Download Unit II - AP-Macro-DHS

Unit II - AP Practice Exam Questions
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. People who quit a job to look for another one are
a. Structurally unemployed
d. Not counted as unemployed
b. Frictionally unemployed
e. Not counted in the labor force
c. Cyclically unemployed
2. Which of the following persons is considered to be unemployed?
I. Mary who has quit her job to look for another
II. John who fulfilled his dream by retiring at age 45
III. Diane who works part-time but would like to work full time
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a. II and III only
d. I only
b. III only
e. I and II only
c. II only
Brent loses his job at the public swimming pool when the pool closes for the winter. This is an
example of
a. Seasonal unemployment
d. Cyclical unemployment
b. Structural unemployment
e. Discouraged worker
c. Frictional unemployment
The population of country X is exactly the same as country Y, but country X produces twice as
much output as country Y. We can conclude that
a. The people of country X are smarter
d. The people of country Y enjoy a
than the people of country Y
standard of living twice as much as
country X
b. The people of country Y work twice as e. Country X is bigger than country Y
hard as the people of country X
c. The people of country X enjoy a
standard of living twice as much as
country Y
Macroeconomics is primarily concerned with
a. Whether a family is making the most d. Whether firms are maximizing their
of its income
production levels
b. Whether the world is making the most e. Money
of its resources
c. Whether a nation is making the most
out of its resources
Inflation
a. Hurts creditors who anticipate it
d. Benefits fixed-income receivers
b. Hurts creditors who do not anticipate it e. Hurts debtors
c. Hurts fixed mortgage owners
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7. Which of the following is true according to the circular flow model?
a. Firms are demanders in the product
d. Firms are suppliers in both the product
markets and suppliers in the factor
and factor markets
markets
b. The government is a demander in the e. Households are demanders in both the
product market only.
product and factors markets
c. Households are demanders in the
product market and suppliers in the
factors market
8. The inflation rate
I. Is the percentage change in the CPI
II. Is the rate at which prices are rising
III. Measures how fast the economy is expanding
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a. I and II are true.
d. II and III are true.
b. I and III are true.
e. I, II, and III are true.
c. Only I is true.
9. Which of the following is NOT included in GDP?
a. Exports
d. Federal government purchases of
goods and services
b. State and local government purchases e. The change in business inventories
of goods and services
c. Imports
10. Which of the following is true of a typical contraction of the business cycle?
a. Private investment is rising
d. Consumption is falling, but household
wealth is rising
b. Consumption is increasing
e. Private savings rates are rising
c. Employment and inflation are low
11. Which of the following transactions would represent an addition to a nation’s GDP?
a. Ms. Smith purchases a share of stock d. The government increase its domestic
in an automobile company
purchases of food for use by the
military
b. A retailer increase her stock of
e. A corporation sells shoes from last
imported shoes
year’s inventory
c. A mother sells her car to her daughter
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12. In 2008, the adult population was 1000, the number of employed individuals was 600 and the
number of unemployed individuals was 200. In 2009, the adult population was 1200, the number
of employed individuals was 800 and the number of unemployed individuals was 200. Based on
this information, which of the following is an accurate statement?
a. The unemployment rate fell from 33
d. Although the population has grown,
percent in 2008 to 25 percent in 2009
the labor force has remained constant
from 2008 to 2009
b. The number of discouraged workers
e. The economic recession in 2008
has fallen from 2003 to 2004
worsened in 2009
c. The unemployment rate fell from 25
percent in 2008 to 20 percent in 2009.
13. If the nominal GDP equals $5,000 and the price index equals 150, then real GDP equals
a. $33.33
d. $7,500
b. $5,150
e. $3,333
c. $750,000
14. If purchases of education and medical care were counted as investment rather than consumption,
GDP would
a. Decrease, because investment is
d. Increase, because consumption is
weighted more heavily than
included in GDP but investment is not
consumption in calculating GDP
b. Decrease, because consumption is
e. Not change, because there is no change
weighted more heavily than
in total expenditures
investment in calculating GDP
c. Increase, because investment is
included in GDP but consumption is
not
15. You buy 100 shares of XYZ Corporation on the Internet and your broker charges you $29.95.
a. This will increase GDP by the cost of d. This will increase GDP by the cost of
the shares plus $29.95
the shares minus $29.95
b. This will increase the investment
e. This has no effect on GDP.
component of GDP and therefore
GDP.
