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WorksheetsAP Macro Unit 2 Retest
Total questions: 80
Worksheet time: 1hrs 20mins
Which of the following is true regarding GDP
intermediate goods are not counted because GDP does not include imports from foreign countries
household production, like home auto repair, is counted in GDP
Transfer payment are not included in GDP because government expenditures are not counted
GDP includes the purchase and sale of all goods and services in a country in one year
GDP, adjusted for inflation, measures economic growth over time
Which of the following is included in the calculation of the US GDP
The money that consumers save when using coupons
the benefit society receives from a cleaner environment
online purchases of used products
a computer produced in CHina by a US owned company
a plane produced in the US but sold in Mexico
The value of which of the following is counted in the US GDP
Foreign countries buying US treasury bills
Transfer payments to the elderly
salary bonuses given to investment bankers
undeclared wages paid to illegal aliens
the change in value of real estate in the US
When calculating GDP, investment is best defined as
spending on stocks, bonds, and financial assets
spending by the central bank on government securities
changes in private and business savings
business spending on capital goods
policies that lead to long run economic growth
If a country's nominal percent change in GDP is positive, which of the following must be true?
The real GDP and/or the price level has increased
the inflation rate was negative
The Real GDP increased
The price level increased
Both the price level and real GDP increased
Gross Domestic Product is equivalent to the sum of:
Consumer spending, investment spending, government purchases, exports, and imports
Consumer spending, investment spending, government purchases, and exports
Consumer spending, investment spending, government purchases and net exports
Consumer spending, consumption of fixed capital, government purchases and exports
Which of the following will be included in the current year's calculation of GDP?
. $50 cash earned but not reported by your neighbor for babysitting
Purchase of lifeguard equipment at a summer camp
The purchase of a used car from a friend
The purchase of a vintage surfboard from thrift store
Which of the following is true regarding nominal and real GDP?
The only thing that can increase real GDP is an increase in output
The only thing that can increase nominal GDP is an increase in inflation
The only thing that can increase nominal GDP is an increase in output
The only thing that can increase real GDP is an increase in nominal GDP
If real GDP is increasing at 5% per year and nominal GDP is increasing at 10% per year, which of the following is necessarily true?
Unemployment is increasing
The economy is in a recession
The price level is increasing
Imports exceed exports
If the nominal GDP in a given year is $500 billion and the GDP deflator for that year is 125, how much is the real GDP?
$1,125 billion
a. $625 billion
a. $500 billion
a. $400 billion
The nominal GDP for the year 2010 is $120 billion and the nominal GDP for the year 2012 is $240 billion. Assuming that the year 2010 is the base year and that the real GDP of the year 2012 is $200, what is the GDP deflator in 2012?
50
100
120
150
. If a worker receives a raise in their nominal wage from $10 to $15 per hour at the same time that price level doubles, the worker's real wage has approximately
A. increased by 50%
A. increased by 100%
A. decreased by 50%
A. stayed the same
Which of the following is true regarding inflation?
A. Inflation decreases the purchasing power of a country's currency
A. Inflation causes unemployment
A. When inflation increases, nominal interest rates decrease
A. Unanticipated inflation benefits lenders
Which of the following is true regarding full employment?
An economy is at full employment when the unemployment rate is 0%
A. An economy can never been at full employment since there are always leakages like taxes, savings, and imports
A. Full employment occurs when cyclical unemployment is zero
Full employment occurs when there is only frictional unemployment
. Which type of unemployment would most likely increase if workers were laid off due to a large decrease in consumer spending?
A. Cyclical
A. Seasonal
A. Frictional
A. Structural
Which of the following is the best example of structural unemployment?
A. New immigrants have a hard time finding jobs
A. Workers are laid off due to a recession
Workers quit their current job to go back to school to get better training
A. Workers are fired because they do not have the specific skills employers value
If the labor force participation rate increased at the same time that the unemployment rate stayed the same, which of the following must be true?
Less workers were classified as part-time workers
The total number of jobs in the economy increased
he total number of jobs in the economy decreased
The total number of jobs in the economy stayed the same
Which of the following individuals is clearly considered unemployed?
A. A lawyer that sold his firm and is now looking for a job as a teacher
An electrician that is working part-time and is looking for a full-time job.
A retired school teacher
A. An auto worker who has given up looking for a job
. If a country's nominal percent change in GDP is positive, which of the following must be true?
the real GDP and/or the price level has increased
A. The inflation rate was negative
The real GDP increased
A. Both the price level and real GDP increased
When calculating GDP, investment is best defined as
spending on stocks, bonds, and financial assets
spending by the central bank on government securities
A. business spending on capital goods
policies that lead to long run economic growth
. Which of the following is included in the calculation of the U.S. GDP?
A. The money that consumers save when using coupons
A. Online purchases of used products
A. A computer produced in China by a U.S. owned company
A. A plane produced in the U.S but sold in Mexico
If the nominal GDP for a given year is $500 Billion and the real GDP for that year is $400 Billion then which of the following must be true
The GDP deflator is 150
The GDP deflator is 125
The country is experiencing deflation
The unemployment rate will increase as the economy improves
The unemployment rate measures the percentage of
People in the labor force who are actively looking, but do not have jobs
People in the adult population who have temporary jobs
People in the adult population who do not have jobs
People who do not have jobs and have given up looking for work
The official unemployment rate is not always the most accurate indicator of actual unemployment in the economy because
Part time workers are considered unemployed
The official rate does not include persons who have given up looking for work
Full employment is greater than the labor force
The unemployment rate is greater than natural unemployment
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
What are the three causes of Inflation?
