AP Macro Unit II Quiz – Flashcards
Unlock all answers in this set
Unlock answersquestion
How do economists calculate GDP for one year using the expenditure approach? A. Add together all the amounts spent on final goods and services. B. Add up all the incomes received. C. Add the amounts spent on goods and services to the incomes received. D. Subtract the amounts received as income from the goods and services.
answer
A
question
What is the difference between real GDP and nominal GDP? A. Real GDP is accurate to hundreds of dollars; nominal GDP is accurate to thousands of dollars. B. Real GDP includes nonmarket activities; nominal GDP has no nonmarket activities. C. Real GDP is based on constant prices; nominal GDP is based on the current year's prices. D. Real GDP allows for depreciation; nominal GDP allows for no depreciation.
answer
C
question
What is the underground economy? A. the amount spent for environmental cleanup B. the goods and services people make or do themselves C. income that is not reported to the government D. costs of vacations and sick pay
answer
C
question
Why is real GDP more accurate than nominal GDP? A. It is adjusted for depreciation. B. It includes unpaid and paid work. C. It is adjusted for price changes. D. It includes unrecorded business.
answer
C
question
What typically happens to consumer and business spending when interest rates go up? A. Both types of spending increase. B. Consumer spending increases and business spending decreases. C. Both types of spending decrease. D. Business spending increases and consumer spending decreases.
answer
C
question
What are the leading economic indicators supposed to predict? A. business cycles B. stagflation C. consumer expectations D. nonmarket activities
answer
A
question
What are two things that usually happen when interest rates go up? A. Both consumers and businesses spend more money. B. Consumers spend more money, but businesses spend less money. C. Consumers spend less money, but businesses spend more money. D. Both consumers and businesses spend less money.
answer
D
question
Which of the following are leading indicators? A. stock prices and external shocks B. tax rates and unemployment rates C. interest rates and stock prices D. tax rates and stock prices
answer
C
question
What are the leading indicators used to predict? A. business cycles B. interest rates C. stock prices D. oil prices
answer
A
question
How can an economist compare the standard of living in two different countries? A. by comparing real GDP per capita B. by looking at the quality of life C. by seeing how the GDP is distributed D. by measuring physical capital
answer
A
question
How can a trade deficit actually increase the productivity of an economy? A. by causing people to save B. by building up a large amount of debt C. by importing investment goods D. by importing goods for short-term use
answer
C
question
If the government uses tax revenue to pay for long-term investments such as roads or other infrastructure, what happens to the economy? A. Investment decreases. B. Investment increases. C. Taxes increase. D. Taxes decrease.
answer
B
question
Why is real GDP per capita considered a more useful figure than real GDP? A. Real GDP per capita takes population into account. B. Real GDP per capital takes quality of life into account. C. Real GDP does not measure capital deepening. D. Real GDP does not include business investments.
answer
A
question
What is one thing that happens when the tax rate goes up? A. Businesses have more money to invest in new plants and equipment. B. The government has more money to invest in infastructure. C. People have more money to spend on goods and services. D. Foreign governments are forced to borrow from the U.S. government.
answer
B
question
Products that would be used in calculating the United States GDP include A. toys manufactured in China at a factory owned by a U.S. company. B. cars manufactured in Tennessee at a factory owned by a Japanese automobile company. C. plastic manufactured in a factory in Kentucky and sold to toy manufacturers around the world to make plastic toys. D. cotton cloth manufactured in India and sold to clothes makers in the United States.
answer
B
question
Which goods would be included in the calculation of GDP? A. toys made in China at a factory owned by a U.S. company B. cars made in Tennessee at a factory owned by a Japanese car company C. plastic made in Kentucky and sold to a toy maker in Ohio D. cotton cloth made in India and sold to clothes makers in the United States
answer
B
question
Which of the following is a main economic variable that affects business cycles? A. stagflation B. national income accounting C. interest rates D. personal savings
answer
C
question
# 22 no picture According to the graph, which of the following best describes the U.S. economy in comparison with that of other countries? A. second highest in standard of living and efficiency B. second highest GDP C. high productivity with even distribution of wealth D. second highest GDP per person
answer
D
question
#23 no picture Which best describes the U.S. economy compared with the economy of other countries? A. second highest in standard of living and efficiency B. second highest in efficiency C. second highest in distribution of wealth D. second highest if GDP were divided equally per person
answer
D
question
An example of capital deepening would be A. permitting two workers to share one job. B. paying for an employee to take college courses. C. laying off employees when a factory is modernized. D. moving a manufacturing plant overseas where labor costs are lower.
