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AP Macro Final Review

Total questions: 100

Worksheet time: 2hrs 40mins

Name
Class
Date
1.
When one decision is made, the next best alternative not selected is called
a)
economic resource
b)
opportunity cost
c)
scarcity
d)
comparative advantage
2.

Kylee, 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
3.
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.
4.
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.
5.
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
6.
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.
7.
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.
8.
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.
9.
Importing more than exporting is
a)
trade surplus
b)
trade deficit
c)
balance of trade
d)
balance of payment
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.
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
13.
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
14.
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 
15.
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.
16.
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%
17.
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
18.
What is a recessionary gap?
a)
when ouput falls below potential
b)
when output exceeds potentional
c)
when output increases
d)
when unemployment decreases
19.
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
20.
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
21.
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.
22.
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
23.
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
24.

Macroeconomics is mostly focused on:

a)

why specific businesses fail.

b)

the individual markets within an economy.

c)

the economy as a whole.

d)

only the largest industries in the economy

25.

The business cycle depicts:

a)

the phases a business goes through from when it first opens to when it finally closes.

b)

the evolution of technology over time.

c)

short-run fluctuations in output and employment.

d)

fluctuations in the general price level.

26.

Unemployment describes the condition where:

a)

a person does not have a job, regardless of whether or not he or she wants one

b)

a person cannot get a job but is willing to work and is actively seeking work

c)

equipment and machinery are going unused

d)

any resource sits idle.

27.

Inflation is defined as

a)

the growth phase of the business cycle.

b)

the rate of growth in nominal GDP.

c)

an increase in the overall level of prices

d)

a situation where all prices in the economy rise simultaneously.

28.

A nation's gross domestic product (GDP):

a)

is always some amount less than C + I + G +Xn.

b)

is the dollar value of all final output produced by its citizens, regardless of where they are living

c)

can be found by summing C + I + S + Xn.

d)

is the dollar value of all final output produced within the borders of the nation during a specific period

29.

Which phase of the business cycle would be most closely associated with an economic contraction?

a)

Trough

b)

Peak

c)

Recession

d)

Recovery

30.

A decrease in government spending will cause a(n):

a)

Decrease in the quantity of real output demanded

b)

Decrease in aggregate demand

c)

Increase in aggregate demand

d)

Increase in the quantity of real output demanded

31.

Fiscal policy refers to the:

a)

fact that equal increases in government spending and taxation will be contractionary.

b)

deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level.

c)

deliberate changes in government spending and taxes to achieve greater equality in the distribution of income.

d)

altering of the interest rate to change aggregate demand.

32.

What function is money serving when you deposit money in a savings account?

a)

A checkable deposit

b)

A unit of account

c)

A medium of exchange

d)

A store of value

33.

What function is money serving when you use it when you go shopping?

a)

A store of value

b)

A medium of exchange

c)

A medium of deferred payment

d)

A unit of account

34.

Alice's disposable income increases by $1,000, and she spends $600 of this increase in disposable income. For Alice, her:

a)

MPS is 0.40 and she saves $400.

b)

MPC is 0.40 and she saves $400.

c)

MPS is 0.40 and she saves $600

d)

MPC is 0.60 and she consumes $400.

e)

MPC is 0.60 and she consumes $1,000

35.

A government might want to increase aggregate demand to:

a)

close an inflationary gap.

b)

close a recessionary gap.

c)

lower prices in the economy.

d)

lower employment in the economy.

e)

decrease nominal interest rates.

36.

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate

a)

Ignores the duration of unemployment

b)

Ignores underemployed and discouraged workers

c)

Includes jobs created by the underground economy

d)

Excludes all unemployed teenagers

e)

Excludes frictionally unemployed workers

37.

According to the short-run Phillips curve, lower inflation rates are associated with

a)

Higher unemployment rates

b)

Higher government spending

c)

Larger budget deficits

d)

Greater labor-force participation rates

e)

Smaller labor-force participation

rates

38.

