AP Macro Unit 2.1 Circular Flow and GDP

What leads to economic growth, resulting in the expansion of the Production Possibility Curve (PPC) outward?

• Decrease in technology

• Increase in employment

• Investment in capital goods

• Reduction in natural resources

Which of the following is NOT a way to measure the growth or success of an economy?

• GDP

• Unemployment Rate

• Consumer Price Index

• Birth Rate

What is the Circular Flow Diagram, and why is it significant in economics?

• It shows the flow of goods and services between businesses and households.

• It tracks international trade exclusively.

• It represents the movement of labor within a company.

• It explains inflation in the economy.

Which of the following is NOT one of the three macroeconomic goals?

• Economic Growth

• Trade Surplus

• Full Employment

• Price Stability

Gross Domestic Product (GDP) is defined as

• The income of every household in a country.

• The amount of money in circulation.

• The total value of goods and services produced in a country over a specific time period.

• The total number of products exported by a country.

How do we measure GDP?

• Total change in GDP year to year

• Percent change in GDP year to year

• Total change in employment year to year

• Percent change in employment from year to year

Why do economists use GDP per capita as a measure?

• To compare the GDP of different countries directly.

• To measure the standard of living in a country.

• To track government spending trends.

• To determine the country's total population.

Which of the following does NOT influence GDP?

• Economic system

• Rule of Law

• Military Conscription

• Natural Resources

Which component is NOT included in the expenditure approach to calculating GDP?

• Stock market investments

• Consumer Spending

• Net Exports

• Government expenditures

Inventories are considered a valuable economic indicator because

• They represent future consumer demand.

• They indicate the level of economic scarcity.

• They reflect government intervention in the economy.

• They show current consumption levels which are used to gauge future economic conditions