AP Macroeconomics Unit 3

Which of the following is true if the production possibilities curve is a curved line concave to the origin?

• Resources are perfectly substitutable between the production of the two goods.
•  It is possible to produce more of both products.
• Both products are equally capable of satisfying consumer wants.
• As more of one good is produced,more and more of the other good must be given up.

Which of the following best describes aggregate supply?

• A schedule indicating the level of real output that will be produced at each possible price level
• A schedule indicating the level of real output that will be purchased at each possible price level
• A schedule showing the trade-off between inflation and unemployment
• A schedule showing the relationship between inputs and outputs

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

The long-run aggregate supply curve will shift to the right when

• foreign exports increase

• government spending increases

• investment increases

• consumption increases

A rightward shift in the aggregate demand curve with a horizontal aggregate supply curve will cause employment and the price level to change in which of the following ways?

• Increase Employment; Increase Price Level
• Increase Employment; No Change to Price Level
• No Change to Employment, Increase Price Level
• Increase Employment; Decrease Price Level

An increase in labor productivity would most likely cause real gross domestic product and the price level to change in which of the following ways

• Increase Real GDP; Increase Price Level
• Increase Real GDP; Decrease Price Level
• Decrease Real GDP; Increase Price Level
• Decrease Real GDP; Decrease Price Level

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

• consume is 0.8

• consume is 0.4

• save is 0.8

• save is 0.4

In the Keynesian aggregate-expenditure model, if the MPC is 0.75 and gross investment increases by $6 billion, equilibrium GDP will increase by

• $6 billion
• $8 billion
• $1.25 billion
• $24 billion

The aggregate demand curve will shift to the right as the result of

• an increase in corporate business taxes

• a decrease in the real interest rate

• recessions in foreign nations that trade with the United States, causing a lower demand for U.S. products

• an increase in the nominal interest rate

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?

• Decrease Real GDP; Decrease Price Level
• Increase Real GDP; Decrease Price Level
• Decrease Real GDP; Increase Price Level
• Increase Real GDP; Increase Price Level