Which of the following is likely to occur following the depreciation of the United States dollar?

a)

United States imports will increase

b)

United States exports will increase.

c)

Demand for the United States dollar will decrease.

d)

United States demand for foreign currencies will increase.

e)

United States goods will become more expensive in foreign markets.

39.

If a country’s economy is operating below the full-employment level of output at a very low inflation rate, the central bank of the country is most likely to

a)

. pursue an expansionary monetary policy because it is required to do so by law whenever output is below the full-employment level

b)

pursue an expansionary fiscal policy because it is required to do so by law whenever output is below the full-employment level.

c)

lower the discount rate and buy bonds on the open market to generate an increase in output

d)

lower the required reserve ration and sell bonds to on the open market to generate an increase in output

e)

raise the discount rate and lower the required reserve ration to generate an increase in output

40.
Which of the following is always true of an
economy operating on its production possibilities
frontier?
a)
Its resources are fully employed.
b)
It is allocatively efficient.
c)
It cannot trade with other nations because it
is the most efficient producer of tradeable
goods.
d)
It will necessarily operate on the same frontier the following year.
41.
Open market operations take place when the
a)
central bank buys or sells stocks
b)
central bank buys or sells government bonds
c)
central bank increases or decreases the
discount rate to monitor the money supply
d)
central bank increases or decreases reserve
requirements for depository institutions
42.
An increase in which of the following is most likely to increase long-run economic growth?
a)
Interest rate
b)
Income tax rate
c)
Marginal propensity to consume
d)
Investment in human capital
43.
Which of the following would generate cost-push inflation?
a)
An increase in the price of labor
b)
A decrease in the price of energy
c)
An increase in household consumption
d)
A decrease in government spending
44.
Scarcity exists because
a)
human wants exceed the productive capacity
of the economy
b)
supplies of land and other natural resources
are unlimited
c)
physical capital does not depreciate
d)
population and labor force growth are
slowing
45.
To counter a recession, the central bank might pursue which of the following actions?
a)
Increasing reserve requirements and selling
securities on the open market
b)
Increasing capital gains tax and selling
securities on the open market
c)
Decreasing reserve requirements and
increasing the discount rate
d)
Decreasing the discount rate and buying
securities on the open market
46.
Given the aggregate demand and aggregate supply curves shown above, if policy makers want to increase real output without causing inflation, they can pursue a policy that will
a)
increase aggregate demand and decrease
aggregate supply by equal amounts
b)
decrease aggregate demand only
c)
increase aggregate demand only
d)
increase aggregate supply only
47.
Which of the following combinations of policies is designed to decrease inflation?
a)
An increase in taxes and a decrease in the
reserve requirement
b)
An increase in taxes and an open-market
purchase of government securities
c)
A decrease in taxes and an open-market
purchase of government securities
d)
A decrease in government spending and an
open-market sale of government securities
48.
A country’s real gross domestic product is the annual value of all final goods and services that are
a)
purchased in that country, adjusted for
changes in the price level
b)
produced in that country, expressed
in current prices
c)
produced in that country, less exports
d)
produced in that country, adjusted for
changes in the price level
49.
In the aggregate demand-aggregate supply model, economic growth can best be represented by a
a)
leftward shift of the long-run aggregate
supply curve
b)
rightward shift of the long-run aggregate
supply curve
c)
rightward shift of the short-run aggregate
supply curve
d)
rightward shift of the aggregate demand
curve
50.
Which of the following would shift a country’s production possibilities curve inward?
a)
A reduction in the country’s inflation rate
b)
A reduction in the country’s real interest rate
c)
A reduction in the size of the country’s labor
force
d)
An increase in the typical retirement age in
the country
51.
According to the short-run Phillips curve, a contractionary fiscal policy will result in
a)
a decrease in both unemployment and prices
b)
a decrease in inflation and an increase in unemployment
c)
a decrease in both wage rates and
unemployment
d)
an increase in both wage rates and
unemployment
52.
The loanable funds market is best described as bringing together
a)
savers and borrowers
b)
investors and borrowers
c)
financial institutions and investors
d)
savers and lenders
53.
An increase in which of the following will cause an increase in the demand for money?
a)
The interest rate
b)
The supply of money
c)
The price level
d)
The velocity of money
54.
Which of the following best describes an economy at full employment?
a)
The rate of unemployment is zero.
b)
There is only structural and cyclical
unemployment.
c)
There is cyclical, but not structural,
unemployment.
d)
There is frictional, but not cyclical,
unemployment.
55.
According to the graph above, which of the following statements about the economy is true?
a)
The economy is in long-run equilibrium.
b)
The LRAS curve will automatically shift to
the right, restoring long-run equilibrium.
c)
In the short run, if wages are sticky the SRAS
will shift to the right, lowering prices.
d)
Wages will eventually decrease, restoring full
employment in the long run.
56.
The real interest rate earned is the
a)
same as the nominal interest rate when
inflation is moderate
b)
cost of borrowing in current consumer prices
c)
cost of borrowing in current producer prices
d)
cost of borrowing adjusted for the rate of
change in the price level
57.

