AP ECON FINAL

Use Table 11-5. The value of Year 4's output in real dollars is:

$36

Use the "Demand for Loanable Funds" Figure 29-2. According to the accompanying figure, when the interest rate is 6%, the quantity demanded of loanable funds will equal:

$50 billion.

If the disposable income increases by $1000 and the consumer spending increases by $800, then the marginal propensity to consume is:

0.8

Use the "Alphaland and Omegaland" Figure 4-4. The opportunity cost of producing 1 tire in Alphaland is ________ radio(s), while the opportunity cost of producing 1 tire in Omegaland is ________ radio(s).

1/2, 2

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:

5%

Use Table 6-1. If the price of lemonade is $1 per cup, total quantity of lemonade supplied will be:

90 cups

Use the "Supply and Demand in the Orange Juice Market" Figure 7-3. Assume that a hurricane hits Florida. In response, what would be the most likely equilibrium point in the orange juice market illustrated?

A

Use the "Demand for Coconuts" Figure 5-1. If coconuts are considered a normal good and the overall income level of consumers is falling, then the movement that would take place in the model could be:

A to C

Expansionary fiscal policy:

An increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output

A supply shock:

An unexpected event that causes the short-run aggregate supply curve to shift

Government spending and taxation rules that cause fiscal policy to be expansionary when the economy contracts and contractionary when the economy expands are known as:

Automatic stabilizers

If the British pound appreciates against the dollar, this will make:

British exports more expensive but lower the price of American exports to Britain.

Use the "International Capital Flows" Figure 41-2. At an interest rate of 4%, the excess of loanable funds supplied by ______ lenders will be exported to ______ borrowers.

British; American

In the soft drink market, an increase in the price of sugar, a necessary ingredient for soft drinks, and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following?

Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

Use the "Monetary Policy and the AD-SRAS Model" Figure 31-8. An increase in the money supply is most likely to cause a shift:

From AD to AD'

Use the "Consumer and Capital Goods" Figure 3-3. Point Z:

Is unattainable, all other things unchanged.

Which of the following schools of thought is the MOST likely to advocate the use of fiscal policy in fighting recessions?

Keynesian

Which of the following statements is broadly agreed upon by modern macroeconomists?

Monetary and fiscal policy can both be effective at decreasing unemployment in the short run, but not in the long run

Which of the following statistics is used to measure changes in the prices that firms pay for goods and services?

Producer Price Index

Which of the following choices would be a factor that contributes to a nation's rapid long-run economic growth?

Research and development

Suppose that political instability in the Middle East temporarily interrupts the supply of oil to the United States. Which of the following is most likely to occur?

The SRAS curve shifts left, output decreases, and price increases

Which are the two markets represented in the simplest circular-flow diagram?

The market for goods and services and the market for factors/resources

When countries replaced gold and silver coins with paper money exchangeable for certain amounts of precious metals, the monetary system evolved from:

Using commodity money to using commodity backed money

A bank run occurs when:

a bank experiences an extraordinarily large volume of withdrawals

Use Table 8-1. In response to popular anger over the high price of fried Twinkies, the government imposes a price ceiling of $1.20 per fried Twinkie. From this table, the price ceiling causes:

a shortage of 3,000 fried twinkies

Diminishing returns to physical capital implies that, when human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to:

a smaller increase in productivity

If a country sold more goods and services to the rest of the world than they purchased from the other countries, then the country has a:

a trade surplus

Investment spending refers to:

adding to physical capital

If a county follows a contractionary monetary policy, with everything else remaining unchanged, then it leads to:

an increase in interest rates and appreciation in currency

Use the "Supply of Loanable Funds" Figure 29-4. According to the accompanying figure, when the interest rate rises from 6% to 8%, then the:

an increase in loanable funds by $20 Billion

Assume an economy that is contracting and unemployment is rising. Which of the following would be a logical explanation for a sudden fall in the unemployment rate even while the economy continues to contract?

an increase in the number of discouraged workers

Use the "DVD Market" Figure 6-2. At a rental price of $6, there will be:

an shortage supply of 20 DVD rentals

Use the "Classical Versus Keynesian Macroeconomics" Figure 35-1. According to the Keynesian view, if this economy shifts from AD2 to AD1, let's say due to a large increase in government spending, then:

both the price level and the real GDP will increase

The short-run alternation between economic downturns, recessions, and economic upturns and expansions is known as the:

business cycle

The Federal Reserve System is the _______ for the United States.

central bank

Which of the following factors cause a movement along the demand curve?

change in the price of the good

Real GDP is nominal GDP adjusted for:

changes in prices

Fiscal policy attempts to affect the level of overall spending in the economy by changes in:

changes in tax policy or government spending

A floating exchange rate is:

determined by the market

Economists frequently use GDP per capita to better reflect:

differences in living standards across countries

Total income households have after paying taxes and receiving government transfers is called:

disposable income.

