AP Macro Review
Unit 2
Measurement of Economic Systems
1. In the simple circular flow model:
a) Individuals and households are sellers of
resources and demanders of products
b) Households are sellers of products and
demanders of resources
c) The GDP is represented by the number of
households and businesses in the economy
d) Businesses are sellers of resources and
demanders of products
e) Businesses are sellers of products and sellers of
resources
2. When economists refer to the gross
domestic product (GDP), they mean:
a) All final goods and services produced in an economy
in a year
b) All intermediate and final goods and services
produced in an economy in a year
c) All final goods and services produced in an economy
in a five-year time period
d) All final goods and services produced in an economy
in a year, including overseas branches and divisions
e) The total expenditure of consumer and government
spending in an economy in a given year
3. The most significant difference between
gross domestic product and gross national
product would be:
a) Government spending
b) Consumer income
c) Net income from foreign investments
d) Consumer spending minus government
investments
e) A and C
4. An example of a final good calculated
into the GDP for the year would be:
a) A computer chip bought by IBM to be used in
a computer
b) A used car sold to a consumer
c) A new car sold to a consumer
d) The lumber used to construct a new house
e) All of the above
5. An example of an intermediate
good would be:
a)
b)
c)
d)
e)
A new car sold to a consumer
A car engine
A new laptop
A new textbook to use for a college class
All of the above
6. The formula for calculating gross
domestic product is:
a)
b)
c)
d)
e)
C – I + G + (X –M)
C + I + G – (X + M)
C + G + (X – M)
(C + G)(I +((X – M))
C + I + G + (X – M)
7. Jason and Mary purchased a new house in
2012 for $300,000. This purchase would be
included in the GDP as:
a) Consumer savings
b) Government investment
c) Investment
d) Consumption of private fixed capital
e) Consumer spending
8. Elaine quit her job as a teaching assistant and went
back to school to be a guidance counselor. Last year
she received her master’s degree and is currently
looking for a job. Elaine is considered:
a)
b)
c)
d)
e)
Cyclically unemployed
Frictionally unemployed
Structurally unemployed
Seasonally unemployed
Not part of the labor force
9. Full employment occurs when:
a)
b)
c)
d)
e)
Cyclical unemployment does not exist
Seasonal unemployment does not exist
Frictional unemployment does not exist
Structural unemployment does not exist
Both cyclical and frictional unemployment do
not exist
10. Stagflation occurs when:
a)
b)
c)
d)
Real GDP increases and price levels decrease
Real GDP decreases and price levels decrease
Unemployment and price levels increase
Nominal GDP decreases and price levels
increase
e) GDP decreases and the price level decreases
11. If a teacher loses his or her job due to low
student enrollment, he or she would be
considered:
a) Cyclically unemployed
b) Seasonally unemployed
c) Frictionally unemployed
d) Structurally unemployed
e) Not part of the labor force
12. Dennis decides to loan his friend some money. He
would like to see a 5% return on the loan. If the
current rate of inflation is 15%, what should he charge
as an interest rate?
a)
b)
c)
d)
e)
10%
20%
25%
3%
12%
13. Jessica received her college degree in computer
science and was offered a job at IBM. She decides to
take a year off and travel throughout Europe. What
would this decision do to the unemployment rate?
a)
b)
c)
d)
e)
An increase in the unemployment rate
A decrease in the unemployment rate
An increase in cyclical unemployment
A decrease in structural unemployment
No change in the unemployment rate
14. Suppose the gross domestic product is $15 million,
where consumer spending is $4 million, investments
are $2 million, government spending is $5 million, and
exports are $4 million. How much is spend on imports?
a)
b)
c)
d)
e)
$2 million
$3 million
$5 million
$4 million
$0
15. When constructing a price index, a
base year refers to:
a) The average price level of goods and services
b) A point of reference to compare real values over
time
c) The percentage change in the price index over
time
d) The top of the business cycle signaling the end
of expansion
e) A collection of goods and services that represent
what is consumed in an economy for the year
16. Nominal GDP refers to:
a) The value of current production, but using prices
from a set point in time
b) The value of current production, but using prices
gathered over the past five years
c) The value of current production at current prices
d) Prices at the peak of the business cycle
e) The value of current production at the trough of
the business cycle subtracted from that at the
peak of the business cycle
Answer Key
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
A
A
C
C
B
E
C
B
A
C
A
B
E
E
B
C