answer
B
question
Savings accounts and investments such as mutual funds promote business expansion by A. teaching savers skills that can help their companies make money. B. supplying funds that firms lend to businesses for capital investment. C. building capital within the companies in which they are invested. D. increasing the amount of capital owned by individuals.
answer
B
question
The calculation of GDP would include A. profits on the sale of a 25-year-old house. B. the monetary value of someone babysitting in exchange for a room. C. the income of a high school English teacher. D. the price of the steel used to build a new hotel.
answer
C
question
What is the rationale for the income approach to calculating GDP? A. the selling price of a good or service, minus the dollar value of intermediate goods and services, represents the seller's income B. the selling price of a good or service, minus the dollar value of final goods and services, represents the seller's income C. the selling price of a service, minus the dollar value of intermediate services, represents the seller's income D. the selling price of a good, minus the dollar value of intermediate goods, represents the seller's income
answer
A
question
After people pay their taxes, the amount of money they have left is called A. aggregate income. B. personal income. C. national income. D. disposable personal income.
answer
D
question
#30 no picture According to the graph, which of the following describes the U.S. business cycle in the first two years of the 1930s? A. It contracted further into a deep and lasting trough. B. It expanded, then contracted slowly before reaching a trough. C. It continued to expand slowly, then peaked and contracted. D. It contracted briefly, then expanded slowly before peaking.
answer
A
question
#31 no picture Based on this graph, how did World War II affect the business cycle? A. It sent the country into a deep trough that lasted for several years. B. It fueled an expansion that stabilized the business cycle afterward. C. It caused huge fluctuations in the business cycle before peaking. D. It created smaller fluctuations before reaching a deep trough.
answer
B
question
#32 no picture How did World War II affect the business cycle? A. It sent the country into a deep trough. B. It caused an expansion. C. It caused a depression. D. It created a small recession.
answer
B
question
How is nominal GDP converted into real GDP? A. by adding up all of the real purchases made in the economy B. by eliminating the effects of price increases on GDP growth C. by subtracting income earned by the government D. by estimating the value of U.S.-owned factories in foreign countries
answer
B
question
No foreign companies produce goods or services in the small Country X, but many companies owned by Country X citizens build products in foreign countries. The effect on Country X is that A. the country's GNP is greater than its GDP. B. the country's GDP is greater than its GNP. C. the country's GDP and GNP are equal. D. the country's GDP is equal to its national income.
answer
A
question
Economists try to predict changes in the business cycle by anticipating A. opinion polls. B. political elections. C. movements in real GDP. D. population shifts.
answer
c
question
Which of the following is an example of depreciation? A. A clothing store owner reduces the price of a swimsuit by $10 to encourage sales. B. After 80,000 miles of driving, a construction company's truck costs more to repair than its value. C. An employer fires several workers for repeatedly arriving late to work or leaving early. D. Shares of a company's stock decline in value over several months, leading to steep losses.
answer
B
question
Higher saving leads to higher GDP in the future because A. the government taxes savings accounts to pay for education. B. stockbrokers, brokerage firms, and speculators gain more profits. C. the invested money leads to higher output through capital deepening. D. a higher savings rate encourages immigration, expanding the labor force.
answer
C
question
Why do economists deduct depreciation when measuring the economy? A. because the value of goods goes down when inflation goes up B. because newer cars are worth more than older cars C. because the worth of factory buildings goes down over time D. because the cost of replacing old equipment lowers the value of what is made
answer
D
question
How does scientific research affect economic growth? A. It gives jobs to researchers and scientists. B. It improves the way things are made. C. It helps businesses follow scientific theories of behavior. D. It creates expensive technology.
