AP MACRO FINAL

Which fiscal policy would be most appropriate for combating a recession?

E. Decrease taxes and decrease government spending

If the government increases its defense spending, the opportunity cost is

D. The next best alternative use for the money spent on defense

Appreciation of the English pound in the foreign exchange market could be caused by a decrease in which of the following?

C. Demand for the English pound by U.S. investors

Economic growth is best illustrated by which of the following?

D. A rightward shift of the long-run aggregate supply curve

If the combination of goods and services being produced in an economy lies on the production possibility curve

A. Any increase in the production of one of the goods or services incurs an opportunity cost in terms of the other good or service

Which group or groups are most likely helped by unanticipated inflation?

I. Borrowers paying fixed-interest ratesSavers earning fixed-interest rates
IlI. Financial institutions that issue long-term fixed-interest rate loans

A. I only

If the money supply is constant, then a decrease in money demand will result in which of the following?

C. Decrease Increase

According to the graph shown below, an increase in input prices will most likely cause the price level and employment to change in which of the following ways?

E. Increase Decrease

Which type of unemployment would not exist if fiscal and monetary policy effectively eliminated the business cycle?

B. Cyclical

If the average propensity to consume is less than one, then

B. The marginal propensity to save must be greater than the marginal propensity to save

If an economy is operating above the natural rate of unemployment, an appropriate stabilizing monetary policy would be to

D. Sell bonds on the open market

Which of the following combinations of fiscal and monetary policy would effectively reduce capital investment while not reducing output?

E. Contractionary Expansionary

If the real interest rate in the United States increase relative to the real interest rate in Belgium while domestic prices remained unchanged, then the U.S. dollar would

C. Appreciate, making Belgian imports from the United States cheaper

If an economy is experiencing a significant recession, which of the following will cause employment to increase and interest rates to decrease?

E. The government increases spending and reduces taxes

An increase in which of the following would most likely hinder economic growth?

A. Personal savings

Money is classified as inconvertible fiat when

A. It is not backed by a valuable commodity

A criticism of expansionary fiscal policy to stimulate the economy and contractionary monetary policy to restrict the economy is that they

C. Create cost-push inflation

In the long run, increases in the money supply result in which of the following changes in the price level and unemployment?

B. Increase Decrease

Crowding out is best described as

D. A decrease in gross private investment resulting from government borrowing

If the real interest rate in China increases relative to that of the rest of the world, capital flow and currency should change in which of the following ways?

A. Out
Appreciate

Which of the following is a combination of fiscal and monetary policy designed to offset the effects of a recession in an economy?

C. Reduce taxes and buy treasury bonds

Which of the following groups would be included in the labor force?

I. People classified as part-time employees
Il. People who want a job and are thinking about filling out job applications next month
III. Recently terminated factory workers who are actively seeking employment in the service sector

D. 1, Il, and III

Which of the following best describes the sequence of events that occurs when the Federal Reserve sells treasury securities on the open market?

C. Money supply decreases, interest rates increase, consumption and investment decrease, aggregate demand decrease, and output and price levels decreases

Assume that autonomous consumption is $500 and that the marginal propensity to consume is 0.9. If disposable income increases by $1,000, then saving will increase by how much?

E. $100

Assume that all input prices are flexible. A decrease in labor productivity will have which of the following effects on output, price level, and real wages?

E. Decrease
Decrease
Decrease

If the money supply increases by 5 percent, then which of the following must also increase by 5 percent for the real gross domestic product to remain unchanged?

D. The average price level

Which of the following will occur in a competitive market if the price exceeds the equilibrium price?

B. The price will decrease to eliminate the surplus

The inverse relationship between price level and real gross domestic product is shown by the

Aggregate demand curve

If consumers spend $.90 for each extra $1.00 of disposable income, then a $50 billion increase in government spending financed by a $50 billion increase in taxes will have which of the following effects on the economy?Aggregate demand will

C. Increase by $450 billion

A decrease in the government's budget surplus will most likely result in which of the following?

