AP Macro Unit 2

Front

What does point C represent on the Circular Flow diagram?

Back

Factor Market

Answer explanation

Point C on the Circular Flow diagram represents the Factor Market, where factors of production like labor and capital are bought and sold. This is crucial for firms to produce goods and services.

Front

Which component makes up the largest percentage of GDP measured by aggregate spending? Options: consumer spending, investment spending, exports, imports, government purchases of goods and services

Back

consumer spending

Answer explanation

Consumer spending accounts for the largest portion of GDP, typically around 70%. It includes all private expenditures by households and is a key driver of economic activity, surpassing investment, exports, and government spending.

Front

What type of unemployment? David lost his job at Target to an self-checkout machine.

Back

structural

Answer explanation

David's job loss is due to a self-checkout machine replacing his role, indicating a shift in the job market and technology. This is classified as structural unemployment, which occurs when technological advancements displace workers.

Front

The Consumer Price Index (CPI) is best used to determine

Back

the rate of inflation.

Answer explanation

The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for goods and services, making it a key indicator for determining the rate of inflation.

Front

If the Price of the Market Basket in 2008 is $40 and the Price of the Market Basket in the base year is $20, what is the CPI for 2008?

Back

200

Answer explanation

The Consumer Price Index (CPI) is calculated as (Price of Market Basket in current year / Price of Market Basket in base year) x 100. Here, CPI = (40 / 20) x 100 = 200. Thus, the correct answer is 200.

Front

Hurley, a farmer, buys machinery with a fixed-rate loan to be repaid over seven years. What is the effect of unanticipated inflation on this situation?

Back

benefits from unanticipated inflation

Answer explanation

Hurley benefits from unanticipated inflation because his fixed-rate loan payments remain the same while the value of money decreases, making it easier to repay the loan with cheaper dollars over time.

Front

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? Options: Real GDP decreased by 20%. Real GDP decreased by 10%. Real GDP increased by 20%. Real GDP increased by 10%. Real GDP did not change.

Back

Real GDP did not change.

Answer explanation

Real GDP is calculated by adjusting nominal GDP for inflation using the price index. If the nominal GDP and price index changes proportionately, real GDP remains unchanged, indicating that real GDP did not change from 2012 to 2013.

Front

How do countries use real GDP to calculate growth?

Back

They calculate the % change in real GDP from one period to the next.

Answer explanation

Countries calculate growth by determining the % change in real GDP from one period to the next. This method provides a clear measure of economic performance over time, unlike the other options which do not accurately reflect growth.

Front

Peak

Back

The point at which a recovery period slows down and begins to move into a recession.

Answer explanation

The correct choice describes the peak as the point where a recovery slows and transitions into a recession, marking the end of economic growth before a downturn begins.

Front

Trough

Back

The point at which a recession begins to improve and move into a period of recovery.

Answer explanation

The correct choice describes a trough as the point where a recession starts to improve, indicating a transition into recovery. This is distinct from other options that refer to different economic phases.