AP Macro Unit 2 - 2022

Which statement is true about the circular flow diagram of an economy?

• The market for factors of production connects spending by firms to household income.

• The market for goods and services connects household spending to government spending.

• The market for goods and services connects labor income to firms as employers.

Which statement is true about the approaches used to measure the value of a nation’s gross domestic product

• The value-added approach to calculating GDP sums the final monetary value of output at each stage of production.

• The income approach to calculating GDP sums the income earned by the factors of production excluding profits.

• The expenditure approach to calculating GDP sums consumption spending, investment spending, government spending, and net exports.

Calculate Country X’s nominal gross domestic product (GDP) for 2017 using the expenditures approach.

• 14 billion dollars

• 18 billion dollars

• 19 billion dollars

Which of the following describes a limitation of gross domestic product

• It does not account for the distribution of income in a nation or income inequality.

• It understates the value of output by accounting for negative environmental side effects of production.

• It fails to make adjustments for the value of services consumed for free such as browsing on the Web.

Which of the following is true about gross domestic product

• Calculations of GDP include the sale of used goods.

• Calculations of GDP do not include the monetary value of production activities involving negative environmental side effects such as pollution.

• Calculations of GDP include the unsold inventories of goods produced within the borders of the country.

As a measure of economic performance, the United States gross domestic product (GDP) accounts for which of the following?

• The use of open-source, free Web browsers

• The cleanup of an oil spill

• A parent’s care of children in the home

Which of the following is classified as a discouraged worker?

• Peter earned a degree in business and is actively seeking a job in the financial sector.

• Ella has been unable to find a job and abandoned her job search.

• Max decided to be a stay-at-home dad after he lost his job.

What type of unemployment describes the situation of factory workers displaced by automation?

• Frictional

• Cyclical

• Structural

Suppose the consumer price index (CPI) was 100 on January 1st, 2017 and 110 on January 1st, 2018 with no changes in nominal wages. Which of the following is definitely true about the economy between January of 2017 and January of 2018?

• The inflation rate was 10 percent.

• The inflation rate was −10 percent.

• Real wages increased by 10 percent.

Jan works a 30-hour week for a minimum wage of $10 an hour. Suppose that last year is the base year for the Consumer Price Index (CPI). Which of the following is true about Jan’s real wage if at the end of this year the CPI is 125 ?

• Jan’s real wage at the end of this year is $10 an hour because the base year equals 100.

• Jan’s real wage is 25% higher because the CPI increased from 100 to 125.

• Jan’s real wage is $8 per hour at the end of the year.