AP Macroeconomics Unit 2 Progress Check:
MCQ UPDATED ACTUAL Questions and
CORRECT Answers
Which statement is true about the circular flow diagram of an economy?
A) The market for goods and services connects household spending to government spending.
B) The market for factors of production connects household spending to goods produced by
firms.
C) The market for factors of production connects spending by firms to household income.
D) The market for goods and services connects labor income to firms as employers.
E) The market for goods and services connects labor income to household spending. -
CORRECT ANSWER - C) The market for factors of production connects spending by
firms to household income.
Correct. The market for factors of production connects spending by firms to household income.
Which statement is true about the approaches used to measure the value of a nation's gross
domestic product (GDP) ?
A) The expenditure approach to calculating GDP sums the components of the supply side of the
economy.
B) The income approach to calculating GDP sums the income earned by the factors of
production excluding profits.
C) The value-added approach to calculating GDP sums the final monetary value of output at each
stage of production.
D) The expenditure approach to calculating GDP sums the market value of all final goods and
services produced by foreigners in a given period of time.
E) The expenditure approach to calculating GDP sums consumption spending, investment
spending, government spending, and net exports. - CORRECT ANSWER - E) The
expenditure approach to calculating GDP sums consumption spending, investment spending,
government spending, and net exports.
, Correct. The expenditure approach to calculating GDP sums the components of the demand side
of the economy - consumption spending, investment spending, government spending, and net
exports.
Calculate Country X's nominal gross domestic product (GDP) for 2017 using the expenditures
approach.
A) 14 billion dollars
B) 18 billion dollars
C) 19 billion dollars
D) 20 billion dollars
E) 21 billion dollars - CORRECT ANSWER - C) 19 billion dollars
Correct. The expenditure approach to calculating GDP sums consumption spending, government
spending, investment spending, and net exports. Using the numbers provided in the table, the
country's nominal GDP for 2017 is therefore 13+3+4+(−1)=19 billion dollars.
Which of the following describes a limitation of gross domestic product (GDP) ?
A) It overstates the value of output by counting non-market transactions such as mowing your
neighbor's lawn.
B) It understates the value of output by accounting for negative environmental side effects of
production.
C) It does not account for the distribution of income in a nation or income inequality.
D) It overstates economic well-being by including all do-it-yourself activities.
E) It fails to make adjustments for the value of services consumed for free such as browsing on
the Web. - CORRECT ANSWER - C) It does not account for the distribution of income in
a nation or income inequality.
Correct. GDP measures the final output produced by a nation but does not account for the
distribution of income or income inequality
Which of the following is true about gross domestic product (GDP)?
MCQ UPDATED ACTUAL Questions and
CORRECT Answers
Which statement is true about the circular flow diagram of an economy?
A) The market for goods and services connects household spending to government spending.
B) The market for factors of production connects household spending to goods produced by
firms.
C) The market for factors of production connects spending by firms to household income.
D) The market for goods and services connects labor income to firms as employers.
E) The market for goods and services connects labor income to household spending. -
CORRECT ANSWER - C) The market for factors of production connects spending by
firms to household income.
Correct. The market for factors of production connects spending by firms to household income.
Which statement is true about the approaches used to measure the value of a nation's gross
domestic product (GDP) ?
A) The expenditure approach to calculating GDP sums the components of the supply side of the
economy.
B) The income approach to calculating GDP sums the income earned by the factors of
production excluding profits.
C) The value-added approach to calculating GDP sums the final monetary value of output at each
stage of production.
D) The expenditure approach to calculating GDP sums the market value of all final goods and
services produced by foreigners in a given period of time.
E) The expenditure approach to calculating GDP sums consumption spending, investment
spending, government spending, and net exports. - CORRECT ANSWER - E) The
expenditure approach to calculating GDP sums consumption spending, investment spending,
government spending, and net exports.
, Correct. The expenditure approach to calculating GDP sums the components of the demand side
of the economy - consumption spending, investment spending, government spending, and net
exports.
Calculate Country X's nominal gross domestic product (GDP) for 2017 using the expenditures
approach.
A) 14 billion dollars
B) 18 billion dollars
C) 19 billion dollars
D) 20 billion dollars
E) 21 billion dollars - CORRECT ANSWER - C) 19 billion dollars
Correct. The expenditure approach to calculating GDP sums consumption spending, government
spending, investment spending, and net exports. Using the numbers provided in the table, the
country's nominal GDP for 2017 is therefore 13+3+4+(−1)=19 billion dollars.
Which of the following describes a limitation of gross domestic product (GDP) ?
A) It overstates the value of output by counting non-market transactions such as mowing your
neighbor's lawn.
B) It understates the value of output by accounting for negative environmental side effects of
production.
C) It does not account for the distribution of income in a nation or income inequality.
D) It overstates economic well-being by including all do-it-yourself activities.
E) It fails to make adjustments for the value of services consumed for free such as browsing on
the Web. - CORRECT ANSWER - C) It does not account for the distribution of income in
a nation or income inequality.
Correct. GDP measures the final output produced by a nation but does not account for the
distribution of income or income inequality
Which of the following is true about gross domestic product (GDP)?
