AP Macroeconomics Final

Which of the following is generally not considered a macroeconomic goal?

E
Zero frictional unemployment

Which of the following is consistent with the law of demand?

D
A decrease in the price of mouse pads causes an increase in the amount of mouse pads purchased

The PPC above represents the total amount of capital and consumer goods and economy is capable of producing. What is illustrated by the change shown above?

B
And advancement in technology related to the production of capital goods

The study of inflation is part of

B
Macroeconomics

The statement "you're better off buying a house then renting" is an example of a

B
Normative statement

GDP and an economy is $4600 billion. Consumer expenditures are $3500 billion, the government purchases are $900 billion, and gross private domestic investment is $400 billion. Net exports are

D
-$200 billion

Which of the following is true if the economy is producing at the full employment level of output?

C
There is frictional unemployment

GDP tends to under estimate the amount of economic activity in the US because it excludes

E
The unpaid work performed by homemakers

Which of the following shifts is a consistent response to increases in interest rates?

D
A decrease in the AD curve do to lower levels of consumption and investment spending.

The CPI attempts to measure changes in

A
A market basket of consumer goods from month-to-month

Which of the following transactions would represent an addition to my nations GDP?

C
The government increases its spending on infrastructure repair projects.

A reserve requirement of 20% will yield a money multiplier of

C
5

Output increases along the AD curve as

B
Price level decreases

How are real GDP and nominal GDP different?

D
Real GDP has been adjusted for price level changes while nominal GDP has not

The unemployment rate in the country is 10%. Total population in the country is 500 million and the size of the labor force is 300 million. Calculate the number of unemployed workers in this economy.

E
30 million

Which of the following would most likely cause a rightward shift in an economy's short run aggregate supply curve

C
An across-the-board reduction of wages in the manufacturing sector

The typical result of an adverse supply shock, such as worldwide increase in oil prices, is for

B
Falling output to a company accelerating inflation

Under which of the following conditions would a restrictive monetary policy be most appropriate?

A
High inflation

If real GDP declines in a given year, nominal GDP

E
May rise or fall

An increase in the interest rates in the US will have the following affect on US net exports and aggregate demand, ceteris paribus

C
net exports -->decrease
aggregate demand-->Decrease

Which of the following would most likely cause an increase in the long run aggregate supply?

D
Technological advances lead to widespread improvements in plant and equipment

The economy experiences a rise in price level accompanied by increases in unemployment. Which of the following may have caused this change?

A
The price of a oil, a major natural resource, increases

This monetary policy has the effect of increasing equilibrium output and price level.

E
Buying bonds on the open market

Is the MPC in an economy is .75, government could eliminate a recessionary gap of $100 billion by increasing standing by

A
$25 billion

When output levels are below full employment, the intersection of aggregate demand and aggregate supply may be found

B
To the left of the LRAS curve

All of the following are components of the money supply in the US except

B
Gold

Open market operations referred to which of the following activities?

C
The buying and selling of government securities by the Federal Reserve

Assume the reserve requirement is 10%. If an individual deposits $100 in a commercial bank, what is the initial increase in excess reserves?

B
90

Which of the following is not one of the functions of money?

D
Factor of production

If nominal interest rates were to decrease, a response in the money market would be

A
An increase in the quantity of money demanded

Federal Reserve may determine how much money thanks must have reserved by setting the

E
Reserve requirement

If the price index is 155, then we can determine that

C
Prices are 55% higher than they were in the base year

Which of the following is not a tool of monetary policy?

B
Decreasing marginal tax rates

What happens to bank reserves and interest rates when the Federal Reserve buys bonds from commercial banks on the open market?

C
Bank reserves --> increase
Interest rates --> decrease

When commercial banks lend each other money for short-term loans, the rate they charge is called the

B
Federal funds rate

Which of the following groups would benefit from unanticipated inflation?

B
II only
(Fixed rate borrowers)

The consumer price index measures which of the following?

A
The changeover time of the weighted prices of a particular group of goods and services

If the nominal interest rate is 6% and the expected rate of inflation is 4%, the real interest rate is

D
2%

If the MPC is .8 and both taxes in government purchases increase by $50 billion, GDP will

A
Increase by $50 billion

If equilibrium income rises by a total of $50 billion in response to an increase in investment of $10 billion, then the MPS is

B
0.2

Assume the federal budget deficit is increasing in the US. How will the increased borrowing by government likely affect interest rates and the international value of the dollar, ceteris paribus?

D
Interest rates --> increase
International value of the dollar --> appreciate

Positive economic growth can be shown as

D
A rightward shift of the long run aggregate supply curve

If you received a 1% raise in your salary last year the CPI increased by 2.5%, then your

B
Real income has decreased

On the AD-AS graph, an increase in government spending is illustrated by

A
A rightward shift of aggregate demand

Refer to the graph above. What combination of actions must fiscal policy makers recommend for the economy represented?

D
I and II only
(I decrease in government spending
II decrease taxes)

Refer to the graph above. If no policy action is taken, by what mechanism will the economy most likely self correct?

A
A decrease in nominal wage rates

Assume the US has the current account deficit of $200 billion and a capital accounts are plus $150 billion. What is the value of the nations official reserves?

D
+$50 billion

Federal Reserve can increase the money supply by

C
Buying government bonds on the open market

Which of the following combinations of monetary and fiscal policies is coordinated to increase output?

E
Monetary policy --> purchase securities
Fiscal policy --> decrease taxes

A decrease in an economy's investment in physical capital would

A
Slow down it's rate of economic growth

Assume trade is balanced on the US current account. The US will experience a trade deficit if

C
The dollar becomes stronger (appreciates) against foreign currencies

If the government simultaneously engages in expansionary monetary and fiscal policies which of the following is a likely affect on interest rates and unemployment?

E
Interest rates --> either increase or decrease
Unemployment --> decrease

Which of the following is an example of an automatic stabilizer?

E
Unemployment compensation increases as workers lose their jobs

Crowding out due to government borrowing occurs when

E
Higher interest rates decrease private sector investment

According to Keynesian theory, decreasing taxes and increasing government spending will most likely change consumption expenditures and unemployment in which of the following ways?

C
Consumption --> increase
Unemployment --> decrease

Positive shocks in short run aggregate supply will

B
Shift the short run Phillips curve to the left

If an economy improves technology, what can be expected to happen to price levels in real GDP, ceteris paribus?

D
Price level --> fall
Real GDP --> rise

Economic growth is best defined as

C
Gains in potential GDP brought about due to increased levels of technology and capital stock

The intersection of the aggregate supply curve in the aggregate demand curve occurs at the economies equilibrium level of

C
Real National output and the price level

Economics is a

B
Social science