Based on the Required Reserves that Reserve Ratio must be

a)

5%

b)

10%

c)

20%

d)

19%

e)

none of the above

58.

The long run aggregate supply curve is also known as

a)

The natural rate of unemployment

b)

Full-employment

c)

The natural rate of employment

d)

Cyclical unemployment

59.

If the price of imported Canadian lumber increases

a)

AS shifts left (decrease)

b)

AS shifts right (increase)

c)

AD shifts left (decrease)

d)

AD shifts right (increase)

60.

Changes in price level

a)

Shift the AD curve left (decrease)

b)

Shift the AD curve right (increase)

c)

Move along the AD curve

d)

Shift the AS curve right (increase)

e)

Shift the AS curve left (decrease)

61.

The multiplier effect shows

a)

How spending is magnified in the economy

b)

How much consumers can spend from their paychecks

c)

How much the government can spend from their budget

d)

How often the economy can survive recessions

62.

Sam pays monthly installments on a five-year fixed interest rate auto loan. If the expected inflation rate increases, which of the following will happen?

a)

Sam will pay a lower nominal interest rate.

b)

Sam will pay a higher nominal interest rate.

c)

Sam will pay a lower real interest rate.

d)

Sam will pay a higher real interest rate.

63.

If the loanable funds market is in equilibrium, then which of the following must be true?

a)

Government spending equals tax revenues.

b)

Investment spending equals private savings.

c)

Foreign inflows of financial capital equal investment spending

d)

Borrowing equals lending.

64.

Which of the following will happen when interest rates increase in an economy?

a)

The opportunity cost of holding money will increase.

b)

Investment spending will increase

c)

The spending multiplier will decrease.

d)

The cost of borrowing will decrease.

65.

Which of the following is considered the most liquid asset?

a)

Currency

b)

Real estate

c)

Bonds

d)

Stocks

66.
Which of the following is NOT a contractionary fiscal policy?
a)
increasing taxes
b)
decreasing spending
c)
decreasing transfers
d)
increasing the money supply
67.
Intermediate goods are not counted in final GDP calculations ...
a)
because they are too cheap
b)
because they tend to be imported
c)
to avoid double-counting
d)
to focus on consumer expenditures
68.
If a person making $50,000 pays a higher marginal tax rate than someone making $30,000, then we can say the tax system is...
a)
progressive
b)
proportional
c)
regressive
d)
unfair
69.
Unexpected inflation is most likely to benefit...
a)
taxpayers
b)
borrowers
c)
lenders
d)
savers
70.

An outwardly-bowed or curved PPC represents:

a)

increasing opportunity costs for both goods

b)

constant opportunity costs for both goods

c)

decreasing opportunity costs for one good

d)

increasing opportunity costs for one good

71.

