AP MACRO UNIT II PRACTICE

Gross Domestic Product is equivalent to the sum of:

• Consumer spending, investment spending, government purchases, exports, and imports

• Consumer spending, investment spending, government purchases, and exports

• Consumer spending, inventory spending, government purchases and net exports

• Consumer spending, investment spending, government purchases and net exports

Which of the following would represent an addition to a nation’s GDP?

• Ms. Jones purchases a share of stock in a technology start-up company

• An auto retailer purchases imported cars

• The government hires workers to install streetlights

• . A business sells used watches

If an American student purchases a personal computer made by a Korean owned company located in California, what would happen to consumption and the GDP of the USA as a result?

Consumption / GDP

• Increase / increase

• . Increase / decrease

• No change / increase

• Decrease / decrease

Which of the following is true regarding nominal and real GDP?

• The only thing that can increase nominal GDP is an increase in inflation

• The only thing that can increase real GDP is an increase in inflation

• The only thing that can increase real GDP is an increase in output

• The only thing that can increase real GDP is an increase in nominal GDP

As a measure of economic welfare, GDP underestimates a country’s production of goods and services when there is an increase in

• The production of naval ships for the military

• Household production

• The production of solar panel devices

• Crime prevention services

The major difference between real and nominal GDP is that real GDP

• Excludes government debt

• Excludes exports

• Measures the prices of a market basket of goods purchased by a typical consumer

• Is adjusted for price-level changes using a price index

Assume the CPI increases from 100 to 120 between 2014 and 2015. Which of the following must be true?

• The average price of a specific market basket increased 20%

• There was unanticipated inflation

• The price for all goods increased between 2014 and 2015

• A gallon of gas that was $2.50 in 2014 will be $3.00 in 2015

. If the Consumer Price Index changes from 100 to 90, economists will know that:

• There was deflation in the economy

• There was disinflation in the economy

• Unemployment is deceasing in the economy

• Consumers paid 10% higher prices since the base year

Which of the following is most true regarding unanticipated inflation?

I. Workers with fixed wage rates are hurt by unanticipated inflation

II. Employers that charge fixed wages are hurt by unanticipated inflation

III. Lenders with fixed rate loans are helped by unanticipated inflation.

IV.Borrowers who have fixed rate loans are helped by unanticipated inflation.

• I and IIII only

• I and IV only

• II and III only

• II and IV only

A mechanic that leaves his job working on cars and is currently looking for a job working on planes is considered

• Not in the Labor Force

• . Cyclically unemployed

• Frictionally unemployed

• Seasonally unemployed