Ap Micro Prblm Set

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Team: _______________________

AP Macro Problem Set #2

Unit 2: Measurement of Economic Performance

1. (_____/15) Supply & Demand
a. Define demand and describe each of the determinants of demand. Give a real world example of each of the determinants. (___/5) b. Define supply and describe each of the determinants of supply. Give a real world example of each of the determinants. (___/5) c. Draw and Supply and Demand graph. (___/5)

2. ( ____/15 Points) Gross Domestic Product
a. Define GDP, identify what is not included, define the four components, and give an example of each (_____/5) b. Explain the difference between nominal GDP and real GDP. Use a simplified numerical example with two different years to show your understanding. (_____/5) c. If someone told you that the nominal GDP increased by 4% in 2004 explain why you would need two additional pieces of information to conclude that the standard of living for the typical person also increased by 4%. ( ____/5)

3. (_____/10 Points) Unemployment
a. In a certain year, the annual unemployment rate was 6.1 percent. Define the term unemployment rate, and explain its meaning. What other information do you want to know before recommending a policy to reduce unemployment? Explain why you would want to know this information. (_____/5) b. Define and give examples of the three types of unemployment discussed in class. (_____/5)

4. (_____/15 Points) Inflation
a. Fully explain how the CPI is constructed and explain how it is used to measure inflation. Be sure to give a clear numerical example. ( _____/5) b. Explain the causes of inflation. Give specific examples of each cause in your response. (_____/5) c. If the actual inflation is greater than the anticipated inflation, fully explain who would benefit and who would be hurt and explain WHY? (_____/5)

5. Practice FRQ: (______/ 10Points) CPI - The following table shows a price index for a five year...
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