C. Higher interest rates

Which of the following would cause the Japanese yen to appreciate relative to the euro?

C. Increase in Japan's average price level

Demand-pull inflation is caused by which of the following?

C. Increased aggregate demand

Which of the following is true of the nominal interest rate is 5 percent and inflation unexpectedly increases from2 percent to 3 percent?

D. The real interest rate benefits fixed-rate borrowers at the expense of fixed-rate lenders

Which of the following would lead to an increase in the U.S. average price level?

B. Banks lend out less of their excess reserves

An increase in labor productivity will cause the

D. Long-run aggregate supply curve to shift right

Which is most likely to occur if the Federal Reserve acts to combat recession with open-market operations?

C. Bond prices will increase

Which action by the government will shift the short-run aggregate supply curve to the left?

E. An increase in business taxes

Assume that the Federal Reserve buys $100 billion worth of treasury securities on the open market. If the required reserve ratio is 20 percent, what is the maximum amount of new loans the baking system can create?

D. $400 billion

Before specialization and trade, the opportunity cost of producing one pair tennis shoes in Luella and Hampton is which of the following?

C. 1 pair of blue jeans
0.5 pairs of blue jeans

Which of the following statements best describes absolute advantage or comparative advantage for these two countries?

A. Hampton has a comparative advantage in tennis shoes, and Luella has a comparative advantage in blue jeans

According to theory of comparative advantage, Luella would find it advantageous to

A. Export blue jeans and import tennis shoes

A decrease in personal income taxes will most likely cause aggregate demand and short-run aggregate supply to change in which of the following ways?

B. Increase
Decrease

Based on the information in the table below, how much is gross domestic product?

D. $12 trillion

If firms face increased per unit production costs, then the short-run aggregate supply curve, short-run Phillips curve, and inflation will change in which of the following ways?

D. Shift to the left
Shift to the left
Decrease

Aggregate demand and aggregate supply would simultaneously decrease because of an increase in which of the following?

C. Business taxes

An increase in the government's budget deficit will have which of the following effects on the exchange rate and net exports?

A.
Appreciate
Depreciate

According to the graph below, which of the following is true about this economy in the long run?

E. Wages will increase as they adjust to the new price level and the short-run aggregate supply curve will shift to the left and restore long-run equilibrium

Assuming that input prices are flexible, an economy in recession will experience which of the following changes in output and price level in the long run?

A.
Increase
Increase

Assuming a system of flexible exchange rates, an open-market sale of bonds by the Federal Reserve while other countries do nothing will most likely have which of the following effects on the rate of inflation and the international value of the U.S. dollar?

A.
Decrease
Appreciate

The discount rate is the

A. Interest rate the Federal Reserve charges member banks for overnight loans

According to the information in the table below, what is the unemployment rate Kumbiktu?

C. 10%

An increase in taxes combined with an open-market purchase of bonds will result in a(n)

C. Indeterminate change in real gross domestic product and a decrease in the interest rate

If the marginal propensity to save is 0.2, then a $40 billion decrease in taxes could cause a maximum increase in output of how much?

D. $160 billion

An increase in labor productivity will shift the

E. Long-run aggregate supply to the left

In the long run, decreases in aggregate lead to which of the following changes in unemployment and price level?

A,
No Change
Decrease

Assume that the required reserve ratio is 10 percent. If Quiana Jackie Amber Brooklynn Mike Chastain (yes, that's one name) deposits $50 in cash into her checking account, what is the maximum change in demand deposits possible in the banking system?

C. $500

If the U.S. rate of economic growth increases relative to its trading partners and if exchanged rates are fixed, then the U.S. imports and exports will most likely change in which of the following ways?

A.
Increase
Decrease

Which of the following would be counted as part of gross domestic product?

C. The purchase of a new domestically produced tractor

59. A shift in the aggregate demand curve corresponds to

B. A shift in the short-run Phillips curve

Which of the following would cause a leftward shift in the short-run aggregate supply curve? A(n)

A. Increase in the expected price level