AP Econ Fall Final Questions
In year 2004, in Candamica, consumption expenditure was $13 billion, interest, rent, and profit were $1.5 billion, government expenditures on goods and services were $3 billion, net exports of goods and services amounted to $2 billion, and investment was $8 billion. Hence total expenditure was
$26 billion
The table gives data for a nation. What is the amount of the country's GDP?
$6,200
The table above has information about an economy. Using this information, GDP equals
$7,100 billion
The unemployment rate equals
(# of people unemployed/ labor force) X 100
If the CPI is 172.4 in one year and 176,2 in the next year, then the inflation rate equals
(176.2-172.4)/ 172.4 X 100
The formula for the CPI is 100 times
(Cost of CPI market basket at current period prices/ Cost of CPI market basket at base period prices)
Which of the following is correct?
- A surplus puts downward pressure on the price of a good - A shortage puts upward pressure on the price of a good - There is no surplus or shortage at equilibrium
As measured, GDP omits which of the following?
- Illegal sales of goods and services - Changes in the amount of leisure time - Household production of goods and services
Economic growth depends upon which of the following?
- Improving the quality of labor - Technological advancement - Increasing the amount of capital
An increase in nominal GDP could result from an increase in
- production - prices
In the reference base period the CPI is equal to
100
The information in the above table gives the 1992 base period market basket and prices used to construct the CPI for a small nation. The table also has 2006 prices. What is the value of CPI for the base period in 1992?
100
Robinson Crusoe divides his time between catching fish and gathering fruit. Part of his production possibilities frontier is given in the above table. If Mr. Crusoe is on his PPF and he increases the amount of fruit he fathers from 56 to 90 pounds, the opportunity cost is
17 pounds of fish
From the table above, which gives data about the U.S. labor market in 1933, the unemployment rate is
20 percent
Scott and Cindy both produce only pizza and tacos. In one hours, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of producing 1 taco is
3/4 of a pizza
In the table above, the size of the labor force is
42 million
What typically happens to benefits as the amount of an activity is increased?
Marginal benefit decreases
Which of the following is true?
Most people live in countries that have average income levels below the world average
Which of the following statement is correct?
Nominal and real GDP can change either in the same direction or the opposite direction
The question of "How are goods and services produced?" most closely addresses which of the following issues?
Should Ford use expensive industrial robots or inexpensive Mexican autoworkers to produce SUV's?
Of the following, the largest expenditure category of the federal government is
Social Security
Which of the following is NOT a normative economic statement?
Teenagers are responsible for most driving fatalities
Suppose that last year, the price of strawberries was $2 and the price of milk was $1. This year, the price of milk is $2 and the price of strawberries is $1. Which of the following statements is true?
The CPI might increase or decrease depending on the quantities in the CPI market basket
The functional distribution of income measures which of the following?
The distribution of earnings by the factors of production
In stores, it is common to find products marked as "On Sale" at a lower than usual price. What explains this behavior?
The law of demand is being used to increase the quantity demanded
A reduction in the unemployment compensation will
decrease the amount of frictional unemployment
If the demand and supply both increase equally, then the equilibrium price _______ and the equilibrium quantity _________
does not change; increases
In the stock market, the price of a share of stock might fall one day and rise the next. This fluctuation indicates that
either demand or supply changed from one day to the next
To increase its economic growth, a nation should
encourage education because that increase the quality of labor
Which of the following best describes comparative advantage?
forgoing the fewest units of one product to produce a unit of another product
The United States possesses a large amount of human capital. As a result of this fact, in the United States there is a
highly skilled and educated labor force
Economists try to isolate the effect of one variable at a time. They do so by
holding all other relevant factors the same
A common political statement in the United States is that we must strengthen social security. This statement is an example of
a normative statement
Using the data in the table above, at the price of $80 a phone,
a surplus of 25,000 cellular telephones occurs
GDP is measured by
adding the market value of total final production
Which of the following is an example of a sunk cost?
after you start watching a movie, the $8 you paid for the ticket
Which of the following could lead the production possibilities frontier to shirt inward?
an earthquake that destroys several major factories
By donating $1,000 to the Salvation Army, Caroline reduces her taxable income. To Caroline, the reduction in her taxable income is
an incentive
Because the CPI overstates inflation,
as times passes, government outlays are increased by more than necessary to compensate for inflation
The CPI is a measure of the
average prices paid by consumers for a fixed basket of goods and services
The expenditure approach to measuring GDP is done by using data on only
consumption expenditure, investment, government expenditures on goods and services, and net exports of goods and services
The largest share of total production in the United States is
consumption goods and services
Which of the following directly contributes people's standard of living?
