AP Macro Unit 3 Review

In the short run if the price of imported Canadian lumber used in furniture increases...

• AS shifts left

• AS shifts right

• AD shifts left

• AD shifts right

• There would be movement along the AS curve

Changes in the price level of consumer goods results in...

• Shift the AD curve left (decrease)

• Shift the AD curve right (increase)

• Move along the AD curve

• Shift the AS curve right (increase)

• Shift the AS curve left (decrease)

Assume the economy is in long run equilibrium and the government increases spending on healthcare

• AD will shift right and an inflationary gap will result

• AD will shift left and a recessionary gap will result

• AS will shift right and an inflationary gap will result

• AS will shift left and a recessionary gap will result

• No change will result

Assume the economy is in long run equilibrium and there is an increase in the price of oil, a key resource

• AD will shift right and an inflationary gap will result

• AD will shift left and a recessionary gap will result

• AS will shift right and an inflationary gap will result

• AS will shift left and a recessionary gap will result

• No change will result

The Phillips Curve represents the tradeoff between

• Inflation and unemployment

• Price and quantity demanded

• Price level and GDP

• Two production options

• Supply and demand

The LRPC is vertical because

• In the long run there is no tradeoff between inflation and unemployment

• In the long run there is no tradeoff between price level and GDP

• In the long run there is no tradeoff between price and quantity demanded

• In the long run there is no tradeoff between two production options

• In the long run there is no trade off between supply and demand

The multiplier effect shows

• How spending is magnified in the economy

• How much consumers can spend from their paychecks

• How much the government can spend from their budget

• How often the economy can survive recessions

Federal budget deficits occur when

• more money is being spent on entitlement programs than has been allocated
• the federal government spends more than it collects in taxes in a given year
• high levels of unemployment use up tax collections
• interest payments on the national debt increase from one year to the next 

If the unemployment rate is rising and GDP is falling, the fiscal policy action that Congress could use for the greatest impact is

• decreasing taxes.

• decreasing spending.

• decreasing the money supply.

• decreasing the reserve requirement.

• increasing spending

If an economy experiences a dramatic increase in prices, which fiscal policy action should be taken?

• Selling securities on the open market

• Raising interest rates

• Increasing taxes

• Raising reserve requirements

• Raising government spending