AP MACROECONOMICS
UNIT 2 PRACTICE TEST
Economic Indicators and the Business Cycle
25 questions — modeled on official AP question styles and stimulus formats.
Give yourself 30 minutes. Answers and explanations begin on a separate page after the questions.
Multiple Choice Questions
1. Which of the following transactions is counted in GDP for the current year?
A) The resale of a five-year-old house
B) A newly constructed house sold for the first time this year
C) A government unemployment benefit payment
D) The purchase of shares of corporate stock
E) Unpaid eldercare provided by a family member at home
2. In the expenditure approach, GDP = C + I + G + NX. A firm's purchase of a new industrial robot for its assembly line
would be classified under:
A) C (Consumption)
B) I (Investment)
C) G (Government spending)
D) NX (Net exports)
E) None of these categories, since capital goods are excluded from GDP
3. Which of the following is a recognized limitation of GDP as a measure of a nation's overall well-being?
A) GDP excludes non-market activity, such as unpaid household labor and volunteer work, despite their real value
B) GDP always accurately reflects how income is distributed across a population
C) GDP fully captures activity in the underground/informal economy
D) GDP directly measures environmental quality and resource depletion
E) GDP has no recognized limitations as an economic indicator
4. A country's nominal GDP is $600 billion, and its GDP deflator (base year=100) is 120. What is this country's real
GDP?
A) $720 billion
B) $500 billion
C) $480 billion
D) $600 billion
E) $620 billion
5. Real GDP is generally a more useful tool than nominal GDP for comparing economic output across different years
primarily because real GDP:
A) Is always numerically larger than nominal GDP
B) Removes the effect of price-level changes (inflation), isolating changes in actual physical output
C) Includes transfer payments that nominal GDP excludes
D) Uses a different set of goods and services in its calculation each year
E) Ignores production entirely, focusing only on prices
, Questions 6–8 refer to the following data for a country's adult population.
Category Number of People
Total adult population 2,000
Employed (full- and part-time) 900
Unemployed (actively seeking work) 100
Discouraged workers (not currently seeking
50
work)
6. Based on the data, what is the size of the labor force?
A) 900
B) 1,000
C) 1,050
D) 2,000
E) 100
7. Based on the data, what is the unemployment rate?
A) 5%
B) 10%
C) 11%
D) 45%
E) 50%
8. If the 50 discouraged workers were reclassified as unemployed and added to the labor force, the official
unemployment rate would:
A) Decrease, since discouraged workers always pull down the unemployment rate
B) Increase, since discouraged workers are not currently counted in the labor force or the unemployed
C) Remain exactly unchanged
D) Become impossible to calculate under any circumstances
E) Automatically fall to zero
9. A wave of layoffs sweeps across multiple industries as the economy enters a nationwide recession. This
unemployment is best classified as:
A) Frictional unemployment
B) Structural unemployment
C) Cyclical unemployment
D) Voluntary unemployment unrelated to macroeconomic conditions
E) Seasonal unemployment
10. A recent college graduate spends three weeks searching for their first job after graduation. This worker's
unemployment is best classified as:
A) Cyclical unemployment
B) Frictional unemployment
C) Structural unemployment
D) Seasonal unemployment
E) This worker would not be counted as unemployed at all
11. A factory worker's role is permanently eliminated by automation, and the worker's existing skill set no longer
matches available job openings in the region. This unemployment is best classified as:
UNIT 2 PRACTICE TEST
Economic Indicators and the Business Cycle
25 questions — modeled on official AP question styles and stimulus formats.
Give yourself 30 minutes. Answers and explanations begin on a separate page after the questions.
Multiple Choice Questions
1. Which of the following transactions is counted in GDP for the current year?
A) The resale of a five-year-old house
B) A newly constructed house sold for the first time this year
C) A government unemployment benefit payment
D) The purchase of shares of corporate stock
E) Unpaid eldercare provided by a family member at home
2. In the expenditure approach, GDP = C + I + G + NX. A firm's purchase of a new industrial robot for its assembly line
would be classified under:
A) C (Consumption)
B) I (Investment)
C) G (Government spending)
D) NX (Net exports)
E) None of these categories, since capital goods are excluded from GDP
3. Which of the following is a recognized limitation of GDP as a measure of a nation's overall well-being?
A) GDP excludes non-market activity, such as unpaid household labor and volunteer work, despite their real value
B) GDP always accurately reflects how income is distributed across a population
C) GDP fully captures activity in the underground/informal economy
D) GDP directly measures environmental quality and resource depletion
E) GDP has no recognized limitations as an economic indicator
4. A country's nominal GDP is $600 billion, and its GDP deflator (base year=100) is 120. What is this country's real
GDP?
A) $720 billion
B) $500 billion
C) $480 billion
D) $600 billion
E) $620 billion
5. Real GDP is generally a more useful tool than nominal GDP for comparing economic output across different years
primarily because real GDP:
A) Is always numerically larger than nominal GDP
B) Removes the effect of price-level changes (inflation), isolating changes in actual physical output
C) Includes transfer payments that nominal GDP excludes
D) Uses a different set of goods and services in its calculation each year
E) Ignores production entirely, focusing only on prices
, Questions 6–8 refer to the following data for a country's adult population.
Category Number of People
Total adult population 2,000
Employed (full- and part-time) 900
Unemployed (actively seeking work) 100
Discouraged workers (not currently seeking
50
work)
6. Based on the data, what is the size of the labor force?
A) 900
B) 1,000
C) 1,050
D) 2,000
E) 100
7. Based on the data, what is the unemployment rate?
A) 5%
B) 10%
C) 11%
D) 45%
E) 50%
8. If the 50 discouraged workers were reclassified as unemployed and added to the labor force, the official
unemployment rate would:
A) Decrease, since discouraged workers always pull down the unemployment rate
B) Increase, since discouraged workers are not currently counted in the labor force or the unemployed
C) Remain exactly unchanged
D) Become impossible to calculate under any circumstances
E) Automatically fall to zero
9. A wave of layoffs sweeps across multiple industries as the economy enters a nationwide recession. This
unemployment is best classified as:
A) Frictional unemployment
B) Structural unemployment
C) Cyclical unemployment
D) Voluntary unemployment unrelated to macroeconomic conditions
E) Seasonal unemployment
10. A recent college graduate spends three weeks searching for their first job after graduation. This worker's
unemployment is best classified as:
A) Cyclical unemployment
B) Frictional unemployment
C) Structural unemployment
D) Seasonal unemployment
E) This worker would not be counted as unemployed at all
11. A factory worker's role is permanently eliminated by automation, and the worker's existing skill set no longer
matches available job openings in the region. This unemployment is best classified as:
