2. Review For NIA, Economic Growth, U nemployment, Recessions, Inflation, & Business Cycles Maytag produces a washersells it don’t sell it don’t sell it until the next year 1. If Maytag produces a washer and sells it, it counts as (Consumption/investment/disinvestment). If they don’t sell it, it counts as (“C”/ investment / disinvestment ). If they don’t sell it until the next year, it counts as (“C”/invest./disinvestment). depreciation exceeds 2. If depreciation exceeds gross investment gross investment, then In is (positive/negative). 3. If Ig were $100 bil., & In was $40 bil., then in that year the country’s capital stock [national factory] (increased/decreased) by ($40/$60) billion. Depreciation$700 Ig $500 bil. -$200 In Depreciation$60 In = $40 Ig$100

3. Review Questions 4-8 GDP 4. GDP is all goods/services produced (by a nation’s citizens all over the world/within the U.S.). Depreciation 5. Depreciation can be determined by: ( subtracting In from Ig/ subtract In from GDP). National Income Accounting 6. National Income Accounting GDP GDP = C+Ig+G+X-M NDP NDP = GDP – depreciation NI NI = NDP – indirect business taxes and – NFFIEUS PIUuCanc PI = NI U(-undis. Corp profits),Can(-corp. inc. taxes, SeesThunderducks t See(-soc. Secur.), + Thunderducks (transfer payments) DI DI = PI – individual income taxes Nominal GDP 7. Nominal GDP Price IndexReal GDP Price Index x 100 = Real GDP hurt during a depression 8. Workers most likely to get hurt during a depression are postponablemonopoly [few sellers] power (durable/non-durable) ones because these goods are postponable & they have monopoly [few sellers] power.

4. Review Questions 5-12 Review Questions 5-12 Inflation 9. Inflation (chg.) [5] later year’s index(120-earlier year’s index(115) (chg.) [5] (org.) [115] x100 = 4.3 % earlier year’s index (115) (org.) [115] x100 = 4.3 % CPI falls If CPI falls from one year to the next, (inflation/deflation) results. 110-115 _-5_ -4.3 % 115 = 115 x 100 = -4.3 % base yearprice index 10. In the base year, the price index is always? ______ $10 trillion 100 $10 trillion x100 = 100 Income earned by U.S. resource suppliers 11. Income earned by U.S. resource suppliers [here & abroad] is (NDP/NI/PI). FE GDP 12. Another name for FE GDP is (zero unemployment/potential GDP).2002 100

5. Review Questions 13-19 Review Questions 13-19 recessionGDP 13. During a recession, (actual/potential) GDP exceeds (actual/potential) GDP, but the (actual/potential) unemployment rate unemployment rate exceeds the (actual/potential) unemployment rate. 5 million part time workers2 million 14. If there are 5 million part time workers and 2 million get full time jobs get full time jobs, the unemployment rate (increases/decreases/stays the same). 6 million unemployed3 million get discouraged 15. If there are 6 million unemployed and 3 million get discouraged and quit looking, unemployment (increases/decreases/stays the same). presence of discouraged workerscounting part-time 16. The presence of discouraged workers and counting part-time workers as fully employed workers as fully employed (understates/overstates) the official rate. unemployment rate is 10nominal GDP is $400 billion cyclicalrealunemployment% gapoutput (GDP) being forgone 17. If the unemployment rate is 10% & nominal GDP is $400 billion, then cyclical (real) unemployment is ___%, the % gap is ___%, and output (GDP) being forgone is $__________. move from a recession to FE 18. If we move from a recession to FE, we move from a (point inside the PPC to the PPC/shift the PPC out). unemployment is 15%nominal GDP is $100 bilcyclical (real) 19. If unemployment is 15% & nominal GDP is $100 bil., then cyclical (real) unemployment% gapY being forgone unemployment is ___%, the % gap is ___%, & Y being forgone is $______.Recession 4 8 32 billion 9 18 18 bil.