AP Macro Unit Three Exam
- 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.
- 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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