AP Macroeconomics

Ch. 7 & 8 Test Review

Coach Knox
Ch. 7
1. Draw and explain the ows o! a circ"lar ow model.
#. $ow do %o" &'"re nominal (DP)
*. $ow do %o" &'"re Real (DP)
+. ,hat does Real (DP meas"re)
-. .xplain how Real (DP and /ominal (DP are di0erent.
1. ,hat is the de&nition o! (DP)
7. ,hat are the two methods to &'"re o"t the (DP price index)
8. ,hat are some examples o! thin's that (DP cannot ta2e into
acco"nt)
3. ,hat are the components o! (DP)
14. .xplain the concept o! val"e added)
11. ,hat does the Cons"mer Price 5ndex 6CP57 meas"re)
1#. $ow do &'"re (DP8 /DP8 /58 P58 D58 and C)
1*. $ow do national acco"ntants avoid m"ltiple acco"ntin')
1+. $ow does one &'"re net exports)
1-. ,hat is the de&nition o! disposa9le income)
11. /ational acco"ntants wo"ld place the p"rchase o! a new
home "nder which component o! (DP)
17. ,hat is the term "sed to descri9e the di0erence 9etween
the val"e o! a &rm:s o"tp"t and the val"e o! the inp"ts it has
p"rchased !rom others)
18. $ow do economists de&ne investment)
13. ,hat is the lar'est component o! total expendit"res in the
;.<.)
#4. (iven onl% nominal (DP and real (DP !rom a partic"lar
%ear8 %o" sho"ld 9e a9le to determine the price index !or that
%ear.
#1. ,hat 'oods does the (DP price index incl"de)
##. .xplain wh% (DP ma% "nderstate chan'es in the
econom%:s well 9ein' over time.
#*. ,hat can we concl"de a9o"t net investment i! depreciation
exceeds domestic investment)
Ch. 8
Economic Growth
1. De&ne .conomic 'rowth in terms o! real (DP or real (DP per
capita.
#. $ow does one determine real (DP per capita)
*. ,h% is 'rowth advanta'eo"s to a nation)
+. =e a9le to determine the rate o! real (DP 9etween two %ears.
-. =e a9le to determine the rate o! real (DP per capita 9>w two
%ears.
1. =e s"re %o" "nderstand the ?r"le o! 74.@
7. ,h% is real (DP per capita a 9etter determinant o! economic
'rowth rather than simpl% anal%Ain' real (DP)
8. ,h% is economic 'rowth advanta'eo"s to a nation)
Business Cycle
1. ,hat is the 9"siness c%cle)
#. ,hat has 9een the lon'Bterm 'rowth trend o! the ;< despite the
erratic short term 9"siness c%cles)
*. ,hich sector o! the econom% is most stron'l% a0ected 9% the
9"siness c%cle)
+. =e s"re %o" "nderstand the !o"r phases o! the 9"siness c%cle.
-. $ow are the prod"ction o! nond"ra9le 'oods and d"ra9le 'oods
di0erent d"rin' the 9"siness c%cle)
Unemployment
1. $ow do %o" determine the "nemplo%ment rate)
#. ,hat is the nat"ral rate o! "nemplo%ment)
*. ,hat does the di0erence 9etween the nat"ral rate o!
"nemplo%ment and the act"al rate o! "nemplo%ment tell "s
a9o"t the rate o! c%clical "nemplo%ment)
+. ,hat is the di0erence 9etween the di0erent t%pes o!
"nemplo%ment 6!rictional8 str"ct"ral8 and c%clical7)
-. $ow are partBtime wor2ers la9eled when determinin' the
"nemplo%ment rate)
1. De&ne and explain C2"n:s law.
Infation
1. ,hat is ination)
#. =e a9le to &nd the rate o! ination "sin' the di0erence 9etween
the cons"mer price index o! two di0erent %ears.
*. .xplain the importance o! CCDA:s.
+. ,hat 'ro"ps are a0ected 9% "nanticipated ination)