AP Macroeconomics chapter practice15 questions

02 Math, Graphs, and Economic Reasoning

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 15

A price index equals 120 in one year and 126 in the following year. Measured from the earlier year, the rate of inflation is

Inflation is (126-120)/(120)=0.05, or 5 percent. A divides the six-point change by the later reading of 126, C reports index points as though a point were a percent, D measures the current index against the base of 100 instead of against last year, and E reports the ratio (126)/(120) rather than the change in it.
Show answer and explanation

B. 5 percent

Inflation is (126-120)/(120)=0.05, or 5 percent. A divides the six-point change by the later reading of 126, C reports index points as though a point were a percent, D measures the current index against the base of 100 instead of against last year, and E reports the ratio (126)/(120) rather than the change in it.

Question 2

Question 2 of 15

The price of a good falls and the quantity demanded rises, with no other determinant of demand changing. Which of the following describes that change?

The good's own price sits on the vertical axis, so a change in it slides buyers along the curve they were already on. A and B relocate the demand curve, which takes a determinant outside the axes, and A additionally reverses the direction implied by a price cut. D moves the supply curve, and E puts the response on the sellers' curve when the stem reports what buyers did.
Show answer and explanation

C. A movement along the demand curve

The good's own price sits on the vertical axis, so a change in it slides buyers along the curve they were already on. A and B relocate the demand curve, which takes a determinant outside the axes, and A additionally reverses the direction implied by a price cut. D moves the supply curve, and E puts the response on the sellers' curve when the stem reports what buyers did.

Question 3

Question 3 of 15

Nominal output in Country X is 660 billion and the price index for the same year is 110. Real output equals

Real output is (660)/(110) 100=600. Choice A subtracts the index points from the nominal figure, B cuts 10 percent off nominal output instead of dividing by the index, D multiplies by 1.10 where the correction calls for division, and E adds the index points to the nominal level.
Show answer and explanation

C. 600 billion

Real output is (660)/(110) 100=600. Choice A subtracts the index points from the nominal figure, B cuts 10 percent off nominal output instead of dividing by the index, D multiplies by 1.10 where the correction calls for division, and E adds the index points to the nominal level.

Question 4

Question 4 of 15

In a single market, demand shifts right while supply shifts left at the same time. Which of the following outcomes is certain?

Stronger demand and weaker supply both push price up, so the price direction is settled before any shift sizes are known. The two shifts pull quantity opposite ways, so A and B each claim a direction the information cannot supply. D reverses the one result that is certain, and C denies that anything moved.
Show answer and explanation

E. Equilibrium price rises.

Stronger demand and weaker supply both push price up, so the price direction is settled before any shift sizes are known. The two shifts pull quantity opposite ways, so A and B each claim a direction the information cannot supply. D reverses the one result that is certain, and C denies that anything moved.

Question 5

Question 5 of 15

A macroeconomic variable rises from 80 in one period to 100 in the next period. The percentage increase over that period is

The increase is (20)/(80)=0.25, or 25 percent. Choice A divides the 20-unit change by the later value of 100, C and D report the levels themselves, and E divides the later value by the earlier one.
Show answer and explanation

B. 25 percent

The increase is (20)/(80)=0.25, or 25 percent. Choice A divides the 20-unit change by the later value of 100, C and D report the levels themselves, and E divides the later value by the earlier one.

Question 6

Question 6 of 15

If the nominal interest rate falls while the price level and real income stay put, the money-market graph shows

The nominal rate is the vertical-axis variable, so a fall in it moves the economy down the existing money-demand curve. A slides along a vertical supply line, where movement changes nothing. B would need the price level or real income to rise, and C and E move the supply curve, which the central bank sets and which the stem leaves untouched.
Show answer and explanation

D. movement down the money-demand curve

The nominal rate is the vertical-axis variable, so a fall in it moves the economy down the existing money-demand curve. A slides along a vertical supply line, where movement changes nothing. B would need the price level or real income to rise, and C and E move the supply curve, which the central bank sets and which the stem leaves untouched.

Question 7

Question 7 of 15

A price index constructed with a base-year value of 100 reads 140 in the current year. The current measured level is

An index of 140 against a base of 100 sits 40 points above it, and with a base of 100 those points are percent. B reverses the direction of the gap, C misplaces the decimal in the index reading of 140, D reads the whole index number as the increase, and E divides by 100 a second time and turns a ratio into a percent.
Show answer and explanation

A. 40 percent above the base-year value

An index of 140 against a base of 100 sits 40 points above it, and with a base of 100 those points are percent. B reverses the direction of the gap, C misplaces the decimal in the index reading of 140, D reads the whole index number as the increase, and E divides by 100 a second time and turns a ratio into a percent.

Question 8

Question 8 of 15

Demand and supply in the same market both increase. Which of the following results is unambiguously determined by the two shifts?

