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Unit 2 of 5

Unit 2: Measuring Economic Performance

Study guide for CLEP CLEP Principles of Macroeconomics — Unit 2: Measuring Economic Performance. Practice questions, key concepts, and exam tips.

69

Practice Questions

19

Flashcards

8

Key Topics

Key Concepts to Study

GDP calculation methods
inflation and CPI
unemployment types
business cycle phases
AD-AS model shifts
Phillips curve (short-run vs long-run)
natural rate of unemployment
wage and price stickiness

Sample Practice Questions

Try these 5 questions from this unit. Sign up for full access to all 69.

Q1EASY

What causes AD curve to shift right?

A) Increase in consumer spending
B) Decrease in interest rates
C) Decrease in government spending
D) Increase in taxes
E) Decrease in exports
Show Answer

Answer: A — Increase in consumer spending is correct because increased consumer spending is a determinant of AD.

Q2MEDIUM

Which of the following is a limitation of using GDP as a measure of welfare?

A) It includes income from foreign investments
B) It does not account for income inequality
C) It includes transfer payments
D) It only measures consumption
E) It only measures investment
Show Answer

Answer: B — It does not account for income inequality is correct because GDP does not account for income inequality, making A a less relevant concern.

Q3HARD

In the long run, what is the relationship between the LRAS curve and the price level?

A) LRAS curve is upward sloping
B) LRAS curve is downward sloping
C) LRAS curve is vertical and price level is flexible
D) LRAS curve shifts with changes in price level
E) LRAS curve is horizontal
Show Answer

Answer: C — LRAS curve is vertical and price level is flexible is correct because LRAS is vertical, reflecting the economy's potential output. A and B are incorrect as LRAS is not sloping.

Q4MEDIUM

Which of the following would be included in GDP?

A) Purchase of a used car
B) Purchase of a new car
C) Purchase of a foreign car
D) Sale of a stock
E) Purchase of a bond
Show Answer

Answer: B — Purchase of a new car is correct because purchase of a new car is included in GDP as it represents production of a new good, unlike used cars or financial assets.

Q5MEDIUM

Which of the following is included in the calculation of GDP using the income approach?

A) Only wages and rents
B) Only profits and interest
C) Wages, rents, profits, and interest
D) Only taxes and subsidies
E) Only depreciation and indirect taxes
Show Answer

Answer: C — Wages, rents, profits, and interest is correct because the income approach includes all types of income..

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Study Tips for Unit 2: Measuring Economic Performance

  • 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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