An increase in the labor force participation rate will

make it more difficult to reduce unemployment

The demand for money increases when national income increases because

spending on goods and services increases

Which of the following is a basic tenet of classical economic analysis?

The economy is self-correcting to full employment.

An increase in which of the following will increase the value of the spending multiplier?

The marginal propensity to consume

According to the Keynesian model, which of the following would increase aggregate demand?

An increase in autonomous investment

aggregate supply curve shifted to the right

Which of the following will result in the greatest increase in aggregate demand?

$100increase gov expenditures,coupled w/ $100 decrease taxes

If the Federal Reserve lowers the reserve requirement, which would most likely occur?

Businesses will purchase more factories and equipment.

increase the money supply when gov. spending is decreased

Government spending is $100 and the multiplier is 5.

Which of the following could cause simultaneous increases in inflation and unemployment?

An increase in inflationary expectations

Which of the following is a key feature of Keynesian economics?

Macroeconomic equilibrium can ocur less than full employment

An increase in the money supply will have the greatest effect on real gross domestic product if

quantity of money demanded is not sensitive to interest rate

Which of following would cause the production possibilities curve shown above to shift outward?

Developing a more efficient steelmaking process

Commercial banks can create money by

Lending excess reserves to customers

X comparative adv. in food/Y comparative adv. in clothing

Which of the following is an example of structural unemployment?

An auto worker who is replaced by a robot

increasing government spending by $25,000

hort-run capital inflows to the United States will decrease.

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

There is frictional unemployment.

Which of the following is true of supply shocks?

