1. Unit 4 Government actions affect economic activity. Economic decisions require the government to evaluate the costs and benefits of actions. Enduring Understandings Essential Questions How should the U.S. government carry out its economic roles? How healthy is the American economy Terms Gross Domestic ProductionUnemployment rateInflation Consumer Price Index Real and Nominal, per capita Draw and identify phases of the business cycleAggregate Aggregate Supply- describe both the Keynesian and Classical models Aggregate Demand Fiscal Policy Monetary Policy Progressive Tax Rate Stagflation

2. Circular Flow Model Business Government Individuals Investors Government Consumer Product Markets Resource Markets Financial Goods and Services Spending Revenue Resources- factors of production Land Labor capital entrepreneurship Resources- factors of production Cost Income Goods and Services Gov’t Spending Resources and labor Gov’t Spending Taxes and loans Taxes Subsidies Transfer Payments Public Goods/Services Supply Demand Supply Demand Marginal- additional, MB= Marginal Benefit, MC= Marginal Cost, MR- Marginal Revenue, MRP- Revenue product, MRC- Resource cost, MSB- Marginal Social Benefit, MSC- Marginal Social Cost MB= MC Utility Maximization MR= MC Profit Maximizing Rule (MC) S= D (MB) or (MR) Profit maximizing rule of hiring MRP= MRC Loans Interest Consumers + Investors + Government + Net Exports __________ Gross Domestic Production MSB= MSC

3. Identify Key terms and answer the associated questions Part 1 (GDP) G.D.P. (Gross Domestic ProductG.D.P. (Gross Domestic Product)- What factors contribute to the GDP?On another piece of paper chart the US GDP from 2000- 2011 (by year) What does not contribute to the GDP?Next chart US real GDP from 2008-2011 by quarter Explain: Nominal GDP Real GDP GDP per Capita Explain how unemployment is it related to GDP? Part 2 (Unemployment)(Unemployment) Explain the different types of unemployment and what is the natural rate of unemployment? Frictional Structural Cyclical What is the natural rate of unemployment? Why is this ok? If our current unemployment rate is 9% how much is the cyclical unemployment? What portion of the population is not counted toward unemployment rates? What is real unemployment?

6. Part 3: The purchasing power of money What is inflation? What does higher inflation do the purchasing power of money? How does this impact price? What is CPI (Consumer Price Index) How does the Consumer price index measure inflation? What is monetary inflationWhat is monetary inflation? Part 4: The Business Cycle Diagram and Identify the different phases of the business cycle: If the business cycle is natural and unavoidable should the government become involved? Explain your answer To economist when is the business cycle officially in a recession?recession?

7. Part 5: Government Role and the Recession: Aggregate Supply and Demand (AS/AD) What is Aggregate Demand What is LRAS? What is Aggregate Supply What is the difference between Classical vs Keynesian Approach to Aggregate SupplyWhat is the difference between Classical vs Keynesian Approach to Aggregate Supply? How would an economist who believed in the classical approach draw Aggregate Supply? Why? What would Keynesian economists say the Aggregate Supply, Aggregate Demand, and Price? How does the Aggregate Supply depending on what model you are looking at? What are the three different phases? What is Keynesian economics and what does it say about the government’s role in getting the economy out of a recession?

8. Part 8: Fiscal Policy and Monetary policy Explain Fiscal Policy: Explain Monetary policy: How do both try to fix recessions and inflation? Recession Fiscal Monetary Inflation Fiscal Monetary Part 7: Phillips Curve (inflation and unemployment) (Long and Short Run) Explain the Phillips Curve and explain how we get short run and long run Phillip’s Curve