AP Macro Final

Scarcity in economics is most accurately described as the condition of:

C. unlimited wants and limited resources

Which of the following would increase the supply of a good?

B. A decrease in the price of inputs used to produce the good

In a circular flow diagram, households primarily:

A. provide labor and consume goods and services

Which of the following transactions would be included in the U.S. GDP?

D. The purchase of a new car produced in the United States

If the nominal GDP increases while real GDP decreases, what must be true?

D. The inflation rate was positive

Which of the following is most likely to reduce the natural rate of unemployment?

B. More job training programs

The aggregate demand curve slopes downward because:

D. higher price levels reduce net exports

An increase in which of the following will shift the short-run aggregate supply (SRAS) curve to the right?

C. Worker productivity

If the economy is operating below full employment, which fiscal policy is appropriate?

A. An increase in government spending

Crowding out occurs when:

A. private investment decreases due to increased government borrowing

What is the effect of an open market purchase of government bonds by the Federal Reserve?

B. Increase in the money supply and a decrease in interest rates

Which of the following combinations of monetary and fiscal policy would reduce inflation?

D. Contractionary fiscal policy and contractionary monetary policy

In the long run, an increase in aggregate demand will result in:

C. higher prices and no change in real output

The Phillips Curve shows the short-run trade-off between:

A. inflation and unemployment

If the Federal Reserve decreases the reserve requirement, what is the likely effect on the economy?

C. Increase in the money supply and lower interest rates

A country has a comparative advantage in producing a good if it:

A. has the lowest opportunity cost in producing the good

Which of the following would cause an appreciation of a country’s currency in the foreign exchange market?

B. An increase in demand for the country's exports

An economy is in long-run equilibrium when:

A. aggregate demand equals aggregate supply at full employment

If the marginal propensity to consume (MPC) is 0.8, what is the spending multiplier?

C. 5  (1 / (1 – 0.8) = 5)

Structural unemployment occurs when:

C. workers lack the skills needed for available jobs

A trade deficit occurs when:

A. a country imports more than it exports

If a country experiences an increase in productivity, which of the following is likely to occur?

D. An increase in real GDP

Which of the following is an example of expansionary monetary policy?

C. Decreasing the discount rate

What is the primary goal of contractionary fiscal policy?

B. Decrease the inflation rate

If the economy is experiencing a recessionary gap, which policy mix would most likely close the gap?

B. Increasing government spending and increasing the money supply

When the economy is operating at full employment, what happens to the natural rate of unemployment?

C. It remains unchanged

Which of the following is true of a balanced budget multiplier?

B. It is equal to one regardless of the marginal propensity to consume