AP Macroeconomics Unit 2 (23-26)

Suppose the CPI is currently 126, while its value one year previously was 120. The rate of inflation over the past year was: (A) 5% (B) 6% (C) 7% (D) 8% (E) 9%

A ~ 5%

Unanticipated inflation: (A) Arbitrarily redistributes income from creditors to debtors (B) invariably leads to unemployment (C) reduces the real incomes of all individuals (D) has the same economic consequences as anticipated inflation (E) causes US currency to be worth more

A ~ arbitrarily redistributes income from creditors and debtors

In the measurement of GDP, investment includes spending by: a. Businesses on capital goods and changes in inventories b. Businesses on stocks, bonds and other financial assets c. Individual households on stocks, bonds and financial assets d. The federal government to purchase bonds issued by the Federal Reserve e. The Federal Reserve to buy government bonds

A ~ businesses on capital goods and changes in inventories

Which of the following sources of economic growth is a demand-side factor? (a) Higher spending on rising output (b) Improved technology (c) Utilizing resources in the least costly way (d) Increases in the quantity of human resources (e) Increase level of training in human capital

A ~ higher spending on rising output

Total real output can be determined by: (a) multiplying total hours of work times labor productivity (b) multiplying total wages paid times output per hour of work (c) dividing total wages paid by labor productively (d) divide total hours of work by labor productively (e) subtract labor productivity from hours worked

A ~ multiplying total hours of work times labor productivity

Which of the following would best explain a decline in potential GDP? (A) Negative net investment (B) The discovery of vast new oil deposits (C) A lower price level (D) A decrease in the infant mortality rate (E) A decrease in wages and profits

A ~ negative net investment

GDP has been criticized as a measure of well-being because it fails to take into account which of the following? a. The distribution of income b. The value of services c. The value of intermediate goods d. The value of financial transactions and sales of used items e. The value of government services

A ~ the distribution of income

Technological progress occurs when the economy gets more output: (a) without using any more capital or labor (b) by using more capital per worker (c) by using more labor but not more capital (d) by using more labor but not more capital (e) by using more capital but not more labor

A ~ without using any more capital or labor

The price of a product is $1.20 and increases to $1.32. The expected inflation rate is 10%. What happens to the nominal price and to real price? a. Nominal price rises and real price remains the same. b. Nominal price rises and real price rises. c. Nominal price rises and the real price falls. d. Real price rises and nominal price remains the same. e. Real price remains the same and nominal falls.

A~ nominal price rises and real price remains the same

The value of pizza sales at an Italian owned restaurant in the United States would be included in: a. U.S. GNP and Italian GDP b. U.S. GDP and Italian GNP c. U.S. GNP and Italian GNP d. U.S. GDP and Italian GDP e. Only the U.S. GDP because the good/service was produced in the U.S.

B ~ US GDP and Italian GNP

Which of the following will increase supply? a. A decrease in labor costs b. A decrease in the price of the good c. An increase in consumer's incomes d. An increase in the price of the good e. An increase in demand for that good

B ~ a decease in the price of the good

A rapid increase in population will result in: (a) an increase in real GDP and per capita GDP (b) an increase in real GDP but a decrease in per capita GDP (c) a decrease in real GDP but an increase in per capita GDP (d) a decrease in both real GDP and per capita GDP (e) no change in per capita GDP but a decrease in real GDP

B ~ an increase in real GDP but a decrease in per capita GDP

The "full employment rate of unemployment" is: (A) zero percent (B) around 5%-6% because the frictional and structural unemployment (C) around 5%-6% because of cyclical unemployment (D) considerably higher in 2011 than it was in the mid-1970s (E) considerably lower in 2011 than it was in the mid-1970s

B ~ around 5%-6% because the frictional and structural unemployemnt

Fluctuations in employment and output in the short-run are known as: (A) economic growth. (B) business cycles. (C) factor cycles. (D) recessions. (E) seasons.

B ~ business cycles

Occasionally, rapidly rising prices for basic inputs such as energy, result in higher prices for many goods and services. The resulting inflation is best categorized as: (A) Cost-pull (B) Cost-push (C) Demand-pull (D) Demand-push (E) Domestic inflation-pull

B ~ cost-push

At the deepest point of the Great Depression, most unemployment consisted of: (A) Structural unemployment (B) Cyclical unemployment (C) Frictional unemployment (D) Search unemployment (E) Service sector unemployment

B ~ cyclical unemployment

Suppose an economy moves from a point inside of its PPC to a point on the curve. The most likely source of this economic growth is: (a) supply factors (b) demand and efficiency factors (c) increases in the quality of inputs (d) technological change (e) decrease in produced goods and services

B ~ demand and efficiency factors

An example of a good or service produced at home which IS included in RGDP is: a. individuals growing gardens at home. b. entrepreneurs working out of their home. c. a mechanic fixes a car for a neighbor. d. an individual sells a used good on craigslist. e. a parent make their children's clothes.

