AP Macro 5.1-5.2

If a reduction in aggregate supply is followed by an increase in aggregate demand, which of the following will definitely occur?

• Output will increase

• Output will decrease

• The price level will decrease

• The price level will increase

A short-run Phillips curve shows an inverse relationship between

• interest rates and borrowing

• inflation and unemployment

• income and consumption

• prices and quantity demanded

An increase in aggregate demand will cause which of the following?

• A movement along a given short-run Phillips curve

• the long-run Phillips curve to become horizontal

• The short-run Phillips curve to shift to the left

• The long-run Phillips curve to shift to the right

According to the short-run Phillips curve, lower inflation rates are associated with

• higher unemployment rates

• higher government spending

• greater labor-force participation rates

• smaller labor-force participation rates

Which of the following combinations of fiscal and monetary policies will correct a severe recession?

• Increasing income tax rates and decreasing money supply

• increasing both the income tax rates and the money supply

• decreasing both the income tax rates and the money supply

• decreasing income tax rates and increasing money supply

Which of the following monetary and fiscal policy mixes will reduce unemployment?

• Buying government bonds in the open market and increasing taxes

• Buying government bonds in the open market and decreasing taxes

• Selling government bonds in the open market and increasing spending

• Selling government bonds in the open market and decreasing government spending

If an economy is in long-run equilibrium, which of the following combinations of policy actions will necessarily result in inflation in the short run?

• Decreasing administered interest rates and increasing government spending

• increasing the discount rate and decreasing income taxes

• increasing the required reserve ratio and increasing the discount rate

• selling government bonds on the open market and decreasing government spending

Country X's banking system has limited reserves and its economy is in a recession. Which of the following combinations of fiscal and monetary policy actions would necessarily move the economy toward full employment in the short run?

• A decrease in government spending and an increase in the discount rate

• A decrease in income taxes and targeting a higher policy rate

• A decrease in income taxes and a sale of government bonds on the open market by the country's central bank

• An increase in government spending and a decrease in the required reserve ratio

Given the situation illustrated in the graph and holding all other influences constant, which of the following policies will restore the macroeconomic equilibrium to full employment?

• A contractionary fiscal policy and an expansionary monetary policy

• A contractionary fiscal policy and a contractionary monetary policy

• An expansionary fiscal policy and a contractionary monetary policy

• An expansionary fiscal policy and an expansionary monetary policy

Which of the following will cause a movement from point X to point Y along the short-run Phillips curve (SRPC) that is shown in the graph above?

• An increase in expected inflation rate

• An increase in input costs

• An increase in government spending

• An increase in income taxes