AP Macro Final Review

Peggy, a recent college graduate, decides to look for a job instead of going to graduate school. If she is unable to find a job that suits her interests right away, what type of unemployment is she MOST likely experiencing?

• Structural
• Seasonal
• Frictional
• Cyclical

The BEST example of structural unemployment in an economy is someone

• between jobs or entering the work force.
• out of work due to a change in the business cycle.
• out of work due to a seasonal downturn in business.
• whose job skills do not match the economy's needs.

What would you conclude about an economy characterized by increasing gross domestic product (GDP), low unemployment, and increasing inflation?

• This economy is in a slow down.
• The government needs to address the unemployment problem.
• This economy is in the expansion phase of a business cycle.
• The Federal Reserve should expand the money supply.

When the Federal Reserve buys government securities/bonds on the open market, what effect does this action have on the nation's money supply and aggregate demand?

• money supply increases; aggregate demand increases
• money supply increases; aggregate demand decreases
• money supply decreases; aggregate demand increases
• money supply decreases; aggregate demand decreases

Monetary policies the Federal Reserve can adopt include all of the following EXCEPT

• raising the discount rate.
• buying government bonds.
• lowering the reserve requirement.
• raising personal income tax rates.

The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT

• decreasing the discount rate.
• increasing the reserve requirement.
• selling securities on the open market.
• making banks hold a reserve for all types of deposits.

If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is 

• decreasing taxes.
• decreasing spending.
• decreasing the money supply.
• decreasing the reserve requirement.

Importing more than exporting is

• trade surplus
• trade deficit
• balance of trade
• balance of payment

Suppose the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen. What would happen to the prices of American goods in Japan?

• increase or decrease
• decrease
• remain the same
• increase

Consumer Spending is the largest portion of GDP

• True
• False