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Unit 5 Review! Flashcards | StudBud
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Unit 5 Review!
Unit 5 Review!
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Test your knowledge on Unit 5 AP Macroeconomics!
Flashcards
25 cards
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Questions
25
Answers
1
In the quantity theory of money, V represents?
The value of a good
The velocity of production
The value of a dollar
The velocity of a dollar
2
If we wanted to get out of a recession with no policy what would happen?
We would lower the reserve requirement and discount rate and buy bonds.
Government will increase spending and lower taxes
Wages and costs will go up which will increase aggregate supply
Wages and costs will decrease which will increase aggregate supply
3
What do economists use to measure economic growth and standard of living?
Nominal GDP
Real GDP per Capita
Real GDP
Growth Rate
4
What is not characteristic of supply-side fiscal policy?
Policy proposals are emphasized as long-run solutions to growth problems.
It focuses on incentives for people to work and produce
Government policies increase production by reducing business taxes
It is aimed at shifting the aggregate demand curve.
5
What is the purpose of the Monetary Policy?
Keep rich people from getting too rich
Contribute to economic growth and stability
Give Congress and the political parties more control of the economy
Same as the Fiscal Policy
6
An increase in which of the following would be most likely to increase long-run growth?
Subsidies to businesses for purchases of capital goods
Pension payments
Tariffs on imported goods
Unemployment compensations
7
The Phillips curve shows what type of relationship between inflation and unemployment?
casual
Positive
Inverse
Similar
8
When drawing the long run Philips Curve, you would show it by?
A downwards sloping line
An upwards sloping line
A vertical line along the x axis
A horizontal line along the y axis.
9
In the quantity theory of money, P and Y represent the price and quantity of?
All financial services sold in an economy
Manufacturing equipment purchased in the economy
All finished goods and services sold in an economy
All raw materials and natural resources sold in an economy
10
Crowding out refers to the decrease in...
Employment caused by higher inflation
Domestic production caused by increased imports
National output caused by higher taxes
Private investment due to increased borrowing by the government
11
Hyperinflation is typically caused by?
A large decline in corporate profits that lead to a decrease in production
High tax rates that discourage work effort
Trade surpluses that are caused by strong protectionist policies
Continuous expansion of the money supply to finance gov budget deficits
12
What government policies most likely result in long-run economic growth?
Education/training spending
Production/Investment incentive programs
All the above
Infrastructure spending
13
What is the formula for Quantity Theory of Money?
M x V / P x Y
M - V + P - Y
M x Y = P x V
M x V = P x Y
14
What can the Federal Reserve due to help prevent crowding out?
Decrease personal income taxes.
Selling government securities to banks
Increase reserve ratios
Lower the discount rate
15
What’s the trade-off of increasing government spending without raising taxes to close a recessionary gap?
Deficit spending
National Debt
Budget Surplus
Budget Balance
16
An increase in the government budget deficit is most likely to result in an increase in which of the following?
The money supply
The marginal propensity to consume
The real interest rate
Exports
17
An increase in which of the following is most likely to promote economic growth?
Real interest rates
The natural rate of unemployment
Consumption spending
Investment tax credits
18
Which of the following combinations of fiscal and monetary policies will correct a severe recession?
Decreasing income tax rates and increasing the money supply?
Increasing income tax rates and decreasing the money supply?
Increasing both the income tax rates and the money supply?
Decreasing both income tax rates and the money supply?
19
According to the short-run Phillips curve, lower inflation rates are associated with?
Higher inflation rates
Higher government spending
Greater labor-force participants
Higher unemployment rates
20
Economic growth occurs when?
When a nation’s input of goods and services increases over time
When a nation’s input of goods and services decrease
when a nation’s population of goods and services stay the same over time.
The economy grows no matter what
21
Which of the following monetary and fiscal policy mixes will reduce unemployment?
Selling government bonds in the open market and increasing gov spending
Buying government bonds in the open market and decreasing tax rates
Selling government bonds in the open market and increasing taxes
Buying government bonds in the open market and increasing taxes
22
The y axis when drawing a Philips Curve graph is labeled as the?
real output
price level
unemployment rate
inflation rate
23
An increase in aggregate demand will cause which of the following?
The long-run Phillips curve to shift to the right
The short-run Phillips curve to shift to the left
A movment along a given short-run Phillips curve
The long-run Phillips curve to become horizontal
24
Which of the following is true about the national debt of the United States?
It increases when exports decrease, and decreases when exports increase
It is the debt owed to foreign investors
It is the accumulation of past and current budget deficits and surpluses
It increases when gross domestic product increases
25
Fiscal Policy is the means by which the government keeps the economy stable through taxes and expenditures.
True
False
