AP Macro Unit 2 Test

Gross Domestic Product is equivalent to the sum of:

• Consumer spending, investment spending, government purchases, exports, and imports

• Consumer spending, investment spending, government purchases, and exports

• Consumer spending, consumption of fixed capital, government purchases and exports

• Consumer spending, inventory spending, government purchases and net exports

• Consumer spending, investment spending, government purchases and net exports

Which of the following will be included in the current year's calculation of GDP?

• $50 cash earned but not reported by your neighbor for babysitting

• Income earned as a lifeguard at a summer camp

• The purchase of a used car from a friend

• The purchase of a vintage surfboard from thrift store

• The purchase of one company by another company

Which of the following would represent an addition to a nation’s GDP?

• Ms. Jones purchases a share of stock in a technology start-up company

• An auto retailer purchases imported cars

• The government hires workers to install streetlights

• A business sells used watches

• A mother prepares a home cooked meal for her family

If an American student purchases a personal computer made by a Korean owned company located in California, what would happen to consumption and the GDP of the USA as a result?

• Increase / increase

• Increase / decrease

• No change / increase

• Decrease / decrease

• Decrease / increase

Which of the following is true regarding nominal and real GDP?

• The only thing that can increase nominal GDP is an increase in inflation

• The only thing that can increase nominal GDP is an increase in output

• The only thing that can increase real GDP is an increase in inflation

• The only thing that can increase real GDP is an increase in nominal GDP

• The only thing that can increase real GDP is an increase in output

If real GDP is increasing at 5% per year and nominal GDP is increasing at 10% per year, which of the following is necessarily true?

• A. Unemployment is increasing

• B. The economy is in a recession

• C. The price level is increasing

• D. The government is running a budget surplus

• E. Imports exceed exports

As a measure of economic welfare, GDP underestimates a country’s production of goods and services when there is an increase in

• A. The production of naval ships for the military

• B. Household production

• C. The production of solar panel devices

• D. Legal protective services

• E. Crime prevention services

If purchases of education and medical care were counted as investment rather than consumption, GDP would:

• A. Not change, because there is no change in total aggregate expenditures

• B. Increase, because investment is included in GDP but consumption is not

• C. Increase, because consumption is included in GDP but investment is not

• D. Increase, because investment is weighted more heavily than consumption in calculating GDP

• E. Increase because consumption is weighted more heavily than investment in calculating GDP.

The major difference between real and nominal GDP is that real GDP

• A. Excludes government debt

• B. Excludes exports

• C. Is adjusted for price-level changes using a price index

• D. Measures only the value of intermediate goods and services that are consumed

• E. Measures the prices of a market basket of goods purchased by a typical consumer

Assume the CPI increases from 100 to 120 between 2014 and 2015. Which of the following must be true?

• A. A gallon of gas that was $2.50 in 2014 will be $3.00 in 2015

• B. The price for all goods increased between 2014 and 2015

• C. There was unanticipated inflation

• D. The average price of a specific market basket increased 20%

• E. There was disinflation