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AP Macro Unit 2 Review

Total questions: 44

Worksheet time: 32mins

Name
Class
Date
1.
What type of GDP is calculated with the current year's prices?
a)
Nominal GDP
b)
Real GDP
c)
GDP per capita
d)
Base Year GDP
2.
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
3.
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
4.
Each individual on food stamps in Delaware can receive up to $194 a month.  Is this included in government spending?
a)
Yes - Government spending
b)
Yes - Consumer Spending
c)
No - Intermediate Goods
d)
No - Tranfer Payment
5.
Mr. Johns is quitting his job as a teacher and moving to california. He is
a)
Cyclically unemployed
b)
Seasonally Unemployed
c)
Structurally Unemployed
d)
Frictionally Unemployed
6.
The unemployment rate does not account for which two types of people?
a)
discouraged workers (hidden unemployed) and those employed
b)
full time carers and those in school
c)
retirees and those in prison
d)
discouraged workers (hidden unemployed)  and underemployed
7.
Who is most likely to be hurt by inflation?
a)
someone who borrowed money
b)
a retiree on a fixed income
c)
a business owner
d)
the U.S. government
8.
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.
9.
Which of the following people would be considered structurally unemployed? 
a)
Unemployed auto assembly line factory worker during a recession.
b)
A high school student who mows lawns during the summer, but is out of work because it is winter
c)
An auto assembly line worker who quit her job to go back to school full-time to improve her job skills
d)
Unemployed auto assembly line factory worker who was replaced with a robot
10.
In a typical circular flow model describing the interaction of businesses and households, which of the following is/are true?
I. Households buy factors of production and goods
II. Firms buy factors of production and goods
III. Households buy factors of production
IV. Firms buy factors of production
V. Firms buy goods VI. Households buy goods
a)
I only
b)
II only
c)
III and IV only
d)
IV and VI only
11.
If the consumer price index (CPI) were 131 at year-end 1999 and 125 at year-end 1998, then inflation during 1999 was 
a)
zero; prices were stable during 1999
b)
4.8 percent
c)
6.0 percen
d)
8.4 percent
12.
Frictional unemployment 
a)
would be eliminated if the economy were operating at full employment levels of GDP.
b)
is zero when we have achieved the Natural rate of unemployment.
c)
is present even when labor markets are working well.
d)
is the result of worker skills not matching the jobs available
13.
An increase in the international value of the dollar (appreciation) would most likely benefit who the most?
a)
domestic producers who export
b)
citizens traveling or living abroad from the United States
c)
German citizens vacation in the U.S.
d)
Canadian citizen looking to buy property in the U.S.
14.
If the U.S. dollar depreciates relative to another currency, which of the following is most likely to occur?
a)
U.S. exports will increase to that country
b)
U.S. government will increase the tariff on goods from that country
c)
U.S. trade deficit will become larger to that country
d)
U.S. tourists will visit that country in greater numbers
15.

What is Inflation?

a)

Money being able to buy more products

b)

is rising general level of products and it reduces the “production power” of money.

c)

is rising general level of prices and it reduces the “purchasing power” of money.

d)

is lowering general level of prices and it raises the “purchasing power” of money.

16.

What are the three causes of Inflation?

a)

Supply Chain

b)

Overspending

c)

Federal Reserve

d)

Gas Prices

17.

Wage measured by dollars rather than purchasing power.

a)

Nominal Wage

b)

Real Wage

c)

Normal Wage

d)

Net Wage

18.

Wage adjusted for inflation.

a)

Nominal Wage

b)

Real Wage

c)

Normal Wage

d)

Net Wage

19.

Who is Hurt by Inflation? Pick 3

a)

Lenders

b)

Savers

c)

Borrowers

d)

People with fixed incomes

20.

People who are helped by inflation. Pick 2.

a)

Borrowers

b)

Lenders

c)

A business where the price of the product increases faster than the price of resources

d)

Savers

21.

The percent change in prices from year to year.

a)

Price Indices

b)

Inflation Rate

c)

Market Rate

d)

GDP Rate

22.

Index numbers assigned to each year that show how prices have changed relative to a specific base year.

a)

Price Indices

b)

GDP Rate

c)

Market Rate

d)

Inflation Rate

23.

is GDP measured in current prices. It does not account for inflation from year to year.

a)

Inflation Rate

b)

Real GDP

c)

Inflation GDP

d)

Nominal GDP

24.

is GDP expressed in constant, or unchanging, dollars.

a)

Inflation Rate

b)

Inflation GDP

c)

Nominal GDP

d)

Real GDP

25.
When Inflation occurs,
a)
Price decreases in the economy
b)
The purchasing power of money decreases in the economy
c)
The dollar appreciates on foreign exchange markets
d)
Basic necessities become cheaper
26.
__________ are common products that consumers buy in a month.(used for CPI)
a)
market basket
b)
inflation
c)
fiscal policies
d)
monetary policy
27.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
28.
Someone buys a house with a 30 year fixed rate loan
a)
helped by inflation
b)
hurt by inflation
29.
A _______________ is a hypothetical set of consumer purchases of goods and services.
a)
Market Basket
b)
Aggregate Price Level
c)
Consumer Price Index (CPI)
d)
Producer Price Index (PPI)
30.

