Unit 4: Measuring Economic Performance
Chapters 7 & 8
National income accounting, GDP, final goods, intermediate goods, expenditures approach,
income approach, consumption, gross private domestic investment, net private domestic
investment, government purchases, net exports, national income, indirect business taxes,
consumption of fixed capital, net domestic product, personal income, disposable income, nominal
GDP, real GDP, price index, consumer price index, business cycle, peak, recession, trough,
recovery, seasonal variation, secular trend, frictional unemployment, structural unemployment,
cyclical unemployment, full-employment, unemployment rate, GDP gap, Okun’s law, inflation,
rule of 70, demand-pull inflation, cost-push inflation, per-unit production costs, nominal income,
real income, unanticipated inflation, cost-of-living adjustment, inflation premium, real interest
rate, nominal interest rate, hyperinflation
Give appropriate data, compute GDP, inflation, and unemployment; identify the potential effects
of these measurements of economic well being and difficulties in their interpretation.
1. Why do we need national income accounting, and when was it developed?
2. Define GNP.
3. Define and calculate GDP using the expenditures approach. GDP=C+Ig+G+Xn
4. Explain the omission of categories of goods and transactions from GDP.
5. Explain the implications for an economy for change in net investment.
6. Using the expanded circular flow model, explain why the income method reaches the
same GDP as the expenditures method.
7. Calculate GDP index; convert nominal GDP to real GDP.
Price index price of market basket
In given = in specific year X 100
Year price of same market
Basket in base year
8. Explain and calculate the CPI
CPI = price of market basket in specific year X 100
Price of same market basket in base year
9. Explain why CPI may be overstated
10. Explain the business cycle.
11. Explain the different types of unemployment and why some unemployment is good.
12. Explain demand-pull inflation and cost-push inflation.
13. Calculate the unemployment rate.
Unemployment rate=unemployment X 100
Chapter 7: 3, 6, 8 (expenditures method), 11, 12, 13, 14. Due 2/13
Chapter 8: 1, 2, 7, 8, 13. Due 2/16
Vocabulary Quiz 2/17
Unit IV TEST 2/21