Measurement of Economic Performance Sample Questions Mr. Bordelon AP Macroeconomics

Measurement of Economic PerformanceSample QuestionsMr. BordelonAP Macroeconomics

If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in consumer spending?a. A reduction in investment

spending equal to the increase in consumer spending

b. A decrease in the nominal GDPc. An increase in the

unemployment rated. A decrease in the inflation ratee. An increase in the nominal GDP

If the circular flow model is in equilibrium (the sum of money flows into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if there is an increase in consumer spending?a. A reduction in investment

spending equal to the increase in consumer spending

b. A decrease in the nominal GDPc. An increase in the

unemployment rated. A decrease in the inflation ratee. An increase in the nominal GDP

What are net exports in this economy?a. $0b. $30c. $60d. $100e. $200

What are net exports in this economy?a. $0b. $30c. $60d. $100e. $200

What is disposable income in this economy?a. $0b. $100c. $400d. $500e. $300

What is disposable income in this economy?a. $0b. $100c. $400d. $500e. $300

In this economy, how does the government finance its purchases of good and services?a. By printing moneyb. By collecting taxesc. By borrowingd. By collecting taxes and

borrowinge. By collecting taxes and

selling assets

In this economy, how does the government finance its purchases of good and services?a. By printing moneyb. By collecting taxesc. By borrowingd. By collecting taxes and

borrowinge. By collecting taxes and

selling assets

Disposable income equals:a. Income plus taxes plus government transfersb. Income plus government spending minus taxes.c. Income minus taxes plus government spending.d. Income minus taxes minus government transfers.e. Income plus government transfers minus taxes.

Disposable income equals:a. Income plus taxes plus government transfersb. Income plus government spending minus taxes.c. Income minus taxes plus government spending.d. Income minus taxes minus government transfers.e. Income plus government transfers minus taxes.

Rent $2400

Consumption Spending

7,900

Social Security Benefit

6,100

Investment Spending

2,100

Wages and Salaries

6,500

Exports 800

Interest 1,900

Government Purchases of goods and services

2,600

Profits 1,400

Imports 1,200

Purchase of stocks

6,300

Unemployment 3,950

Payroll taxes 2,965

Sales Taxes 1,300

Using the information in the table provided, which of the following is the correct calculation for GDP in 2008?a. $47,475b.$12,200c. $21,485d.$34,085e.$12,600

Rent $2400

Consumption Spending

7,900

Social Security Benefit

6,100

Investment Spending

2,100

Wages and Salaries

6,500

Exports 800

Interest 1,900

Government Purchases of goods and services

2,600

Profits 1,400

Imports 1,200

Purchase of stocks

6,300

Unemployment 3,950

Payroll taxes 2,965

Sales Taxes 1,300

Using the information in the table provided, which of the following is the correct calculation for GDP in 2008?a. $47,475b.$12,200c. $21,485d.$34,085e.$12,600

Which one of the following transactions will be included in the official measurement of GDP?a. Stan sold his house at a huge gain.b. Monica illegally downloaded movies to her laptop.c. Ben bought shares of Apple stock.d. Sean bought a new Iphone.e. Max bought an antique dresser.

Which one of the following transactions will be included in the official measurement of GDP?a. Stan sold his house at a huge gain.b. Monica illegally downloaded movies to her laptop.c. Ben bought shares of Apple stock.d. Sean bought a new Iphone.e. Max bought an antique dresser.

Which of the following best represents the equation for GDP?a. GDP = C + I + G – X + IMb. GDP = C + I + G + X – IMc. GDP = C + I + G + Taxes – Value Addedd. GDP = C + I + G + Taxes + X + IMe. GDP = C + I + G + Taxes – Transfers + X - IM

Which of the following best represents the equation for GDP?a. GDP = C + I + G – X + IMb. GDP = C + I + G + X – IMc. GDP = C + I + G + Taxes – Value Addedd. GDP = C + I + G + Taxes + X + IMe. GDP = C + I + G + Taxes – Transfers + X - IM

Intermediate goods are not counted in the calculation of GDP, because:a. That involves double-counting.b. These goods are not produced for the market.c. These are produced in the underground economy.d. These goods involve financial transactions.e. These goods were not produced in the current year.

