AP Macro Unit 2 Review Questions (College Board)
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
Consumption 3000 gov purchases 1000 Investment 700 depreciation 300 Exports 300 Imports 500 Indirect business taxes 0 Based on the economic figures in the table above, what is the value of gross domestic product, in billions of dollars? A. $4500 B. $4700 C. $4900 D. $5150 E. $5950
A
Gross domestic product 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
Gross private domestic investment includes which of the following? A. Changes in business inventories B. National defense spending C. New durable goods purchased by households D. Transfer payments E. Depreciation of government goods
A
If purchases of education and medical care were counted as investment rather than consumption, gross domestic product would A. not change, because there is no change in total expenditures B. increase, because investment is included in gross domestic product but consumption is not C. increase, because consumption is included in gross domestic product but investment is not D. decrease, because investment is weighted more heavily than consumption in calculating gross domestic product E. decrease, because consumption is weighted more heavily than investment in calculating gross domestic product
A
In the measurement of gross domestic product, 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 other financial assets D. the federal government to purchase bonds issued by the Federal Reserve E. the Federal Reserve to buy government bonds
A
Melanie quits her job to look for a better one that has opportunity for advancement. Melanie will be classified in which category of unemployment? A. Frictional B. Hidden C. Seasonal D. Structural E. Cyclical
A
Public policy that generates an unexpected increase in consumer prices will inflict short-run costs on all of the following EXCEPT A. borrowers B. workers with fixed incomes C. savers holding non-interest-bearing money D. taxpayers shifted into higher tax brackets E. people whose incomes are not adjusted for inflation
A
Structural unemployment is best described as unemployment arising from A. the elimination of jobs as a result of technological change B. an increase in the number of workers searching for better-paying jobs C. an increase in the number of jobs demanding unskilled labor D. the temporary reduction of jobs during a downturn in the business cycle E. the reduction in jobs due to seasonal changes in demand
A
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
The consumer price index measures which of the following? A. The change over time of the weighted prices of a particular group of goods and services B. The change over time of the weighted wholesale price index 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
A
The table below shows a country's macroeconomic data in 2013. Consumption Spending ($175 billion) Individual income taxes ($32 billion) Private investment spending ($30 billion) Corporate Taxes ($25 billion) Exports ($75 billion) Government purchases ($40 billion) Imports ($100 billion The country's gross domestic product is A. $220 billion B. $282 billion C. $304 billion D. $309 billion E. $347 billion
A
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 borrower would benefit. B. The lender would benefit. C. The real interest rate would be lower than expected. D. The nominal interest rate would be higher than expected. E. The nominal interest rate would increase.
B
The circular-flow model indicates that final goods are produced by A. firms and sold in the factor markets B. firms and sold in the product markets C. firms and sold in the resource markets D. households and sold in the factor markets E. households and sold in the product markets
B
A lender will realize unexpected benefit when the A. actual inflation rate is higher than the anticipated inflation rate B. actual inflation rate is lower than the anticipated inflation rate C. rate of interest is greater than the actual rate of inflation D. rate of interest is less than the actual rate of inflation E. rate of interest equals the actual rate of inflation
B
Frictional unemployment occurs when which of the following happens? A. A worker is replaced by robots on factory assembly lines. B. A worker voluntarily quits a job to search for a better one. C. A worker is laid off because of a downturn in economic activity. D. A worker undergoes on-the-job training. E. A worker switches from working full-time to part-time.
B
If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic product grew by 4 percent, inflation for this year would be A.-7% B. 7% C. 8% D. 11% E. 15%
B
If nominal gross domestic product fell while real gross domestic product rose, which of the following must be true? A. Unemployment increased B. The inflation rate was negative C. Net exports were negative D. The average of stock prices rose while bond prices fell. E. Nominal interest rates rose by less than the rate of inflation.
B
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. 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
Inflation occurs when there is a sustained increase in which of the following? A. Real gross domestic product B. The average price level C. The price of any commodity D. Labor productivity E. Unemployment rate
B
Which of the following groups of people would benefit from unanticipated inflation? 1. Savers 2. Borrowers 3. Lenders A. 1 only B. 2 only C. 3 only D. 1 and 2 only E. 1 and 3 only
B
Which of the following necessarily occurs during an economic recession? A. Cost-push inflation decreases. B. Real gross domestic product decreases. C. Cyclical unemployment decreases. D. Demand-pull inflation increases. E. Nominal wages increase.
