Unit 2: AP Macro
The table below (shown in google form: circular flow pt.2) shows a country's macroeconomic data in 2013. The country's gross domestic product is a) $220 B b) $309 B c) $304 B d) $282 B e) $347 B
a) $220 B
The value of which of the following would be included in the United States gross domestic product? a) a movie ticket purchased at a local theater b) time spent volunteering at a local hospital c) a us savings bond received as a bday gift d) a new handbag made in italy by a us firm e) a used car sold at the same price paid for it
a) A movie ticket purchased at a local theater.
Which of the following allows an individual to gain from unexpected inflation? a) Borrowing money at a fixed interest rate b) Lending money at a fixed interest rate c) Working at the minimum wage d) Saving money in a fixed-interest-rate savings account e) Living on a fixed income
a) Borrowing money at a fixed interest rate.
If a worker's nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has a) approximately increased by 10% b) approximately decreased by 20% c) not changed d) approximately decreased by 10% e) approximately increased by 20%
a) approximately increased by 10%
Which of the following explains why the rate of change of the consumer price index (CPI) tends to overstate the actual inflation rate? a) Consumers tend to substitute lower-priced goods that may not be represented in the basket of goods. b) Consumers will require more income to buy goods whose prices have increased. c) Nominal wages do not always increase by as much as prices do. d) The basket of goods in the base year is frequently updated with new products. e) When real wages increase, consumers can afford higher-priced goods.
a) consumers tend to substitute lower-priced goods that may not be represented in the basket of goods.
The table below (shown in google form: unemployment pt.2) shows labor market statistics for a nation. Based on the above table which of the following is most likely correct? a) The natural rate of unemployment is 5 percent. b) The labor force participation rate is 91 percent. c) Discouraged workers are 4 percent of the labor force. d) There are 9 million discouraged workers in the nation e) There are 95 million people in the labor force
a) the natural rate of unemployment is 5 percent.
In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was a) $100 billion b) $25 billion c) $150 billion d) $50 billion e) $4 billion
b) 25 billion
Which of the following will lead to an increase in the United States gross domestic product? a) Some citizens begin working abroad as computer programmers. b) Foreign companies build new assembly plants in the United States. c) A million United States households sell their used cars to their children. d) More individuals prepare their own personal income tax forms. e) The government prohibits the sale of alcoholic beverages.
b) Foreign companies build new assembly plants in the United States.
Which of the following statements about the simple circular flow model of a market economy is correct? a) Households receive income in the form of wages, and business firms receive income in the form of investment. b) Households are on the demand side of the product market and the supply side of the resource market. c) Exports and investment expenditures are examples of leakage from the circular flow, whereas imports and savings are injections. d) Business firms are on the supply side of both the product market and the resource market. e) Circular flow models are used primarily to explain why money is necessary in any economic system.
b) Households are on the demand side of the product market and the supply side of the resource market.
If purchases of education and medical care were counted as investment rather than consumption, gross domestic product would a) increase, because consumption is included in gross domestic product but investment is not b) not change, because there is no change in total expenditures c) decrease, because consumption is weighted more heavily than investment in calculating gross domestic product. d) decrease, because investment is weighted more heavily than consumption in calculating gross domestic product e) increase, because investment is included in gross domestic product but consumption is not
b) No change, because there is no change in total expenditures
Which of the following transactions would represent an addition to a nation's current gross domestic product? a) Ms. Smith purchases a share of stock in an automobile company. b) the government increases its domestic purchases of food for use by the military c) A retailer increases her stock of imported shoes. d) a mother sells her car to her daughter e) A corporation sells shoes from last year's inventory.
b) The government increases its domestic purchases of food for use by the military.
The major difference between real and nominal gross domestic product (GDP) is that real GDP a) excludes government transfer payments b) is adjusted for price-level changes using a price index c) measures the prices of a market basket of goods d) purchased by a typical urban consumer d) measures only the value of final goods and services that are consumed e) excludes imports
b) is adjusted for price-level changes using a price index
A country's real gross domestic product is the annual value of all final goods and services that are a) purchased in that country, adjusted for changes in the price level b) produced in that country, adjusted for changes in the price level c) produced in that country, less exports d) produced in that country, less depreciation e) produced in that country, expressed in current prices
b) produced in that country, adjusted for changes in the price level.
The consumer price index measures which of the following? a) The change over time of the weighted wholesale price index b) The change over time of the weighted prices of a particular group of goods and services c) The change over time of the difference between the gross domestic product deflator and the wholesale price index d) Inflation corrected for changes in the real gross domestic product e) Inflation corrected for changes in the wholesale price index
b) the change over time of the weighted prices of a particular group of goods and services.
