Unit 2 Measurement of Economic Systems 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 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

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

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

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

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

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)

7. Jason and Mary purchased a new house in 2012 for $300,000 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

Cyclically unemployed Frictionally unemployed Structurally unemployed 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

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

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

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

12. Dennis decides to loan his friend some money 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%

An increase in the unemployment rate 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

$2 million $3 million $5 million $4 million $0 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

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

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

Answer Key A C B E