B
The value of which of the following would be included in the United States gross domestic product? A. Time spent volunteering at a local hospital B. A United States savings bond received as a birthday gift C. A movie ticket purchased at a local theater D. A new handbag made in Italy by a United States firm E. A used car sold at the same price paid for it
C
For an economy consisting of households and businesses only, which of the following is consistent with the circular flow of income and production? A. Households are producers of goods and services and consumers of resources. B. Households are users of resources, and businesses are sources of saving. C. Households are suppliers of resources and consumers of goods and services. D. Businesses are users of taxes, and households are sources of taxes. E. Businesses are suppliers of resources and consumers of goods and services.
C
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
In one year, spending on consumption, investment, and government purchases was equal to 103 percent of a country's gross domestic product. This would be possible only if A. the money supply increased B. net exports were positive C. net exports were negative D. the government ran a budget surplus E. the government had a balanced budget
C
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 household sector D. Financial sector E. The foreign sector
C
Population 180 Employed 94 Unemployed 6 Not in labor force 80 Based on the information in the table above, what is the unemployment rate for Country X? A. 3.3% B. 4.0% C. 6.0% D. 6.38% E. 7.5%
C
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. consumer incomes are doubled C. the prices in an average consumer's market basket are doubled D. all consumer goods prices are doubled E. all prices in the economy are doubled
C
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
The natural rate of unemployment can be defined as the A. unemployment rate consistent with accelerating inflation B. labor force participation rate plus the unemployment rate 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 unemployment rate
C
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
Which of the following best explains why transfer payments are not included in the calculation of gross domestic product? A. Transfer payments are used to pay for intermediate goods, and intermediate goods are excluded from gross domestic product. B. Transfer payments are a government expenditure, and government expenditures are excluded from gross domestic product. C. Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments. D. Recipients of transfer payments are usually children, and income earned by children is excluded in gross domestic product. E. Recipients of transfer payments are sometimes not citizens of the United States.
C
Which of the following describes a typical business cycle in the correct sequence? A. Peak, trough, recession, and expansion B. Peak, trough, expansion, and recession C. Peak, recession, trough, and expansion D. Peak, recession, expansion, and trough E. Peak, expansion, trough, and recession
C
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
Which of the following is an example of structural unemployment? A. A computer programmer who leaves her job to move to Florida B. A worker who loses his job during a recession C. An autoworker who is replaced by a robot D. A construction worker who is always unemployed during the winter months E. A worker who is engaged in unproductive work
C
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
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. Combining two domestic military bases into one overseas base 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 airplanes
C
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. A retailer increases her stock of imported shoes. C. The government increases its domestic purchases of food for use by the military. D. A corporation sells shoes from last year's inventory. E. A mother sells her car to her daughter.
C
Which of the following will be counted as unemployed by the United States Bureau of Labor Statistics? A. Persons who quit their previous jobs to stay at home to care for sick parents 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 businesses
C
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
An industry historically used employees with specific skills. If this 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
As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in A. the production of military goods B. the production of antipollution devices C. crime prevention services D. household production E. legal services
D
If unemployed workers become discouraged and give up trying to find work, the number of workers employed and the unemployment rate would change in which of the following ways? A. Decrease, decrease B. Decrease, increase C. Decrease, no change D. No change, decrease E. No change, increase
D
In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was A. 150 B. 100 C. 50 D. 25 E. 4
D
The circular flow of economic activity between consumers and producers includes which of the following? 1. Households buy factor services from firms 2. Households sell factor services to firms. 3. Households buy outputs from firms. 4. Households sell outputs to firms. A. 3 only B. 4 only C. 1 and 2 only D. 2 and 3 only E. 3 and 4 only
D
The consumer price index (CPI) measures the A. value of current gross domestic product in base-year dollars B. prices of all consumer goods and services produced in the economy C. prices of selected raw materials purchased by firms D. prices of a specific group of goods and services purchased by consumers E. prices of imports, but not exports
D
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
The value of which of the following is counted in the United States gross domestic product? A. Clean air B. Child care a father provides for his child C. An automobile produced in Sweden by a United States firm D. A car produced in the United States and sold in Europe E. Medical services not provided due to preventative health care
D
Unexpected increases in inventories usually precede A. increases in inflation B. increases in imports C. stagflation D. decreases in production E. decreases in unemployment
D
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 15 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
Which of the following is true according to the circular flow model? A. Firms are suppliers in both the product and factor markets. B. Firms are demanders in the product markets and suppliers in the factor markets. C. Households are demanders in both the product and factor markets. D. Households are demanders in the product markets and suppliers in the factor markets. E. The government is a demander in the product market only.
