Econ AP Classroom 93 Math Questions answers

The country's gross domestic product is

A $220 Bn

Assume that Jane's marginal propensity to consume equals 0.8, and that in 2004 Jane spent $36,000 from her disposable income of $40,000. If her disposable income in 2005 increased to $50,000, her consumption spending increased by

A $4000

Which of the following is an example of foreign direct investment?

A A United States automobile manufacturer building a steel plant in Russia

Which of the following best illustrates an improvement in a country's standard of living?

A An increase in real per capita gross domestic product

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

A An increase in the money supply will have less effect on nominal gross national product.

If the money stock decreases but nominal gross domestic product remains constant, which of the following has occurred?

A Income velocity of money has increased.

Assume that Canadian consumers increase their demand for Mexican financial assets How would the international supply of Canadian dollars, the value of the Mexican peso relative to the Canadian dollar, and Canadian net exports to Mexico change?

A Increase all 3

If, at full employment, the government wants to increase its spending by $100 billion without increasing inflation in the short run, it must do which of the following?

A Raise taxes by more than $100 billion.

Assume members of the Organization of the Petroleum Exporting Countries (OPECOPEC) agree to a coordinated increase in oil production. If the economy is at equilibrium at point B, what effect will this have on the Phillips curve model in the long run?

A The SRPC will shift to the left.

An economy is in long-run equilibrium. If the central bank reduces the growth rate of the money supply, which of the following must occur in the long run?

A The rate of inflation will decrease.

If the velocity of money is stable, the quantity theory of money predicts that an increase in the money supply will lead to a proportional

A increase in the nominal output

If purchases of education and medical care were counted as investment rather than consumption, gross domestic product would

A not change, because there is no change in total expenditures

The short-run aggregate supply curve is likely to shift to the left when there is an increase in

A the cost of productive resources

Suppose that in a particular country, nominal gross domestic product (GDP) grew by 8 percent, and the GDP deflator increased by 10 percent. The country's growth rate of real GDP would be approximately equal to

A —2%

Based on the above table which of the following is most likely correct?

A The natural rate of unemployment is 5 percent.

Assume that the marginal propensity to consume out of disposable income is 0.8 and that the government taxes all income at a constant rate of 30 percent. If gross income increases by $100, consumption will initially increase by

B $56

Between points X and Y on the PPC, the opportunity cost of one unit of peaches is which of the following?

B 1 unit of apples

At what real exchange ratio, also referred to as the terms of trade, between grain (G) and steel (S) would both Alpha and Beta find it mutually advantageous to specialize and trade?

B 1G = 1.5S

If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic product grew by 4 percent, inflation for this year would be

B 7%

Assume the marginal propensity to consume is 0.8. How will a decrease in taxes of $100 billion and a decrease in government spending of $100 billion affect aggregate demand?

B Aggregate demand will decrease by $500 billion.

Which of the following policy combinations could reduce a government deficit without changing aggregate demand?

B An increase in taxes and an increase in the money supply

Which of the following policy combinations is most likely to cure a severe recession?

B Buy Securities Decrease Increase

Country A can produce either 2 tons of cocoa or 4 cars with 10 units of labor. Country B can produce either 5 tons of cocoa or 25 cars with 10 units of labor. Based on this information, which of the following is true?

B Country A has a comparative advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars.

What is the effect of Kim's purchase of the bond on the required and excess reserves of XYZXYZ Bank and the total money supply?

B Decrease all 3

A favorable supply shock, such as a decrease in energy prices, is most likely to have which of the following short-run effects on the price level and output?

B Decrease, Increase

Assume that the Federal Reserve pursues a contractionary monetary policy. Based on the resulting change in the interest rate, what will happen to the international value of the dollar, United States imports, and United States exports?

