AP Macro 2.1-2.3 Review

What is the circular flow model primarily used to illustrate?

• The flow of goods and services in an economy

• The flow of money between households and firms

• The flow of government policies

• The flow of international trade

Which of the following is NOT a component of GDP?

• Consumption Spending

• Investment Spending

• Financial Asset Spending

• Government Spending Spending

Identify the type of unemployment that occurs when workers' skills do not match the jobs available.

• Frictional Unemployment

• Structural Unemployment

• Cyclical Unemployment

• Seasonal Unemployment

• $950

• $1050

• $850

• $1000

Which of the following best describes cyclical unemployment?

• Unemployment due to seasonal work

• Unemployment due to economic downturns

• Unemployment due to technological changes

• Unemployment due to voluntary job changes

Explain how the circular flow model demonstrates the relationship between households and firms.

• Households provide labor and receive wages, while firms produce goods and services.

• Households produce goods and services, while firms provide labor and receive wages.

• Households and firms both produce goods and services.

• Households and firms both provide labor.

Which method of GDP calculation involves summing up all incomes earned in the economy?

• Expenditure Approach

• Income Approach

• Production Approach

• Value-Added Approach

Discuss the impact of high unemployment on an economy.

• It leads to increased consumer spending.

• It results in higher tax revenues for the government.

• It can cause a decrease in overall economic output.

• It encourages more foreign investment.

What is the formula for calculating GDP using the income approach?

• GDP = C + I + G + (X - M)

• GDP = Wages + Rent + Interest + Profits

• GDP = Total Output - Total Input

• GDP = Consumption + Savings

How do you calculate the natural rate of unemployment?

• Frictional + Structural

• Frictional + Cyclical

• Structural + Cyclical

• Cyclical + Seasonal