D
Which of the following statements is true of unanticipated inflation? A. It decreases the economic well-being of all members of society proportionately. B. It decreases the economic well-being of all members of society equally. C. It increases the economic well-being of net creditors. D. It increases the economic well-being of net debtors. E. It increases the economic well-being of workers with long-term labor contracts.
D
Which of the following will lead to an increase in the United States gross domestic product? A. More individuals prepare their own personal income tax forms. B. Some citizens begin working abroad as computer programmers. C. The government prohibits the sale of alcoholic beverages. D. Foreign companies build new assembly plants in the United States. E. A million United States households sell their used cars to their children.
D
Which of the following would be true if the actual rate of inflation were less than the expected rate of inflation? A. Inflation had been underpredicted. B. The real interest rate had exceeded the nominal interest rate. C. The real interest rate had been negative. D. People who borrowed funds at the nominal interest rate during this time period would lose E. The economy would expand because of the increased investment and spending.
D
Year 1 RGDP (100b) NGDP (70b) Year 2 RGDP (120b) NGDP (120b) Year 3 RGDP (130b) NGDP (150b) Which of the following can be concluded from the data above? A. The base year for the price index was year 1. B. The base year for the price index was year 3. C. The economy was producing higher-quality goods and services in years 2 and 3 than in year 1. D. The economy was experiencing inflation during years 2 and 3. E. The economy was experiencing deflation during years 1, 2, and 3.
D
2012 Nominal GDP (100,000) Price Index (200) 2013 Nominal GDP (110,000) Price Index (220) The table above 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 decreased by 20%. B. Real GDP decreased by 10%. C. Real GDP increased by 20%. D. Real GDP increased by 10% E. Real GDP did not change.
E
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
An increase in the labor force participation rate will A. increase investment and decrease savings B. increase savings and decrease investment C. have no effect on unemployment D. make it easier to reduce unemployment E. make it more difficult to reduce unemployment
E
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. both the price level and the real GDP have increased B. neither the price level nor the real GDP has increased C. the price level increased by a larger percentage than did the real GDP D. the price level increased by a smaller percentage than did the real GDP E. the price level and/or the real GDP has increased
E
The consumer price index (CPI) is designed to measure changes in the A. spending patterns of urban consumers only B. spending patterns of all consumers C. wholesale price of manufactured goods D. prices of all goods and services produced in an economy E. cost of a select market basket of goods and services
E
The table above shows the consumer price index for selected years. On the basis of these data, how much did it cost in 1995 to buy the same goods and services that cost $50 in 1929 ? 1929 CPI 20 1984 CPI 100 1995 CPI 120 A. $25 B. $100 C. $125 D. $250 E. $300
E
Which of the following best describes an economy at full employment? A. The rate of unemployment is zero. B. There is only structural and cyclical unemployment. C. There is only cyclical unemployment. D. There is cyclical, but not structural, unemployment. E. There is frictional, but not cyclical, unemployment.
E
Which of the following can be considered a leakage from the circular flow of economic activity? A. Investment B. Government expenditures C. Consumption D. Exports E. Saving
E
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
Which of the following represents a leakage from the circular flow in an economy? A. Consumption spending B. Government spending C. Investment spending D. Unemployment benefits E. Imports
E
Which of the following statements about the simple circular flow model of a market economy is correct? A. Households are on the demand side of the product market and the supply side of the resource market. B. Business firms are on the supply side of both the product market and the resource market. C. Households receive income in the form of wages, and business firms receive income in the form of investment. D. Exports and investment expenditures are examples of leakage from the circular flow, whereas imports and savings are injections. E. Circular flow models are used primarily to explain why money is necessary in any economic system.
E
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.
E