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