Which of the following can be concluded from the data above (shown in google form: real vs nominal gdp)? a) The base year for the price index was year 1. b) The economy was experiencing inflation during years 2 and 3. c) The base year for the price index was year 3. d) The economy was experiencing deflation during years 1, 2, and 3. e) The economy was producing higher-quality goods and services in years 2 and 3 than in year 1.
b) the economy was experiencing inflation during years 2 and 3.
A short-run increase in national income could be caused by a decrease in which of the following? a) consumption b) investment c) imports d) government spending e) exports
c) Imports
Which of the following statements is true of unanticipated inflation? a) It decreases the economic well-being of all members of society equally. b) It increases the economic well-being of net creditors. c) It increases the economic well-being of net debtors. d) It decreases the economic well-being of all members of society proportionately. e) It increases the economic well-being of workers with long-term labor contracts.
c) It increases the economic well-being of net debtors.
Which of the following individuals is considered officially unemployed? a) Chris, who has not worked for more than three years and has given up looking for work b) Kim, who is going to school full-time and is waiting until graduation before looking for a job c) Pat, who recently left a job to look for a different job in another town d) Leslie, who retired after turning 65 only five months ago e) Lee, who is working 20 hours per week and is seeking full-time employment
c) Pat, who recently left a job to look for a different job in another town
Last year both a borrower and a lender expected an inflation rate of 3 percent when they signed a long-term loan agreement with fixed nominal interest rates of 5 percent. If the actual inflation rate were lower than expected, then which of the following would be true? a) The real interest rate would be lower than expected. b) The nominal interest rate would be higher than expected. c) The lender would benefit. d) The borrower would benefit. e) The nominal interest rate would increase.
c) The lender would benefit.
The recent popularity of job search Web sites that enable job seekers and potential employers to more efficiently contact each other is most likely to cause a) a reduction in the labor force participation rate b) a reduction in structural, but not in frictional, unemployment rates c) a reduction in the frictional unemployment rate d) an increase in the overall unemployment rate e) a reduction in cyclical, but not in frictional, unemployment rates
c) a reduction in the frictional unemployment rate.
Which of the following would cause the official unemployment rate to understate the problem of unemployment? a) Workers receiving unemployment compensation b) Cyclically unemployed workers c) Discouraged workers d) Recent college graduates looking for work e) Retirees
c) discouraged workers.
Which of the following is true about the real GDP ? a) It measures aggregate output using constant prices. b) It is equal to nominal GDP multiplied by the GDP deflator. c) It measures aggregate output using current prices. d) It is equal to the GDP deflator divided by nominal GDP . e) It is greater than nominal GDP when the GDP deflator is greater than 100.
c) it measures aggregate output using current prices.
Which of the following would be true if the actual rate of inflation were less than the expected rate of inflation? a) The real interest rate had been negative. b) Inflation had been under predicted. c) People who borrowed funds at the nominal interest rate during this time period would lose. d) The real interest rate had exceeded the nominal interest rate. e) The economy would expand because of the increased investment and spending.
c) people who borrowed funds at the nominal interest rate during this time period would lose.
If the nominal gross domestic product (GDP) of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007 a) the price level increased by a larger percentage than did the real GDP b) neither the price level nor the real GDP has increased c) the price level and/or the real GDP has increased d) both the price level and the real GDP have increased e) the price level increased by a smaller percentage than did the real GDP
c) the price level and the real gdp has increased
As a measure of economic performance, GDP accounts for which of the following? a) Used books donated to a local library b) Depletion of durable consumer goods c) Cash transactions in the underground economy d) Souvenir gifts purchased by tourists domestically e) Increased leisure time
d) Souvenir gifts purchased by tourists domestically
GDP does NOT account for which of the following? a) imports from foreign countries b) wages, rent, profit, and interest payments c) the value added by all firms in the economy d) the depletion of natural resources e) the value of final goods and services produced domestically
d) The depletion of natural resources.
In the circular flow diagram of a market economy, which of the following supplies the factors of production? a) the business sector b) the government c) the foreign sector d) the household sector e) financial sector
d) The household sector
Which of the following statements exemplifies the concept of structural unemployment? a) New entrants into the labor force have trouble finding jobs. b) Workers leave their current jobs to find better jobs. c) Workers are laid off because aggregate demand has declined. d) Workers are fired because consumers have reduced their total expenditures. e) Workers are fired because their skills are no longer in demand.
d) Workers are fired because their skills are no longer in demand.
When an economy is in equilibrium at potential gross domestic product, the actual unemployment rate is a) equal to the cyclical rate b) greater than the natural rate c) less than the natural rate d) equal to the natural rate e) equal to zero
d) equal to the natural rate.
