1. Unit 2 Measurement of Economic Systems
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
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. 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

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
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. 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

15. $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

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 C B E