AP Macroeconomics Unit 2 Practice Test & Exam | 22 Questions

Questions 1-3 refer to the following data for the hypothetical economy of Econland in the year 2023.

1. Based on the data provided, what is the Gross Domestic Product (GDP) for Econland in 2023?

(A)1,150 billion dollars(B)1,300 billion dollars(C)1,350 billion dollars(D)1,500 billion dollars

2. Which of the following transactions from the table would be excluded from the calculation of Econland's GDP using the expenditures approach?

(A)Gross Private Domestic Investment(B)Government Purchases(C)Social Security Payments(D)Net Exports

3. If Econland’s citizens engaged in a significant amount of household production, such as home gardening and childcare, how would this affect the measured GDP?

(A)GDP would be overstated because it includes non-market activities.(B)GDP would be understated because these non-market transactions are not included.(C)GDP would be unaffected because household production is counted in personal consumption.(D)GDP would be adjusted downward by the estimated value of these activities.

Questions 4-6 refer to the following labor market data for a nation.

4. Based on the data, what is the unemployment rate for this nation?

(A)5.0%(B)7.7%(C)8.3%(D)10.0%

5. What is the labor force participation rate for this nation?

(A)60%(B)65%(C)70%(D)80%

6. Suppose 2 million of the unemployed individuals become discouraged workers and stop looking for a job. Which of the following would be the most likely result?

(A)The unemployment rate would increase, and the labor force participation rate would increase.(B)The unemployment rate would decrease, and the labor force participation rate would decrease.(C)The unemployment rate would decrease, and the labor force participation rate would remain unchanged.(D)The unemployment rate would remain unchanged, and the labor force participation rate would decrease.

Questions 7-9 refer to the graph below.

7. Which point on the graph represents the turning point of the business cycle known as a peak?

(A)Point A(B)Point B(C)Point C(D)Point D

8. During the phase of the business cycle represented by the segment from Point A to Point C, which of the following is most likely to be true?

(A)The natural rate of unemployment is falling.(B)The cyclical unemployment rate is rising.(C)The inflation rate is accelerating.(D)Real GDP is greater than potential GDP.

9. The straight line labeled "Potential Output" represents the level of real GDP that occurs when the economy is experiencing

(A)zero unemployment(B)a high rate of inflation(C)only frictional and structural unemployment(D)a balanced budget and a trade surplus

Questions 10-12 are based on the following data for a hypothetical economy that produces only two goods: books and pens.

10. What is the cost of the market basket in the base year, 2022?

(A)40 dollars(B)140 dollars(C)1,400 dollars(D)1,950 dollars

11. Using 2022 as the base year, what is the Consumer Price Index (CPI) for 2023?

(A)100(B)120(C)128.6(D)139.3

12. What is the nominal GDP for 2023?

(A)1,400 dollars(B)1,730 dollars(C)1,830 dollars(D)1,950 dollars

13. Which of the following best explains a limitation of Gross Domestic Product (GDP) as a measure of a country's standard of living?

(A)It fails to account for the production of services, only goods.(B)It does not account for the distribution of income among the population.(C)It overstates well-being by including government transfer payments.(D)It includes the value of intermediate goods, leading to double-counting.

14. A worker who was laid off from a textile factory because the company moved its manufacturing operations overseas is experiencing which type of unemployment?

(A)Frictional unemployment(B)Structural unemployment(C)Cyclical unemployment(D)Seasonal unemployment

15. An individual who recently graduated from college and is actively searching for their first full-time job is considered

(A)structurally unemployed(B)frictionally unemployed(C)cyclically unemployed(D)not in the labor force

16. If the actual inflation rate is higher than the expected inflation rate, which of the following groups will be better off?

(A)Lenders who provided loans at a fixed interest rate(B)Individuals living on a fixed nominal income(C)Borrowers who took out loans at a fixed interest rate(D)Savers who have their money in accounts with a fixed interest rate

17. If an economy's nominal GDP increased by 5 percent while its real GDP increased by 2 percent, what can be concluded about the price level?

(A)The price level increased by approximately 3 percent.(B)The price level increased by approximately 7 percent.(C)The price level decreased by approximately 3 percent.(D)The price level remained unchanged.

18. In the simple circular flow diagram, which of the following is true?

(A)Households are sellers in the product market and buyers in the factor market.(B)Firms are buyers in the product market and sellers in the factor market.(C)Households supply resources to firms in exchange for income.(D)Firms supply goods and services to households in exchange for resources.

19. The official unemployment rate may understate the true level of unemployment in an economy because it

(A)includes part-time workers who would prefer to be working full-time(B)includes individuals who are frictionally unemployed(C)counts discouraged workers as unemployed(D)excludes individuals who are structurally unemployed

20. When the price of a product rises, consumers tend to buy less of it and more of a cheaper alternative. This consumer behavior is a cause of which bias in the Consumer Price Index (CPI)?

(A)New product bias(B)Quality change bias(C)Outlet bias(D)Substitution bias

AP Macroeconomics Unit 2: Economic Indicators and the Business Cycle Practice Exam

Exam Details

A. Multiple-Choice Questions (20 Questions)

B. Short Answer Questions (2 Questions)

AP Macroeconomics Unit 2: Economic Indicators and the Business Cycle Practice Exam

Exam Details

A. Multiple-Choice Questions (20 Questions)

B. Short Answer Questions (2 Questions)