Which of the following is true when the velocity of money falls?

A money supply increase will have less effect on nominal GNP

total Demand for all goods & services in the economy / yr

An increase in which of the following would reduce the US balance-of-trade deficit?

The value of foreign currency relative to the US dollar

If the rr is 25% & banks hold no excess reserves, a sale of $400k of securities by the FED will

decrease the money supply by up to $1.6 million

An increase in labor productivity will most likely result in which of the following?

An increase in output & a decrease in inflation

If the Fed sells tons of gov't securities in the open market, which will occur?

Total amount of bank loans will decrease.

If the nominal GDP fell while the real GDP rose, which of the following must be true?

The inflation rate was negative.

To counteract a recession, the Federal Reserve should

buy securities and lower the discount rate

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Macro Practice 1

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Questions from College Board AP Macroeconomics Practice Test

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Questions 15

Answers

1
Which of the following is true when the velocity of money falls?
A change in the money supply will affect output only.
The FED will decrease the money supply
A money supply increase will have less effect on nominal GNP
Output will be great for a given money supply
2
On a short-run Phillips curve, high rates of inflation coincide with
high unemployment rates
low unemployment rates
low interest rates
high interest rates
3
Aggregate Demand:
is inversely related to the Price level
total Demand for all goods & services in the economy / yr
is positively related to the Income level
is measured in terms of total expenditure on goods & service
4
A stimulative fiscal policy combined with a restrictive monetary policy will necessarily cause
GDP in increase
Interest rates to rise
GDP in decrease
Interest rates to fall
5
If the gov't increases expenditures on goods & services & increases taxation the same amount...
Interest rates will decrease
AD will increase
The money supply will decrease
AD will be unchanged
6
An increase in which of the following would cause an increase in aggregate supply?
Prices of imports
Labor productivity
The wage rate
Consumer spending
7
An increase in which of the following would reduce the US balance-of-trade deficit?
US rate of inflation compared to other countries
US demand for foreign goods
The federal budget deficit
The value of foreign currency relative to the US dollar
8
If the rr is 25% & banks hold no excess reserves, a sale of $400k of securities by the FED will
decrease the money supply by up to $1.6 million
increase the money supply by up to $1.6 million
increase the money supply by up to $300,000
increase the money supply by up to $100,000
9
An increase in labor productivity will most likely result in which of the following?
A decrease in exports & an increase in unemployment
A decrease in both money demand & money supply
An increase in output & a decrease in inflation
An increase in interest rates & decrease in investment
10
If no action were taken, which changes would move the economy to its long-run equilibrium?
A decrease in wages
An increase in wages
A decrease in the expected price level
An increase in exports
11
If the Fed sells tons of gov't securities in the open market, which will occur?
Total amount of bank loans will decrease.
Total amount of banks loans will increase.
The money supply will increase.
Rates of interest will decrease.
12
If the nominal GDP fell while the real GDP rose, which of the following must be true?
Unemployment increased.
Net exports were negative.
The inflation rate was negative.
The average of stock prices rose while bond prices fell.
13
Which is most likely to cause an increase in the international value of the US dollar?
Expansionary monetary policy in the US
Higher real interest rates abroad
Lower US government expenditures
Higher US real interest rates
14
The relation between Multiple Propensity to Consume and the Multiple Propensity to Save is:
MPC = MPS
MPC x MPS = 1
MPS = 1 - APC
MPS = 1 - MPC
15
To counteract a recession, the Federal Reserve should
buy securities and raise the discount rate
sell securities and lower the discount rate
buy securities and lower the discount rate
sell securities and raise the discount rate

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