1.Use a supply-and-demand model to understand the labor market

2.Explain the relationship between the supply of and the demand for labor and real wages and employment

3.Define and calculate the unemployment rate and the participation rate

4.Differentiate among the three types of unemployment and the costs associated with each

1.Explain how the Consumer Price Index (CPI) is constructed and use it to calculate the inflation rate

2.Show how the CPI is used to adjust economic data to eliminate the effects of inflation

3.Discuss the two most important biases in the CPI

4.Distinguish between inflation and relative price changes to find the true cost of inflation

5.Understand the connections among inflation, nominal interest rates, and real interest rates

1.Explain how economists define and measure an economy's output

2.Use the expenditure method for measuring GDP to analyze economic activity

3.Define and compute nominal GDP and real GDP

4.Discuss the relationships between GDP and economic well-being

1.The Scarcity Principle: having more of any good thing necessarily requires having less of something else

2.The Cost-Benefit Principle: an action should be taken if and only if its benefit is at least as great as its costs

3.The Incentive Principle:examine people's incentives to predict their behavior