AP Macroeconomics Midterm Exam

What is the economic factor of production that is comprised of those resources responsible for risk-taking and leadership decisions?

• Labor

• Entrepreneurship

• Land

• Capital

What is the economic factor of production that is comprised of all natural resources and raw materials?

• Land

• Capital

• Scarcity

• Labor

Motor vehicles and gasoline are

• complements

• not substitutable

• substitutes

• inferior goods

A leftward shift of the short-run aggregate supply curve is most likely to occur when there is an increase in

• productivity growth

• the cost of inputs

• the money supply

• imports

Which of the following is a key feature of Keynesian economics?

• The level of spending depends mostly on interest rates

• The level of government expenditures depends mostly on interest rates

• Supply creates its own demand

• Macroeconomic equilibrium can occur at less then full employment

One method the United States Federal Government has used to stimulate consumer spending has been to

• increase taxes on imports

• raise yields on government bonds

• cut unemployment benefits

• reduce personal income taxes

If an economy is in a severe recession, which of the following is the fiscal policy most effective in stimulating production?

• Government spending increases

• Government spending decreases

• Personal income taxes are increased

• The federal reserve sells bonds on the open market

• The Federal reserve buys bonds on the open market

In a circular flow diagram, which of the following is true?

• Businesses pay wages, rent, interest, and profits to households in return for use of the factors of production

• Businesses purchase goods and services from households in return for money payments

• Household pay wages, rents, interest, and profits to businesses in return for use of the factors of production

• The relationship between households and businesses exists only in traditional society

• The relationship between households and businesses exists only in a command economy

If an increase in the price of Good X causes an increase in the demand for Good Y, then Good Y is

• an input good

• a substitute for Good X

• a complement for Good X

• an inferior good

• a Giffen good

In an economy at full employment, a presidential candidate proposes cutting the government debt in half in four years by increasing income tax rates and reducing government expenditures. According to Keynesian theory, implementation of these policies is most likely to increase

• unemployment

• consumer prices

• aggregate demand

• aggregate supply

• the rate of economic growth