Supply Chain
Overspending
Federal Reserve
Gas Prices
Wage measured by dollars rather than purchasing power.
Nominal Wage
Real Wage
Normal Wage
Net Wage
Wage adjusted for inflation.
Nominal Wage
Real Wage
Normal Wage
Net Wage
Who is Hurt by Inflation? Pick 3
Lenders
Savers
Borrowers
People with fixed incomes
People who are helped by inflation. Pick 2.
Borrowers
Lenders
A business where the price of the product increases faster than the price of resources
Savers
The percent change in prices from year to year.
Price Indices
Inflation Rate
Market Rate
GDP Rate
Index numbers assigned to each year that show how prices have changed relative to a specific base year.
Price Indices
GDP Rate
Market Rate
Inflation Rate
is GDP measured in current prices. It does not account for inflation from year to year.
Inflation Rate
Real GDP
Inflation GDP
Nominal GDP
is GDP expressed in constant, or unchanging, dollars.
Inflation Rate
Inflation GDP
Nominal GDP
Real GDP
Which explanation best explains the effects of inflation?
Consumers have more products to choose from.
Inflation erodes (take away from) the purchasing power of the dollar.
Inflation results in lower prices.
Demand increases because prices are higher.
Fill in the blank: When inflation is high the _______________of the dollar decreases.
cost value
purchasing power
importance
validity
According to the wage-price spiral, if a company gives a worker a raise in pay, what must they also do?
Raise the price of their products
go out of business
lower the price of their products
merge with a competitor
What causes cost-push inflation?
An increase in demand for goods and services
An increase in supply
A rise in production costs passed on to consumers
A fall in the price of imports
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
C + S + G + NX.
C + S + G – NX.
C + I + G + NX
C + I + G – NX
Which of the following is NOT part of GDP?
General Motors’ purchases of new capital equipment
Expenditures by the federal government for national defense
Social security payments made to the elderly
The purchase of new homes by consumers
Real GDP measures the
total profits earned by all businesses valued using prices from a single year.
changes in the prices of output measured in dollars
general upward drift in prices.
value of total production linked to prices of a single year.
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.
Nominal $5600 in 2016
Nominal $6100 in 2017
Real GDP-2017-$6800
Nominal $5700 in 2016
Nominal $6100 in 2017
Real GDP-2017-$6800
Nominal $5600 in 2016
Nominal $6100 in 2017
Real GDP-2017-$6700
Nominal $5600 in 2016
Nominal $6200 in 2017
Real GDP-2017-$6800
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.
In 2015 nominal GDP is $50 and in 2016 nominal GDP is $700.
Real GDP in 2015 is $50 and in 2016 is $135
In 2015 nominal GDP is $50 and in 2016 nominal GDP is $600.
Real GDP in 2015 is $50 and in 2016 is $135
In 2015 nominal GDP is $40 and in 2016 nominal GDP is $600.
Real GDP in 2015 is $50 and in 2016 is $135
In 2015 nominal GDP is $50 and in 2016 nominal GDP is $600.
Real GDP in 2015 is $60 and in 2016 is $135
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
Given the labor market data above, what are the labor-force participation rate (LFPR) and the unemployment rate (UR) ?
The LFPR is 60% and the UR is 6.0%.
The LFPR is 60% and the UR is 10.0%.
The LFPR is 60% and the UR is 3.3%.
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.
Which of the following terms describes a slowdown in the rate of increase in the consumer price index?
Deflation
Disinflation
Inflation
Last year, Myron purchased a $10,000 certificate of deposit with a 3% rate of interest from his bank. The government reported that prices, on average, have fallen by 5% during the current year. Which of the following can be concluded as a result of this transaction?
Myron loses, while the bank gains.
Myron gains, while the bank loses.
Both Myron and the bank equally gain.
Which of the following will happen when the actual inflation rate exceeds the expected inflation rate?
This will harm lenders with fixed-interest rate loans.
This will benefit lenders with fixed-interest rate loans.
This will harm borrowers with fixed-interest rate loans.
Labor unions negotiated a 3-year contract with employers in the automobile industry. They agreed to a 3 percent per year increase in pay over the 3 years. How would each group be affected by an actual inflation rate of 4% next year?
Workers would be better off, and the employers would be worse off.
Workers would be worse off, and the employers would be unaffected.
Workers would be worse off, and the employers would be better off.
Which of the following describes a difference between nominal gross domestic product (nGDP) and real GDP (rGDP)?
Nominal GDP uses constant prices to measure the value of final output, while real GDP uses current prices.
Nominal GDP uses current prices to measure the value of final output, while real GDP uses constant prices.
Nominal GDP takes into account the size of the population while real GDP does not.
Suppose Miguel wants to know the value of real gross domestic product (GDP) for 2011 in terms of the base year 1984 dollars. In 1984 nominal GDP was $10 billion. In 2011 nominal GDP was $15 billion and the price deflator was 200. Real GDP in 1984 dollars would be equal to which of the following?
$5 billion
$10 billion
$7.5 billion
On the Business Cycle, the output gap is measured by which of the following?
The difference between nominal and real GDP.
The difference between actual and potential GDP.
The difference between the actual rate of unemployment and the natural rate of unemployment.
The economy of Fisherland is at full employment for which year in the above diagram?
2009
2013
2015
When an economy is at the trough of the business cycle, which of the following is then true about the state of the economy?
There is a recessionary gap.
There is an inflationary gap.
The economy is producing at its potential output level.