c. This will increase GDP by $29.95
16. Which of the following best measures changes in the price-level of national product?
a. The unemployment rate
d. The consumer price index
b. The producer price index
e. The GDP deflator
c. The real interest rate
17. Which of the following is NOT included in GDP?
a. Wages and salaries
d. Rental income
b. Proprietors’ income
e. Transfer payments
c. Depreciation of plant and equipment
18. If the nominal GDP equals $9,000 and real GDP equals $6,000, then the GDP deflator equals
a. 667
d. 1.5
b. 150
e. 20
c. 0.667
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19. When a nation is operating at the natural rate of employment,
a. The unemployment rate is zero
d. The nation is experiencing a recession
b. The inflation rate is zero
e. There is no cyclical unemployment
c. There is no structural unemployment
20. The official unemployment rate is not an accurate indicator of the actual unemployment in the
economy because
a. The official rate does not reflect the
d. The unemployment rate is less than
number of people receiving
natural unemployment
unemployment compensation
b. The official rate does not include
e. Full employment is greater than
persons who have given up looking for
natural unemployment
work
c. Structural unemployment is greater
then cyclical unemployment at the
going wage rate
21. An increase in the Consumer Price index is commonly referred to as
a. Inflation
d. Deflation
b. Economic growth
e. Discouraged workers
c. Unemployment
22. You purchase a carpet from Syria
a. This will have no effect on the GDP of d. This will increase the GDP of the U.S.
the U.S.
b. This will have no affect on the GDP of e. This will reduce the GDP of Syria
Syria
c. This will decrease the GDP of the U.S.
23. Which of the following is not included in national income?
a. Wages
d. Salaries
b. Profits
e. Depreciation
c. Interest
24. The GDP deflator
a. Is more accurate than CPI
d. Is calculated for each month
b. Does not account for changes in the
e. Can be used to calculate the CPI
prices of imported goods and services
c. Is derived from the CPI
25. Which of the following transactions would be included in the computation of GDP?
a. Nancy offers to babysit her
d. Josh buys a new pair of running shoes
granddaughter
b. Molly rake the leaves in her yard
e. Jim cannot go to a concert so he resells
his ticket to a friend
c. Katie buys her dad’s used car
26. Business cycles are
a. Based on Say’s Law
d. Easy to predict
b. Regular and persistent
e. No longer operating in capitalist
economies
c. Irregular
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27. If the CPI increases from 110 to 115, then the cost of living has increased
a. 4.3 percent
d. 4.5 percent
b. 15 percent
e. 115 percent
c. 5 percent
28. At the peak of a typical business cycle, which of the following is likely the greatest threat to the
macroeconomy?
a. Unemployment
d. Falling real household income
b. Bankruptcy
e. Declining labor productivity
c. Inflation
29. Which of the following is true of the complete circular flow model of an open economy?
a. Households supply resources to
d. There is no role for the foreign sector
producers in exchange for goods and
services
b. Households provide goods and
e. The government collects taxes from
services to firms in exchange for the
firms and households in exchange for
costs of production
goods and services
c. All goods and services flow through
the government in exchange for
resource payments
30. As a measure of economic welfare, GDP underestimates a country’s production of goods and
services when there is an increase in
a. Legal services
d. Household production
b. Crime prevention services
e. The production of military goods
c. The production of antipollution
devices
31. Which of the following are harmed by unexpectedly high rates of inflation?
I. Borrowers repaying a long-term loan at a fixed interest rate
II. Savers who have put their money in long-term assets that pay a fixed interest rate
III. Workers who have negotiated cost-of-living raises into their contracts
IV. Persons living on fixed incomes
a. II and III only
b. I, II, and IV only
c. I and III only
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d. II and IV only
e. II, III, and IV only
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32. What does the presence of discouraged workers do to the measurement of the unemployment rate?
a. Discouraged workers are counted as
d. Discouraged workers are counted as
“unemployed,” thus overstating
“unemployed,” thus understating the
unemployment rate, making the
unemployment rate, making the
economy look weaker that it is
economy look stronger than it is
b. Discouraged workers are counted as
e. Discouraged workers are counted as
“out of the labor force,” thus
“out of the labor force,” thus
overstating the unemployment rate,
understating the unemployment rate,
making the economy look weaker than
making the economy look stronger
it is
than it is
c. Discouraged workers are not surveyed
so there is no impact on the
unemployment rate
33. Inflation in excess of 50 percent per year is called
a. Galloping inflation
d. Super inflation
b. Hyperinflation
e. Stealth inflation
c. Creeping inflation
34. Which choice produces a faster rate of economic growth for the U.S.?
a. More investment in the military and
d. Annual limits on the number of
less investment in higher education
foreigners immigrating into the U.S.
b. More investment in capital
e. Elimination of mandatory school
infrastructure and less consumption of
attendance laws
nondurable goods and services
c. Institution of higher tariffs on imported
goods
35. Which of the following would best explain a decline in potential GDP?
a. A decrease in the infant mortality rate d. A decrease in wages and profits
b. The discovery of vast new oil deposits e. A lower price level
c. Negative net investment
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Unit II - AP Practice Exam Questions
Answer Section
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