answer
B
question
How does the expenditure approach calculate GDP? A. It adds up all the incomes in the economy B. It adds up the value of four groups of final goods and services. C. It adds up the value of business goods and services. D. It adds up the value of consumer goods and services.
answer
B
question
The movie Action Packed, released last year, is the highest earning film in current GDP. The film Old Romance, released in the 1930s, is the highest earning film in real GDP. What caused this difference? A. Movie tickets cost less in the 1930s. B. Movies cost more to make now. C. Fewer people went to movies in the 1930s. D. Movies today are also shown on TV.
answer
A
question
A big hurricane hits the United States. The hurricane upsets the economy. Which one of the four economic factors is a hurricane? A. business investment B. credit C. consumer expectation D. external shock
answer
D
question
No foreign companies make goods in the country of Newlandia. But many Newlandian companies make goods in foreign countries. What effect does this have on Newlandia? A. Newlandia's GNP is greater than its GDP. B. Newlandia's GDP is greater than its GNP. C. Newlandia's GDP and GNP are equal. D. Newlandia's GDP is equal to its national income.
answer
A
question
How do economists predict changes in the business cycle? A. They conduct opinion polls. B. They analyze the results of political elections. C. They look for changes in leading indicators. D. They look for population shifts.
answer
C
question
Which shows depreciation? A. A store owner lowers the price of a swimsuit by $10. B. After 180,000 miles of driving, a truck is worth less than when it was purchased. C. An employer refuses to pay for training for his employees. D. A company's stock loses value when profits fall.
answer
B
question
Why does higher savings lead to higher GDP? A. The government taxes savings to pay for education. B. Stockbrokers, brokerage firms, and speculators gain more profits. C. The saved money is lent by banks to businesses, who use the money to expand. D. A higher savings rate encourages immigration, which increases the number of workers.
answer
C
question
Critical Thinking and WritingDirections: Use complete sentences to answer the questions below. Explain how population, government, and foreign trade affect economic growth.
answer
Population affects economic growth because a larger and growing population means that the labor force can be larger. A larger, employed work force can produce more output of goods and services. A growth in output increases the economy's growth and GDP. But if the population grows at the same rate as economic growth, then the economy does not grow because the amount of output per person remains unchanged. The government can affect economic growth because increased government spending in a recession can help more money flow through the economy. The government can improve economic growth in a recession to turn the economy towards expansion. But an overflow of government spending can lead to too much money flowing, and that cause can cause inflation. Inflation limits economic growth. Foreign trade can affect economic growth because an increase in net exports by importing less or exporting more, can lead to an increase in aggregate demand. An increase in aggregate demand can lead to an increase in GDP and increase economic growth.
question
Critical Thinking and WritingDirections: Use complete sentences to answer the questions below. How do government and technology affect economic growth?
answer
The government can affect economic growth because increased government spending in a recession can help more money flow through the economy. The government can improve economic growth in a recession to turn the economy towards expansion. But an overflow of government spending can lead to too much money flowing, and that cause can cause inflation. Inflation limits economic growth. Technology can affect economic growth as new and improved technologies are made then productivity increases. When productivity increases, output increases, GDP increases, and economic growth increases.
question
In your own words, explain what capital deepening is and how it affects the business cycle.
answer
Capital deepening is an increase in investment and spending where capital per worker also increases. Capital deepening affect the business cycle by increasing capital investment, which leads to new technologies and allows more productivity in the labor force. More productivity in the labor force leads to expansion in the business cycle.
question
Explain why other income and output measures in addition to GDP are used to express the performance of the economy.
answer
Other income and output measures in addition to GDP are used to express the performance of the economy because there are shortcomings or other information we must know that GDP doesn't cover. We figure net domestic product because GDP does not make allowances for replacing the capital goods used up in each year's production. NDP tells us how much output was available for consumption and for additions to the stock of capital. National Income is not included in GDP, but it is useful to know how much Americans earned for their combination of land, labor, capital, and entrepreneurial talent. Personal income is important to know how much income Americans received; earned and unearned. Disposable income is important too in expressing the performance of the economy because it is the amount of income that households have left over after personal taxes and is the money they can spend. Income and output measures are used to express the performance of the economy because their information is important and GDP does not include them.
