AP Macroeconomics Unit 3 Test Review

Front

Assume that the marginal propensity to consume is 0.90. As a result of an increase in the tax rates, the government collects an additional $20 million. What will be the impact on gross domestic product (GDP)?

Back

GDP will decrease by a maximum of $180 million.

Front

The short-run aggregate supply curve will shift to the right when: energy prices increase, government regulation increases, prices of inputs decrease, productivity rates decrease.

Back

prices of inputs decrease

Front

If Mr. Woodward's disposable income increases from $600 to $650 and her level of personal consumption expenditures increase from $480 to $520, you may conclude that her marginal propensity to

Back

consume is 0.8

Front

An increase in personal income taxes will most likely result in which of the following changes in real GDP and the price level in the shortrun?

Back

Decrease Real GDP; Decrease Price Level

Front

Contractionary fiscal policy would most likely be used during...

Back

periods of sustained, demand pull inflation

Front

If an economy experiences a dramatic rise in prices, which fiscal policy action could be taken? Options: Selling securities on the open market, Raising interest rates, Reducing government spending, Raising reserve requirements

Back

Reducing government spending

Front

According to the graph above, which of the following is true about the long-run equilibrium of the economy depicted? Options: Without a fiscal policy stimulus, the economy will remain in a recession. The long-run aggregate supply curve will shift to the right to restore long-run equilibrium. As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium. The aggregate demand curve will shift to the left to restore long-run equilibrium. The economy is in long-run equilibrium.

Back

As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium.

Front

If the government does nothing and wages are flexible, which of the following will most likely occur in the long run? Falling wages will shift the aggregate demand curve to the right, producing full employment. Rising wages will shift the aggregate demand curve to the right, producing full employment. The economy will remain at point A. Rising wages will shift the aggregate supply curve to the right, producing full employment. Falling wages will shift the aggregate supply curve to the right, producing full employment.

Back

Falling wages will shift the aggregate supply curve to the right, producing full employment.

Front

If disposable income is $1,000, consumption is $700, and the marginal propensity to consume (MPC) is 0.6, what will consumption and savings equal if disposable income increases by $100? Consumption     Savings

Back

$760 $340

Front

Which of the following changes will have the smallest expansionary effect on aggregate demand in the short run? A decrease in savings of $20 million, A decrease in imports of $20 million, An increase in exports of $20 million, An increase in government spending of $20 million, A decrease in taxes of $20 million

Back

A decrease in taxes of $20 million