AP Macro GDP and Growth 2

Question 1

Which of the following transactions would be counted in U.S. GDP?

Accepted Answer

A U.S. firm sells machinery to a German company

Answer

U.S. GDP includes exports (goods produced domestically and sold abroad), while stock sales, transfer payments, and imports of foreign goods are excluded.

Question 2

If nominal GDP rises from $18 trillion to $20 trillion and the GDP deflator rises from 100 to 110, real GDP has:

Accepted Answer

Increased by about 1.8%

Answer

Real GDP = (Nominal GDP / GDP deflator) × 100; $20T/110 × 100 ≈ $18.18T, a rise of roughly 1.8% from $18T.

Question 3

Which component of GDP is most volatile over the business cycle?

Accepted Answer

Gross private domestic investment

Answer

Business investment in structures, equipment, and inventories swings sharply with economic expectations, making it the most volatile GDP component.

Question 4

The underground economy (unreported cash transactions) causes official GDP to:

Accepted Answer

Understate true output

Answer

Because illegal and unreported transactions are not captured in official statistics, measured GDP understates the economy's actual production.

Question 5

In the expenditure approach, which formula correctly represents GDP?

Accepted Answer

GDP = C + I + G + NX

Answer

The expenditure approach sums Consumption (C), Investment (I), Government purchases (G), and Net Exports (NX = Exports − Imports).

AP Practice Test

AP Practice Test

AP Macro GDP and Growth 2