Intermediate goods are not counted in the calculation of GDP, because:a. That involves double-counting.b. These goods are not produced for the market.c. These are produced in the underground economy.d. These goods involve financial transactions.e. These goods were not produced in the current year.

Which of the following would be an example of an intermediate good?a. Stocks and bonds purchased by a business executive.b. A cellular telephone purchased by a college studentc. A wedding ring purchased by an engineer for his fianceed. Tires purchased from Goodyear by General Motors for newly

produced electric cars.e. A subscription for satellite television services from DirectTV.

Which of the following would be an example of an intermediate good?a. Stocks and bonds purchased by a business executive.b. A cellular telephone purchased by a college studentc. A wedding ring purchased by an engineer for his fianceed. Tires purchased from Goodyear by General Motors for newly

produced electric cars.e. A subscription for satellite television services from DirectTV.

Suppose a consumer buys a frozen pizza at the grocery store at a price of $10. The frozen pizza company sold the pizza to the store for $5. The frozen pizza company purchased the pizza dough and tomato sauce from a food processing company at a price of $2 and bought the cheese from a dairy at a price of $1. How much has GDP increased?a. $2b. $5c. $10d. $18e. $15

Suppose a consumer buys a frozen pizza at the grocery store at a price of $10. The frozen pizza company sold the pizza to the store for $5. The frozen pizza company purchased the pizza dough and tomato sauce from a food processing company at a price of $2 and bought the cheese from a dairy at a price of $1. How much has GDP increased?a. $2b. $5c. $10d. $18e. $15

Consider an economy that produces only two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is:a. $100.b. $700.c. $1,100.d. $900.e. $7,000

Consider an economy that produces only two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is:a. $100.b. $700.c. $1,100.d. $900.e. $7,000

Year Output Price per Unit

1 2 $2

2 3 4

3 (base period) 4 5

4 6 6

5 7 9

The value of Year 4’s output in nominal dollars is:a. $6b. $24c. $30d. $36e. $12


1 2 $2

2 3 4

3 (base period) 4 5

4 6 6

5 7 9

The value of Year 4’s output in nominal dollars is:a. $6b. $24c. $30d. $36e. $12


1 2 $2

2 3 4

3 (base period) 4 5

4 6 6

5 7 9

The value of Year 2’s output in real dollars is:a. $4.b. $12.c. $6.d. $16.e. $15.


1 2 $2

2 3 4

3 (base period) 4 5

4 6 6

5 7 9



1 2 $2

2 3 4

3 (base period) 4 5

4 6 6

5 7 9



1 2 $2

2 3 4

3 (base period) 4 5

4 6 6

5 7 9


Nominal GDP:a. Has not been adjusted for changes in prices over time.b. Has been adjusted for changes in prices over time.c. Is a small or nominal amount of output.d. Excludes the international sector.e. Excludes government spending.

Nominal GDP:a. Has not been adjusted for changes in prices over time.b. Has been adjusted for changes in prices over time.c. Is a small or nominal amount of output.d. Excludes the international sector.e. Excludes government spending.

Real GDP is:a. The value of the production of all final goods and services

measured in current prices.b. The value of the production of all final goods and services

adjusted for price changes.c. The projected future value of GDP.d. Calculated by adding up only the real number of all items sold in

the U.S. regardless of their prices.e. The value of the production of all final goods and services

measured in future prices.

Real GDP is:a. The value of the production of all final goods and services

measured in current prices.b. The value of the production of all final goods and services

adjusted for price changes.c. The projected future value of GDP.d. Calculated by adding up only the real number of all items sold in

the U.S. regardless of their prices.e. The value of the production of all final goods and services

measured in future prices.

To be counted as unemployed, one must:a. Have had a job previously.b. Be out of work and be actively looking for a job.c. Have had a job before and be actively looking for work.d. Actively looking for a job and have at least a high school degree or

its equivalent.e. Be out of work and not a full-time student.

To be counted as unemployed, one must:a. Have had a job previously.b. Be out of work and be actively looking for a job.c. Have had a job before and be actively looking for work.d. Actively looking for a job and have at least a high school degree or

its equivalent.e. Be out of work and not a full-time student.