B Increase Decrease Increase

According to the short-run Phillips curve, a contractionary fiscal policy will result in

B a decrease in inflation and an increase in unemployment

Crowding out occurs when

B government borrowing to finance its spending decreases private sector investment

If the marginal propensity to consume is 0.9, the government increases purchases by $100, and net exports decline by $60, the equilibrium level of real gross domestic product will

B increase by up to $400

To stimulate investment in new plant and equipment without increasing the level of real output, the best policy mix is to

B increase the money supply and decrease government spending

Assume that the reserve requirement is 20 percent. If a bank initially has no excess reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is

B $8000

Suppose that the Federal Reserve buys $400 billion worth of government securities from the public. If the required reserve ratio is 20 percent, the maximum increase in the money supply is

C $2,000 billion

In 2016 the nominal GDP for Country XX was $330 billion and the GDP deflator was 110. The real GDP for 2016 was

C $300 billion

Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will be

C $900

If nominal gross domestic product in a country is $1,600 and the money supply is $400, what is the velocity of money?

C 4

Assume that the nominal interest rate is 10 percent. If the expected inflation rate is 5 percent, the real interest rate is

C 5%

Based on the information in the table above, what is the unemployment rate for Country X?

C 6.0%

Which of the following is most likely to promote long-run economic growth?

C An increase in tax credits for business spending on research and development

Which of the following means of reducing military spending would have the greatest positive impact on gross domestic product for the United States?

C Closing overseas military bases and relocating those operations to the United States

Using equal amounts of labor hours, Country X and Country Y can each produce the number of watches and radios shown in the production possibilities curves above. Based on the information, which of the following is true?

C Countries X and Y can engage in a mutually advantageous trade by exchanging 1 watch for 1 radio.

Assume that the economy is at full employment. Policymakers wish to maintain the price level but want to encourage greater investment. Which of the following combinations of monetary and fiscal policies would best achieve this goal?

C Expansionary Contractionary

In the short run, which of the following would occur to bond prices and interest rates if a central bank bought bonds through open-market operations?

C Increase Decrease

Suppose that the economy is in the midst of a recession and government policy makers want to increase aggregate demand by $600 billion. If the economy's marginal propensity to consume is 0.75 and there is no crowding out, the government should do which of the following?

C Increase Spending by $150 Bn

Which of the following mixes of fiscal and monetary policy would reduce inflation?

C Increase Taxes Sell Bonds

In an economy with a horizontal aggregate supply curve, an increase in government spending will cause output and the price level to change in which of the following ways?

C Increase, No Change

Nations A and B produce only chairs and bicycles. If each laborer in Nation A can produce twice as many chairs as each laborer in Nation B, then which of the following is necessarily true?

C Nation A has an absolute advantage in chairs.

If 2012 is the base year, which of the following is true?

C The CPICPI in year 2013 is 120.

The table gives the values of selected accounts in a nation's balance of payments in millions of dollars.

C The current account is in deficit and the capital and financial account is in surplus

Given this information, which of the following statements is correct?

C X has a comparative advantage in food production, whereas Y has a comparative advantage in clothing production.

If a worker's nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has

C approximately increased by 10%

The amount of money that the public wants to hold in the form of cash will

C decrease if interest rates increase

In one year, spending on consumption, investment, and government purchases was equal to 103 percent of a country's gross domestic product. This would be possible only if

C net exports were negative

The money-creating ability of the banking system will be less than the maximum amount indicated by the money multiplier when

C people hold a portion of their money in the form of currency

A leftward shift of the long-run aggregate supply curve is most likely consistent with an improvement in a country's standard of living if

C population decreases

The opportunity cost of moving production from point R to point T is

C six units of Good Y

Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that

C the prices in an average consumer's market basket are doubled

A commercial bank is facing the conditions given above. If the reserve requirement is 12 percent and the bank does not sell any of its securities, the maximum amount of additional lending this bank can undertake is

C $3000

In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was

D $25 BN

Suppose that in an economy with lump-sum taxes and no international trade, autonomous investment spending increases by $2 million. If the marginal propensity to consume is 0.75, equilibrium gross domestic product will change by a maximum of

D $8 Mn

According to the income and consumption schedules shown above, the marginal propensity to consume is

D .75

Country X's economy is in recession. Which of the following combinations of fiscal and monetary policy actions would move the economy toward full employment in the short run?

