AP Macro Unit 2

Question 1

Example:

Which of the following can be considered a leakage from the circular flow of money?

Answer 1

Savings

Question 2

GDP Deflator (equation)

Answer 2

(nominal GDP/real GDP) x 100

Question 3

In the measurement of GDP, investment includes spending by

Answer 3

businesses on capital goods and changes in inventory

Question 4

BEST explains why transfer payments are not included in the calculation of GDP?

Answer 4

Recipients of transfer payments have not produced or supplied goods and services in exchange for these services.

Question 5

true according to the circular flow model?

Answer 5

Households are demanders in the product market and suppliers in the resource market.

Question 6

The circular flow of economic activity between consumer and producers includes which of the following?

Answer 6

Households sell resources to firms.
Households buy output from firms.

Question 7

Pick the correct component of GDP-a new car

Answer 7

Consumption

Question 8

Pick the correct component of GDP-a public school

Answer 8

Government spending

Question 9

Pick the correct component of GDP-CIsco builds an office building

Answer 9

Investment

Question 10

Pick the correct component of GDP-When I mow my lawn.

Answer 10

Not included

Question 11

Pick the correct component of GDP-a new residential home

Answer 11

Investment

Question 12

Pick the correct component of GDP-buying stocks

Answer 12

Not included

Question 13

Pick the correct component of GDP-paying a stock broker to buy stock for you.

Answer 13

Consumption

Question 14

Pick the correct component of GDP-soybeans grown in Iowa and sold to China

Answer 14

Net exports

Question 15

What is the difference between real and nominal GDP?

Answer 15

real reflects price-level inflation, nominal does not

Question 16

GDP= GROSS DOMESTIC PRODUCT Equation

Answer 16

GDP= Consumption + Investment + Government +Xn, exports

Question 17

What is excluded from GDP?

Answer 17

Used goods
Intermediate goods
Purely financial transactions (such as stocks and bonds)
Transfer payments
Non-market production
Underground or black market activity

Question 18

Actual rate of unemployment

Answer 18

(unemployed people/labor force) x100

Question 19

Consumer Price Index (Definition)

Answer 19

Weighted market basket of goods and services purchases by households

Question 20

Cost-Plus Inflation

Answer 20

Occurs when overall prices increase due to increases in the cost of wages and raw materials

Question 21

Cyclical Unemployment

Answer 21

Overall unemployment that results from downturns in the business cycle

Question 22

Demand-pull inflation

Answer 22

Results when prices rise because aggregate demand in economy is greater than aggregate supply

Question 23

Deflation

Answer 23

A sustained decrease in an economy’s overall price level

Question 24

Discouraged Workers

Answer 24

Someone who is no longer looking for a job

Question 25

Disinflation

Answer 25

A decrease in the inflation rate

Question 26

Employed

Answer 26

Persons 16 and older who are working, either part-time or full time

Question 27

Expenditures approach

Answer 27

Method of calculating GDP by summing amount spent on final goods and services within an economy during a particular year

Question 28

Exports

Answer 28

Something you make in your country and sell to another country

Question 29

Frictional Unemployment

Answer 29

Between jobs, just starting out

Question 30

Final Goods

Answer 30

Goods that are ready for final use by consumers/firms

Question 31

Gross Domestic Product (definition)

Answer 31

The market value of all final goods and services produced within a nation in a year

Question 32

Income Approach

Answer 32

Wages + Interest Payments + Rental Incomes + Profits = GDP

Question 33

Imports

Answer 33

Something you buy from another country

Question 34

Inflation

Answer 34

A sustained increase in an economy's overall price level, reducing the purchasing power of money

Question 35

Intermediate Goods

Answer 35

You use these goods to produce something else (excluded from GDP)

Question 36

Investment

Question 37

Labor Force

Answer 37

employed + unemployed

Question 38

Natural Rate of Unemployment

Answer 38

Frictional + Structural unemployment

Question 39

Nominal

Answer 39

Not adjusted for price-level inflation. Real + Inflation

Question 40

Non-market Transactions

Answer 40

Not recorded, taxed, or monitored by the government

Question 41

Price Index

Answer 41

A measurement used to determine the price level and changes in the price level over time

Question 42

Real

Answer 42

Adjusted for price-level inflation

Question 43

Recessionary Gap

Answer 43

Real GDP is lower than the potential GDP at full employment level

Question 44

Stagflation

Answer 44

Economic cycle characterized by slow growth and a high unemployment rate accompanied by inflation

Question 45

Structural Unemployment

Answer 45

Job skills have become obsolete

Question 46

Unemployed

Answer 46

Jobless, but actively seeking work during 4 weeks

Question 47

Value-added approach

Answer 47

Adding up all value added at various stages of production

Question 48

Real GDP (equation)

Answer 48

(nominal GDP/GDP deflator) x 100

Question 49

GDP Growth Rate

Answer 49

[(real GDP period 2 - real GDP period 1)/ real GDP period 1] x 100

Question 50

CPI (equation)

Answer 50

(cost of base year market basket at current prices)/(cost of base year market basket at base year prices) x 100

Question 51

Consumer Inflation Rate (equation)

Answer 51

(CPI new- CPI old/CPI old)

Question 52

Real Interest Rate (equation)

Question 53

Unemployment Rate (equation)

Answer 53

(unemployed/labor force) x100

Question 54

Labor Force Participation Rate (equation)

Answer 54

(labor force/working age pop.) x100