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is:a. 4%.b. 7.5%.c. 10%.d. 67.5%.e. 30%.

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is:a. 4%.b. 7.5%.c. 10%.d. 67.5%.e. 30%.

Which of the following would describe a person who is counted as unemployed by the government?I. Stan does not have a job but is actively seeking employment.II. Beverly has a part-time job but would prefer a full-time job.III. Moesha does not have a job because she recently retired.a. I only.b. II only.c. III only.d. I and II only.e. I, II, and III.

Which of the following would describe a person who is counted as unemployed by the government?I. Stan does not have a job but is actively seeking employment.II. Beverly has a part-time job but would prefer a full-time job.III. Moesha does not have a job because she recently retired.a. I only.b. II only.c. III only.d. I and II only.e. I, II, and III.

If the labor force totals 100 million persons and 90 million are actively working, then the unemployment rate is _____.a. 1%b. 5%c. 10%d. 90%e. 11%

If the labor force totals 100 million persons and 90 million are actively working, then the unemployment rate is _____.a. 1%b. 5%c. 10%d. 90%e. 11%

Demographics Number of Residents

Employed 5000

Unemployed and looking for work 1000

Not working due to disability 200

Not working due to retirement 700

Unemployed and not looking for work due to discouragement over job prospects

500

Under the age of 16 2000

How many people are in the labor force?a. 6900b. 9400c. 7400d. 6500e. 6000


Employed 5000





500


How many people are in the labor force?a. 6900b. 9400c. 7400d. 6500e. 6000


Employed 5000





500


What is the unemployment rate in this economy?a. 64%b. 48%c. 17%d. 6%e. 1%


Employed 5000





500


What is the unemployment rate in this economy?a. 64%b. 48%c. 17%d. 6%e. 1%

The presence of discouraged workers in the economy tends to:a. Raise the official unemployment rate.b. Lower the official unemployment rate.c. Lower the number of people who are frictionally unemployed.d. Increase the number of people who are structurally unemployed.e. Have no impact on the official unemployment rate.

The presence of discouraged workers in the economy tends to:a. Raise the official unemployment rate.b. Lower the official unemployment rate.c. Lower the number of people who are frictionally unemployed.d. Increase the number of people who are structurally unemployed.e. Have no impact on the official unemployment rate.

Suppose the labor market is in equilibrium at E when the government introduces a minimum wage of Wf. One problem that may arise is that the quantity of labor supplied would _____, resulting in structural unemployment.a. Decrease to Qdb. Stay at Qec. Increase to Qsd. Stay at Wee. Decrease to zero.

Suppose the labor market is in equilibrium at E when the government introduces a minimum wage of Wf. One problem that may arise is that the quantity of labor supplied would _____, resulting in structural unemployment.a. Decrease to Qdb. Stay at Qec. Increase to Qsd. Stay at Wee. Decrease to zero.

Suppose the labor market is in equilibrium at E when the government introduces a minimum wage of Wf. Structural unemployment will equal:a. Qs – Qdb. Qe – Qdc. Qs – Qed. Zeroe. Wf - We

Suppose the labor market is in equilibrium at E when the government introduces a minimum wage of Wf. Structural unemployment will equal:a. Qs – Qdb. Qe – Qdc. Qs – Qed. Zeroe. Wf - We

Suppose that after some time with a minimum wage of Wf, the government abolishes the minimum wage. Employment would:a. Decrease to Qe.b. Increase to Qs.c. Stay at Qe.d. Decrease to zero.e. Increase to Qe.

Suppose that after some time with a minimum wage of Wf, the government abolishes the minimum wage. Employment would:a. Decrease to Qe.b. Increase to Qs.c. Stay at Qe.d. Decrease to zero.e. Increase to Qe.

A minimum wage of $7.25 per hour might cause structural unemployment if the equilibrium wage in that labor market is:a. $7.25.b. $8.00.c. $10.00.d. $7.30.e. $6.85.

A minimum wage of $7.25 per hour might cause structural unemployment if the equilibrium wage in that labor market is:a. $7.25.b. $8.00.c. $10.00.d. $7.30.e. $6.85.

