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AP Macro exam
| Question | Answer |
|---|---|
| A production possibilities curve that is concave to the origin (bowed out) implies that as more of a good is produced, the opportunity cost | increases |
| The long-run Phillips curve indicates that there are no trade-offs between | inflation and unemployment |
| Which of the following will happen if a country’s government reduces business taxes? | The short-run aggregate supply curve will shift to the right. |
| An increase in inventories will increase which component of gross domestic product | Government purchases |
| Assume a country’s banking system has ample reserves. Which of the following combinations of fiscal and monetary policy will reduce the price level? | Fiscal policy - Decrease government spending Monetary policy - increase administered interest rates |
| Which of the following would cause a movement from point S to point R on the short-run Phillips curve above? (It's a shift to the left along the Phillips curve, from natural rate of unemployment to the left) | Unanticipated increase in government spending |
| Crowding out occurs when investment spending by the private sector decreases as a result of | increasing interest rates caused by an increase in government borrowing |
| Assume that banks hold no excess reserves. A decrease in the required reserve ratio will cause total reserves in banks, the money multiplier, and the money supply to change in which of the following ways? | Total Reserves - no change Money multiplier - Increase Money supply - Increase |
| In the long run, a fully anticipated expansion of the money supply will | Increase both the nominal gross domestic product and price level |
| Which of the following transactions would increase the current account surplus in Japan’s balance of payments accounts? | A Japan-based company sells roasted coffee to Canada |
| Suppose countries Alphania and Betania produce electronics and apparel using identical resources. Which of the following is true if Alphania exports electronics to and imports apparel from Betania within a free-trade system ? | Betania has a comparative advantage in producing apparel, and Alphania has a comparative advantage in producing electronics |
| vWhich of the following will cause an increase in the equilibrium real interest rate? | An increase in investment demand |
| Assume a country’s banking system has limited reserves. Which of the following results when the central bank sells bonds to commercial banks? | The money supply decreases |
| Which of the following is true of a current account deficit? | It is financed by a surplus in the financial (capital) account. |
| Which of the following combinations of changes in income taxes, real interest rate, and investment spending is most likely to promote economic growth? | Income taxes - Decrease Interest Rate - Decrease Investment - Increase |
| Assume that the United States central bank conducts monetary policy with the goal of increasing the federal funds rate. How will the increase in the federal funds rate affect the value of the USD on the foreign exchange market and United States exports? | Value of dollar - increases Exports - decrease |
| As an indicator of an impending recession, inventories will most likely | increase as a result of a decrease in consumption |
| The demand curve for money shifts to the right when | the nominal gross domestic product increases |
| If the required reserve ratio is 10 percent, what is the maximum change in the money supply from John’s deposit of $50,000 cash into his checking account? | 450,000 |
| An increase in the number of discouraged workers causes the unemployment rate to | decrease, along with the labor-force participation rate |
| Which of the following will most likely result in an increase in aggregate demand? | A decrease in the central bank’s administered interest rates |
| In the country of Peirce, government spending decreased while the level of private savings increased. How will these changes affect the real interest rate and interest-sensitive spending in the short run? | The real interest rate will decrease, and interest-sensitive spending will increase. |
| Assume a country’s economy is currently in long-run equilibrium. What is the long-run effect of an increase in aggregate demand? | An increase in the price level |
| Assume a country’s banking system has limited reserves. If the government has increased the budget deficit and interest rates have remained constant, which of the following is true | Government spending is greater than tax revenue, and the central bank increases the money supply. |
| Suppose that the real interest rate is equal to seven percent and the expected inflation rate is currently three percent. If an oil crisis in the Middle East increases the expected inflation rate to four percent, the new nominal interest rate is equal to | 11% |
| Government investment in human capital is likely to shift | the aggregate demand curve to the right in the short run and the aggregate supply curve to the right in the long run |
| The consumer price index (CPI) does not measure the true cost of inflation because | improvements in the quality of goods or services are not fully reflected |
| Which of the following statements about inflation is true in the short run? | The economy’s real output increases when there is demand-pull inflation and decreases when there is cost-push inflation. |
Created by:
phillipchristopherr