Download Module 10 - Circular Flow and GDP 1. Draw the Circular Flow Model

Module 10 - Circular Flow and GDP
1. Draw the Circular Flow Model w/ businesses, households, and firms.
2. Disposable Income is that a household has after __________ is taken out.
3.
Where do households get the majority of their income from?
4. Where does the government get its financing from in the circular flow model?
5. Define Investment Spending.
6. Give an example of investment spending.
7. What is the formula for GDP?
8. Give an example of an item/activity that would result in an increased GDP?
9. What is an example of something that would NOT be an addition to GDP?
10. If a store sells a hot dog for $5 and the store purchased the ketchup for $2, the bun for
$0.50, and the hot dog sausage for $1, what is the total amount added to GDP?
11. What is the formula for net exports?
12. If a country exports 10 billion dollars of hotdogs, but imports 5 billion dollars of
hamburgers, what is the net exports?
13. What effect on GDP do imports have?
Module 11 - Real GDP
1. Define Aggregate Output.
2. What is nominal GDP?
3. How do you calculate real GDP?
4. Why is it important to account for Real GDP and not just nominal GDP?
Chart 1
Year 2010
Year 2011
Year 2012
Quantity of Hot Dogs
2
5
10
Price of Hotdogs
$1
$1.50
$2
Quantity of
Hamburgers
5
8
15
Price of Hamburgers
$5
$10
$15
5. What is the nominal GDP in each of these years?
a. 2010
b. 2011
c. 2012
6. For year 2011 - what would be the REAL GDP if you used 2010 as a base year for
prices?
a. Real GDP b. Does 2011 show real GDP growth? Why or why not?
7. What does GDP per capita mean?
8. What is GDP per capita good at measuring?
Module 12 - Meaning and Calculation of Unemployment
1. Define:
a. Employed
b. Unemployed
c. Labor Force
d. Labor Force Participation Rate
e. Unemployment Rate
2. What is the formula for the unemployment rate?
3. If the total population is 100 million people. 50 million have jobs, 10 million are looking
for jobs, 10 million of working age but not seeking work, and the rest below working
age…
a. What is the total amount counted as unemployed?
b. What is the unemployment rate?
4. If the unemployment rate is 5% and there are 10,000 people in the labor force, how
many are unemployed?
5. What leads to discouraged workers? Do they still count as part of the unemployment
rate?
6. Describe what happens to the unemployment rate as GDP and growth of a country
fluctuates.
Module 13 - Causes and Categories of Unemploymen​t
1. Define:
a. Frictional Unemployment
b. Structural Unemployment
c. Natural Rate of unemployment
d. Cyclical Unemployment
2. Give an example of frictional unemployment.
3. Give an example of structural unemployment.
4. What effect does a minimum wage have on employment?
5. What effect do labor unions have on employment?
6. If the minimum wage is above the equilibrium wage, the number of workers
______________ the number of jobs available.
7. When the economy is in full employment there is the ____________________, but the
___________________________ is zero.
8. A person who is unemployed because of a mismatch between the quantity of labor
supplied and the quantity of labor demanded is experiencing what type of
unemployment?
9. A person who moved to a new state and took two months to find a new job experienced
which type of unemployment?
Module 14 - Inflation: Overview
1. Define:
a. Real Wage
b. Real Income
c. Inflation Rate
2. What is the formula to find the inflation rate?
3. If the price level in year 1 is $100 and the price in year 2 is $125, what is the inflation
rate?
4. What are Shoe-Leather Costs? Give an example.
5. What are menu costs?
6. What are Unit-of-Account costs?
7. What is the nominal interest rate?
8. What is the real interest rate?
9. What is the formula to find the real interest rate?
10. If the nominal interest rate is 5% and the inflation rate is 2%, what is the real interest
rate?
11. Define Disinflation.
12. Why is disinflation difficult and costly?
Module 15 - Measurement and Calculation of Inflation
1. Define:
a. Aggregate Price Level
b. Market Basket
c. Price Index
d.
Consumer Price Index
e. Producer Price Index
f.
GDP Deflator
2. What is the formula for the Price Index in a given year?
3. Calculate: If the market basket in year 1 is $300 and the Market basket in year 2 is $500,
what is the price index for year 2, using year 1 as the base?
4. What is the formula for the inflation rate using the price index?
FRQ Practice:
1. Draw a supply and demand graph:
a. Draw the Equilibrium at $5
b. Draw a price ceiling at $6
c. What happens to the supply of the product?
d. What happens to the demand of the product?