenditure approach used to calculate it ? I n this approach, economists estimate annual expen ditures on consumer, business, and government goods and services, and net exports or imports of goods and servIces. 3. How is the income approach used to calculate it ? Economists add up all the incomes in the country. 4. What is the difference between nominal GDP and real GDP? Nominal G DP is measured in current prices; real GDP is expressed in constant, or unchanging, prices. Describe four limitations of using GDP to measure economic growth: 5. GDP does not measure nonmarket activities-goods and services that people make or do themselves. 6. 8. There are things not counted by GDP that contribute to people's quality of life. 9. How is the gross national p.roduct derived from the gross domestic product? by subtracting earnings by foreign firms and residents in the United States from GDP and earnings by U:5. firms and residents outside the U.S. 10. How is GDP related to aggre�ate supply and aggregate demand ? Aggregate supply is the real GDP; aggregate demand calculates GOP using"tne expenditure approach. B. Reviewing Key Terms Match the descriptions in Column I with the terms in Column II. Write the letter of the correct answer in the blank provided. You will not use all the terms. Column I h Co lumn II 1 1. a system that collects macroeconomic statistics on production, income, investment, and savings f 12. goods used in the production of final goods b _ 13. GDP measured in current prices _ d _ 14. goods that last a short period of time _ 15. GDP expressed in constant, or unchanging, prices a � 16. goods that last for a relatively long time � 17. loss of the value of capital equipment that results from normal wear and tear c _ 18. the total amount of goods and services in the economy available at _ all possible price levels e _ 19. the average of all prices in the economy _ k _ 20. the annual income earned by u.S.-owned firms and U.S. residents _ i 21. the dollar value of all final goods and services produced within a _ a. real GDP h. nominal GDP c. aggregate supply d. nondurable goods e. price level f. intermediate goods g. depreciation h. national income accounting i. gross domestic product j. durable goods k. gross national product 1. aggregate demand _ country's borders in a given year ( 54 Chapter 12 Guided Reading and Review NAME __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ___ CLASS ____________ __ DATE __ __ __ __ __ __ Section 2: Guided Reading and Review Busi ness Cycl es A. As You Read As you read Section 2, fill in each item in the following diagram. Cyc le Indicators Contributing Factors Phases 9. stock market interest rates ana creait 1 0. interest rates 7. consumer expectations 11. manufacturers' new oraers of capital gooGis 8. external shocks 1. expansion 5. business investment 2. peak 6. 3. contraction 4. trough B. Reviewing Key Terms Define the following terms. 12. business cycle a perioa of macroeconomic expansion followea by a perioa of contraction 13. expansion a period of economic growth as measurea by a rise in real GDP 14. economic growth a steaay, long-term increase in real GDP 15. peak the height of an economic expansion, when real GDP stops rising 16. contraction a perioa of economic aecline markea by falling real GDP 17. trough the lowest point in an economic contraction, when real GDP stops falling 18. recession a prolongea economic contraction 19. depression a recession that is especially long ana severe 20. stagflation ------T."::':'7"'::":-::-: : =-::-':":':::-:= :�_=_r,.,...".�_.".,.,..==l=���_=_c,..,.� ..,, �__,__..,� ,_, �-- ey economic varia bu:...:s:...:in....:e:...:s:...: s....:c.!L yc:...:l.:.. e 21 . leading indicators --'- __ __ __ __ __ __ __ __ __ __ __ _ _ _ _ _ _ _ _ _ _ __ Guided Reading and Review Chapter 12 55 ') NAME __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ c�ss _____________ DATE � __ __ __ ---- Section 3: Guided Reading and Review Economic G rowth A. As You Read As you read Section 3, fill in supporting facts or details under each main idea by answering each question. Possible answers below \. Main Idea: Capital deepening is an important source of growth in modern economies. 1. How does capital deepening increase output per worker ? With more oapital, workers oan be more effioient anti protluotive anti protluoe more output per hour of work. 2. How is human capital deepened ? through training programs anti on-the-job experienoe of workers Main Idea: The rate of saving and investment affects the economy. 3. What happens when saving rises ? more investment funtls beoome available to business firms anti these firms then spentl more on oapital 4. How does increased investment help the economy ? Businesses spentl the extra money on oapital investment, to expantl the stook of oapital in the business seotor. Main Idea: Population, government, and trade all directly affect the economy. 5 . What happens when population grows and capital remains constant ? Ihe amount of oapital per worker shrinks, leatling to lower living stantlartls. i 6. How do government taxation for consumption sl?en?ing and importing good� for sho�t term consumption affe�t economi rowth ? laxing In order to pay for oonsum Ion spentllng G1eoreases the amount ot Investment. f, orting goo s or s o - rm oonsump Ion WI no ma e e eponomy grow any faster, anti will leave t e oountry without atltlitional GDP to pay baok tlebts. Main Idea: Technological progress is a key source of economic growth. 7. How do ec.onomists measure the im.J?;lct of technQlogical p):ogress on e<;:onomic e:rowth ? TFiey i:letermlne hOW muoh growth In outf'ut oomes trom Inc:l""eases In capital ancl lnoreases 'i11 labor; any remaining growth oomes from teohnologioal progress. 8. How does the government aid technological innovation ? It issues patents anti sponsors basio researoh. B. Reviewing Key Terms Complete each sentence by writing the correct term in the blank. 9. Savings rate is the proportion of disposable income spent to income saved. 