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Part A: Multiple Choice

AP Macro Unit 2 Practice Test: Economic Indicators and the Business Cycle

Try our free AP Macro Unit 2 practice test. The second unit covers economic indicators and measurement, including GDP, unemployment, and inflation. It also introduces the business cycle and explains how to interpret price indices like the CPI. These AP Macroeconomics Unit 2 practice test questions will help you master the fundamentals of macroeconomic data.

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The table above shows the data for the labor market of a nation. What is this nation’s unemployment rate?

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10%

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15%

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17.6%

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Question 4 of 15

4. Question

Numbers of Workers Structurally Unemployed	5 million
Numbers of Workers Cyclically Unemployed	7 million
Numbers of Workers Frictionally Unemployed	3 million
Number of Employed Workers	85 million
Working-Age Population	150 million

The table above shows the labor market data for a nation. What is the labor force participation rate?

40%

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56.7%

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66.7%

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85%

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100%

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Question 5 of 15

5. Question

Numbers of Workers Structurally Unemployed	5 million
Numbers of Workers Cyclically Unemployed	7 million
Numbers of Workers Frictionally Unemployed	3 million
Number of Employed Workers	85 million
Working-Age Population	150 million

What is the natural rate of unemployment or full employment level for the nation based on the data in table above?

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15%

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Question 6 of 15

6. Question

In year 1, Gloria earns $100,000. In year 2 her income increases to $103,000. The inflation rate in year 2 was 4%. What happened to her nominal and real income in years 1 and 2?

Nominal income decreased but her real income increased
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Nominal income increased but her real income decreased
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Nominal income stayed the same but her real income decreased
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Nominal income decreased but her real income increased
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Nominal income increased and her real income increased
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Question 7 of 15

7. Question

Consumer price index is criticized as a measure of inflation because

may understate inflation because the base year was so long ago.
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may understate inflation by ignoring substitutions and product quality.
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may understate inflation by ignoring intermediate goods.
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may overstate inflation by ignoring intermediate goods.
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may overstate inflation by ignoring substitutions and product quality.
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Question 8 of 15

8. Question

Good A Good B

Price Quantity Price Quantity

Year 1 $3 5 $5 5

Year 2 $4 5 $5 6

Assume an economy produces 2 goods, A and B, as shown in the table above. If year 1 is the base year, what is the GDP deflator for year 2?

50
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75
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125
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150
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200
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Question 9 of 15

9. Question

Which of the following groups is hurt by unanticipated inflation

I. Savers at a fixed interest rate

II. Fixed-rate Lenders

III. Fixed-rate Borrowers

I only
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II only
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III only
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I and II only
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I and III only
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Question 10 of 15

10. Question

The nominal GDP in a year is $40 billion. The GDP deflator for that same year is 200. What was the real GDP?

$10 billion
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$20 billion
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$40 billion
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$50 billion
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$80 billion
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Question 11 of 15

11. Question

An unexpected increase in inventories is often a sign that an economy is moving into what phase of the business cycle?

recovery
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peak
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trough
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recession
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expansion
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Question 12 of 15

12. Question

If an economy has an inflationary or positive GDP gap, what phase of the business cycle is the economy most likely experiencing?

trough
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recession
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contraction
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depression
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peak
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Question 13 of 15

13. Question

Which of the following is mostly likely to increase during a recession?

cyclical unemployment
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structural unemployment
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frictional unemployment
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demand-pull inflation
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real gross domestic product
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Question 14 of 15

14. Question

An economic measurement of the prices in a market basket of goods and services that the typical American family purchases is known as

the producer price index.
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the consumer price index.
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real gross domestic product.
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nominal gross domestic product.
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the federal funds rate.
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Question 15 of 15

15. Question

A worker’s nominal wages increase by 5% during the same year that inflation was 7%. The worker’s real wage

decreased by 2%.
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increased by 2%.
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decreased by 12%.
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increased by 12%.
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increased by 5%.
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Current
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Next: AP Macro Unit 3 Practice Test

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	Good A		Good B
	Price	Quantity	Price	Quantity
Year 1	$3	5	$5	5
Year 2	$4	5	$5	6

Free AP Macroeconomics Tests

AP Macro Practice Tests

Full-Length AP Macro Practice Exam

AP Macro Unit 2 Practice Test: Economic Indicators and the Business Cycle

Quiz Summary

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Results

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1. Question

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

2. Question

A limitation of gross domestic product is that it

3. Question

The table above shows the data for the labor market of a nation. What is this nation’s unemployment rate?

4. Question

The table above shows the labor market data for a nation. What is the labor force participation rate?

5. Question

What is the natural rate of unemployment or full employment level for the nation based on the data in table above?

6. Question

In year 1, Gloria earns $100,000. In year 2 her income increases to $103,000. The inflation rate in year 2 was 4%. What happened to her nominal and real income in years 1 and 2?

7. Question

Consumer price index is criticized as a measure of inflation because

8. Question

Assume an economy produces 2 goods, A and B, as shown in the table above. If year 1 is the base year, what is the GDP deflator for year 2?

9. Question

Which of the following groups is hurt by unanticipated inflation

I. Savers at a fixed interest rate

II. Fixed-rate Lenders

III. Fixed-rate Borrowers

10. Question

The nominal GDP in a year is $40 billion. The GDP deflator for that same year is 200. What was the real GDP?

11. Question

An unexpected increase in inventories is often a sign that an economy is moving into what phase of the business cycle?

12. Question

If an economy has an inflationary or positive GDP gap, what phase of the business cycle is the economy most likely experiencing?

13. Question

Which of the following is mostly likely to increase during a recession?

14. Question

An economic measurement of the prices in a market basket of goods and services that the typical American family purchases is known as

15. Question

A worker’s nominal wages increase by 5% during the same year that inflation was 7%. The worker’s real wage

Next: AP Macro Unit 3 Practice Test