AP Macroeconomics Free Response Review Quiz

What is the correct labeling for the axes on a Phillips curve?

• Interest Rate and Inflation

• Inflation and GDP

• Inflation and Unemployment

• GDP and Employment

What happens to real GDP when a new residential construction project is implemented?

• It remains unchanged

• It fluctuates

• It decreases

• It increases

How does a tariff affect the supply of a country's currency in the foreign exchange market?

• Fluctuates supply

• No effect

• Decreases supply

• Increases supply

What is the effect on net exports when a country's currency appreciates?

• Net exports fluctuate

• Net exports increase

• Net exports remain unchanged

• Net exports decrease

What happens to the capital and financial account when the current account moves towards a deficit?

• It moves towards a deficit

• It remains unchanged

• It fluctuates

• It moves towards a surplus

What action should a central bank take to depreciate its currency back to its original value?

• Decrease interest rates

• Increase interest rates

• Sell currency

• Buy currency

In a country with limited reserves, what should the central bank do to stimulate the economy?

• Increase reserve requirements

• Buy bonds

• Decrease reserve requirements

• Sell bonds

What is the effect of lowering the interest on reserves in a country with ample reserves?

• Fluctuates the policy rate

• No effect on the policy rate

• Decreases the policy rate

• Increases the policy rate

How do you calculate real GDP for a given year?

• Using average prices

• Using future year prices

• Using base year prices

• Using current year prices

What is the multiplier effect if the marginal propensity to consume is 0.8?

• 10

• 5

• 4

• 2