question
Explain the relationship between consumer expectations and economic performance.
answer
Consumer expectations affect economic performance because if consumer confidence is low, then economic performance will be hurt because consumers will invest and spend less. This will affect economic growth and will lead to less current investment, less output, and less future consumption. Those factors are important to the economy's performance and growth. The opposite is true if consumer expectations are high. If consumer confidence is high, then consumers will invest and spend more. This will lead to economic growth and a high economic performance because there will be more current investment, more output, and more future consumption.
question
What is capital deepening? How does it affect the business cycle?
answer
Capital deepening is an increase in investment and spending where capital per worker also increases. Capital deepening affect the business cycle by increasing capital investment, which leads to new technologies and allows more productivity in the labor force. More productivity in the labor force leads to expansion in the business cycle.
question
What are three limitations of GDP?
answer
One limitation of GDP is that GDP does not take in account of non market activities, such as carpenters who repair their own homes. These activities never show up in GDP because only market activities are accountable. This causes GDP to understate a nation's total output because it does not count unpaid work. Another limitation of GDP is leisure. The average workweek has been declining over the years. While this allows a positive affect on the overall well-being, GDP accounting understates the well-being by ignoring leisure's value. Another limitation of GDP is improved product quality. GDP is a quantitative measure rather than a qualitative measure. Quality improvement has had a great effect on economic well being. While GDP is adjusted for quality improvement in some items, the majority of goods and services improvement is not reflected in GDP.
question
How do consumer expectations affect the economy?
answer
Consumer expectations affect economic performance because if consumer confidence is low, then economic performance will be hurt because consumers will invest and spend less. This will affect economic growth and will lead to less current investment, less output, and less future consumption. Those factors are important to the economy's performance and growth. The opposite is true if consumer expectations are high. If consumer confidence is high, then consumers will invest and spend more. This will lead to economic growth and a high economic performance because there will be more current investment, more output, and more future consumption.
question
Essential Question Essay Directions: When considering this question, think about what you have learned about GDP and growth from your textbook, class work, and other sources. You may wish to include information from current events to support your arguments. Essential Question: How do we know if the economy is healthy?
answer
We know if the economy is healthy by looking at GDP, GDP per person, economic growth factors, real GDP, employment rates, and inflation levels. By looking at GDP, we can determine a nation's monetary value of all the finished goods and services produced within a country's borders in a specific time period. This shows a nation's output per year. In 2007, the United States's GDP was $13,841 billion. This means that the US produced $13,841 billion worth in output. This shows that our country's economy is very healthy for producing that much output, which can circulate around in the economy. By looking a GDP per person, we can see the average amount of output each person in each could have if each country's total output were divided among is citizens. In 2007, the US's GDP per person was $45,845 compared to Zimbabwe's GDP per person at $188. This also shows that our economy is healthy because we have the highest amount of GDP per person compared to other nations. By looking at economic growth factors, we can tell if a economy is growing. A growing economy is a healthy economy. If a country has strong property rights, patents and copyrights, efficient financial institutions, literacy and widespread education, free trade, and a competitive market system, the economy will expand and grow, leading to a health economy. By looking at real GDP, we can tell how a country is increasing it's output and income through labor inputs and labor productivity. A country's real GDP is determined through multiplying hours of work by labor productivity. Through that, we can tell if a country's economic growth is increasing. Economic growth increasing leads to a healthy economy. By looking at employment rates we can tell how much a country's population is employed in making output. Out of the labor force, only 4.6% were unemployed in America in 2007. By the standards, the US was in full-employment. The 4.6% unemployment rate fell under the natural rate of unemployment. With the country at full-employment, the economy is healthy. By looking at inflation levels, we can tell if a country had a rise in the general level of prices. A high inflation rate is bad for an economy because that means the monetary value is worth less. The US has had a relatively low inflation rate around 2 to 5% compared to Zimbabwe's inflation rate of over 100,000% throughout the years. This means that the US's economy is healthy with a low inflation rate. All these factors help determine if a economy is healthy.
