Stagflation occurs when: (11.3)

The price level rises and output falls

Demand pull inflation occurs when (19)

Inflation occurs because the government increases the money supply

There is relatively more crowding out as the result of expansionary fiscal policy when (12.2)

The investment demand curve is elastic

The fed decides to sell bonds on the open market. How is this likely to affect interest rates and the dollar's value?

The interest rate increases and the value of the dollar increases

What are the different stages of business cycles? (11)

Expansion, peak, recession, trough

A recessionary gap exists when the short-run equilibrium level of real GDP: (11.4)

Is below the full-employment level of Real GDP

Which of the following will not cause the AD curve to shift to the right? (14)

Government decrease in the money supply

Japan decides to reduce taxes, causing growth. How does this affect the US Dollar? (13.5)

Reducing taxes in Japan increases the demand of the US Dollar

The circular flow diagram illustrates the flow of resources through an economy & demonstrates what principle? (8)

The equality of aggregate income & aggregate demand

Real GDP is different from nominal GDP in that: (9)

Real GDP adjusts for inflation or deflation, while nominal GDP does not

Long run aggregate supply is most likely to increase as a result of: (10.4)

Increased investment in capital

Which of the following statements is correct in regard to the federal budget deficit and the federal debt? (12.1)

When the deficit is negative, the debt decreases

The short-run Phillips curve indicates: (13.2)

Inverse relation between unemployment and inflation

Which of the following will not cause the AS curve to shift to the left? (17)

A decrease in corporate income taxes

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AP Macroeconomics Review

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Questions 26

Answers

1
How will an increase in investment from businesses and consumers affect aggregate demand? (12.8)
Aggregate demand will decrease
Aggregate demand will remain the same
Investment from businesses and consumers doesn't affect aggregate demand
Aggregate demand will increase
2
Which of the following explains why corn does not function well as money? (28)
Does not store value because it is perishable
Not standard in size and quality and difficult to account for
Not everyone wants corn causing consumers to trade multiple items
All of the above
3
Which of the following unemployment conditions in an economy can be the result of the business cycles? (10.8)
Frictional Unemployment
Seasonal Unemployment
Cyclical Unemployment
Structural Unemployment
4
Which of the following elements cannot be considered as a financial asset? (12.9)
Net Worth
Bonds
Bank deposits
Stocks
5
Stagflation occurs when: (11.3)
The price level stays the same and output increases
The price level rises and output falls
The price level rises for two consecutive quarters
The price level stays the same and output decreases
6
Which of the following would be considered contractionary monetary policy? (12.3)
The purchase of bonds
An increase in government spending
An increase in taxes
The sale of bonds
7
Demand pull inflation occurs when (19)
Inflation occurs because the government increases the money supply
Prices rise due to an increase in the costs of the factors of production
Inflation remains steady for a long period at a low rate
Inflation increases unsteadily and in excess of 10% per year
8
There is relatively more crowding out as the result of expansionary fiscal policy when (12.2)
Expansionary monetary policy accompanies the fiscal policy
The investment demand curve is elastic
The investment demand curve is inelastic
Government spending improves profit expectations among businesses
9
Which of the following variables can cause inflation? (12.10)
Money growth
Growth in bank capitals
Higher rate of employment
Higher rate of unemployment
10
The fed decides to sell bonds on the open market. How is this likely to affect interest rates and the dollar's value?
The interest rate increases and the value of the dollar increases
The interest rate decreases and the value of the dollar increases
The interest rate decreases, and the value of the dollar decreases
The interest rate increases, and the value of the dollar decreases
11
What are the different stages of business cycles? (11)
Expansion, peak, and growth
Expansion, peak, recession, trough
Growth, recession, trough
Growth, peak, expansion, trough
12
A recessionary gap exists when the short-run equilibrium level of real GDP: (11.4)
Is below the full-employment level of Real GDP
Decreases over time
Increases over time
Is above the full-employment level of Real GDP
13
Which of the following will not cause the AD curve to shift to the right? (14)
Government decrease in the money supply
Consumer/Business optimism on job growth
Increased income or wealth
Interest Rates dropping
14
Which of the following goods are not included in GDP? (5)
New homes and motor homes
Cars, motorcycles, and vans
Cereal & breakfast bars
Stocks and bonds
15
Japan decides to reduce taxes, causing growth. How does this affect the US Dollar? (13.5)
Reducing taxes in Japan causes the Fed to reduce taxes in the United States
Reducing taxes in Japan decreases the demand for the US Dollar
Reducing taxes in Japan increases the demand of the US Dollar
Reducing taxes in Japan has no effect on the US dollar
16
Depreciation of the dollar is most likely to: (13.1)
Decrease a trade surplus
Increase imports
Increase travel abroad
Increase exports
17
Which of the following is an example of fiat money? (26)
Shares of Stock
Yen
Silver
Gold
18
The circular flow diagram illustrates the flow of resources through an economy & demonstrates what principle? (8)
The impact of inflation in an economy
Income approach of calculating GDP
The equality of aggregate income & aggregate demand
The impact of unemployment in an economy
19
Real GDP is different from nominal GDP in that: (9)
Real GDP adjusts for inflation or deflation, while nominal GDP does not
Real GDP adjusts for unemployment, nominal GDP does not
Real GDP adjusts for changes in fed funds rate, while nominal does not
Nominal GDP adjusts for changes in price levels, while real GDP does not
20
The government measures inflation using: (10.2)
FED
GNP
CPI
GDP
21
Long run aggregate supply is most likely to increase as a result of: (10.4)
An increase in the real interest rate
Increased investment in capital
An increase in aggregate demand
An increase in the unemployment rate
22
Which of the following is not a characteristic of money? (27)
Fungibility
Immobility
Durability
Divisibility
23
Which of the following policies might the Fed adopt to counter a recession? (12.5)
An increase in the discount rate
The purchase of bonds
A decrease in taxes
An increase in government spending
24
Which of the following statements is correct in regard to the federal budget deficit and the federal debt? (12.1)
When the debt is negative, the deficit decreases
When the debt is positive, the deficit decreases
When the deficit is negative, the debt decreases
The deficit is the accumulation of past debts
25
The short-run Phillips curve indicates: (13.2)
Inverse relation between unemployment and inflation
Direct relation between price and quantity demanded
Direct relation between unemployment and inflation
Inverse relation between price and quantity demanded
26
Which of the following will not cause the AS curve to shift to the left? (17)
A decrease in corporate income taxes
A shortage in a major raw material such as oil
A major war breaking out involving 3 major economic powers
An increase in major damaging weather events like hurricanes

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