Unit 2 MCQ - AP Macro

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

In what way is the GDP deflator similar to the consumer price index? (A) Both can be used to adjust nominal values to real values. (B) Both use select market baskets of goods and services to measure changes in the price level. (C) Both measure only the change in prices of domestically produced goods and services. (D) Both measure the potential output of an economy. (E) Both increase as the underemployment rate increases.

(A) Both can be used to adjust nominal values to real values

After a fixed-rate loan is repaid, the borrower's financial position will have improved if (A) the inflation rate was higher than expected (B) nominal interest rates increased (C) real interest rates increased (D) financial capital outflow increased (E) the money supply decreased

(A) the inflation rate was higher than expected

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) —0.8% (C) 0.8% (D) 2% (E) 18%

(A) —2%

Which of the following is most likely to benefit from unexpected inflation? (A) A lender making new loans (B) A borrower paying fixed interest payments on debt (C) A lender collecting fixed interest payments on loans (D) A retiree with a fixed income (E) A saver who owns a certificate of deposit

(B) A borrower paying fixed interest payments on debt

Which of the following is accounted for in the calculation of a country's gross domestic product? (A) Sales of stocks and bonds (B) Changes in inventories (C) Changes in product quality (D) The underground economy (E) Nonmarket activities

(B) Changes in inventories

Which of the following transactions would be counted as investment spending in the calculation of a nation's gross domestic product? (A) Robert buys 100 shares of stock in an energy company. (B) Ming purchases a new delivery truck for her bakery business (C) Latasha pays a mechanic to repair her personal car (D) Sam earns interest on Canadian government bonds. (E) Taylor receives unemployment benefits when he loses his job

(B) Ming purchases a new delivery truck for her bakery business.

What is definitely true in the short run about the economy if real output begins to decrease again after months of decline? (A) The economy is falling into recession (B) The economy is exiting a business cycle trough (C) The price level is decreasing (D) The unemployment rate is increasing (E) The purchasing power of nominal wages is increasing

(B) The economy is exiting a business cycle trough

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate (A) ignores the duration (B) ignores underemployed and discouraged workers (C) includes jobs created by the underground economy (D) excludes all unemployed teenagers (E) excludes frictionally unemployed workers

(B) ignores underemployed and discouraged workers

Nominal gross domestic product is best defined as (A) the market value of all goods and services consumed in a nation in a given year (B) the market value of final goods and services produced in a nation in a given year (C) the base-year value of total goods and services produced in a nation in a given year (D) the base-year value of final goods and services produced in a nation in a given year (E) the market value of all goods and services produced and consumed in a nation in a given year

(B) the market value of final goods and services produced in a nation in a given year

Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation is $500 billion. Disposable income is equal to which of the following? (A) $1,500 billion (B) $2,000 billion (C) $2,500 billion (D) $3,000 billion (E) There is not enough information to answer this question

(C) $2,500 billion

The business cycle diagram below shows the cyclical movement of actual real GDP relative to potential real GDP over time for the nation of Galactia The economy of Galactia is expanding and the actual unemployment rate exceeds the natural rate of unemployment for which year in the above diagram? (A) 1992 (B) 1996 (C) 2002 (D) 2007 (E) 2011

(C) 2002

Which of the following means of reducing military spending would have the greatest positive impact on gross domestic product for the United States? (A) Combining two domestic military bases into one overseas base (B) Cutting retirement benefits to military personnel (C) Closing overseas military bases and relocating those operations to the United States (D) Closing overseas military bases and laying off military personnel (E) Canceling contracts with domestic producers for new airplaines

(C) Closing overseas military bases and RELOCATING those operations to the United States

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

Country X produces only apples and bananas. The following table shows prices and quantities of both products in two years. Assuming year 1 is the base year, what is the nominal and real gross domestic product (GDP) for year 2? (A) Nominal GDP: $200 // Real GDP: $280 (B) Nominal GDP: $200 // Real GDP: $200 (C) Nominal GDP: $280 // Real GDP: $200 (D) Nominal GDP: $280 // Real GDP: $560 (E) Nominal GDP: $560 // Real GDP: $280

(C) Nominal GDP: $280 // Real GDP: $200

Which of the following is true if the economy is producing at the full-employment level of output?(A) The unemployment rate is zero. (B) No person is receiving unemployment compensation from the government (C) There is frictional unemployment (D) The government's budget is balanced (E) The balance of trade is in equilibrium

(C) There is frictional unemployment

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 decreased by 10% (B) approximately decreased by 20% (C) approximately increased by 10% (D) approximately increased by 20% (E) not changed

(C) approximately increased by 10%

The natural rate of unemployment can be defined as the (A) unemployment rate consistent with accelerating inflation (B) unemployment rate of the least-skilled workers (C) economy's long-run equilibrium rate of unemployment (D) labor force participation rate plus the unemployment rate (E) labor force participation rate minus the uneployment rate

(C) economy's long-run equilibrium rate of unemployment

The major difference between real and nominal gross domestic product (GDP) is that real GDP (A) excludes government transfer payments (B) excludes imports (C) is adjusted for price-level changes using a price index (D) measures only the value of final goods and services that are consumed (E) measures the prices of a market basket of goods purchased by a typical urban consumer

(C) is adjusted for price-level changes using a price index

In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was (A) $150 billion (B) $100 billion (C) $50 billion (D) $25 billion (E) $4 billion

(D) $25 billion

Which of the following is an example of frictional unemployment? (A) A former mayor doing volunteer work (B) A factory worker who loses her job because of recession (C) A college student working part-time at the campus bookstore (D) A college graduate interviewing for two available positions (E) An architect whose job is replaced by computer software that designs buildings

(D) A college graduate interviewing for two available positions

Based on the data provided in the table, which of the following conclusions can be drawn for the period 2019 to 2020? (A) Nominal GDP increased by 40% (B) Nominal GDP increased by 20% (C) Real GDP increased by 25% (D) Real GDP did not change (E) The inflation rate was 20%

(D) Real GDP did not change

A criticism of the consumer price index as a measure of the cost of living is that it (A) understates the rate of inflation because the base year is outdated (B) understates the rate of inflation because it only considers spending by typical urban consumers (C) understates the rate of inflation because it reflects the increase in prices due to the introduction of new goods (D) overstates the rate of inflation because it ignores consumers' ability to substitute among similar items when prices change (E) overstates the rate of inflation to compensate for statistical errors in data collection

(D) overstates the rate of inflation because it ignores consumers' ability to substitute among similar items when prices change

Assume the base year is 2000. If the consumer price index in 2014 was 125, it can be concluded that a typical market basket of goods in 2014 cost (A) 125 percent more than the same basket brought in the base year (B) 125 percent more than the same basket brought in 2013 (C) 25 percent less than the same basket bought in the base year (D) 25 percent more than the same basket bought in 2013 (E) 25 percent more than the same basket bought in the base year

(E) 25 percent more than the same basket brought in the base year

If the number of people that are employed is 140 million, the number of people that are unemployed is 20 million, and the civilian, noninstitutional population aged 16 and over is 200 million, then the labor force participation rate is (A) 10.0% (B) 12.5% (C) 60.0% (D) 70.0% (E) 80.0%

(E) 80.0%

Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product? (A) Government bonds (B) Shares of a company stock (C) Corporate bonds (D) A new car for personal use (E) A newly constructed home

(E) A newly constructed home

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, expressed in current prices (C) produced in that country, less exports (D) produced in that country, less depreciation (E) produced in that country, adjusted for changes in the price level

(E) produced in that country, adjusted for changes in the price level