Use the "Consumer and Capital Goods" Figure 3-3. The movement from Curve 1 to Curve 2 indicates:

economic growth

The simplest circular-flow model shows the interaction between households and firms. In this model:

firms supply goods and services to households, which, in turn, supply factors of production to firms.

The modern tools of macroeconomic policy are:

fiscal policy and monetary policy

In the long run, wages and prices are considered to be:

flexible

The market in which foreign currencies are traded is known as the:

foreign exchange market

Use the "International Capital Flows" Figure 41-2. At an interest rate of 4%, the quantity of loanable funds demanded by American borrowers is ______ the quantity of loanable funds supplied by American lenders

greater than

The skills, training, and education possessed by workers contribute to economic growth and are known as:

human capital.

An increase in the price level that is extremely rapid (say 400% per year) is called:

hyperinflation

The term "Human capital" describes:

improvement in a worker's skills made possible by education, training and knowledge.

If goods A and B are substitutes, a decrease in the price of good B will:

increase the demand of good B

If the interest rate on CDs increases from 5% to 10%, the opportunity cost of holding money will ______ and the quantity demanded of money will ______.

increase; decrease

The concept of monetary neutrality describes a situation in the long run when:

increases in the money supply have no effect on real variables such as GDP but only raises the price level

When the budget is in deficit, the government generally:

increases taxes

Stagflation is a combination of:

increasing unemployment and increasing inflation and stagnation of demand

Increases in the average level of prices is called:

inflation

Roads, telephone lines, power facilities, and schools are examples of a nation's:

infrastructure

Monetary policy attempts to affect the overall level of spending in the economy by changes in:

interest rates.

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

issuing bonds

When a corporation borrows money from lenders in exchange for a fixed share of the firm's assets and potential profits, the corporation is:

issuing stocks

The government has a budget deficit if:

it spends more than it earns

A binding price ceiling is designed to:

keep prices low

Macroeconomics deals with:

large-scale or general economic factors, such as interest rates and national productivity.

If the Federal Reserve wanted to increase the money supply, it could:

lower the reserve requirement

Banks create money when they:

make loans

All of the following are responsibilities of the Fed EXCEPT:

mint bills and coins

Fiat money is:

money because the government asserts that it is

Greenhouse gas emission is an example of:

negative externality

Use the "Supply and Demand" Figure 8-6. In the market shown in the figure, a price ceiling of P1 causes:

no change to the market.

Scarcity in economics means

not having sufficient resources to produce all the goods and services we want

Fixed exchange rates are determined by the:

policies of the domestic government.

Purchasing power parity refers to:

quantity of the currency needed to purchase a given unit of a good

Too little spending in an economy often leads to:

recession

Reserve requirements:

regulations on the minimum amount of reserves that banks must hold against deposits

Sticky wages and prices occur:

short run

Gains from trade arise because of:

specialization in production

Sam, who is 55 years old and has been a steel worker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is experiencing:

structural unemployment.

Use the "Short-Run Determination of the Interest Rate" Figure 29-11. If the money supply is currently at MS1 and the central bank chooses to buy bonds, then the resulting short-run shift in the supply of savings (loanable funds) may be represented by a shift of the:

supply of loanable funds from S1 to S2 and a lower interest rate

The short-run Phillips curve shows:

that in the short-term there is a tradeoff between inflation and unemployment

Contractionary monetary policy:

the Federal Reserve's policy of increasing interest rates to reduce inflation

Inflation is a situation where:

the average price level increases

Which one of the following price indices is commonly used to measure the cost of living?

the consumer price index

The inflation tax is:

the decrease in the real value of money held by the public caused by inflation

A direct relationship between price and quantity is represented by:

the demand relationship

If an economy finds itself in a liquidity trap, this means that:

the economy is trapped by the inability of monetary policy to reduce nominal interest rates further

Microeconomics deals with:

the effects of individual decisions and single factors

8 Use the "Classical Versus Keynesian Macroeconomics" Figure 35-1. According to the classical view, if this economy shifts from AD2 to AD1, let's say due to a large increase in government spending, then:

the price level will increase, but real GDP will not change

The money demand curve shows the relationship between the:

the quantity of money demanded and the interest rate

According to the liquidity preference model, the equilibrium interest rate is determined by:

the supply of and demand for money.

Physical capital would include:

the tools a worker has to work with

Unemployment rates tend to decrease when:

there is an expansion in the economy.

One of the most important types of infrastructure that government can provide is:

transportation and means of transportation

When the dollar value of the euro is high:

travel in the U.S. is less expensive for Europeans.

Which of the following is an automatic stabilizer?

unemployment compensation

The long-run aggregate supply curve is:

vertical

The marginal propensity to consume is equal to:

ΔC / ΔY, where ΔC is change in consumption, and ΔY is change in income

The economy is in a recession. Which of the following is a fiscal policy that the government should adopt to strengthen the economy?

Expansionary fiscal policy

The labor force is defined as

The total number of employed and unemployed workers in the economy.