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AP Macro Review

AP Macro Review. Unit 2 Measurement of Economic Systems. 1. In the simple circular flow model:. Individuals and households are sellers of resources and demanders of products Households are sellers of products and demanders of resources

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AP Macro Review

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  1. AP Macro Review Unit 2 Measurement of Economic Systems

  2. 1. In the simple circular flow model: • Individuals and households are sellers of resources and demanders of products • Households are sellers of products and demanders of resources • The GDP is represented by the number of households and businesses in the economy • Businesses are sellers of resources and demanders of products • Businesses are sellers of products and sellers of resources

  3. 2. When economists refer to the gross domestic product (GDP), they mean: • All final goods and services produced in an economy in a year • All intermediate and final goods and services produced in an economy in a year • All final goods and services produced in an economy in a five-year time period • All final goods and services produced in an economy in a year, including overseas branches and divisions • The total expenditure of consumer and government spending in an economy in a given year

  4. 3. The most significant difference between gross domestic product and gross national product would be: • Government spending • Consumer income • Net income from foreign investments • Consumer spending minus government investments • A and C

  5. 4. An example of a final good calculated into the GDP for the year would be: • A computer chip bought by IBM to be used in a computer • A used car sold to a consumer • A new car sold to a consumer • The lumber used to construct a new house • All of the above

  6. 5. An example of an intermediate good would be: • 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

  7. 6. The formula for calculating gross domestic product is: • C – I + G + (X –M) • C + I + G – (X + M) • C + G + (X – M) • (C + G)(I +((X – M)) • C + I + G + (X – M)

  8. 7. Jason and Mary purchased a new house in 2012 for $300,000. This purchase would be included in the GDP as: • Consumer savings • Government investment • Investment • Consumption of private fixed capital • Consumer spending

  9. 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: • Cyclically unemployed • Frictionally unemployed • Structurally unemployed • Seasonally unemployed • Not part of the labor force

  10. 9. Full employment occurs when: • 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

  11. 10. Stagflation occurs when: • 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 • GDP decreases and the price level decreases

  12. 11. If a teacher loses his or her job due to low student enrollment, he or she would be considered: • Cyclically unemployed • Seasonally unemployed • Frictionally unemployed • Structurally unemployed • Not part of the labor force

  13. 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? • 10% • 20% • 25% • 3% • 12%

  14. 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? • 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

  15. 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? • $2 million • $3 million • $5 million • $4 million • $0

  16. 15. When constructing a price index, a base year refers to: • The average price level of goods and services • A point of reference to compare real values over time • The percentage change in the price index over time • The top of the business cycle signaling the end of expansion • A collection of goods and services that represent what is consumed in an economy for the year

  17. 16. Nominal GDP refers to: • The value of current production, but using prices from a set point in time • The value of current production, but using prices gathered over the past five years • The value of current production at current prices • Prices at the peak of the business cycle • The value of current production at the trough of the business cycle subtracted from that at the peak of the business cycle

  18. Answer Key • A • A • C • C • B • E • C • B • A • C • A • B • E • E • B • C

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