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Unit V Study Guide* - Measuring Economic
Performance
Unit Summary: As you recall, macroeconomics is the study of entire economies. Unit V
covers the basic macroeconomics concepts of gross domestic product (GDP), economic
growth, business cycles, unemployment, inflation and deflation, and poverty and income
distribution. Other important concept you will learn include the phases of the business cycle,
the factors that promote economic growth, and how economists measure GDP,
unemployment, inflation and poverty.
Big Ideas:
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Gross Domestic Production (GDP) is the primary measure of a nation’s economic
performance.
The business cycle measures fluctuations (increases and/or decreases) in real GDP, the
major indicator of a nation’s economic performance.
Achieving economic growth, an increase in real GDP over time, is a national economic
goal.
The rates of unemployment and inflation result from specific stages in the business cycle.
Income inequality and poverty, unique though related topics, concern many economists
and policy makers.
Essential Questions: (On the exam, you will be required to answer one question)
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How do economists use real and nominal GDP and the business cycle to measure a
nation’s economic performance?
Analyze the policies that the U.S. government uses to reduce the income gap and
decrease poverty?
Analyze how unemployment and inflation affect GDP and the business cycle.
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Describe how inflation affects the economy?
Identify and analyze the main economic costs of unemployment.
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Explain the relationship between consumer expectations and economic performance.
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What is the relationship between full employment and cyclical, structural, and seasonal
unemployment?
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Topics/Terms:
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National income
accounting
Gross domestic
product
Intermediate goods
Durable goods
Nondurable goods
Nominal GDP
Real GDP
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Gross national product
Depreciation
Price level
Aggregate supply
Aggregate demand
Business cycle
Expansion
Economic growth
Peak
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Contraction
Trough
Recession
Depression
Stagflation
Leading indicators
Real GDP per capita
Capital deepening
Saving
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Savings rate
Technological
progress
Frictional
unemployment
Seasonal
unemployment
Structural
unemployment
Cyclical unemployment
Census
Unemployment rate
Full employment
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Underemployed
Discouraged worker
Inflation
Purchasing power
Price index
Consumer Price Index
(CPI)
Market basket
Inflation rate
Core inflation rate
Hyperinflation
Quantity theory
Demand-pull theory
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Cost-push theory
Wage-price spiral
Fixed income
Deflation
Poverty threshold
Poverty rate
Income distribution
Food stamps
Lorenz Curve
Enterprise zone
Block grant
Workfare
Short-Answer Questions—some or all will be used as short-answer questions on the exam:
1.
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How do economists calculate gross domestic product?
What are some of the limitations of gross domestic product?
3.
Describe the four phases of the business cycle?
4.
How do leading indicators predict where the economy is headed?
5.
Describe the unemployment rate.
6.
Illustrate the four major types of unemployment?
7.
How do economists evaluate price changes over time?
8.
What are the causes of inflation?
9.
Describe Consumer Price Index (CPI), the main index that economists use to measure
inflation.
10. How does the Bureau of Labor Statistics calculate the rise in prices each year?
11. How do economists determine the poverty level in the U.S.?
12. Describe how economists measure the distribution of income.
13. Explain why final goods and services are included in the calculation of GDP and
intermediate goods are not.
*Applicable California Economic Standard:
 12.5, 12.5.1, 12.5.2,12.5.3: Students analyze the aggregate economic behavior of the
U.S. economy.
 12.3.3: Students analyze the influence of the federal government on the American
economy.
 12.4.1, 12.4.4: Students analyze the elements of the U.S. labor market in a global setting.