Section+12.3

Pg. 324 1-4 1.) Why do economists measure **real GDP per capita**? Economists measure **real GDP per capita** because it brings population growth and decrease into the equation. b.)Why does real GDP per capita provide a better way to compare the economies of two different nations than does real GDP alone? You can tell if the standard of living is better if real GDP is rising faster than real GDP per capita. You can also compare the real GDP per capita of other time periods. 2.)What is the **capital deepening**, and how does it contribute to economic growth? Capital deepening is the process of increasing the amount of capital per worker. The workers get more money and that means that they will spend more money and contribute to the economy more. 3.)What role does **saving** play in the process of economic growth? Saving is income that is not used for consumption which is money not being used and put into the economy 4.) How do patents encourage technological progress? Technological is an increase in efficiency which can't happen if people don't have to make things better. So if there is a patent on something you can't make the same object and sell it as yours so you make something like it but better. Pg. 326 1-6 1.) **Intermediate goods** are the good used in the production of final goods. 2.)A **business cycle** can be described as a period of macroeconomic expansion followed by a period of contraction 3.) Economists use the term **gross national produc**t to describe the dollar value of all final goods and services produced within a country's borders in a given year 4.) **Capital deepening** occurs when the amount of capital per worker increases. 5.) The **price level** is the average of all prices in the economy. 6.) A prolonged economic contraction is known as **recession**. 8.)List three limitations of using GDP as a measure of the nations economy. GDP does not measure goods or services that people make or do themselves. GDP does not measure things not reported like stuff from the black market. GDP tells you if there is more money being made not if the place where you live is a nice place to live. 9.) Identify for factors that keep the business cycle going. Four factors that keep the business cycle going are business investment, interest rates and credit, consumer expectations, and external shocks.  10.) Summarize the ways in which economists measure economic growth. They can compare the GDP of the current time periods with other time periods 11.) What is the differnce between nominal GDP and real GDP? Nominal GDP is the GDP measured with the prices at the time. Real GDP is the GDP measured without the change in prices.