GDP and Growth Flashcards
7 cards from real AP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 GDP and Growth flashcards as text
Which of the following would be included in the calculation of U.S. Gross National Product (GNP) but NOT in U.S. GDP?
Answer: Profits earned by a U.S.-owned factory operating in Mexico
GNP counts output by a country's residents regardless of location, so profits from U.S.-owned foreign operations are in GNP but not GDP.
A sharp rise in oil prices that reduces productive capacity would best be represented as:
Answer: A leftward shift of both the short-run and long-run aggregate supply curves
A permanent increase in input costs reduces productive capacity, shifting both SRAS and LRAS leftward, lowering potential GDP.
Which of the following best describes 'human capital' as a source of economic growth?
Answer: The knowledge, skills, and education embodied in workers
Human capital refers to the productive value of workers' education, training, and skills, which boosts labor productivity and long-run growth.
Which of the following correctly explains why inventory accumulation is counted as investment (I) in GDP?
Answer: Unsold goods are treated as 'purchased' by the producing firm, keeping the expenditure identity intact
The national accounts treat unsold inventory additions as if the firm bought its own output, ensuring GDP = C + I + G + NX always holds.
Country A grows at 1% per year and Country B grows at 3% per year. Both start with the same real GDP. After approximately 70 years, Country B's economy will be roughly how many times larger than Country A's?
Answer: 4 times larger
Country B doubles every ~23 years (70÷3), so ≈3 doublings in 70 years (×8 total), while Country A doubles once (×2); ratio ≈ 8÷2 = 4 times larger.
Which of the following is the best example of 'capital deepening'?
Answer: Each worker in the economy has access to more and better machinery
Capital deepening means the capital-to-labor ratio rises, so each worker has more physical capital, increasing labor productivity.
If an economy is currently producing on its long-run aggregate supply curve, a demand-side stimulus will most likely result in which short-run and long-run outcome?
Answer: Higher real GDP in the short run but a return to potential output with higher prices in the long run
Starting at full employment, demand stimulus raises real GDP and prices short-run, but wages adjust upward, shifting SRAS left until output returns to potential with a higher price level.