Unit 3 Study Guide (10.1, 10.3, 11.1, Chapter 12)
Name: _____________________________
Define the following:
aggregate demand
GDP
aggregate supply
interest
business cycle
intermediate goods
capital deepening
investment
contraction
liquidity
depression
medium of Exchange
diversification
money supply
expansion
mutual fund
fiat money
peak
fractional reserve banking price level
real GDP
real GDP per capita
recession
stagflation
store of value
trough
unit of account
10.1 and 10.3
1. Explain how a $1 bill has all six characteristics of money
2. Give one example of commodity money, representative money, fiat money
3. What difficulties might you encounter if you lived in a society that has a barter
system?
4. What is the difference between M1 and M2? Give an example of each
5. Describe 3 services that banks provide
11.1
6. Explain how savers, borrowers, and financial intermediaries contribute to the
financial system
7. Explain the risks and returns of the following savings plans and investments: (a)
savings account (b) certificate of deposit (c) stock in your neighbors pet care service
Chapter 12
8. What are 3 economic activities not included in GDP?
Unit 3 Study Guide (10.1, 10.3, 11.1, Chapter 12)
Name: _____________________________
9. If aggregate demand rises, what happens to real GDP? What
happens to price level?
10. Which phase of a business cycle can lead an economy into recession?
11. Which point in a business cycle would you rather be, the peak or trough and why?
12. Why do economists measure real GDP per capita? Why is this a better way to
compare economies of two different nations than real GDP alone?
13. How does capital deepening lead to economic growth?
14. What role does saving play in the process of economic growth?
15. How do patents encourage technological progress?