B ~ entrepreneurs working out of their home

Ascii has just finished school and is searching for his first full-time job. Ascii is considered to be: (A) Structurally unemployed (B) Frictionally unemployed (C) Cyclically unemployed (D) Employed (E) College graduate

B ~ frictionally unemployed

"The market value of all final goods and services produced within a nation in a given year." This best describes: a. Net domestic product b. Gross domestic product c. National income d. Personal income e. Nonmarket activities

B ~ gross domestic product

Which statement below is correct? a. nominal is what you see and does NOT include inflation. b. real is what you get and does NOT include inflation. c. nominal is what you get and does include inflation. d. real is what you get and does include inflation. e. nominal = real - expected inflation

B ~ real is what you get and does NOT include inflation

To determine the change in the capital stock, the level of gross investment must be adjusted for depreciation because some new investment: (a) is not used immediately (b) replaces existing, but worn out capital (c) replaces existing workers (d) is more efficient than existing capital (e) is usually unproductive

B ~ replaces existing, but worn out, capital

Which group of individuals is hurt by inflation? a. spenders b. savers c. government d. borrowers e. people with a COLA increase in pay

B ~ savers

The "G" term in C + I + G + X n includes all of the following except: a. State government purchases of new computers b. Social Security checks received by retirees c. Salaries received by members of the military d. Local government expenditures for building new roads e. Purchases made by local school districts

B ~ social security checks received be retirees

Which of the following is NOT a component of Real GDP? a. Government Spending b. Taxes c. Consumption d. Investment e. Net Exports

B ~ taxes

If real GDP is increasing at 3 percent per year and nominal GDP is increasing at 7 percent per year, which of the following is true: a. Unemployment is increasing b. The price level is increasing c. Exports exceed imports d. The economy is in a recession e. The government is running a budget deficit

B ~ the price level is increasing

The reason stocks and bonds are NOT included in Real GDP is: a. they are both part of the banking industry. b. they don't produce anything. c. they are both issued only by the government. d. they both earn rates of return on investment. e. they are traded in the black market.

B ~ they don't produce anything

Among the industrial structures that promote economic growth, most economists would include: (a) strong property rights, religious freedom and restricted trade (b) wide-spread education, free trade and strong property rights (c) religious freedom, patents and copyrights and government economic planning (d) strong industrial regulation, government economic planning and restricted trade (e) increased opportunities for high-education and training opportunities

B ~ wide-spread eduction, free trade, and strong property rights

If a nation's real GDP is growing at 2% per year, its real output will double in approximately : (a) 50 years (b) 40 years (c) 35 years (d) 33 years (e) Not enough information to solve

C ~ 35 years

If real GDP was $5,000 billion last year and is $5,200 billion this year, the approximate rate of economic growth over the past year is: (a) 0.2% (b) 0.4% (c) 4.0% (d) $200 billion (e) $26,000 billion

C ~ 4.0%

Assume the nominal interest rate is 10 percent. If the expected inflation rate is 5 percent, the real interest rate is: (A) 0.5% (B) 2.0% (C) 5.0% (D) 10% (E) 15%

C ~ 5.0%

Which of the following statements best illustrates the concept of diminishing marginal utility? a. If the price of hamburger declines, there will be a change in consumer tastes in favor of hamburger. b. A typical consumer will receive less satisfaction from consuming hamburgers than from consuming pork. c. A typical consumer will receive less satisfaction from consuming the fourth hamburger per week than the third hamburger per week. d. A decrease in the price of hamburger will cause consumers to buy more hamburgers because they have, in effect, received an increase in income. e. The typical consumer would eat a different type of food.

C ~ a typical consumer will receive less satisfaction from consuming the fourth hamburger per week than the third hamburger per week

Disposable income is calculated by which of the following: (a) consumption minus savings (b) spending times consumption (c) consumption plus savings (d) spending divided by consumption (e) consumption divided by consumption

C ~ consumption plus savings

The vast difference in worldwide living standards owes primarily to: (a) differences in patent law and enforcement (b) leader countries growing at an increased rate than follower countries over the past 100 years (c) different starting dates for modern economic growth (d) cultural differences in labor force participation hours of work

C ~ different starting dates for modern economic growth

Which of the following would cause the official unemployment rate to underestimate 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 calculating the GDP: a. Both exports and imports are added b. Neither exports nor imports are added c. Exports are added and imports are subtracted d. Imports are added and exports are subtracted e. Include underground activities that are exported

C ~ exports are added and imports are subtracted

Economics generally agree that for sustained inflation to occur, the (A) government must accommodate it by increasing spending. (B) government must accommodate it by decreasing taxes. (C) government must accommodate it by increasing the money supply. (D) Federal reserve must accommodate it by decreasing the money supply. (E) government must accommodate it by decreasing government spending.

