AP MACRO FINAL EXAM

In a mixed economy, what to produce and how much to produce are determined by

• A private planning agency

• An international planning agency

• Markets and the government

• Large corporations and the government

The major difference between real and nominal gross domestic product is that real GDP

• Excludes imports

• Is adjusted for price-level changes using a price index

• Measures only final goods and services that are consumed

• Measures how successful we are with international trade

Which of the following statements exemplifies the concept of structural unemployment

• New entrants into the labor force have trouble finding jobs

• Workers leave their current jobs to find better jobs

• Workers are fired because consumers have reduced their total expenditures

• Workers are fired because their skills are no longer in demand

Assume that for consumers, pears and apples are substitutes. It is announced that pesticides used on apples may be dangerous to consumers’ health. As a result, which of the following market changes is most likely to occur in the pear market?

Federal budget deficits occur when

• More money is being spent on entitlement programs than has been allocated

• The Internal Revenue Service spends more than it collects in taxes in a given year

• The federal government spends more than it collects in taxes in a given year

• High levels of unemployment use up tax collections

Under which of the following conditions would consumer spending most likely increase?

• Consumers have large unpaid balances on their credit cards

• Consumers' wealth is increased by changes in the stock market

• The government encourages consumers to increase their savings

• Consumers believe they will not receive a pay increase next year

Crowding out is best described as which of the following?

• The decreases in full employment output caused by an increase in taxes

• The decrease in consumption or private investment spending caused by an increase in government spending

• The decrease in government spending caused by a decrease in taxes

• The increase in the amount of capital inflow caused by the increase in government spending

Under a fractional reserve banking system, banks are required to

• Keep part of their demand deposits as reserves

• Expand the money supply when requested by the central bank

• Insure their deposits against losses and bank runs

• Charge the same interest rates on all loans

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

• Taxes

• Government spending

• The federal funds rate

• The discount rate

When the United States government engages in deficit spending, that spending is primarily financed by

• Increasing the reserve requirement

• Issuing new bonds

• Appreciating the value of the dollar

• Depreciating the value of the dollar