Which explanation best explains the effects of inflation?

a)

Consumers have more products to choose from.

b)

Inflation erodes (take away from) the purchasing power of the dollar.

c)

Inflation results in lower prices.

d)

Demand increases because prices are higher.

31.

Which of the following causes of inflation is often described as “too much money chasing too few goods”?

a)

Demand-pull inflation

b)

Cost-push inflation

c)

Demand-push inflation

d)

Cost-pull inflation

32.

Fill in the blank: When inflation is high the _______________of the dollar decreases.

a)

cost value

b)

purchasing power

c)

importance

d)

validity

33.
An index that measures the prices of a market basket of goods that typical consumers purchase.
a)
Consumer Price Index
b)
Federal Reserve
c)
Bank
d)
Deflation
34.

According to the wage-price spiral, if a company gives a worker a raise in pay, what must they also do?

a)

Raise the price of their products

b)

go out of business

c)

lower the price of their products

d)

merge with a competitor

35.

What causes cost-push inflation?

a)

An increase in demand for goods and services

b)

An increase in supply

c)

A rise in production costs passed on to consumers

d)

A fall in the price of imports

36.
What causes demand pull inflation?
a)
rise in price due to a decrease in supply
b)
a rise in price level due to an increase in consumption
c)
a rise in price due to an increase in the cost of production
d)
a decrease in price due to a decrease in supply
37.

Which cause of inflation occurs when prices rise in the economy due to an increase in the costs of the factors of production?

a)

Cost-push inflation

b)

Demand-pull inflation

c)

Price-push inflation

d)

Supply-pull inflation

e)

None of the answers

38.
The Consumer Price Index (CPI) is best used to determine
a)
the Dow Jones Index.
b)
the rate of inflation.
c)
the unemployment rate.
d)
currency exchange rates.
39.

Gross domestic product is the total ____ produced within a country in a given time period.

a)

market value of all final and intermediate goods and services

b)

market value of all final and intermediate goods and services plus investment and depreciation

c)

amount of final and intermediate goods and services

d)

market value of all final goods and services

40.

Let C represent consumption expenditure, S saving, I gross private domestic investment, G government purchases of goods and services, and NX net exports of goods and services. Then GDP equals

a)

C + S + G + NX.

b)

C + S + G – NX.

c)

C + I + G + NX

d)

C + I + G – NX

41.

Which of the following is NOT part of GDP?

a)

General Motors’ purchases of new capital equipment

b)

Expenditures by the federal government for national defense

c)

Social security payments made to the elderly

d)

The purchase of new homes by consumers

42.

Real GDP measures the

a)

total profits earned by all businesses valued using prices from a single year.

b)

changes in the prices of output measured in dollars

c)

general upward drift in prices.

d)

value of total production linked to prices of a single year.

43.

Tropical Republic produces only bananas and coconuts. The base year is 2016, and the tables give the quantities produced and the prices.

1. Calculate nominal GDP in 2016 and 2017.

2. Calculate real GDP in 2017 expressed in base-year prices.

a)

Nominal $5600 in 2016

Nominal $6100 in 2017

Real GDP-2017-$6800

b)

Nominal $5700 in 2016

Nominal $6100 in 2017

Real GDP-2017-$6800

c)

Nominal $5600 in 2016

Nominal $6100 in 2017

Real GDP-2017-$6700

d)

Nominal $5600 in 2016

Nominal $6200 in 2017

Real GDP-2017-$6800

44.

An economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices.

1. Calculate nominal GDP in 2015 and 2016.

2. Calculate real GDP in 2015 and 2016 expressed in base-year prices.

a)

In 2015 nominal GDP is $50 and in 2016 nominal GDP is $700.

Real GDP in 2015 is $50 and in 2016 is $135

b)

In 2015 nominal GDP is $50 and in 2016 nominal GDP is $600.

Real GDP in 2015 is $50 and in 2016 is $135

c)

In 2015 nominal GDP is $40 and in 2016 nominal GDP is $600.

Real GDP in 2015 is $50 and in 2016 is $135

d)

In 2015 nominal GDP is $50 and in 2016 nominal GDP is $600.

Real GDP in 2015 is $60 and in 2016 is $135

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