C ~ government must accommodate it by increasing the money supply

What are two major ways in which an economy can grow and push out its production possibilities curve (PPC)? a. Higher increases in consumer spending b. Higher taxes and lower spending c. Increases in resource supplies and advances in technology d. Increases in trade and lower investment spending e. Lower taxes and government subsidies

C ~ increases in resource supplies and advances in technology

The major difference between real and nominal GDP in 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 good and services that are consumed e. Measures the prices of a market basket of goods and services purchased by a typical urban consumer

C ~ is adjusted for price-level changes using a price index

Which of the following will be counted as unemployed by the US Bureau of Labor Statistics? (A) Persons who quit their previous jobs to stay at home to care for their sick parent (B) Persons who were laid off from their previous jobs and have not applied for a job in two years (C) Persons who were fired from their previous jobs and are actively applying for work (D) Persons who have given up looking for jobs after long searches (E) Persons who quit their previous jobs to start their own business

C ~ persons who were fired from their previous jobs and are actively applying for work

If an economy's production possibilities curve has shifted out, we can unambiguously conclude that: (a) the supply of natural resources increased (b) the supply of labor increased (c) potential GDP increased (d) technology improved (e) the economy went into a recession

C ~ potential GDP increased

If an effective price floor is removed from a market for a good, then the price and quantity of the good sold will change in which of the following: Price Quantity (a) Increase Increase (b) Increase Decrease (c) Decrease Increase (d) Decrease Decrease (e) No change No change

C ~ price decreases & quantity increases

Which statement is NOT true? a. nominal = expected inflation + real b. real = nominal - expected inflation c. real = expected inflation - nominal d. nominal = real + expected inflation e. Nominal is what you see; real is what you get

C ~ real = expected inflation - nominal

Inflation always: (A) reduces both the purchasing power of the dollar and real income (B) reduces the purchasing power of the dollar and increases real income (C) reduces the purchasing power of the dollar but may have no impact on real income (D) increases the purchasing power of the dollar and reduces real income (E) reduces the purchasing power of foreign currency

C ~ reduces the purchasing power of the dollar but may have no impact on real income

In 2016, Guppy's nominal income increased by 3%, while the price level rose by 1%. Consequently, real income: (A) rose by approximately 4% (B) fell by approximately 1% (C) rose by approximately 2% (D) fell by approximately 2% (E) no change since real and nominal are not related

C ~ rose by approximately 2%

One way that a government can encourage economic growth is by encouraging: (a) population growth (b) consumption (c) savings and investment (d) imports (e) accumulation of wealth

C ~ savings and investment

The income approach to GDP sums the total income earned by resource suppliers and: a. Adds net transfer payments and personal taxes b. Adds net investment and depreciation c. Subtracts net foreign factor income but adds depreciation and taxes on production and imports d. Adds net transfer payments, depreciation and net foreign factor income e. Subtracts net transfer payments and personal taxes

C ~ subtracts net foreign factor income but adds depreciation and taxes on production and imports

Human capital consists of: (a) machines that require workers in order to produce more efficiently (b) any production technique developed by humans (c) workers' education and skills (d) workers in factories (e) workers who can be used instead of machines

C ~ worker's education and skills

Suppose that last year domestic firms spent $80 billion on final purchases on plants and equipment, of which $15 billion was for depreciation. In addition, firms collectively added $10 billion to inventories and new construction totaled $35 billion. In calculating GDP, national income accountants would add gross investment of: a. $95 billion b. $100 billion c. $110 billion d. $125 billion e. $140 billion

D ~ $125 billion

If the natural rate of unemployment is 5.5% and the actual unemployment is 6.5%, then according to Okun's law, the GDP gap is: (A) 1% (B) 3% (C) -1% (D) -2% (E) 2%

D ~ -2%

Suppose that you are given a $100 budget to purchase only two office supply items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is: a. 10 pens b. 5 pens c. zero pens d. 4 pens e. 2 pens

D ~ 4 pens

Suppose the total population in 200 million workers, 100 million of whom are in the labor force. 80 million people are employed full time and another 16 million are employed part time; 5 million are "discouraged workers". The unemployment rate is: (A) 21% (B) 20% (C) 11% (D) 4% (E) unable to be calculated

D ~ 4%

The value of car sales at a German owned dealership in the United States would be included in: (a) U.S. GNP and German GDP (b) U.S. GNP and German GNP (c) U.S. GDP and German GDP (d) U.S. GDP and German GNP (e) Only the GNP of Germany because the company is foreign

D ~ US GDP and German GNP

All of the following are reasons for the productivity acceleration of 1995-2007 except: (a) invention and innovation associated with the microchip (b) economics of scale for newly emerging enterprises (c) increasing global consumption (d) a higher rate of personal savings (e) Increasing opportunities for global trade

D ~ a higher rate of personal savings

Which of the following individuals is classified as unemployed? (A) A fifteen-year- old high school student who is looking for a babysitting job. (B) A laid-off computer programmer who has given up looking for a new job. (C) A parent who works in an after-school day care center for fifteen hours a week. (D) A recent college graduate who is looking for her first job. (E) A mayor who lost an election and retired.

