AP Macroeconomics Mock Test 1

1.

The concept of opportunity cost would no longer be relevant if

(A) poverty in an economy no longer existed

(B) the supply of all resources were unlimited

(C) resources were allocated efficiently

(D) real wages were flexible

(E) all current incomes were invested in technological research

2.

On the basis of the diagram above showing an economy's production possibilities curve for two goods, which of the following statements must be true?

I. The opportunity cost of moving from point P to point R is 10 units of Y.

II. The opportunity cost of moving from point R to point P is 8 units of X.

III. The opportunity cost of moving from point Q to point R is 0 units of Y.

(A) I only

(B) III only

(C) I and II only

(D) II and III only

(E) I, II, and III

3.

Suppose two countries are each capable of individually producing two given commodities. Instead, each specializes by producing the commodity for which it has a comparative advantage and then trades with the other country.

Which of the following is most likely to result?

(A) The two countries will become more independent of each other.

(B) Unemployment will increase in one country and decrease in the other.

(C) There will be more efficient production in one country but less efficient production in the other.

(D) Both countries will become better off.

(E) Both countries will be producing their commodity inefficiently.

4.

Assume that for consumers, pears and apples are substitutes. It is announced that pesticides used on most apples may be dangerous to consumers’ health. As a result of this announcement, which of the following market changes is most likely to occur in the short run in the pear market?

5.

A leftward shift of the supply curve for computers could be caused by which of the following in the short run?

(A) A decrease in the number of computer manufacturers

(B) A decease in taxes on computer manufacturers

(C) A decrease in the price of computers

(D) A decrease in the price of components used to assemble computers

(E) An increase in the price of mobile devices, a substitute good

6.

Which of the following is true according to the circular flow model?

(A) Firms are suppliers in both the product and factor markets.

(B) Firms are demanders in the product markets and suppliers in the factor markets.

(C) Households are demanders in both the product and factor markets.

(D) Households are demanders in the product markets and suppliers in the factor markets.

(E) The government is a demander in the product market only.

7.

As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in

(A) the production of military goods

(B) the production of antipollution devices

(C) crime prevention services

(D) household production

(E) legal services

8.

Which of the following individuals is classified as unemployed?

(A) A fifteen-year-old high school student who is looking for a babysitting job

(B) A laid-off computer programmer who has given up looking for a new job

(C) A parent who works in an after-school day care center for 15 hours a week

(D) A recent college graduate who is looking for her first job

(E) A mayor who lost an election and retired

9.

The consumer price index (CPI) does not measure the true cost of inflation because

(A) improvements in the quality of goods or services are not fully reflected

(B) lenders are better off when actual inflation is less than anticipated inflation

(C) borrowers are better off when actual inflation is greater than anticipated inflation

(D) changes in consumers’ real income are not accounted for

(E) consumers may substitute toward more expensive goods without being significantly worse off

10.

A lender will realize unexpected benefit when the

(A) actual inflation rate is higher than the anticipated inflation rate

(B) actual inflation rate is lower than the anticipated inflation rate

(C) rate of interest is greater than the actual rate of inflation

(D) rate of interest is less than the actual rate of inflation

(E) rate of interest equals the actual rate of inflation

11.

The nation of Turboland produces only two goods, X and Y. The prices and final quantities produced of the two goods in 1993 and the base year of 1992 are shown in the table below.

What are the nominal GDP and real GDP in 1993?

(A) Nominal GDP is $90, Real GDP is $96

(B) Nominal GDP is $74, Real GDP is $96

(C) Nominal GDP is $70, Real GDP is $96

(D) Nominal GDP is $96, Real GDP is $90

(E) Nominal GDP is $96, Real GDP is $74

12.

The figure above shows data for actual real GDP and potential real GDP from year 1 to year 6 for an economy.

Which of the following is true based on this figure?

(A) The economy is in expansion from year 1 to year 3 .

(B) The economy is in recession from year 3 to year 5 .

(C) There is an inflationary gap from year 2 to year 4.

(D) The economy is at full employment in year 5 .

(E) The economy is in long-run equilibrium in year 2.

13.

When an economy is in equilibrium at potential gross domestic product, the actual unemployment rate is

(A) equal to the cyclical rate

(B) greater than the natural rate

(C) less than the natural rate

(D) equal to the natural rate

(E) equal to zero

14.

Which of the following changes would cause an economy’s aggregate demand curve to shift to the right?

(A) An increase in spending on imports

(B) An increase in autonomous consumption spending

(C) An increase in interest rates

(D) A decrease in the money supply

(E) A decrease in the overall price level in the economy

15.

If the marginal propensity to consume is 0.75, then a $100 increase in investment will result in a maximum increase in equilibrium real gross domestic product of

(A) $40.00

(B) $100.00

(C) $133.33

(D) $400.00

(E) $500.00

16.

Which of the following will most likely cause the short-run aggregate supply curve to shift to the left?

(A) A decrease in nominal wages

(B) A decrease in the expected rate of inflation

(C) An increase in energy prices

(D) An increase in the price level

(E) An increase in the size of the labor force

17.

Which of the following must be true in the long run?

(A) Production increases when prices increase.

(B) An increase in the price level reduces aggregate demand.

(C) The natural rate of unemployment is not affected by changes in production capacity.

(D) Full employment increases when price level decreases.

(E) Prices and wages are flexible.