AP Macroeconomics Unit 3 Quiz

Based on the diagram, demand-pull inflation is caused by a movement from

• (A) SRAS1 to SRAS2

• (B) SRAS2 to SRAS1

• (C) AD1 to AD2

• (D) AD2 to AD1

• (E) Yf to Y1

An appropriate fiscal policy to combat a recession would be to increase which of the following?

• (A) Interest rates

• (B) The money supply

• (C) Taxes

• (D) Government spending

• (E) The sales of government bonds

• (A) The curve will shift to the right, and the economy will be in long-run equilibrium at point J.

• (B) The curve will shift to the right, and the economy will be in long-run equilibrium at point M.

• (C) The curve will shift to the right, the curve will shift to the left, and the economy will be in long-run equilibrium at point M.

• (D) The curve will shift to the left, and the economy will be in long-run equilibrium at point M.

• (E) The curve will shift to the right, and the economy will be in long-run equilibrium at point K.

Which of the following will cause an increase in aggregate demand?

• (A) An increase in the price level

• (B) A decrease in income taxes

• (C) An increase in the demand for money

• (D) A decrease in the supply of money

• (E) A decrease in government transfer payments

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

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

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

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

• (D) increase the money supply and increase government spending by the same proportion

• (E) 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) A decrease in labor productivity

• (B) A decrease in income tax rates

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

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

• (E) 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?

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

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

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

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

• (E) The trade balance is unaffected, and equilibrium income decreases

Which of the following changes in aggregate demand and aggregate supply will cause an increase in both the price level and unemployment?

• (A) An increase in aggregate demand, and an increase in aggregate supply

• (B) An increase in aggregate demand, and no change in aggregate supply

• (C) No change in aggregate demand, and a decrease in aggregate supply

• (D) A decrease in aggregate demand, and no change in aggregate supply

• (E) A decrease in aggregate demand, and an increase in aggregate supply

If there is an inflationary gap, which of the following changes will move the economy back toward full employment?

• (A) An increase in investment spending

• (B) An increase in government spending

• (C) An increase in taxes

• (D) An increase in exports

• (E) An increase in transfer payments

If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur?

• (A) Aggregate demand will be unchanged

• (B) Aggregate demand will increase.

• (C) Interest rates will decrease.

• (D) The money supply will decrease.

• (E) The money supply will increase.