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WorksheetsAP Macro Final Review
Total questions: 35
Worksheet time: 33mins
Name
Class
Date
1.
Peggy, a recent college graduate, decides to look for a job instead of going to graduate school. If she is unable to find a job that suits her interests right away, what type of unemployment is she MOST likely experiencing?
a)
Structural
b)
Seasonal
c)
Frictional
d)
Cyclical
2.
The BEST example of structural unemployment in an economy is someone
a)
between jobs or entering the work force.
b)
out of work due to a change in the business cycle.
c)
out of work due to a seasonal downturn in business.
d)
whose job skills do not match the economy's needs.
3.
What would you conclude about an economy characterized by increasing gross domestic product (GDP), low unemployment, and increasing inflation?
a)
This economy is in a slow down.
b)
The government needs to address the unemployment problem.
c)
This economy is in the expansion phase of a business cycle.
d)
The Federal Reserve should expand the money supply.
4.
When the Federal Reserve buys government securities/bonds on the open market, what effect does this action have on the nation's money supply and aggregate demand?
a)
money supply increases; aggregate demand increases
b)
money supply increases; aggregate demand decreases
c)
money supply decreases; aggregate demand increases
d)
money supply decreases; aggregate demand decreases
5.
Monetary policies the Federal Reserve can adopt include all of the following EXCEPT
a)
raising the discount rate.
b)
buying government bonds.
c)
lowering the reserve requirement.
d)
raising personal income tax rates.
6.
The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT
a)
decreasing the discount rate.
b)
increasing the reserve requirement.
c)
selling securities on the open market.
d)
making banks hold a reserve for all types of deposits.
7.
If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is
a)
decreasing taxes.
b)
decreasing spending.
c)
decreasing the money supply.
d)
decreasing the reserve requirement.
8.
Importing more than exporting is
a)
trade surplus
b)
trade deficit
c)
balance of trade
d)
balance of payment
9.
Suppose the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen. What would happen to the prices of American goods in Japan?
a)
increase or decrease
b)
decrease
c)
remain the same
d)
increase
10.
Consumer Spending is the largest portion of GDP
a)
True
b)
False
11.
Money that has actual value
a)
Fiat
b)
Commodity
c)
Commodity-backed
d)
Barter
12.
This economist would argue that in the long run, we are all dead. Government must act to stabilize the economy.
a)
Hayek
b)
Keynes
c)
Smith
d)
Milton
13.
When the economy is working properly, what is the unemployment rate?
a)
0 to 3 percent
b)
4 to 6 percent
c)
8 to 10 percent
d)
10 to 12 percent
14.
Which of the following is the best measure of a nation’s standard of living?
a)
Real GDP per capita
b)
Nominal GDP
c)
Unemployment
d)
Inflation
15.
Which of the following is an example of an intermediate good?
a)
a pair of shoes at the mall
b)
a new car
c)
lumber purchased to build a house
d)
a fee paid to real estate agent for sale of a house
16.
The calculation of GDP would directly include
a)
the sale of a 25-year-old house.
b)
the income of a person who pays rent by babysitting for the homeowner’s children.
c)
A dinner at Applebee’s.
d)
the price of the steel used to build a new hotel.
17.
If nominal interest rates are 12% and the rate of inflation is 7% the real rate of interest is
a)
12%
b)
5%
c)
19%
d)
7%
18.
The unemployment rate is calculated as the number of
a)
unemployed persons divided by number of employed persons
b)
persons in the labour force divided by the number of unemployed
c)
unemployed divided by size of the labour force
d)
employed persons divided by number of unemployed persons
19.
What is the vertical line called on the AD/AS Model?
a)
short-run aggregate supply
b)
aggregate demand
c)
long run aggregate supply
d)
r GDP
20.
What is a recessionary gap?
a)
when ouput falls below potential
b)
when output exceeds potentional
c)
when output increases
d)
when unemployment decreases
21.
What is an inflationary gap?
a)
when output goes beyond full employment
b)
when output falls below full employment
c)
when unemployment increases
d)
when deflation is present in an economy
22.
What would cause AD to decrease?
a)
an increase in taxes
b)
a decrease taxes
c)
an increase in government spending
d)
keeping government spending constant
23.
If investors expect the economy is headed for expansion the ______ of loanable funds will _______.
a)
demand; decrease
b)
demand; increase
c)
supply; decrease
d)
supply; increase
24.
The shift in the graph could be caused by
a)
increasing the discount rate.
b)
decreasing taxes.
c)
decreasing the Federal Funds rate.
d)
lowering the reserve requirement.
25.
The shift in the graph could be caused by
a)
an increase in consumer wealth.
b)
an increase in deficit spending.
c)
the Fed buys securities.
d)
the population grows.
26.
If someone wins the lottery tomorrow, which of the following would have the largest value, given an expected rate of interest of 5%?
a)
A lump sum payment today of $100,000
b)
A lump sum payment in three years of $115,500
c)
Three annual payments of $37,000
d)
A lump sum payment next year of $106,000
27.
In the next decade, interest rates are expected to be 10% per year in Country A but only 5% in Country B. Which of the following prevents people from making money by borrowing money in Country B and investing it in Country A?
a)
Currency
b)
Inflation
c)
Exchange rates
d)
Trade Balance
28.
If real interest rates in Europe rose relative to that in the US, what would happen to US dollars in the foreign exchange markets?
a)
The supply of US dollars would decrease.
b)
The demand of US dollars would decrease.
c)
The supply of US dollars would increase.
d)
There would be no change.
29.
The real interest rate is simply stated as the
a)
inflation rate minus the CPI
b)
nominal interest rate over time
c)
nominal interest rate minus the expected inflation rate
d)
nominal interest rate plus the expected inflation rate
30.
The crowding-out effect can be best described as
a)
the effect on business borrowing that occurs when the government borrows
b)
the effect on businesses that occurs when the government saves
c)
the effect on businesses that occurs when the government sells
d)
the effect on businesses that occurs when the government lends
31.
The Phillips curve illustrates the relationship between
a)
inflation and the money supply
b)
unemployment and the money supply
c)
the money supply and the real interest rate
d)
inflation and unemployment
32.
The demand for money decreases when national income decreases because
a)
bond prices rise
b)
the price level decreases
c)
spending on goods and services decreases
d)
the money supply increases
33.
Which of the following statements explains how the circular flow can be used to measure national economic activity?
I. The circular flow measures the national income.
II. The circular flow shows injections and leakages of the economy
III. The circular flow shows how consumer savings become investment.
I. The circular flow measures the national income.
II. The circular flow shows injections and leakages of the economy
III. The circular flow shows how consumer savings become investment.
a)
I only
b)
II only
c)
III only
d)
II and III
34.
Company A makes $10,000 worth of buttons, which it sells to Company B. Company B makes shirts with those buttons and sells the shirts for $50,000. Company C is a resale shop where all the shirts are donated after their first owners tire of them, and it sells the shirts for $15,000. What is the total contribution to GDP of these shirts?
a)
$75,000
b)
$40,000
c)
$50,000
d)
$60,000
35.
If someone wins the lottery tomorrow, which of the following would have the largest value, given an expected rate of interest of 5%?
a)
A lump sum payment today of $100,000
b)
A lump sum payment in three years of $115,500
c)
Three annual payments of $37,000
d)
A lump sum payment next year of $106,000
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