D ~ a recent college graduate who is looking for her first job

If the government does not react to cost-push inflation with any policy actions, then there is likely to be: (A) an increase in the RGDP. (B) a lower unemployment rate. (C) an inflation spiral that could become "hyperinflationary." (D) a recession. (E) constant price level.

D ~ a recession

Which group of individuals benefit from inflation? a. people on fixed income b. savers c. lenders d. borrowers e. people with no COLA increase in pay

D ~ borrowers

DI consists of: a. Personal income plus personal taxes b. New domestic product minus personal taxes c. GDP corrected for inflation d. Consumption plus saving e. National income plus personal taxes

D ~ consumption plus saving

GDP excludes expenditures for: a. Additions to inventories b. New housing c. Government purchase of military equipment d. Corporate stock e. Net exports

D ~ corporate stock

Which of the following groups would most likely gain from unanticipated inflation? (A) Landlords who own apartments in cities with rent controls (B) Individuals who have fixed retirement incomes (C) Individuals who earn high income (D) Individuals who have borrowed money at fixed interest rates (E) Banks that have loaned all excess reserves at a fixed interest rate

D ~ individuals who have borrowed money at fixed interest rates

The change in real GDP is not an accurate measure of the change in economic welfare because: a. Improvements in product quality are overstated b. Expenditures for personal services are excluded c. The price level changes over time d. Some production creates pollution e. The amount of gross investments decreases

D ~ some production creates pollution

An industry historically used employees with specific skills. If the industry experiences technological advances that require new skills, there will most likely be: (A) cyclical unemployment (B) frictional unemployment (C) seasonal unemployment (D) structural unemployment (E) no change in unemployment

D ~ structural unemployment

Changes in which of the following factors would affect the growth of an economy? I. Quantity and quality of human and natural resources II. Amount of capital goods available III. Technology (A) I only (B) I and II only (C) I and III only (D) II and III only (E) I, II, and III

E ~ I, II, and III

The value of which of the following is counted in the United States GDP? a. Clean air b. Child care a father provides for his child c. An automobile produced in Germany by a United States firm d. Medical services not provided due to preventative health care e. A car produced in the United States and sold in Europe

E ~ a car produced in the United States and sold in Europe

Economic growth is best defined as: (A) a reduction in the infant mortality rate (B) a decrease in the unemployment rate (C) an increase in the labor force participation rate (D) a short-run increase in GDP without inflation (E) a sustained increase in real GDP per capita

E ~ a sustained increase in real GDP per capita

Which of the following is included in the computation of GDP: a. Government transfer payments b. Purchases of used goods c. Lawn work done by the owner of the property d. Total value of business inventories e. Additions to business inventories

E ~ additions to business inventories

If the inflation rate is ___ and inflation goes to ____, then the real rate goes ____? a. 3%, 2%, up b. 3%, 4%, down c. 0%, 1%, down d. 2%, 1%, up e. all of the above are correct

E ~ all of the above are correct

An increase in the overall level of price is known as: (A) expansion. (B) growth. (C) employment. (D) real GDP growth. (E) inflation.

E ~ inflation

Economists compare how rich or poor different nations are by measuring their: (a) GDP (b) debt-to-GDP ratio (c) GNP (d) GDP per unit of capital (e) per capita GDP

E ~ per capita GDP

Real GDP is a. the total of all goods and services produced inside a country. b. the total of all goods and services sold inside a country. c. the total of all goods and services produced inside a country in a year. d. the total market value of all final goods and services produced inside a country in a year. e. the total market value of all final goods and services sold inside a country in a year.

E ~ the total market value of all final goods and services sold inside a country in a year

The invisible-hand concept suggests that: a. Government action is necessary to correct for market failures b. Changes in product demands are only randomly reflected in changes in the demand for resources c. Profit maximization is inconsistent with an efficient allocation of resources d. The profit motive of firms drives all other firms from the marketplace e. When firms maximize their profits, society's output will also be maximized

E ~ when firms maximize their profits, society's output will also be maximized

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 job 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

E ~ workers are fired because their skills are no longer in demand