Suppose that a typical consumer buys the following quantities of three commodities in 1993 and 1994. Which of the following can be concluded about the consumer price index (CPI) for this individual from 1993 to 1994 (shown in google form: price indices and inflation pt.1)? a) It decreased by 25%. b) It decreased by 20%. c) It increased by 25%. d) It increased by 20%. e) It remained unchanged.
d) it increased by 20%
The table shows the nominal gross domestic product (GDP) and the price index for an economy during the period 2012 and 2013. Which of the following would have occurred from 2012 to 2013? a) Real GDP increased by 20%. b) Real GDP increased by 10%. c) Real GDP decreased by 10%. d) Real GDP did not change. e) Real GDP decreased by 20%.
d) real gdp did not change.
If real gross domestic product is increasing at 3 percent per year and nominal gross domestic product is increasing at 7 percent per year, which of the following is necessarily true? a) The government is running a budget deficit. b) Unemployment is increasing. c) Exports exceed imports. d) The price level is increasing. e) The economy is in a recession.
d) the price level is increasing.
The natural rate of unemployment is the unemployment rate when a) all workers seeking employment have taken jobs b) all the unemployed are only structurally unemployed c) there is no frictional unemployment d) there is no cyclical unemployment e) there are no new unemployed individuals
d) there is no cyclical unemployment
In 2016 the nominal GDP for Country X was $330 billion and the GDP deflator was 110. The real GDP for 2016 was a) $110 billion b) $440 billion c) $220 billion d) $330 billion e) $300 billion
e) $300 billion
Based on the economic figures in the table above (table shown in google form: Circular flow & GDP-pt. 1), what is the value of gross domestic product, in billions of dollars? a) $4,700 b) $5,150 c) $4,900 d) $5,950 e) $4,500
e) $4,500
Suppose that in a particular country, nominal gross domestic product (GDP) grew by 8 percent, and the GDP deflator increased by 10 percent. The country's growth rate of real GDP would be approximately equal to a) 2% b) 18% c) 0.8% d) —0.8% e) —2%
e) -2%
Which of the following will happen if the actual inflation rate is greater than the expected inflation rate? a) Borrowers of fixed interest rate loans will be worse off. b) Borrowers of variable interest rate loans will be better off. c) Lenders of fixed interest rate loans will be better off. d) Borrowers of fixed interest rate loans will be better off. e) Lenders of variable interest rate loans will be worse off.
e) Lenders of variable interest rate loans will be worse off.
In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to $105,000. The inflation rate in 2018 was 2%. How did Sabrina's nominal income and real income change in 2018 compared to 2017? a) Nominal income decreased and real income did not change. b) Nominal income increased and real income decreased. c) Nominal income increased and real income did not change. d) Nominal income decreased and real income decreased. e) Nominal income increased and real income increased.
e) Nominal income increased and real income increased.
Which of the following can be considered a leakage from the circular flow of economic activity? a) consumption b) government expenditures c) investment d) exports e) savings
e) Savings
Which of the following situations will benefit lenders of fixed interest rate loans? a) The actual inflation rate is equal to the fixed interest rate. b) There is no cyclical unemployment. c) The actual inflation rate is equal to the natural rate of unemployment. d) The consumer price index is greater than 100. e) The actual inflation rate is less than the expected inflation rate.
e) The actual inflation rate is less than the expected inflation rate.
The consumer price index (CPI) is designed to measure changes in the a) wholesale price of manufactured goods b) prices of all goods and services produced in an economy c) spending patterns of urban consumers only d) spending patterns of all consumers e) cost of a select market basket of goods and services
e) cost of a select market basket of goods and services.
The circular-flow model indicates that final goods are produced by a) firms and sold in the factor markets b) households and sold int he product markets c) firms and sold in the resource markets d) households and sold in the factors markets e) firms and sold in the product markets
e) firms and sold in the product markets
The nation of Turboland produces only two goods, X and Y . The prices and final quantities produced of the two goods in 1993 and the base year of 1992 are shown in the table below (shown in google form: real vs nominal gdp) . What are the nominal GDP and real GDP in 1993? a) Nominal GDP is $74, Real GDP is $96 b) Nominal GDP is $70, Real GDP is $96 c) Nominal GDP is $90, Real GDP is $96 d) Nominal GDP is $96, Real GDP is $74 e) Nominal GDP is $96, Real GDP is $90
e) nominal gdp is $96, real gdp is $90
If nominal gross domestic product fell while real gross domestic product rose, which of the following must be true? a) Nominal interest rates rose by less than the rate of inflation. b) Unemployment increased. c) Net exports were negative. d) The average of stock prices rose while bond prices fell. e) The inflation rate was negative.
e) the inflation rate was negative
Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that a) each person's real income is cut in half b) all prices in the economy are doubled c) all consumer goods prices are doubled d) consumer incomes are doubled e) the prices in an average consumer's market basket are doubled
e) the prices in an average consumer's market are doubled
