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AP ECONOMICS CHAPTER 8 STUDY GUIDE
5. If a nation's real GDP is growing by 3 percent
per year, its real domestic output will double
in approximately:
A) 21 years.
B) 23 years.
C) 29 years.
D) 42 years.
1. The best measure of economic growth
adjusted for the population of a nation is the
increase in:
A) aggregate demand over time.
B) real GDP per worker over time.
C) real GDP per capita over time.
D) real GDP per dollar of capital stock over
time.
Use the following to answer question 6:
2. Real GDP was $9,950 billion in Year 1 and
$10,270 billion in Year 2. What was the
approximate rate of economic growth from
Year 1 to Year 2?
A) 1.6 percent
B) 2.4 percent
C) 3.2 percent
D) 4.3 percent
6. The above diagram is best described as an
idealized:
A) business cycle.
B) cyclical variation.
C) recession cycle.
D) prosperity cycle.
3. Real GDP was $9,950 billion in Year 1 and
$10,270 billion in Year 2. The population
rose from 270 million in Year 1 to 275 million
in Year 2. What was the approximate increase
in real GDP per capita rate from Year 1 to
Year 2?
A) 1.3 percent
B) 2.1 percent
C) 3.3 percent
D) 4.2 percent
7. Which phase of the business cycle would be
most closely associated with an economic
contraction?
A) peak
B) recession
C) trough
D) recovery
8. Some economists prefer to use the term
business fluctuations rather than business
cycles to describe the historical growth record
in the United States because:
A) cycles include a trough phase while
fluctuations do not.
B) cycles imply regularity while fluctuations
do not.
C) fluctuations include an expansion phase
while cycles do not.
D) fluctuations are relatively predictable
events.
4. Real GDP in 1995 was $7,544 billion. By
2000 real GDP had risen to $9,320 billion.
The annual growth rate in real GDP over this
five-year period was approximately:
A) 1.5 percent.
B) 2.7 percent.
C) 4.7 percent.
D) 12.1 percent.
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9. Assuming the total population is 200 million,
the labor force is 100 million, and 92 million
workers are employed, the unemployment rate
is:
A) 4 percent.
B) 6 percent.
C) 8 percent.
D) 10 percent.
14. Okun's law indicates that for:
A) every 1 percent that the actual
unemployment rate exceeds the natural
unemployment rate, there is generated a 2
percent GDP gap.
B) every 1 percent that the actual
unemployment rate exceeds the natural
unemployment rate, there is generated a 5
percent GDP gap.
C) a 5 percent GDP gap, there is generated a
1 percent increase in the natural
unemployment rate.
D) a 2 percent GDP gap, there is generated a
2 percent increase in the actual
unemployment rate.
10. The unemployment rate in an economy is 12
percent. The civilian labor force is 50 million.
The number of employed workers in the
economy is:
A) 38 million.
B) 40 million.
C) 42 million.
D) 44 million.
15. If the natural rate of unemployment is 4.5
percent and the actual unemployment rate is
6.5 percent, then Okun's law indicates that the
GDP gap is:
A) 2 percent.
B) 3 percent.
C) 4 percent.
D) 6 percent.
11. The total population of an economy is 175
million, the labor force is 125 million, and the
number of unemployed is 8 million. The
unemployment rate for this economy is:
A) 4.6 percent.
B) 5.8 percent.
C) 6.4 percent.
D) 7.8 percent.
16. If the consumer price index was 170 in one
year and 180 in the next year, then the rate of
inflation from one year to the next was
approximately:
A) 5.5 percent.
B) 5.9 percent.
C) 6.3 percent.
D) 7.2 percent.
12. Kevin has lost his job in an automobile plant
because of the use of robots for welding on the
assembly line. Kevin plans to go to technical
school to learn how to repair microcomputers.
The type of unemployment Kevin is faced
with is:
A) cyclical.
B) frictional.
C) structural.
D) natural.
17. If the annual inflation rate is 5 percent a year,
about how many years will it take for the price
level to double?
A) 10 years
B) 12 years
C) 14 years
D) 16 years
13. The GDP gap measures the amount by which:
A) nominal GDP exceeds real GDP.
B) actual GDP exceeds potential GDP.
C) potential GDP exceeds actual GDP.
D) actual GDP exceeds national income.
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18. Inflation that occurs when total spending is
greater than the economy's ability to produce
output at the existing price level is:
A) anticipated inflation.
B) demand-pull inflation.
C) cost-push inflation.
D) unanticipated inflation.
21. Refer to the above diagram. An increase in the
price level and output would be caused by an
increase in total spending in:
A) Range 1.
B) Range 2.
C) Range 3.
D) Ranges 2 and 3.
22. Only two resources, capital and labor, are used
in an economy to produce an output of 400
million units. If the total cost of capital
resources is $200 million and the total cost of
labor resources is $100 million, then the per
unit production costs in this economy are:
A) $0.75 million.
B) $1.33 million.
C) $2.00 million.
D) $3.50 million.
Price level
Range 3
Use the following to answer questions 19-21:
ge
an
R
Range 1
0
2
23. If the price level increases by 15 percent while
nominal income increases by 8 percent, then
in percentage terms real income would:
A) rise by about 8 percent.
B) fall by about 8 percent.
C) fall by about 7 percent.
D) fall by about 15 percent.
Full-employment
output
Real output (and employment)
19. Refer to the above diagram. A decrease in
total spending in Range 1 will:
A) decrease the price level, but not
employment and output.
B) decrease employment and output, but not
the price level.
C) decrease employment, output, and the
price level.
D) cause unemployment and inflation.
24. If average nominal income was about $15,000
and the price level index was 118, then
average real income would be about:
A) $11,146.
B) $12,712.
C) $13,385.
D) $14,249.
20. Refer to the above diagram. An increase in
total spending in Range 3 will increase:
A) employment and the price level.
B) output and the price level.
C) the price level, but not output or
employment.
D) the price level and decrease the natural
rate of unemployment.
25. Unanticipated inflation tends to penalize:
A) people who save money in financial
institutions.
B) individuals who borrow money from
financial institutions.
C) businesses which borrow money from
financial institutions.
D) governments which have a progressive
personal income tax.
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