AP Macroeconomics Exam Questions
Complete Solutions New Update (A+
Pass)
What are the components of GDP - Answers -✔✔ Consumption, investment,
government spending, and net exports (exports minus imports).
What is "C" in the GDP equation? - Answers -✔✔ Consumption which is done by
households. It is all of the goods and services we spend our money on.
What is GDP (besides Gross Domestic Product)? - Answers -✔✔ The total value of
goods and services produced in a country over a given period of time. It is a measure of
economic well being
What is ¨I¨ in the GDP/AD equation? - Answers -✔✔ Investment spending which is
done by businesses
What is "G" in the GDP/AD equation? - Answers -✔✔ government spending
What is ¨NX¨ in the GDP/AD equation? - Answers -✔✔ Net exports = exports - imports.
Exports are what we sell to other countries. Imports are what we buy from other
countries.
What is the natural rate of unemployment? - Answers -✔✔ structural unemployment +
frictional unemployment. This is the type of unemployment the U.S. always has and is
what is represented on the Long Run Philips Curve.
What is structural unemployment? - Answers -✔✔ A mismatch between a person's
skills and the jobs available. The mismatch could occur because technology has made
their job obsolete or their job was outsourced.
What is frictional unemployment? - Answers -✔✔ A type of unemployment that occurs
when people are transitioning, either from one job to another or just out of college.
What is another word for output? - Answers -✔✔ Real GDP
What is cyclical unemployment? - Answers -✔✔ unemployment caused by the lack of
jobs during a recession
What is the short run Phillips Curve? - Answers -✔✔ A curve that represents cyclical
unemployment.
, What will shift the SRPC? - Answers -✔✔ A change in the expected rate of inflation.
What is the difference between nominal and real GDP? - Answers -✔✔ Nominal GDP
is not adjusted for inflation. Therefore an increase in nominal GDP could just reflect an
increase in inflation.
What are real wages? - Answers -✔✔ A salary increase that takes into account the
impact of inflation to determine the overall impact to purchasing power.
What are nominal wages? - Answers -✔✔ the dollar amount of the wage paid
What does the deflator, price index and CPI measure? - Answers -✔✔ Inflation
What is inflation? - Answers -✔✔ a general increase in prices and fall in the purchasing
power of money.
For the Phillips Curve, what is the Y and X axis? - Answers -✔✔ Y axis = Inflation
X axis = unemployment
What is the main concern during expansion/peak? - Answers -✔✔ inflation
What is the main concern during contraction/trough? - Answers -✔✔ cyclical
unemployment
Define the expected rate of inflation - Answers -✔✔ The average rate of inflation
expected in a country. In the U.S. it is 2%.
Who is helped by unexpected inflation? - Answers -✔✔ People who borrowed at a
fixed interest rate and renters on a fixed lease.
Who is hurt by unexpected inflation? - Answers -✔✔ Lenders, savers, people living off
fixed income, people providing a service for a fixed rate.
What is a transfer payment? - Answers -✔✔ Transfer payments are money given from
one group or person to another and are not included in GDP. This money gets counted
in GDP when the receiving person spends the money. For example, Social Security and
Food Stamps are transfer payments (money given from the government to an
individual). When the recipients gets and spends the money, then it will be counted in
GDP.
What is not included in GDP? - Answers -✔✔ Household production
Intermediate goods
Black market
Transfer payments
Complete Solutions New Update (A+
Pass)
What are the components of GDP - Answers -✔✔ Consumption, investment,
government spending, and net exports (exports minus imports).
What is "C" in the GDP equation? - Answers -✔✔ Consumption which is done by
households. It is all of the goods and services we spend our money on.
What is GDP (besides Gross Domestic Product)? - Answers -✔✔ The total value of
goods and services produced in a country over a given period of time. It is a measure of
economic well being
What is ¨I¨ in the GDP/AD equation? - Answers -✔✔ Investment spending which is
done by businesses
What is "G" in the GDP/AD equation? - Answers -✔✔ government spending
What is ¨NX¨ in the GDP/AD equation? - Answers -✔✔ Net exports = exports - imports.
Exports are what we sell to other countries. Imports are what we buy from other
countries.
What is the natural rate of unemployment? - Answers -✔✔ structural unemployment +
frictional unemployment. This is the type of unemployment the U.S. always has and is
what is represented on the Long Run Philips Curve.
What is structural unemployment? - Answers -✔✔ A mismatch between a person's
skills and the jobs available. The mismatch could occur because technology has made
their job obsolete or their job was outsourced.
What is frictional unemployment? - Answers -✔✔ A type of unemployment that occurs
when people are transitioning, either from one job to another or just out of college.
What is another word for output? - Answers -✔✔ Real GDP
What is cyclical unemployment? - Answers -✔✔ unemployment caused by the lack of
jobs during a recession
What is the short run Phillips Curve? - Answers -✔✔ A curve that represents cyclical
unemployment.
, What will shift the SRPC? - Answers -✔✔ A change in the expected rate of inflation.
What is the difference between nominal and real GDP? - Answers -✔✔ Nominal GDP
is not adjusted for inflation. Therefore an increase in nominal GDP could just reflect an
increase in inflation.
What are real wages? - Answers -✔✔ A salary increase that takes into account the
impact of inflation to determine the overall impact to purchasing power.
What are nominal wages? - Answers -✔✔ the dollar amount of the wage paid
What does the deflator, price index and CPI measure? - Answers -✔✔ Inflation
What is inflation? - Answers -✔✔ a general increase in prices and fall in the purchasing
power of money.
For the Phillips Curve, what is the Y and X axis? - Answers -✔✔ Y axis = Inflation
X axis = unemployment
What is the main concern during expansion/peak? - Answers -✔✔ inflation
What is the main concern during contraction/trough? - Answers -✔✔ cyclical
unemployment
Define the expected rate of inflation - Answers -✔✔ The average rate of inflation
expected in a country. In the U.S. it is 2%.
Who is helped by unexpected inflation? - Answers -✔✔ People who borrowed at a
fixed interest rate and renters on a fixed lease.
Who is hurt by unexpected inflation? - Answers -✔✔ Lenders, savers, people living off
fixed income, people providing a service for a fixed rate.
What is a transfer payment? - Answers -✔✔ Transfer payments are money given from
one group or person to another and are not included in GDP. This money gets counted
in GDP when the receiving person spends the money. For example, Social Security and
Food Stamps are transfer payments (money given from the government to an
individual). When the recipients gets and spends the money, then it will be counted in
GDP.
What is not included in GDP? - Answers -✔✔ Household production
Intermediate goods
Black market
Transfer payments
