AP Macroeconomics

If the economy was in a severe recession, the most expansionary fiscal policy would be to

• decrease both personal income taxes and government spending by equal amounts

• decrease both the reserve requirement and government spending by the same proportion

• decrease personal income taxes and increase government spending by equal amounts

• increase the money supply and increase government spending by the same proportion

• increase social security taxes and increase government spending by equal amounts

Which of the following would most likely lead to cost-push inflation in the short run?

• A decrease in labor productivity

• A decrease in income tax rates

• A decrease in consumers’ and businesses’ optimism about future economic activity

• An increase in government deficit spending to stimulate a weak economic recovery

• Discovery of new sources of energy

Which of the following is true in the short run if consumers buy more imported goods and fewer domestic goods?

• The trade balance moves toward deficit, and equilibrium income decreases.

• The trade balance moves toward deficit, and equilibrium income increases.

• The trade balance moves toward surplus, and equilibrium income is unaffected.

• The trade balance moves toward surplus, and equilibrium income decreases.

• The trade balance is unaffected, and equilibrium income decreases

An increase in which of the following would most likely cause the gross domestic product of a country to decrease in the short run?

• (A) Government spending

• (B) Imports

• (C) Money supply

• (D) Consumption spending by households

• (E) Investment spending by domestic firms

The dollar value of all final goods and services produced within a country's borders in one year. Most important measure of economic growth

• Gross Domestic Product

• GDP Per Capita

• Real GDP

• Nominal GDP

Consumer Spending

Investment (business spending on tools/equipment

Government spending (NOT transfer payments)

Net exports -- exports (x) - Imports (M)

• Four components of GDP

• factors of productivity

• Major Economic Goals for Every Country

• The Business Cycle

When economists collect statistics on production, income, investment, and savings

• National Income Accounting

• Gross Domestic Product

• Expenditures Approach

• Income Approach

GDP divided by the population. It identifies on average how many products each person makes. Best measure of standard of living.

• GDP Per Capita

• Income Approach

• Labor Force Participation Rate

• Problems with the CPI

Who is hurt by unanticipated inflation?

• -Lenders (people who lend money at fixed interest rates)

  -People with fixed incomes

  -Savers

• -Borrowers (people who borrow money)

  -A business where the price of the product increases faster than the price of resources

• -Above 16 years

  -Able/willing to work

  -Not institutionalized (jail/hospital)

  -Not in military, in school full time, or retired

Temporary unemployment or being between jobs. Individuals are qualified workers with transferable skills

• Frictional Unemployment

• Structural Unemployment

• Cyclical Unemployment