AP Macroeconomics Review Sheet
Section 3 (Modules 10-15)
Test on Monday, November11, 2013
Please make sure to bring a #2 pencil with you – all the test questions are
multiple choice.
GDP
1.) Know the definition for Gross Domestic Product (GDP).
2.) Know the Circular Flow Model.
3.) Know what is and isn’t counted in GDP.
4.) Know the GDP equation (and how to use it to calculate GDP) and
definitions of each of the components of GDP.
5.) Know the expenditures and value added approach to calculating GDP.
5.) Know the difference between nominal and real GDP and how to
calculate real GDP (2 methods: using price index or using current quantities
X constant prices).
6.) Know the actual GDP growth rate for the 2nd quarter of 2013.
Unemployment
1.) Know the 3 types of unemployment.
2.) Know how to calculate the unemployment rate .Understand the
shortcomings of this statistic (treatment of discouraged workers and parttime workers underestimates the unemployment rate).
3.) Know how to calculate the labor force participation rate.
4.) Natural Rate of Unemployment (NRU) is between 5%- 6% -- NRU =
frictional + structural unemployment.
5. Know the actual unemployment rate for September 2013.
Inflation
1.) Know what a price index is and how it is used to measure the rate of
change in prices (know definition of the Consumer Price Index).
2.) For unanticipated inflation:
Nominal Interest Rate – Actual Inflation Rate = Real Interest Rate.
If inflation is anticipated, the nominal interest rate is adjusted to reflect
the inflation rate:
Real interest rate + premium for anticipated inflation = Nominal
Interest Rate
3.) Know who is hurt and who benefits from unanticipated inflation, or when
the actual inflation is different from what was anticipated.
4.) Know the actual annual inflation rate for September 2013.