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AP Macroeconomics: Unit 2 - GDP and the Business Cycle

Total questions: 62

Worksheet time: 21mins

Name
Class
Date
1.

The market value of all the final goods and services produced within a country in a given time period.

a)

Gross Domestic Product

b)

Net exports of goods and services

c)

Nominal GDP

d)

Real GDP

2.

The purchase of new capital goods (tools, instruments, machines, buildings) and additions to inventories

a)

Exports of goods and services

b)

Real GDP

c)

Investment

d)

Net exports of goods and services

3.

The expenditure by households on consumption goods and services.

a)

Business Cycle

b)

Exports of goods and services

c)

Consumption expenditure

d)

Government expenditure on goods and services

4.

The value of the final goods and services produced in a given year expressed in terms of the prices in a reference base year.

a)

Real GDP

b)

Gross Domestic Product

c)

Business Cycle

d)

Nominal GDP

5.

The value of the final goods and services produced in a given year expressed in terms of the prices of the same year.

a)

Real GDP

b)

Nominal GDP

c)

Net exports of goods and services

d)

Gross Domestic Product

6.

Items that firms in the United States produce and sell to the rest of the world

a)

Imports of goods and services

b)

Investment

c)

Nominal GDP

d)

Exports of goods and services

7.

The value of exports of goods and services minus the value of imports of goods and services.

a)

Gross Domestic Product

b)

Net exports of goods and services

c)

Investment

d)

Nominal GDP

8.
Expectant parents buy supplies for the nursery.  Would this be included in GDP? 
a)
Yes - Consumer Spending
b)
Yes - Investment 
c)
No - Intermediate goods
d)
No - Non-market activity
9.
Which of the following purchases is included in the calculation of gross domestic product?
a)
A used economics textbook from the bookstore
b)
1,000 shares of stock in a computer firm
c)
A car produced in a foreign country
d)
New harvesting equipment for the farm
10.
Which of the following would be counted as investment when calculating gross domestic product?
a)
The purchase of a used computer by an auto manufacturer
b)
The purchase of a share of IBM stock by an employee
c)
The construction of a new house
d)
The construction of roads by the government
11.
Which of the following would be an example of an intermediate good or service?
a)
A calculator purchased by a college student for taking exams
b)
Gasoline purchased by an insurance agent to visit clients at their homes
c)
A car purchased by a student’s parents and given to the student
d)
Tuition paid by a student at a state university
12.
During a recession, which of the following is likely to occur?
a)
an increase in real wages
b)
an increase in production
c)
and increase in the GDP growth rate
d)
an increase in the unemployment rate
13.
Which of the following would not affect the size of real GDP?
a)
Consumer purchase of a new car for personal use.
b)
Government purchase of a new car for the military
c)
Consumer purchase of a rare renaissance painting. 
d)
Business purchase of a new car for a delivery vehicle.
14.
Which of the following will most likely occur during the expansionary phase of the business cycle? 
a)
Real GDP rises and unemployment falls.
b)
Real GDP rises and unemployment rises. 
c)
Real GDP declines and inflation rises.
d)
Interest rates rise and the number of business failures rise. 
15.
What is the formula for GDP?
a)
C + I + G + (X-M)
b)
C + I + G / (X-M)
c)
C + I + G + (population)
d)
C + I + G + (M-X)
16.
The lowest point of output in a recession, before a recovery begins
a)
trade deficit
b)
depression
c)
trough
d)
recovery
17.
Where on the business cycle would you find the highest unemployment?
a)
A
b)
B
c)
C
d)
D
18.
Increasing unemployment and decreasing GDP is a sign of what part of the Business Cycle?
a)
Expansion
b)
Peak
c)
Contraction
d)
Hot Cheetos
19.
If GDP falls for at least 2 Quarters, it is called.
a)
Expansion
b)
Recession
c)
Clumsy
d)
Frictional
20.
What term is used to describe an increase in the general price level?
a)
Deflation
b)
Monetary policy
c)
Stagnation
d)
Inflation
21.
Which is NOT included in Gross Domestic Product (GDP) as a measure of the economy?
a)
Final goods and services
b)
Work done at home such as house renovations
c)
Dollars
d)
Government spending
22.
Which best describes GDP?
a)
Monetary value of all final goods and services produced within a country’s borders in a year
b)
Personal income and expenses each day
c)
It is a cycle of things and stuff
d)
Products shipped from one country to another for purchase
23.
Which term describes the phases of expansion and contraction in an economy over time?
a)
Recessions
b)
Business cycles
c)
Output yo-yos
d)
Total product oscillations
24.
Which would most likely occur during a period of recession?
a)
Cost-push inflation occurs
b)
Unemployment rate falls
c)
Production increase
d)
Real gross domestic output falls
25.
Which of the following is associated with peaks in the business cycle?
a)
Relatively high levels of unemployment
b)
Recessions 
c)
Relatively low levels of unemployment
d)
Both High Unemployment and Recession
26.
How do we measure economic growth?
a)
Increases in the price level, as indicated by the GDP chain price index
b)
Increases in fictional GDP
c)
Increases in real GDP
d)
Increases in the labor force
27.

