S3 Online Practice Test (AP Econ)

AP Macroeconomics Section 3 Practice Test
1. If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people
unemployed and seeking employment, then its labor force is:
A. 335 million.
B. 200 million.
C. 155 million.
D. 150 million.
E. 135 million.
2. “Owen had a typewriter business but he went out of business because no one buys typewriters anymore.” This
statement best represents the economic concept of:
A. resources are scarce.
B. people usually exploit opportunities to make themselves better off.
C. markets move toward equilibrium.
D. one person's spending is another person's income.
E. overall spending sometimes gets out of line with the economy's productive capacity.
Rent $2,400
Consumption Spending 7,900
Social Security Benefit 6,100
Investment Spending 2,100
Wages and Salaries 6,500
Exports 800
Interest 1,900
Government Purchases of 2,600
goods and services
Profits 1,400
Imports 1,200
Purchase of stocks 6,300
Unemployment 3,950
Compensation
Payroll Taxes 2,965
Sales Taxes 1,300
Table 10-1: Calculating GDP
3. Use Table 10-1. Using the information in the table provided, which of the following is the correct calculation for
GDP in 2008?
A. $47,475
B. $12,200
C. $21,485
D. $34,085
E. $12,600
Demographic Group Number of Residents

Employed 5000
Unemployed and looking for 1000
work
Not working due to disability 200
Not working due to retirement 700
Unemployed and not looking for 500
work due to discouragement over
job prospects
Under the age of 16 2400
Total Population 9400
Table 12-3: Population Data for Madtucky
4. Use Table 12-3. How many people are in the labor force?
A. 6900
B. 9400
C. 7400
D. 6500
E. 6000
Year Consumer Price Index
1 80
2 (base year) 100
3 105
4 125
5 150
Table 15-1: The Consumer Price Index
5. Use Table 15-1. The approximate rate of inflation in Year 3 is _____ percent.
A. 1
B. 10
C. 19
D. 20
E. 5
6. The unemployment rate is defined as:

A. the percent of the labor force that is unemployed.
B. the number of people unemployed.
C. the ratio of the labor force to the number of people unemployed.
D. the average length of time someone is unemployed.
E. the percent of the population that is unemployed.
7. Real GDP is the same as

A. current dollar GDP.
B. interest rate adjusted GDP.
C. nominal GDP.
D. value added GDP.
E. inflation adjusted GDP.
Figure 10-1: Circular Flow Model
8. Use the “Circular Flow Model” Figure 10-1. If the circular flow model is in equilibrium (the sum of money flows
into each box is equal to the sum of the money flows out of that box), which of the following is likely to happen if
there is an increase in consumer spending?
A. a reduction in investment spending equal to the increase in consumer spending
B. a decrease in the nominal GDP
C. an increase in the unemployment rate
D. a decrease in the inflation rate
E. an increase in the nominal GDP
9. Use the “Circular Flow Model” Figure 10-1. What are net exports in this economy?
A. $0
B. $30
C. $60
D. $100
E. $200
10. Suppose the real interest rate is 2.1% and the nominal interest rate is 5.4%. Then the expected inflation rate is:
A. 7.5%.
B. 3.3%.
C. –3.3%.
D. 2.1%.
E. 5.4%.
Figure 13-1: Minimum Wage

11. Use the “Minimum Wage” Figure 13-1. A binding minimum wage would be:
A. P1.
B. P2.
C. P3.
D. zero.
E. Q4.
Figure 13-2: Effect of Minimum Wage
12. Use the “Effect of Minimum Wage” Figure 13-2. Suppose the labor market is in equilibrium at E when the
government introduces a minimum wage of WF. One problem that may arise is that the quantity of labor supplied
would ______, resulting in structural unemployment.
A. decrease to QD
B. stay at QE
C. increase to QS
D. stay at WE
E. decrease to zero.
13. Consider an economy that only produces two goods: DVDs and DVD players. Last year, 10 DVDs were sold at $20
each and 5 DVD players were sold at $100 each, while this year 15 DVDs were sold at $10 each and 10 DVD
players were sold at $50 each. Nominal GDP this year is:
A. $100.
B. $650.
C. $700.
D. $500
E. $1,350
14. If the cost of a market basket is $200 in Year 1 and $230 in Year 2, the price index for Year 2 with a Year 1 base is:
A. 100.
B. 90.
C. 130.
D. 200.
E. 115.
15. Which of the following is true?

A. Unexpected inflation benefits lenders and hurts borrowers.
B. Unexpected inflation benefits lenders but does not affect borrowers.
C. Unexpected inflation benefits borrowers but does not affect lenders.
D. Unexpected deflation benefits lenders but does not affect borrowers.
E. Unexpected inflation benefits borrowers and hurts lenders.
Year Output Price per Unit
1 2 $2
2 3 4
3 = base period 4 5
4 6 6
5 7 9
Table 11-2: Price and Output Data
16. Use Table 11-2. The value of Year 4's output in nominal dollars is:
A. $6.
B. $24.
C. $30.
D. $36.
E. $12.
17. Unemployment that is due to the time workers spend in job search is considered:
A. operational unemployment.
B. structural unemployment.
C. cyclical unemployment.
D. natural unemployment.
E. frictional unemployment.
Year Price Index

2005 100
2006 104
2007 103
2008 110
Table 15-2: Price Index
18. Use Table 15-2. Consider the information in table provided. Which year is most likely to be the base year?
A. 2006
B. 2008
C. 2007
D. 2005
E. A year not presented in the table.
19. A depression occurs when:

A. both output and employment increase.
B. the economic downturn becomes extremely deep and prolonged.
C. both price level and unemployment increase.
D. output rises but employment remains unchanged.
E. output falls while the employment rate rises.
20. When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum,
economists say that Emily is experiencing a:
A. search cost.
B. menu cost.
C. unit-of-account cost.
D. Fisher effect.
E. shoe-leather cost.

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AP Macroeconomics Section 3 Practice Test

Demographic Group Number of Residents

6. The unemployment rate is defined as:

7. Real GDP is the same as

Figure 13-1: Minimum Wage

15. Which of the following is true?

Year Price Index

19. A depression occurs when:

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