Name

Period

Date

AP Macroeconomics Practice FRQs

1. Define an expansion and economic growth, and explain the difference
between the two concepts.

2. Define inflation, and explain why an increase in the price of donuts does not
indicate that inflation has occurred.

3. Assume that an economy can choose between producing food and producing
shelter at a constant opportunity cost. Draw a correctly labeled production
possibilities curve for the economy. On your graph:
a. Use the letter E to label one of the points that is efficient in production.
b. Use the letter U to label one of the points at which there might be
unemployment.
c. Us the letter I to label one of the points that is not feasible.

4. Refer to the graph below. Assume that the country is producing at point C.

a. Does this countrys production possibilities curve exhibit increasing

opportunity costs? Explain.
b. If this country were to go to war, the most likely move would be from
point C to which point? Explain.
c. If the economy entered into recession, the country would move from
point to C to which point? Explain.
5. Refer to the table below to answer the following questions. These two
countries are producing textiles and wheat using equal amounts of resources.

Bushels of wheat
Units of textiles

Weekly output per worker

Country A
Country B
15
10
60
60

6. Draw a correctly labeled graph showing the market for tomatoes in

equilibrium. Label the equilibrium price P E and the equilibrium quantity
QE. On your graph, draw a horizontal line indicating a price, labeled P C,
that would lead to a shortage of tomatoes. Label the size of the shortage on
your graph.

7. Draw a correctly labeled graph showing the market for cups of coffee in
equilibrium. On your graph, show the effect of a decrease in the price of
coffee beans on equilibrium price and equilibrium quantity in the market for
cups of coffee.

8. Draw a correctly labeled graph of a housing market in equilibrium. On your

graph, illustrate an effective legal limit (ceiling) on rent. Identify the quantity
of housing demanded, the quantity of housing supplied, and the size of the
resulting surplus or shortage.

9. Will each of the following transactions be included in GDP for the United
States? Explain why or why not.
a. Ford builds a new assembly plant in Detroit.
b. IBM sells used computers and furniture to a Chinese company.
c. Mr. Smith buys 100 shares of AT & T stock.
d. A New York jeweler sells 10 necklaces to a Canadian retailer.
e. An American buys a bottle of Argentinean wine at a Garden City liquor
f.

store.
A Beanie Baby factory produces too many Beanie Babies; they do not
all sell this year, so the producer adds the surplus Beanie Babies to
inventories.

10.The economy of Britannica produces three goods: computers, DVDs and

pizza. The accompanying table shows the prices and output of the three
goods for the years 2008, 2009 and 2010.
Year
2008
2009
2010
a.
b.
c.
d.
e.

Computers
Price
Quantity
$900
10
1,000
10.5
1,050
12

Price
$10
12
14

DVDs
Quantity
100
105
110

Price
$15
16
17

Pizza
Quantity
2
2
3

What is the percent change in computer production from 2008 to 2009?

What is the percent change in the price of pizza from 2009 to 2010?
Calculate nominal GDP in Britannica for 2008.
Calculate the real GDP in Britannica for 2008 using 2008 as the base year.
Calculate real GDP in Britannica for 2010 using 2008 as the base year.

11.Use the data provided below to calculate each of the following. Show how
you calculate each.
a. The size of the labor force.
b. The labor force participation rate.
c. The unemployment rate.

Population age 16 and older = 12 million

Employment = 5 million
Unemployment = 1 million

12.What is the labor market classification of each of the following individuals?

Be as specific as possible, and explain your answer.
a. Julie has a graduate degree in mechanical engineering. She works full
time mowing lawns.

b. Jeff was laid off from his previous job. He would very much like to work
at any job, but, after looking for work for a year, has stopped looking
for work.
c. Ian is working 25 hours per week at a bookstore, and has no desire to
work full time.
d. Randy has decided to take a year off from work to stay home with his
daughter.

13.
a. Define the natural rate of unemployment.
b. The natural rate of unemployment is made up of which of the types of
unemployment?
c. Explain how cyclical unemployment relates to the natural rate of
unemployment.
d. List three factors that can lead to a change in the natural rate of
unemployment.

14.You borrow $1,000 for one year at 5% to buy a couch. Although you did not
anticipate any inflation, there is unexpected inflation of 5% over the life of
your loan.
a. What was the real interest rate on your loan?
b. Explain how you gained from the inflation.
c. Who lost as a result of the situation described? Explain.