10. The real GDP divided by the total population is called 11. Increasing the amount of capital per worker is 12. Income not used for consumption is considered real GDP per oapita oapital tleepening saving 13. An increase in efficiency gained by producing more output without using more inputs is called teohnologioal progress . ( 56 Chapter 1 2 Guided Reading and Review NAME __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ___ CLASS __ __ __ __ __ __ __ DATE _____________ Section 1 : Guided Reading and Review Unempl oyme nt A. As You Read As you read Section 1, supply the missing reason for or type of unemployment on the lines pro vided in the chart. Possible answers below Type of Unemployment Reason for Unempl oyment 1. people taking time looking for work after finishing school 1. frictional unemployment 2. chanBes in consumer demand 2. structural unemployment 3. lack of education or training for skills in demand peo�le changing Jobs, fetting lala off, or taking time off from . 4. wor 1MB for a varlet:£ 0 reasons 3. structural unemployment 5. a healthy economy that is working properly 5 . full emplo:£ment 6. industries slowinB or shuttinB down for a season 6. seasonal unemployment 7. an econom:£ that is BrowinB too guickl:£ 7. very low unemployment 8. discove� of new resources 8. structural unemployment 9 . development of new technologies 9. structural unemplo:£ment 4. frictional unemployment 10. a downturn in the business c:£cle 10. cyclical unemployment 11. jobs movinB to other countries (Blobalization) 11. structural unemployment B. Reviewing Key Terms Complete each sentence by writing the correct term in the blank provided. 12. My cousin Harold is used to seasonal unemplo:£ment , since he works for a landscaping company and is laid off every winter. 13. It is easy to find a job these days, since the unemplo:£ment rate is so low. 14. People who do not finish high school often suffer from structural unemplo:£ment . 15. With -,f..::;. ul::. 1 e::. '-'l ... m .:. p�lo=-:£'" - m.:..: " e-'-':: nt=---- , nearly everyone who wants a job has a job. __ 16. The excellent mechanic who has been working as a clerk at a convenience store since the local garage closed is considered underemployed 17. My aunt who left her job to care for her sick mother and is now looking for work is an example of frictional unemplo:£ment . Guided Reading and Review Chapter 13 57 1 NAME ________________________________ ___ CLASS DATE __ __ __ __ __ __ __ __ __ __ __ _ _ Section 2: Guided Reading and Review I nflatio n A. As You Read As you read Section 2, answer the following questions. Possible answers below d.:..: in.:..: ce:...:.;.: ex-'-ri.:..: 1 . What would you use to see how prices have changed over time? a:.:.LP.:..: _ _ _ _ _ 2. What does the example of the Barrow's house increasing from $12,000 to $ 150,000 over nf_la 50 years show? _i_ '-t_io'-n _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ 3. How is the Consumer Price Index (CPI) used? to compare the cost of a group of goods this month with that of a similar group of goods months or years ago 4 . How does the Bureau of Labor Statistics determine the CPI? It establishes a base period, and assigns the index number 100 to a "market basket" of goods for that period; each month the cost of the market basket is updated and compared to the base period. 5. What data must you have to calculate the inflation rate for a specific year? the CPI for the year you wish to calculate and the CPI for the previous year 6. What happens when hyperinflation occurs over an extended period of time? Money loses its value; hyperinflation often leads to total economic collapse. Describe three theories of the causes of inflation. 7. qua ntity theory-inflation results when there is too m uch money in the economy 8. demand-pull theory-inflation occurs when demand for goods and services exceeds supplies 9. cost-push theory-inflation occurs when producers raise prices to meet increased costs How does inflation affect each of the following? 10 . purchasing power It erodes purchasi ng power. 11. fixed income It erodes fixed income. 1 2. savings If the inflation rate is higher than the interest rate, savers lose money. B. Reviewing Key Terms Define the following terms. 1 3. inflation rate the percentage rate of change in price level ovet· time 14. 15. 1 6. 1 7. 1 8 . price index -'---'--""'-"-�-'-�_'_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ ( 58 Chapter 1 3 Guided Reading and Review NAME __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ____ CLASS ______ DATE ____________ _ Section 3: Guided Read ing and Review Poverty A. As You Read As you read Section 3, fill in two supporting facts or details under each main idea by answering each question. Possible a nswers below Main Idea: The U.S. Census Bureau has developed measurements to calculate the number of poor. 1. What condition must exist for everyone in a household to be counted as poor? A family's total income must be below the poverty threshold. 2. What does the poverty rate help us understand? whom the government considers to be poor and what factors seem to contribute to poverty Main Idea: Poverty has a number of root causes. 3. What do statistics show about a lack of education contributio!1: to noverty,? StatIstIcs show that on average, hlgn scliool tlropouts earn one thlrtl less 'Chan hlgli scFlool graduates and two and a half times less than college graduates. 4. What has the divorce rate shown about poverty? As the divorce rate has climbed, so has the number of single-parent families. As a result, there are more children living in poverty. Main Idea: Knowing how the nation's total income is distributed helps peo-ple understand poverty. 5. What percentage of the nation's total income does the lowest 40 percent of the population receive ? 12.5 percent 6. What two key factors contribute to the differences in income distribution? the differences in the amount of skills and effort among people and the amount of money inherited by people Main Idea: The government has various programs and policies to combat poverty. 7. What programs and laws help working people achieve an adequate income? job training programs and minimum-wage laws 8 . How might the welfare reform program help reduce poverty ? It may provide Americans with labor skills and access to a steady, adequate income that they now lack. B. Reviewing Key Terms Complete each sentence by writing the correct term in the blank. 9. The C u_rv L_ o r_ e_ n z__ e _'-- _ _ _ __ is the graphed curve that illustrates income distribution in the economy. 10. The program that requires work in exchange for assistance is called w-=orC'-kf "'l'I"'-r-=e --'-'- _ __ __ __ poverty rate is the percentage of people in a particular group who are officially considered living in poverty. 11. The 12. The level of income below which income is insufficient to support a family or household is called the poverty threshold Guided Reading and Review Chapter 13 59 ')