consumption goods and services
The decisions of firms and households are
coordinated by markets
Mike has just been laid off following six months of slow sales at his firm associated with a recession in the economy. Mike is
cyclically unemployed
Based on the Consumer Expenditure Survey, the largest fraction of an average urban household budget is spent on
housing
Scarcity exists because
human wants exceed the resources available to satisfy them
Capital (NOT human capital) is the productive resource that
includes machinery and tools
"During 2005, the higher price of gasoline led to a decrease in demand for gasoline." Holding other things constant, this statement is
incorrect, because as the price increases, the quantity demanded decreases, not the demand
The table above shows a nation's production possibilities frontier. If the nation wants to produce 4 robots and 34 pizzas
it will be unable to so because the production point is unattainable
The CPI overstates inflation because the average consumer buys
less of those goods whose relative price has risen
The benefit someone gets from consuming one more glass of lemonade is known as the
marginal benefit
The cost of a one-unit increase in an activity is called the
marginal cost
Teenagers drink more soda than other age groups. If the number of teenagers increases, everything else remaining the same,
market demand for soda increases
The production possibilities frontier illustrates the
maximum combination of goods and services that can be produced
Having an absolute advantage
means being able to produce more of each product than the trading partner
To help unscramble cause and effect, economists
must use the ceteris paribus assumption
To be considered unemployed, a worker must have had
no employment during the week before the survey and be actively looking for a job
If you make dinner for yourself
only the market value of ingredients that you purchased this year is added to GDP
In economics, there are two types of statements. One describes what is; the other describes what ought to be. These statements are
positive and normative
Allocative efficiency refers to
producing the goods and services most highly valued
Real GDP can increase if the
quantities of goods and services produced increase
Payments to the factors of production are
rent, wages, interest, and profit or loss
The phrase "a change in demand" most directly implies a
shift of the demand curve
If the number of sellers decreases, then the supply curve _____ and the supply _____
shifts leftward; decreases
To achieve gains from trade, a country
specializes in the producing a good in which it has a lower opportunity cost
Investment is defined as the purchase of
the purchase of new capital goods and additions to inventories
The law of demand refers to how
the quantity demanded changes when the price of the good changes
The United Auto Workers bargained for higher wages and more benefits for autoworkers. As a result of the higher wages and increased benefits,
the supply of new automobiles decreases
When the cyclical unemployment is zero,
the unemployment rate equals the natural unemployment rate
Correlation means
the values of two variables move in a predictable and related way
If the price is below the equilibrium price,
there is a shortage
The fact of increasing opportunity cost when moving on the PPF means that
to increase the production of one product requires larger and larger sacrifices of the other good
The figure above shows the production possibilities frontier for a country. A combination of 4 million gallons of milk and 4 million gallons of ice cream is
unattainable
Positive statements are statements about
what is
The labor force consists of
the number of people in the working-age population who are employed or unemployed
Which of the following results in a rightward shift of the supply curve of rutabagas? (A rutabaga is a potato-like vegetable)
a fall in the price of the fertilizer used to grow rutabagas
Pizza is a normal good. Which figure above shows the effect of a decrease in consumers' incomes?
Figure B (2 demand curves and 1 supply - demand shifts left)
Hank requires 1 hours to cut the grass and 3 hours to clean the house. His sister Holly requires 1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true?
Holly has a comparative advantage in cutting the grass
The GDP deflator measures
the price level
Which of the following is true?
To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as unpaid workers in your family business
The Colorado Ski Shop sold 60 ski jackets to a Belgium company's headquarters located in Paris, France. The ski jackets are a
U.S. export
You have chosen to take a trip during Spring Break. If you had not gone, you would either have worked at a temporary job or studied for exams. The opportunity cost of your trip is
We cannot determine what the opportunity cost is without knowing which alternative, working or studying, you would have preferred
When Ford decides to produce more hybrid cars that run on both gas and electricity, it directly answers the ________ question
What
The United States produces large amounts of software. Based on this observation, it is possible to state that the United States has decided that "software" is part of the answer to which economic question?
What goods and services are produced?
The economic choices made by individuals, businesses, and governments and the interactions of those choices answer which three major questions?
What?, How?, and For Whom?
Which of the following is a macroeconomic topic?
Why did production and jobs expand rapidly in 2004?
Gross Domestic Product equals
Y=C+I+G+NX
Suppose the price of leather used to produce shoes increases. As a result, there is _______ in the supply of shoes and the supply curve of shoes
a decrease; shifts leftward
Which of the following is a final good or service?
a new replacement muffler installed by Midas Mufflers
Making choices on the margin means
comparing all relevant alternatives systematically and incrementally
If the demand for used cards decreases after the price of a new car falls, used cars and new cars are
substitute goods
Structural unemployment is the result of
technological change or foreign competition
Potential GDP is
the amount of real GDP that the economy would produce if it were at full employment
An opportunity cost is
the benefits of the highest-valued alternative forgone
For rock concerts, the admission price is set by the promoter. If scalpers (sellers who buy tickets and then sell them just before the concert) are able to sell their tickets for more than the admission price, then
the equilibrium price to the concert must be more than the set admission price
When measuring GDP,
the expenditures on goods and services by all levels of government are included
The consumer price index market basket contains
the goods and services purchased by an average urban household
In the circular flow model,
the government buys goods and services from firms
The opportunity cost of a decision is measured in terms of
the next best thing given up