AP Macro Practice Questions 4

Given the production and price information

listed in the table above, and assuming 2015

is the base year, calculate the Real Gross

Domestic Product (RGDP) for 2016 and the

GDP deflator for 2016.

• RGDP = $24

  Deflator = 60

• RGDP = $25

  Deflator = 100

• RGDP = $40

  Deflator = 125

• RGDP = $50

  Deflator = 150

Which of the following would most likely result in cost-push inflation?

• A significant increase in union wages

• Contractionary fiscal policy

• A substantial decrease in consumption expenditures

• An appreciation of the country’s

  currency

If society experiences an increase in human

capital but nominal wages remain the same,

what will happen to real gross domestic

product (RGDP) and real wages?

• A

• B

• C

• D

• E

Scarcity is the condition in which

• human wants are beyond society’s

  production

• supplies of the four factors of production

  are relatively unlimited

• capital stock does not depreciate

• population and labor force are

  experiencing negative growth possibilities

Assuming the country is experiencing a

recessionary gap, which of the following

actions would the central bank most likely

engage in?

• Buy bonds in open market operations

  and decrease the discount rate

• Sell bonds in open market operations and

  increase the reserve requirement

• Increase the discount rate and decrease

  the reserve requirement

• Sell bonds in open market operations and

  decrease personal income taxes

Which of the following will be the result of a

decrease in input prices in the short run?

• A

• B

• C

• D

• E

Assume the economy of the nation of Cliffland is operating short of full employment output and economists agree that it would take $400 million dollars of additional spending to bring the economy to long run equilibrium. If the marginal propensity to consume is 0.75, what is the least amount of government spending that could bring the nation back to long run equilibrium?

• $50 million

• $80 million

• $100 million

• $200 million

Which of the following is true regarding the

consumer price index (CPI)?

• The CPI measures prices of a specific

  market basket of goods and services

  purchased by consumers

• The CPI measures the amount of imports

  purchased by domestic consumers

• The CPI measures prices of all consumer

  goods and services produced in the economy

• The CPI measures prices of selected raw

  materials purchased by businesses

A rise in a nation’s real interest rate might be

fueled by which of the following events?

• An increase in taxes on consumer goods

• A decrease in government spending

• A purchase of government bonds by the

  country’s central bank

• A perceived increase in the country’s

  political and economic turmoil

Which of the following would cause the shift illustrated in the money market graph above?

• The Federal Reserve selling bonds on the

  open market

• A decrease in the discount rate

• A decrease in the required reserve ratio

• A depreciating dollar causing an increase

  in the supply of dollars in foreign

  exchange markets