AP Macro Problem Set 2 Recovered 
Name: _______________________
Team: _______________________
AP Macro Problem Set #2
Unit 2: Measurement of Economic Performance 1. (_____/15)
Article Analysis
Read each of these current articles and identify three different concepts we learned that are mentioned. Define and summarize what is being said for each concept that you identify.
a. GDP Article (_____/5)
b. Unemployment Article (_____/5)
c. Inflation Article (_____/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. Define and give examples of the three types of unemployment discussed in class. (_____/5)
b. How is the unemployment rate calculated? What is the Natural Rate of Unemployment? Do we want zero unemployment? (_____/5) 4. (_____/15 Points
) Inflation
a. Define and identify how to calculate the Consumer Price Index (CPI)? Explain the meaning of the following CPIs relative to a base year. Year 1=90, Year 2=100, Year 3=125, Year
4=150. Lastly explain why the percent change in prices from year 3 to year 4 is NOT 25%.
(_____/5)
b. Identify how to calculate nominal interest rates and real interest rates. Assume that you put
$100 in the bank. Use numeric examples to explain three different scenarios in which your
REAL income falls, stays the same, and increases. (_____/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.
Team: _______________________
AP Macro Problem Set #2
Unit 2: Measurement of Economic Performance 1. (_____/15)
Article Analysis
Read each of these current articles and identify three different concepts we learned that are mentioned. Define and summarize what is being said for each concept that you identify.
a. GDP Article (_____/5)
b. Unemployment Article (_____/5)
c. Inflation Article (_____/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. Define and give examples of the three types of unemployment discussed in class. (_____/5)
b. How is the unemployment rate calculated? What is the Natural Rate of Unemployment? Do we want zero unemployment? (_____/5) 4. (_____/15 Points
) Inflation
a. Define and identify how to calculate the Consumer Price Index (CPI)? Explain the meaning of the following CPIs relative to a base year. Year 1=90, Year 2=100, Year 3=125, Year
4=150. Lastly explain why the percent change in prices from year 3 to year 4 is NOT 25%.
(_____/5)
b. Identify how to calculate nominal interest rates and real interest rates. Assume that you put
$100 in the bank. Use numeric examples to explain three different scenarios in which your
REAL income falls, stays the same, and increases. (_____/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.