D An increase in government spending and a decrease in the required reserve ratio

Based on the balance sheets above for three different banks, which of the following is true, if the reserve requirement is 10 percent?

D Bank B can increase its loans by $40.

Assume that the economy is in equilibrium. If aggregate demand increases, nominal interest rates and bond prices will most likely change in which of the following ways?

D Decrease Increase

Assume that the reserve requirement for demand deposits is 20 percent, that banks hold no excess reserves, and that the public holds no currency. If the central bank sells $10,000 worth of government securities to commercial banks, the total money supply will

D Decrease by $50,000

Unexpected increases in inventories usually precede

D Decreases in production

As a result of this announcement, which of the following market changes is most likely to occur in the short run in the pear market?

D Demand shifts right

Which of the following concepts can be illustrated using the production possibilities curve?

D I, II, and IV only

If the government simultaneously engages in expansionary monetary and fiscal policies, which of the following is the effect on interest rates and unemployment?

D Indeterminate Decrease

Which of the following groups would most likely gain from unanticipated inflation?

D Individuals who have borrowed money at fixed interest rates

What are the nominal GDPGDP and real GDPGDP in 1993?

D Nominal GDP is $96, Real GDP is $90

An economy is currently in short-run equilibrium, and real output is below the full-employment level of output. Which of the following market adjustments is most likely to occur in the long run?

D Nominal wages will fall, shifting the short-run aggregate supply curve to the right.

Based on the information in the table above, which of the following is true?

D Peru has a comparative advantage in producing coffee.

Increases in the real per capita income of a country are most closely associated with increases in which of the following?

D Productivity

When firms restructure their operations to decrease production costs, the aggregate supply curve, the price level, and real output will change in which of the following ways?

D Right, Decrease, Increase

In the AD−AS model, which of the following is true?

D The economy is in a recessionary gap when the short-run equilibrium real output is below the long-run equilibrium real output.

Which of the following can be concluded from the data above?

D The economy was experiencing inflation during years 2 and 3.

Stagflation is caused by

D a decrease in aggregate supply

The unemployment rate is calculated as

D the number of people not working but actively seeking employment divided by the number of people in the labor force

What is the nation's unemployment rate?

D 9%

Which of the following will happen if the actual inflation rate is greater than the expected inflation rate?

D Borrowers of fixed interest rate loans will be better off.

A major advantage of automatic stabilizers in fiscal policy is that they

D go into effect without passage of new legislation

Suppose that disposable income is $1,000, consumption is $700, and the marginal propensity to consume (MPC) is 0.6. If disposable income then increases by $100, consumption and savings will equal which of the following?

E $760 $340

For which of the following sets of unemployment and inflation rates will a central bank be most reluctant to increase the rate of growth in the money supply?

E 5% 10%

If the public's desire to hold money as currency increases, what will the impact be on the banking system?

E Banks would be less able to expand credit.

Which conclusion can be supported by the data in the table above?

E Country Y's real GDP per capita is greater than Country X's real GDP per capita

On the basis of the diagram above showing an economy's production possibilities curve for two goods, which of the following statements must be true?

E I, II, and III

Which of the following can be concluded about the consumer price index (CPI) for this individual from 1993 to 1994 ?

E It increased by 25%.

An increase in which of the following is most likely to cause the short-run aggregate supply curve to shift to the left?

E The per unit cost of production

An increase in government spending financed by borrowing will result in which of the following?

E The rate of physical capital accumulation will decrease in the long run.

Based on the diagram above, which of the following describes what will happen in the long-run adjustment process?

E Wages and input prices will increase.

A contractionary supply shock would most likely result in

E a decrease in employment

An increase in the labor force participation rate will

E make it more difficult to reduce unemployment

If the nominal gross domestic product (GDP) of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007

E the price level and/or the real GDP has increased