AP Macroeconomics Quiz

Which of the following will most likely result in a country's lower real interest rate?

• The nation provides an investment tax credit to new businesses.

• The citizens of the nation increase their savings for retirement.

• The nation is experiencing political instability and economic risk.

• The nation’s central bank sells government bonds in the open market.

• The nation’s government increases its borrowing to finance spending on capital projects.

Answer explanation

This will increase the supply of loanable funds and result in a lower real interest rate.

Match the economic systems to its characteristics or meaning.

• Public and private sectors

• Mixed economy

• Private sector, profit, and minimal gov.

• Traditional economy

• Centrally owned by the government

• Command economy

• Customs, family, and historical basis

• Free Market

Which of the following is a primary function of money in an economy?

• Medium of exchange

• Store of value

• Unit of account

• All of the above

What is the main purpose of the Federal Reserve's open market operations?

• To control inflation

• To regulate banks

• To manage the money supply

• To set interest rates

Which of the following is an example of fiscal policy?

• Raising interest rates

• Increasing government spending

• Reducing the money supply

• Selling government bonds

What does GDP stand for in macroeconomics?

• Gross Domestic Product

• General Domestic Product

• Gross Development Product

• General Development Product

Which of the following best describes a recession?

• A period of high inflation

• A period of economic growth

• A period of declining economic activity

• A period of stable prices

What is the primary goal of monetary policy?

• To achieve full employment

• To control inflation

• To reduce government debt

• To increase exports

Which of the following is a tool used by central banks to control the money supply?

• Taxation

• Government spending

• Open market operations

• Subsidies

What is the natural rate of unemployment?

• Zero unemployment

• Unemployment due to cyclical factors

• Unemployment that occurs when the economy is at full employment

• Unemployment due to seasonal factors