AP Macro Practice Exam Questions 1

The central problem in economics is

• promoting economic growth.

• ensuring stable prices; limiting inflation

• promoting private ownership and

  protection of private property rights.

• scarcity; the use of limited resources

Stagflation is the result of which of the following

shifts in the AD/AS model?

• The long run aggregate supply curve shifting

  to the left

• The aggregate supply curve shifting to the

  left

• The aggregate demand curve shifting to the

  right

• The aggregate supply curve shifting to the

  right

The natural rate of unemployment is

• The rate of unemployment when the

  economy is in long run equilibrium

• The number of unemployed divided by the

  labor force

• The labor force divided by the workingage

  non-institutionalized population

• The rate of unemployment when there is

  no frictional unemployment

An increase in the expected rate of inflation is

most likely to cause which of the following

changes in the Phillips curve?

• a shift of the entire short run Phillips curve

  to the left

• a shift of the long run Phillips curve to the

  right

• a shift of the entire short run Phillips curve to

  the right

• a move downward to a new point along the

  short run Phillips curve

If foreign investors purchase U.S. government

treasury bills, those purchases will be included

in their nation’s

• current account

• financial account

• net cash transfers

• balance of trade

A rightward shift in the aggregate demand

curve could most likely be caused by which of

the following?

• the purchase of government securities by

  the central bank

• a decrease in consumer confidence

• decrease in investment spending

• an increase in personal income taxes

If nominal wages and prices are not flexible,

which of the following must be true when the

economy has a severe recessionary gap?

• The aggregate demand curve is vertical

• The short run aggregate supply curve is

  horizontal

• The short run aggregate supply curve is

  vertical

• The short run aggregate supply curve is

  upward sloping

Which of the following groups would benefit

in the short run from an unanticipated rise in

the inflation rate?

• Homeowners with adjustable mortgage

  rate loans from banks

• Financial institutions that have more fixed

  interest outstanding loans than adjustable

  rate loans on their books

• Young people repaying fixed-interest-rate

  student loans

• Retirees on a fixed income

What must be true if a nation’s economy is

operating inside of its production possibilities

curve?

• The nation is using resources and

  technology inefficiently

• The nation must increase investment

  spending on capital stock to produce on the

  curve

• The nation is utilizing all resources as

  efficiently as possible

• The nation’s nominal gross domestic

  product is growing at a faster rate than real

  gross domestic product

Which of the following is most likely to

improve an economy's productivity?

• A decrease in cyclical unemployment

• An increase in government discretionary

  expenditures

• An increase in the velocity of money

• Positive net capital stock investment