Which of the following equations describes the calculation of the natural unemployment rate?a. Natural unemployment = frictional unemployment + structural

unemploymentb. Natural unemployment = cyclical unemployment + structural

unemploymentc. Natural unemployment = frictional unemployment + cyclical

unemploymentd. Natural unemployment = frictional unemployment + structural

unemployment + cyclical unemploymente. Natural unemployment = actual unemployment – structural

unemployment

Which of the following equations describes the calculation of the natural unemployment rate?a. Natural unemployment = frictional unemployment + structural

unemploymentb. Natural unemployment = cyclical unemployment + structural

unemploymentc. Natural unemployment = frictional unemployment + cyclical

unemploymentd. Natural unemployment = frictional unemployment + structural

unemployment + cyclical unemploymente. Natural unemployment = actual unemployment – structural

unemployment

The natural level of unemployment occurs if there is no:a. unemployment.b. Frictional unemployment.c. Structural unemployment.d. Cyclical unemployment.e. Seasonal unemployment.

The natural level of unemployment occurs if there is no:a. unemployment.b. Frictional unemployment.c. Structural unemployment.d. Cyclical unemployment.e. Seasonal unemployment.

When the economy is in full employment,a. Unemployment is zero.b. Only cyclical unemployment is zero.c. Only frictional unemployment is zero.d. The natural rate of unemployment is zero.e. Actual unemployment rates exceed the natural rate of

unemployment.

When the economy is in full employment,a. Unemployment is zero.b. Only cyclical unemployment is zero.c. Only frictional unemployment is zero.d. The natural rate of unemployment is zero.e. Actual unemployment rates exceed the natural rate of

unemployment.

In 2011, the Bureau of Labor Statistics calculated the unemployment rate to be 7.5%. If the frictional unemployment was 3% and the structural employment was 2%, then the cyclical unemployment rate would be:a. 2.5%b. 4.5%c. 12.5%d. 5.5%e. 5%

In 2011, the Bureau of Labor Statistics calculated the unemployment rate to be 7.5%. If the frictional unemployment was 3% and the structural employment was 2%, then the cyclical unemployment rate would be:a. 2.5%b. 4.5%c. 12.5%d. 5.5%e. 5%

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing a:a. Search cost.b. Menu cost.c. Unit-of-account cost.d. Fisher effect.e. Shoe-leather cost.

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing a:a. Search cost.b. Menu cost.c. Unit-of-account cost.d. Fisher effect.e. Shoe-leather cost.

Menu costs of inflation are the:a. Costs associated with money being a less reliable unit of

measurement.b. Costs of transactions associated with avoiding the inflation tax.c. Costs associated with businesses changing prices.d. Revenue the government gets from printing money.e. Costs associated with negotiating lower prices.

Menu costs of inflation are the:a. Costs associated with money being a less reliable unit of

measurement.b. Costs of transactions associated with avoiding the inflation tax.c. Costs associated with businesses changing prices.d. Revenue the government gets from printing money.e. Costs associated with negotiating lower prices.

Which of the following is true?a. Unexpected inflation benefits lenders and hurts borrowers.b. Unexpected inflation benefits lenders but does not affect

borrowers.c. Unexpected inflation benefits borrowers but does not affect

lenders.d. Unexpected deflation benefits lenders but does not affect

borrowers.e. Unexpected inflation benefits borrowers and hurts lenders.

Which of the following is true?a. Unexpected inflation benefits lenders and hurts borrowers.b. Unexpected inflation benefits lenders but does not affect

borrowers.c. Unexpected inflation benefits borrowers but does not affect

lenders.d. Unexpected deflation benefits lenders but does not affect

borrowers.e. Unexpected inflation benefits borrowers and hurts lenders.

Unanticipated inflation:a. Increases the value of money.b. Decreases uncertainty about the future.c. Reduces the value of the debt owed by borrowers.d. Helps lenders.e. Benefits potential home buyers.

Unanticipated inflation:a. Increases the value of money.b. Decreases uncertainty about the future.c. Reduces the value of the debt owed by borrowers.d. Helps lenders.e. Benefits potential home buyers.

