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Unit 1 of 5

Unit 1: Basic Economic Concepts

Study guide for CLEP CLEP Principles of Macroeconomics — Unit 1: Basic Economic Concepts. Practice questions, key concepts, and exam tips.

163

Practice Questions

10

Flashcards

4

Key Topics

Key Concepts to Study

scarcity and opportunity cost
production possibilities curve
comparative advantage
circular flow model

Sample Practice Questions

Try these 5 questions from this unit. Sign up for full access to all 163.

Q1HARD

Suppose a country's GDP is $1 trillion, and its population is 100 million. If the GDP growth rate is 3% and the population growth rate is 1%, what is the approximate growth rate of GDP per capita?

A) 2%
B) 3%
C) 4%
D) 1%
E) 5%
Show Answer

Answer: A — 2% is correct because the growth rate of GDP per capita is the difference between the GDP growth rate and the population growth rate, which is 3% - 1% = 2%..

Q2MEDIUM

A rise in the minimum wage shifts SRAS to the

A) right
B) left
C) top
D) bottom
E) none
Show Answer

Answer: B — left is correct because higher input costs shift SRAS left.

Q3MEDIUM

An increase in labor productivity shifts SRAS to the

A) right
B) left
C) top
D) bottom
E) none
Show Answer

Answer: A — right is correct because higher productivity shifts SRAS right.

Q4EASY

A decrease in labor costs

A) increases aggregate demand
B) shifts SRAS left
C) decreases productivity
D) shifts SRAS right
E) increases expectations of economic downturn
Show Answer

Answer: D — shifts SRAS right is correct because lower input costs shift SRAS right.

Q5MEDIUM

Which factor contributes to wage stickiness?

A) High inflation expectations
B) Downward nominal rigidity due to contracts
C) Perfectly flexible prices
D) Low unemployment rates
E) High worker turnover
Show Answer

Answer: B — Downward nominal rigidity due to contracts is correct because contracts cause downward nominal rigidity.

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Study Tips for Unit 1: Basic Economic Concepts

  • Focus on understanding concepts, not memorizing facts — CLEP tests application
  • Practice with timed questions to build exam-day speed
  • Review explanations for wrong answers — they reveal common misconceptions
  • Use flashcards for key terms, practice questions for deeper understanding

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