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 short-run aggregate supply curve will shift to the right when

• energy prices increase
• government regulation increases
• prices of inputs decrease
• productivity rates decrease

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 Maria Escalera’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

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

If the MPC is .80, the government spending multiplier is:

• 4
• 5
• 3
• 2

Why will government have to change taxes by a larger magnitude than they would change spending.

• Some spending leaks out of the economy through international trade
• Some portions of tax cuts are saved and not spent
• Government spending is too inefficient a process
• Tax cuts are always superior to government spending