AP Macro Semester 2 Multiple Choice

An increase in the international value of the US dollar will tend to cause A) us exports to fall B) national income of the US to increase C) employment in the manufacturing sector of the US to increase D) inflation rate in the US to increase E) growth rate of the US economy to increase

A

If the money stock decreases but nominal gross domestic product remains constant, which of the following has occurred? A) income velocity of money has increases B) income velocity of money has decreased C) price level has increased D) price level has decreased E) real output has decreased

A

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 nominal output B) decrease in price level C) decrease in nominal interest rate D) decrease in real interest rate E) decrease in the unemployment rate

A

Which of the following is an example of fiscal policy? A) increasing government expenditures to build highways B) increasing the money supply to increase income C) decreasing the discount rate to lower unemployment and inflation D) decreasing the federal funds rate to stimulate investment E) decreasing the reserve ratio to increase bank reserves

A

Which of the following is an example of foreign direct investment? A) US automobile manufacturer building a steel plant in Russia B) US citizen purchasing corporate bonds issued by a French manufacturing firm C) a Mexican citizen purchasing US treasury bills D) the federal reserve purchasing Japanese yen E) immigrant workers sending money to their native country

A

Which of the following is most likely to increase if the public decides to increase its holding of currency? A) interest rate B) price level C) disposable personal income D) employment E) reserve requirement

A

Which of the following would best explain a decline in potential gdp? A) negative net investment B) the discovery of vast new oil deposits C) lower price level D) decrease in infant mortality rate E) decrease in wages and profits

A

Which of the following would occur if the international value of the US dollar decreased A) US exports would rise B) more gold would flow into the US C) US demand for foreign currency would increase D) the US trade deficit would increase E) Americans would pay less for foreign goods

A

expansionary fiscal policy will be most effective when A) AS is horizontal B) economy is at or above full-employment output C) transfer payments are decreased, while taxes remain unchanged D) wages and prices are very flexible E) reserve requirement increases

A

Compared to expansionary monetary policies adopted to counteract a recession, expansionary fiscal policies tend to result in A) less public spending B) higher interest rates C) lower prices D) high rate of economic growth E) decreased investment by foreigners

B

If businesses are experiencing an unplanned increase in inventories, which of the following is most likely to be true? A) AD is greater than output, and the level of spending will increase B) AD is less than output, and the level of spending will decrease C) the economy is growing and will continue to grow until a new equilibrium level of spending is reached D) planned investment is greater than planned saving and the level of spending will decrease E) planned investment is less than planned saving, and the level of spending will increase

B

To stimulate investment in new plant and equipment without increasing the level of real output, the best policy mix is to A) decrease the money supply and increase government spending B) increase the money supply and decrease government spending C) decrease the money supply and increase income taxes D) increase the money supply and decrease income taxes E) decrease income taxes and increase government spending

B

Which of the following will most likely cause an increase in both the price level and real gross domestic product A) the prime rate increases B) exports increase C) income taxes increase D) crude oil prices decrease E) inflationary expectations decrease

B

Which of the following would cause the US dollar to increase in value compared to the Japanese Yen? A) an increase in the money supply in the US B) an increase in interest rates in the US C) and increase in te US trade deficit with Japan D) the US purchase of gold on the open market E) the sale of 2 billion dollars worth of Japanese TV sets to the US

B

A leftward shift in the LRAS curve is most likely consistent with an improvement in a country's standard of living if A) prices fall B) deprecation increases C) population decreases D) taxes decrease E) imports decline

C

An increase in which of the following is consistent with an outward shift of the PPC? A) transfer payments B) AD C) LRAS D) income taxes E) Exports

C

Crowding our due to government borrowing occurs when A) lower interest rates increase private sector investment B) lower interest rates decrease private sector investment C) higher interest rates decrease private sector investment D) a smaller money supply increases private sector investment E) a smaller money supply decreases private sector investment

C

In the country of Agronomía, banks charge 10 % interest on all loans. If the general PL has been increasing at the rate of 4 % per year, the real rate of interest is A) 14% B)10% C) 6% D) 4% E) 2.5%

C

The annual inflation rate is expected to be 5 percent over the next three years. Juan plans to take out a 3-year loan to purchase an automobile/ If Juan decides not to take out the loan if the real interest rate exceeds 3 percent, the highest nominal interest rate he is willing to pay is A) 2 percent B) 3 percent C) 8 percent D) 15 percent E) 25 percent

C

Which of the following will most likely occur in an economy if more money is demanded than is supplied? A) the amount of investment spending B) interest rates decrease C) interest rates increase D) demand curve for money shifts right E) demand curve for money shifts left

C

An increase in government spending with no change in taxes leads to A) lower income level B) lower price level C) smaller money supply D) higher interest rate E) higher bond price

D

An unanticipated decrease in AD when the economy is in equilibrium will result in A) decrease in voluntary unemployment B) decrease in the NRU C) decrease in AS D) increase in unplanned inventories E) increase in the rate of inflation

D

As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in A) the production of military goods B) the production of anti pollution devices C) crime prevention services D) household production E) legal services

D

If an economy's AS curve is upward sloping, an increase in government spending will most likely result in a decrease in the A) real level of output B) price level C) interest rate D) unemployment rate E) government budget deficit

D

If the federal reserve lowers the reserve requirement, which of the following will most likely occur? A) imports will rise, decreasing trade deficit B) the rate of saving will increase C) unemployment and inflation will both increase D) businesses will purchase more factories and equipment E) the budget deficit will increase

D

If the federal reserve undertakes a polity to reduce interest rates, international capital flows will be affected in which of the following ways? A) long run capital outflows from the US will decrease B) long run capital flows to the US will increase C) short run capital outflows from the US will decrease D) short run capital inflows to the US will decrease E) short run capital inflows to the US will not change

D

Suppose that the federal reserve is committed to keeping the nominal interest rate fixes. To maintain the interest rate target in the face of an expansionary fiscal policy, the federal reserve can do which of the following. A) increase the prime rate B) increase the discount rate C) increase the federal funds rate D) engage in open market purchases E) engage in open market sales

D

Unexpected increases in ventures usually precede A) increases in inflation B) increases in imports C) stagflation D) decreases in production E) decreases in unemployment

D

Which of the following could cause simultaneous increases in inflation and unemployment A) decrease in government spending B) decrease in the money supply C) decrease in the velocity of money D) increase in inflationary expectations E) increase in the overall level of production

D

Which of the following most undermines the ability of a nation's currency ti store value? A) a decrease in the purchasing power of the currency B) the use of credit and debit cards as mediums of exchange C) an increase in the prices of federal bonds D) appreciation of the currency in the international money market E) an increase in the supply of foreign currencies in the international money market

D

Which of the following policies is most likely to encourage long-run economic growth in a country? A) an embargo on high technology imports B) a decline in the number of immigrants to the country C) an increase in government transfer payments D) an increase in the per capita savings rate E) an increase in defense spending

D

During a mild recession, if policymakers want to reduce unemployment by increasing investment, which of the following policies would be most appropriate? A) equal increase in gov expenditures and taxes B) an increase in gov expenditures only C) an increase in transfer payments D) an increase in the reserve requirement E) purchase of gov securities by the fed

E

If the economy is operating at full employment and there is a substantial increase in the money supply, the quantity theory of money predicts an increase in A) velocity of money B) real output C) interest rates D) unemployment E) the price level

E

The price of one nations currency expressed in terms of another nations currency is called

The exchange rate