Indianapolis purchases a new fire truck. Where would this show up in GDP formula? (GDP=C+I+G+(X-M))

a)

Consumption (Consumer)

b)

Investment (Business)

c)

Government Spending

d)

Exports-Imports

28.

Costco builds a new store in Noblesville, Indiana. Where would this show up in the GDP formula? (GDP=C+I+G+(X-M))

a)

Consumption (Consumer)

b)

Investment (Business)

c)

Government Spending

d)

Exports-Imports

29.

John went to Sports Clips and purchased a haircut. Where would this show up in the GDP formula?

a)

Consumption (Consumer)

b)

Investment (Business)

c)

Government Spending

d)

Exports-Imports

30.

The Nation of Nardrupia has a very high GDP. If that is the case, which of the following concerning life in the country is true?

a)

People have a great standard of living.

b)

Everyone in the country is wealthy.

c)

The country has a market economy.

d)

A high GDP tells you nothing about life in the country.

31.
Lauren coaches softball and gets paid in cash each week.  Is this included in GDP?
a)
Yes - Consumer Spending
b)
Yes - Investment 
c)
No - Underground Economy
d)
No - Purely financial transaction 
32.

The total dollar value of all final goods and services produced within the country’s border in a given year after inflation is taken out of the data.

a)

Nominal GDP

b)

GDP/capita

c)

Gross GDP

d)

Real GDP

33.
Why is real GDP more accurate than nominal GDP?
a)
It's adjusted for price changes
b)
It's adjusted for depreciation
c)
It includes unpaid and paid work.
d)
It includes unrecorded business.
34.

If you graph Real GDP, then you have created...

a)

An economic forecast

b)

An Inflation Index

c)

The Business Cycle

d)

Labor Output Graph

35.
Which letter represents the Contractionary (Recession) Phase?
a)
A
b)
B
c)
C
d)
D
36.

Which of the following factors would be an indicator of a healthy economy?

a)

GDP growth at 3.5%

b)

Unemployment at 10%

c)

Wages stagnating

d)

Stock prices declining

37.

This economic model is called:

a)

The business cycle

b)

Supply & demand

c)

Production Possibilities Curve

d)

Circular Flow Model

38.

Points 1 and 4 represent

a)

Peaks and expansion

b)

Troughs and recession

c)

Peaks and depression

d)

Contraction and expansion

39.

Which recent historical event most represents Point 2 and 3 on the chart?

a)

Great Recession

b)

Current Economy

c)

Great Depression

d)

"Dot Com" Boom of the early 2000s

40.

What is the biggest difference between a "recession" and a "depression"?

a)

Length and severity of economic contraction

b)

Depressions are more frequent than recessions

c)

Depressions only happen when banks fail

d)

Recessions are more severe than depressions

41.

A decline in business spending results in a decline in GDP

a)

True

b)

False

42.

