AP Macro Unit Three Exam

30 Questions | Total Attempts: 154

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Psychometrics Quizzes & Trivia

Questions and Answers
  • 1. 
    Which of the following best describes aggregate supply?
    • A. 

      The amount buyers plan to spend on output

    • B. 

      A schedule showing the relationship between inputs and outputs

    • C. 

      A schedule indicating the level of real output that will be purchased at each possible price level

    • D. 

      A schedule indicating the level of real output that will be produced at each possible price level

  • 2. 
    A change in which of the following will cause the aggregate demand curve to shift?
    • A. 

      Energy prices

    • B. 

      Productivity rates

    • C. 

      Consumer wealth

    • D. 

      Prices of consumer goods

  • 3. 
    The SRAS curve will shirt to the right when
    • A. 

      Energy prices increase

    • B. 

      Government regulation increases

    • C. 

      Prices of inputs decrease

    • D. 

      Productivity rates decrease

  • 4. 
    A rightward shift in the AD curve with a horizontal AS curve will cause employment and the price level to change in which of the following ways
    • A. 

      Employment increases, Price level increases

    • B. 

      Employment increases, Price level decreases

    • C. 

      Employment increases, Price level has no change

    • D. 

      Employment decreases, Price level decreases

  • 5. 
    An increase in the capital stock will cause the
    • A. 

      Aggregate demand curve to shift left

    • B. 

      PPC to shift in

    • C. 

      LRAS curve to shift right

    • D. 

      Philips curve to shift out

  • 6. 
    Which of the following is a fiscal policy that would increase AD in the Keynesian model?
    • A. 

      A decrease in personal income taxes

    • B. 

      A decrease in government spending

    • C. 

      An increase in corporate income taxes

    • D. 

      A sale of government bonds by the Federal Reserve

  • 7. 
    An increase in labor productivity would most likely cause real GDP and the price level to change in which of the following ways?
    • A. 

      Real GDP increase, price level increase

    • B. 

      Real GDP increase, price level decrease

    • C. 

      Real GDP increase, price level has no change

    • D. 

      Real GDP decrease, price level increase

  • 8. 
    1. If Maria Escalera's disposable income increase from $600 to $650 and her level of personal consumption expenditures increase from $480 to $520, you may conclude that her marginal propensity to 
    • A. 

      Consume is 0.8

    • B. 

      Consume is 0.4

    • C. 

      Consume is 0.25

    • D. 

      Save is 0.25

  • 9. 
    In the Keynesian aggregate-expenditure model, if the MPC is 0.75 and gross investment increases by $6 billion, equilibrium GDP will increase by 
    • A. 

      $6 billion

    • B. 

      $8 billion

    • C. 

      $12 billion

    • D. 

      $24 billion

  • 10. 
    In the Keynesian aggregate-expenditure model, the simple spending multiplier can be calculated by dividing 
    • A. 

      The initial change in spending by the change in real GDP

    • B. 

      The change in real GDP by the initial change in spending

    • C. 

      One by one plus the marginal propensity to consume

    • D. 

      The propensity to save by the propensity to consume

  • 11. 
    Which of the following will cause the consumption schedule to shift upward?
    • A. 

      An increase in the amount of consumer indebtedness

    • B. 

      A reduction in the wealth or assets held by consumers

    • C. 

      An expectation of future declines in the consumer price index

    • D. 

      An expectation of future shortages of essential consumer goods

  • 12. 
    The investment demand curve will shift to the right as a result of
    • A. 

      Excess productive capacity

    • B. 

      An increase in corporate business taxes

    • C. 

      Firms becoming more optimistic with respect to future business conditions

    • D. 

      A decrease in the real interest rate

  • 13. 
    Automatic stabilizers in the economy include which of the following?
    • A. 

      A progressive personal income tax and Congressional action that increases tax rates

    • B. 

      Unemployment compensation and Congressional action that increases tax rates

    • C. 

      A progressive personal income tax and unemployment compensation

    • D. 

      A progressive personal income tax and Philips reductions

  • 14. 
    In order to be called an automatic, or built-in, stabilizer, which of the following must taxes do in a recessionary period and in an inflationary period?
    • A. 