Unanticipated inflation:a. Helps those on fixed incomes.b. Hurts borrowers and helps lenders.c. Helps borrowers and hurts lenders.d. Causes nominal interest rates to decrease.e. Causes people to hold more cash.

Unanticipated inflation:a. Helps those on fixed incomes.b. Hurts borrowers and helps lenders.c. Helps borrowers and hurts lenders.d. Causes nominal interest rates to decrease.e. Causes people to hold more cash.

Suppose that the nominal interest rate is 7% and the expected rate of inflation is 3% then the real interest rate is equal to:a. 3%b. 4%c. 10%d. 7%e. 21%

Suppose that the nominal interest rate is 7% and the expected rate of inflation is 3% then the real interest rate is equal to:a. 3%b. 4%c. 10%d. 7%e. 21%

Currently banks are issuing personal loans at an interest rate of 9%. If expected inflation is supposed to be 3%, then:a. The nominal interest rate is 6% and the real interest rate is 9%.b. The real interest rate is 6% and the nominal interest rate is 9%.c. The real interest rate is 3% and the nominal interest rate is 9%.d. The nominal interest rate is 6% and the real interest rate is 12%.e. The nominal interest rate is 12% and the real interest rate is 9%.

Currently banks are issuing personal loans at an interest rate of 9%. If expected inflation is supposed to be 3%, then:a. The nominal interest rate is 6% and the real interest rate is 9%.b. The real interest rate is 6% and the nominal interest rate is 9%.c. The real interest rate is 3% and the nominal interest rate is 9%.d. The nominal interest rate is 6% and the real interest rate is 12%.e. The nominal interest rate is 12% and the real interest rate is 9%.

In periods of unexpected inflation:a. Borrowers benefit since they repay their loans in dollars with

lower real value.b. Lenders benefit since they are repaid in dollars with a higher real

value.c. Neither borrowers nor lenders are affected by the inflation rate

since their nominal interest rate stays the same.d. Lenders benefit since the nominal interest rate does not change.e. Borrowers are hurt since they repay their loans in dollars with

higher real value.

In periods of unexpected inflation:a. Borrowers benefit since they repay their loans in dollars with

lower real value.b. Lenders benefit since they are repaid in dollars with a higher real

value.c. Neither borrowers nor lenders are affected by the inflation rate

since their nominal interest rate stays the same.d. Lenders benefit since the nominal interest rate does not change.e. Borrowers are hurt since they repay their loans in dollars with

higher real value.

If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____.a. 10%b. 20%c. 25%d. 50%e. 100%

If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____.a. 10%b. 20%c. 25%d. 50%e. 100%

Year CPI

1 80

2 (base year) 100

3 105

4 125

5 150

The approximate rate of inflation in year 2 from year 1 is _____.a. 10%b. 19%c. 20%d. 25%e. 100%

Year CPI

1 80

2 (base year) 100

3 105

4 125

5 150

The approximate rate of inflation in year 2 from year 1 is _____.a. 10%b. 19%c. 20%d. 25%e. 100%

You read in the newspaper that the CPI in 2008 was 120, you will conclude that a typical market basket in 2008 would have costa. 20 percent more than the same market basket purchased in 2007.b. 120 percent more than the same market basket purchased in

2007.c. 20 percent more than the same market basket purchased in the

base year.d. 120 percent more than the same market basket purchased in the

base year.e. 20 percent less than the same market basket purchased in the

base year.

You read in the newspaper that the CPI in 2008 was 120, you will conclude that a typical market basket in 2008 would have costa. 20 percent more than the same market basket purchased in 2007.b. 120 percent more than the same market basket purchased in

2007.c. 20 percent more than the same market basket purchased in the

base year.d. 120 percent more than the same market basket purchased in the

base year.e. 20 percent less than the same market basket purchased in the

base year.

Year Price Index

2005 100

2006 104

2007 103

2008 110

Which year is most likely to be the base year?a. 2006b. 2008c. 2007d. 2005e. A year not presented in the table.

Year Price Index

2005 100

2006 104

2007 103

2008 110

Which year is most likely to be the base year?a. 2006b. 2008c. 2007d. 2005e. A year not presented in the table.

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Measurement of Economic Performance Sample Questions Mr. Bordelon AP Macroeconomics