Both shifts push quantity up, so quantity must rise. Their price effects run opposite ways, which is why B, C, and E claim a price result the information cannot support, and D reverses the certain outcome.
Show answer and explanation

A. Equilibrium quantity rises.

Both shifts push quantity up, so quantity must rise. Their price effects run opposite ways, which is why B, C, and E claim a price result the information cannot support, and D reverses the certain outcome.

Question 9

Question 9 of 15

Real output grows 20 percent in one year and 10 percent in the next. Over the two years together, output grows

The two growth factors multiply: 1.20 1.10=1.32, a rise of 32 percent. Choice B adds the yearly rates and misses the growth earned on the first year's increase. A reports the second year alone, while D and E read growth factors as though they were rates, one for the first year and one for the two years together.
Show answer and explanation

C. 32 percent

The two growth factors multiply: 1.20 1.10=1.32, a rise of 32 percent. Choice B adds the yearly rates and misses the growth earned on the first year's increase. A reports the second year alone, while D and E read growth factors as though they were rates, one for the first year and one for the two years together.

Question 10

Question 10 of 15

A straight line rises by 12 vertical units as it runs 4 horizontal units to the right. The slope of that line is

Slope is rise over run: (12)/(4)=3. A inverts the ratio into run over rise, C reports the run by itself, D subtracts the run from the rise, and B adds the two.
Show answer and explanation

E. three

Slope is rise over run: (12)/(4)=3. A inverts the ratio into run over rise, C reports the run by itself, D subtracts the run from the rise, and B adds the two.

Question 11

Question 11 of 15

Which of the following events shifts the demand curve for a good rather than producing movement along it?

Income sits outside both axes, so a change in it relocates the whole demand curve. A and B describe movement along that curve rather than a shift of it. C and D both work on the supply side: one names a change in quantity supplied, the other a seller tax that raises the price buyers pay and moves them along the demand curve they already occupy.
Show answer and explanation

E. An increase in buyers' income

Income sits outside both axes, so a change in it relocates the whole demand curve. A and B describe movement along that curve rather than a shift of it. C and D both work on the supply side: one names a change in quantity supplied, the other a seller tax that raises the price buyers pay and moves them along the demand curve they already occupy.

Question 12

Question 12 of 15

The unemployment rate in Country X rises from 5.0 percent to 6.0 percent over one year. Which of the following describes that change correctly?

The rate rises by one percentage point, and one point measured against the original 5.0 is a 20 percent increase. Choice A calls the point a percent, B reverses the two units, C reads the new level as the change, and E uses the new rate of 6.0 as the denominator.
Show answer and explanation

D. An increase of 1 percentage point, which is 20 percent of the original rate

The rate rises by one percentage point, and one point measured against the original 5.0 is a 20 percent increase. Choice A calls the point a percent, B reverses the two units, C reads the new level as the change, and E uses the new rate of 6.0 as the denominator.

Question 13

Question 13 of 15

An index number series is built so that later readings can be compared with a reference year. By convention, the index value in that base year is

Setting the base period at 100 is what lets any later reading be read directly as a percentage of the reference year. A scales the base to zero, which would make the index a change rather than a level, and B scales it to one, which reports a bare ratio. C and E pick multiples no standard price index uses.
Show answer and explanation

D. 100.0

Setting the base period at 100 is what lets any later reading be read directly as a percentage of the reference year. A scales the base to zero, which would make the index a change rather than a level, and B scales it to one, which reports a bare ratio. C and E pick multiples no standard price index uses.

Question 14

Question 14 of 15

In a two-good production problem, an opportunity cost is reported as 2 hours of labor. Which of the following identifies the error in that report?

Opportunity cost in a two-good production problem is measured in units of the other good given up, so a figure still expressed in hours has stopped one step short. B and D demand price or money-cost data the calculation never needs, C denies that labor-hour data can yield the ratio when it can, and E sums the time spent on both goods, which answers no question the problem raised.
Show answer and explanation

A. Opportunity cost should name the output forgone, not the time spent.

Opportunity cost in a two-good production problem is measured in units of the other good given up, so a figure still expressed in hours has stopped one step short. B and D demand price or money-cost data the calculation never needs, C denies that labor-hour data can yield the ratio when it can, and E sums the time spent on both goods, which answers no question the problem raised.

Question 15

Question 15 of 15

On a graph with the nominal interest rate on the vertical axis and the quantity of money on the horizontal axis, which of the following shifts a curve?

The price level is not on either axis, so a change in it raises the nominal balances demanded and moves the whole money-demand curve. Choices A and C change the vertical-axis variable, and D and E describe movement along the existing curve.
Show answer and explanation

B. A rise in the overall price level

The price level is not on either axis, so a change in it raises the nominal balances demanded and moves the whole money-demand curve. Choices A and C change the vertical-axis variable, and D and E describe movement along the existing curve.

Quiz complete