tend to change both relative prices & general price level

An inflationary gap could be reduced by

an increase in the income tax rate

Close overseas military bases & relocate theoperations to US

Both countries will become better off

supply of money increases and market interest rates decrease

The educational attainment of the population

The real value of the United States dollar is determined by

the goods and services it will buy

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AP Econ Review

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Questions 60

Answers

1
An increase in the labor force participation rate will
make it easier to reduce unemployment
increase savings and decrease investment
increase investment and decrease savings
make it more difficult to reduce unemployment
2
Question below:
A
B
E
C
3
Question below:
B
D
C
A
4
All of the following are components of the money supply in the United States EXCEPT
demand deposits
checkable deposits
gold bullion
paper money
5
Question below:
III only
II and III only
I only
II and IV only
6
The demand for money increases when national income increases because
the money supply increases
interest rates increase
spending on goods and services increases
the public becomes more optimistic about the future
7
Which of the following is a basic tenet of classical economic analysis?
Saving is usually greater than investment.
Inflation is not a serious economic problem.
Economy may be in equilibrium at less than full employment.
The economy is self-correcting to full employment.
8
An increase in which of the following will increase the value of the spending multiplier?
The marginal propensity to consume
Personal income tax rates
The supply of money
Equilibrium output
9
Question below:
I only
II only
I and III only
III only
10
According to the Keynesian model, which of the following would increase aggregate demand?
An increase in autonomous investment
A decrease in unemployment compensation payments
A decrease in government expenditures on public works
An increase in the discount rate
11
Question below:
A
C
E
D
12
Which is most likely to increase if the public decides to increase its holdings of currency?
The interest rate
Disposable personal income
The reserve requirement
The price level
13
Question below:
III only
I only
I and II only
II only
14
Question below:
aggregate demand curve shifted to the right
aggregate supply curve shifted to the right
aggregate supply curve shifted to the left
aggregate demand curve shifted to the left
15
Question below:
C
A
B
16
Which of the following will result in the greatest increase in aggregate demand?
A $100 decrease in taxes
$100increase gov expenditures,coupled w/ $100 decrease taxes
A $100 increase in government expenditures
A $100 increase in taxes
17
Question below:
$100
$80
$20
$400
18
Question below:
A
D
B
E
19
Question below:
Government spending increases.
Government spending decreases.
Personal income taxes are increased.
The Federal Reserve sells bonds on the open market.
20
If the Federal Reserve lowers the reserve requirement, which would most likely occur?
Unemployment and inflation will both increase.
Businesses will purchase more factories and equipment.
The rate of saving will increase.
The budget deficit will increase.
21
Question below:
Size of population
Productivity of labor
Size of labor force
Level of taxation
22
Question below:
increase interest rates when gov. spending is increased
decrease the money supply when gov. spending is increased
decrease interest rates when gov. spending is decreased
increase the money supply when gov. spending is decreased
23
The long-run aggregate supply curve is likely to shift to the right when there is
an increase in the federal budget deficit
an increase in the cost of productive resources
an increase in productivity
a decrease in the money supply
24
Question below:
$500
$100
$300
$750
25
Question below:
Government spending is $300 and the multiplier is 5.
Gov. spending and GDP increase by $500 each.
Government spending is $100 and the multiplier is 5.
Consumption and gross domestic product increase by $500 each
26
Which of the following could cause simultaneous increases in inflation and unemployment?
A decrease in the velocity of money
An increase in inflationary expectations
A decrease in the money supply
An increase in the overall level of productivity
27
Which of the following is a key feature of Keynesian economics?
Supply creates its own demand
The level of saving depends mostly on interest rates
Macroeconomic equilibrium can ocur less than full employment
level of gov. expenditure depends mostly on interest rates
28
An increase in the money supply will have the greatest effect on real gross domestic product if
unemployment is very low
quantity of money demanded is not sensitive to interest rate
the marginal propensity to consume is low
the required reserve ratio is high
29
The consumer price index measures which of the following?
D
C
E
A
30
Which of following would cause the production possibilities curve shown above to shift outward?
Developing a more efficient steelmaking process
Rehiring laid-off steel workers
Reopening steel plants that had been closed
Using machinery missile production instead steel production
31
Commercial banks can create money by
Maintaining a 100 percent reserve requirement
Sending vault cash to the Federal Reserve
Lending excess reserves to customers
Buying Treasury bills from the Federal Reserve
32
Question below:
Y has comparative advantage in production of food & clothing
Y comparative adv. in food/X comparative adv. in clothing
X has comparative advantage in production of food & clothing
X comparative adv. in food/Y comparative adv. in clothing
33
Question below:
C
D
A
B
34
Question below:
C
E
B
D
35
Question below:
C
A
D
B
36
Which of the following is an example of structural unemployment?
A worker who loses his job during a recession
A computer programmer who leaves her job to move to Florida
An auto worker who is replaced by a robot
A worker who is engaged in unproductive work
37
Question below:
decreasing taxes by $25,000
increasing government spending by $100,000
increasing government spending by $25,000
increasing government spending by $33,333
38
Question below:
Long-run capital inflows to the United States will increase
hort-run capital inflows to the United States will decrease.
Short-run capital outflows from the US will decrease
Short-run capital inflows to the US will not change
39
Question below:
D
B
A
C
40
Which of the following relationships is illustrated by a short-run Phillips curve?
B
C
A
D
41
Which of the following is true if economy is producing at the full-employment level of output?
The balance of trade is in equilibrium.
The government’s budget is balanced.
There is frictional unemployment.
The unemployment rate is zero.
42
Which of the following is true of supply shocks?
tend to change both relative prices & general price level
They make the aggregate supply curve vertical
They affect only the general price level
43
An inflationary gap could be reduced by
an increase in government spending
an increase in the income tax rate
an increase in the supply of money
a decrease in the discount rate
44
Question below:
Combining two domestic military bases into one overseas base
Close overseas military bases & relocate theoperations to US
Canceling contracts with domestic producers for new airplane
Cutting retirement benefits to military personnel
45
If other things are held constant, an increase in United States imports will
E
D
A
B
46
Question below:
Both countries will become better off
Unemployment will increase in 1 country & decrease in other
Both countries will produce their commodity inefficiently
The two countries will become more independent of each other
47
Question below:
supply of money increases and market interest rates increase
demand for money decreases&market interest rates decrease.
supply of money increases and market interest rates decrease
demand for money increases & market interest rates increase.
48
If a large increase in total spending has no effect on real GDP, it must be true that
the price level is rising
the economy is experiencing high unemployment
aggregate supply has increased
the spending multiplier is equal to
49
Question below:
D
E
B
C
50
Question below:
The supply of money in circulation
The educational attainment of the population
The proportion of gross domestic product consumed
Personal income taxes
51
The real value of the United States dollar is determined by
the money multiplier
federal regulations regarding purchasing power
the goods and services it will buy
the marginal propensity to consume
52
Question Below:
E
C
B
D
53
Question below:
Consumer prices
Aggregate demand
Unemployment
Aggregate supply
54
The public’s desire to hold money as currency increases, what the impact on the banking system?
Banks would be more able to decrease aggregate supply.
Banks would be less able to expand credit.
Banks would be more able to expand credit.
Banks would be less able to decrease aggregate supply.
55
Question below:
8%
7%
11%
15%
56
Question below:
An increase in the reserve requirement
An increase in transfer payments
An increase in government expenditure only
Purchase of government securities by the Federal Reserve
57
Question below:
II and III only
III only
I and II only
IV only
58
Which of the following will most likely result from a decrease in government spending?
A decrease in aggregate demand
An increase in the price level
A decrease in aggregate supply
An increase in employment
59
According to Keynesian theory, the most important determinant of saving and consumption is the
level of employment
level of income
interest rate
price level
60
Question below:
D
B
C
E

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