High interest rates encourage consumer and business borrowing, spending, and investment

a)

True

b)

False

43.

When consumers feel better about the economy and their future prospects, they tend to spend more money

a)

True

b)

False

44.

External shocks can happen anywhere in the world and can have positive or negative impacts on the business cycle

a)

True

b)

False

45.

The GDP of the United States is the __________ in the entire world at ~$19.4 trillion.

a)

highest

b)

lowest

c)

dumbest

d)

best smelling

46.
Based on an examination of the graph, what conclusions can be drawn regarding the production possibilities of corn and jeans?
a)
The blue curve indicates a decrease in the capacity to produce both corn and jeans, resulting in economic growth.
b)
The blue curve indicates an increase in the capacity to produce both corn and jeans, resulting in economic growth.
c)
The blue curve indicates an increase in the capacity to produce both corn and jeans, resulting in economic decline.
d)
The blue curve indicates a decrease in the capacity to produce both corn and jeans, resulting in economic decline.
47.
Which is a final product in a bakery?
a)
Cake
b)
Flour
c)
Eggs
d)
Sugar
48.
Cars, TVs, computers belong in which part of the GDP formula?
GDP = C+I+G+(X-M)
a)
Consumption Expenditures
b)
Investment Expenditures
c)
Government Expenditures
d)
Net Imports
49.
An airline buying a plane belong in which part of the GDP formula?
GDP = C+I+G+(X-M)
a)
Consumption Expenditures
b)
Investment Expenditures
c)
Government Expenditures
d)
Net Imports
50.
Tanks and roads belong in which part of the GDP formula?
GDP = C+I+G+(X-M)
a)
Consumption Expenditures
b)
Investment Expenditures
c)
Government Expenditures
d)
Net Imports
51.
What does X represent in calculating net imports?
X-M
a)
Imports
b)
Exports
c)
Expenditures
d)
None of the Above
52.
What does M represent in calculating net imports?
X-M
a)
Imports
b)
Exports
c)
Taxes
d)
None of the Above
53.
A British company purchases a one-year membership to PartyFolks.com, a U.S. based company
a)
GDP increases
b)
GDP decreases
c)
No change
54.

The U.S. Government hired 10 Chinese-language experts, from a Chinese company based in China, to train U.S. Workers.

a)

GDP increases

b)

GDP decreases

c)

No change

55.

The trade in exotic animals being illegally sold as pets is a multi-billion-dollar-a-year industry. Is this included in GDP?

a)

Yes - Consumer spending

b)

Yes - Government Spending

c)

No - Underground Economy

d)

No - Non-market activity

56.

A shoe produced in South Korea and sold in the U.S.

a)

Included in U.S. GDP

b)

Included in South Korea GDP

c)

Included in Canadian GDP

57.
What does Per Capita Mean?
a)
Per Household
b)
Per Object
c)
Per Worker
d)
Per Person
58.

All of the following are excluded from GDP except

a)

non-market goods and services

b)

used goods

c)

environmental quality

d)

final goods and services

59.
A Chik-fil-A milkshake today costs $2.75.  The Camden location sold 5,000,000 this year.  In 1961, it cost $0.80 and they sold 2,000,000.  How do I find the nominal GDP for Chik-fil-A milkshakes in 1961?
a)
2.75 x 5,000,000
b)
.80 x 2,000,000
c)
.80 x 5,000,000
d)
2.75 x 2,000,000
60.
The Income Approach of Calculating GDP includes...
a)
All spending on final products in the year.
b)
All Income made from selling all final goods.
c)
All costs on all products.
d)
The ammount of people involved in production.
61.

What does this calculate?

(Nominal GDP ÷ real GDP) x 100

a)

Real GDP

b)

The unemployment rate

c)

GDP

d)

The GDP deflator

62.

If the GDP deflator is equal to 105, it means that...

a)

GDP has decreased 5 percent

b)

the inflation rate is 5 percent

c)

GDP has increased 105 percent

d)

the inflation rate is 105 percent

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