      Recessionary period decrease, inflationary period decrease

    • B. 

      Recessionary period decrease, inflationary period increase

    • C. 

      Recessionary period increase, inflationary period decrease

    • D. 

      Recessionary period increase, inflationary period increase

  • 15. 
    In which of the following ways will increases in the SRAS change the price level and unemployment?
    • A. 

      Price level increase, unemployment no change

    • B. 

      Price level decrease, unemployment decrease

    • C. 

      Price level decrease, unemployment increase

    • D. 

      Price level decrease, unemployment no change

  • 16. 
    The balanced-budget multiplier indicates that
    • A. 

      Equal increases in government spending and taxation will make a recession worse

    • B. 

      Equal increases in government spending and taxation will increase total spending

    • C. 

      Government deficits might have contractionary impact on the economy

    • D. 

      The level of GDP is never less than the level of disposable income

  • 17. 
    Assume the AS curve is upward sloping and the economy is in a recession. If the government increases both taxes and government spending by $25 billion, the price level and real GDP will most likely change in which of the following ways?
    • A. 

      Price level increase, real GDP increase

    • B. 

      Price level increase, real GDP decrease

    • C. 

      Price level increase, real GDP no change

    • D. 

      Price level decrease, real GDP decrease

  • 18. 
    (Use graph 3.1) Which of the following are true statements about total income?
    • A. 

      Equilibrium total income is $800 billion

    • B. 

      Planned investment is $50 billion

    • C. 

      Equilibrium aggregate expenditure is $600 billion

    • D. 

      Planned investment is $50 billion AND equilibrium aggregate expenditure is $600 billion

  • 19. 
    (Use graph 3.1) In the graph, if full-employment GDP is $800 billion, the minimum increase in autonomous expenditures that would be required to move total income to full employment income is
    • A. 

      $200 billion

    • B. 

      $100 billion

    • C. 

      $50 billion

    • D. 

      Zero because total income is already at full employment

  • 20. 
    (use graph 3.1) In the graph, the values of the MPC, MPS and simple expenditure multiplier are
    • A. 

      MPC 0.5, MPS 0.5, Multiplier 4

    • B. 

      MPC 0.6, MPS 0.4, Multiplier 4

    • C. 

      MPC 0.75, MPS 0.25, Multiplier 4

    • D. 

      MPC 0.8, MPS 0.2 Mutiplier 4

  • 21. 
    Which of the following fiscal policy actions would be most effective in combating a recession?
    • A. 

      $25 billion decrease in taxes, $25 billion decrease in government spending

    • B. 

      $25 billion decrease in taxes, $25 billion increase in government spending

    • C. 

      $25 billion decrease in taxes, no change in government spending

    • D. 

      $25 billion increase in taxes, $25 billion increase in government spending

  • 22. 
    If the primary goal is to reduce inflation, which of the following fiscal policy actions would be appropriate during a period of a rapidly increasing consumer price index?
    • A. 

      Increase transfer payments

    • B. 

      Increase personal income taxes

    • C. 

      Reduce government spending on defense and increase transfer payments

    • D. 

      Reduce government expenditures for space research and increase personal income taxes

  • 23. 
    As the average price level decreases, the purchasing power of people's cash balances increases. This results in an increase in spending. This effect is called
    • A. 

      The Keynesian effect

    • B. 

      The real-balance effect

    • C. 

      The money illusion effect

    • D. 

      The Phillips effect

  • 24. 
    A severe, sustained increase in oil prices would most likely cause the SRAS, LRAS, and PPC to change in which of the following ways?
    • A. 

      SRAS decrease, LRAS no change, PPC shift outward

    • B. 

      SRAS decrease, LRAS decrease, PPC shift outward

    • C. 

      SRAS decrease, LRAS decrease, PPC shift inward

    • D. 

      SRAS increase, LRAS no change, PPC no change

  • 25. 
    A decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following occurs?
    • A. 

      Government spending decreases to maintain a balanced budget

    • B. 

      Consumption spending incrases because disposable personal income increases

    • C. 

      Investment spending decreases because disposable personal income increases

    • D. 

      Consumer spending increases and government spending decreases

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