What measure shows how well the economy is doing over time?

a)

Gross Domestic Product

b)

Unemployment Rate

c)

Inflation Rate

72.

Which of the following is NOT included in a country's GDP?

a)

Consumer Spending

b)

Business Spending

c)

Government Spending

d)

Net Exports

e)

Net Imports

73.

Monetary policy, or changing the money supply to influence the economy, is controlled by who?

a)

Congress and the President

b)

The Federal Reserve

74.

Greg buys $1,000 of stock. He has to pay $50 for broker fee. How much can be counted in GDP?

a)

$1000 (only the stock)

b)

$1050 (stock + broker fee)

c)

$0 (neither stock nor broker fee)

d)

$50 (only the broker fee)

75.

Assume that the required reserve ratio is 10 percent, banks keep no excess reserves, and borrowers deposit all loans made by banks. Suppose you have saved $100 in cash at home and decide to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of

a)

$800

b)

$900

c)

$1,000

d)

$1,100

e)

$1,200

76.
There is an increase in supply.  This will cause the equilibrium price to ______ & the equilibrium quantity to ______.
a)
decrease; increase
b)
decrease; decrease
c)
increase; increase
d)
increase; decrease
77.
If the supply and demand curves intersect at a price of $20 then any price above that would result in a(n):
a)
shortage.
b)
equilibrium.
c)
increase in demand.
d)
surplus.
78.

Interest Rate Effect

a)

“Sticky Wages” prevents wages from falling. The government should deficit spend to close the gap.

b)

Price levels effect purchasing power which effects spending

c)

When U.S. price levels rise, then GDP decreases due to an increase in imports and a decrease in exports.

d)

Price levels and economy will fix itself. No Government involvement required

e)

When price levels increase, lenders need to charge higher interest rates which decreases consumer and business investment spending.

79.

Foreign Trade Effect

a)

“Sticky Wages” prevents wages from falling. The government should deficit spend to close the gap.

b)

Price levels effect purchasing power which effects spending

c)

When U.S. price levels rise, then GDP decreases due to an increase in imports and a decrease in exports.

d)

Price levels and economy will fix itself. No Government involvement required

e)

When price levels increase, lenders need to charge higher interest rates which decreases consumer and business investment spending.

80.

Inflationary Gap

a)

Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.

b)

Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)

c)

Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.

d)

A gap with higher prices and a decrease in GDP

e)

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)

81.

Recessionary Gap

a)

Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.

b)

Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)

c)

Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.

d)

A gap with higher prices and a decrease in GDP

e)

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)

82.

Stagflation

a)

Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.

b)

Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)

c)

Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.

d)

A gap with higher prices and a decrease in GDP

e)

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)

83.

Contractionary Fiscal Policy

a)

Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.

b)

Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)

c)

Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.

d)

A gap with higher prices and a decrease in GDP

e)

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)

84.

What does the AD curve show for a given price level?

a)

The amount of output buyers want to buy at that price

b)

How many people would buy a product at that price

c)

The real GDP of the country

d)

The output that buyers should provide to make a profit

85.

All of the following are counted in a nation's current account (CA) except

a)

$50,000 car imported from Italy

b)

$500 of cheese exported from France

c)

A $50 million Chinese factory purchased by a Canadian

d)

$1 million donated in first aid supplies to Indonesia

e)

$1,000 sent to Russia from a Russian working in the US

86.

Which of the following would decrease the U.S. capital and financial account (CFA)?

a)

A boat purchased by a British investment banker in Florida

b)

A ski chateau purchased in Switzerland by an American entrepreneur

c)

An American earns $1000 in the Japanese stock market

d)

The purchase of $1000 of US Treasury bonds by a Chinese investor

e)

The purchase of a foreign car by an American diplomat living in Costa Rica

87.

If the demand for the British Pound increases relative to the U.S. dollar, then the

a)

US dollar would appreciate

b)

Supply of US dollars would decrease

c)

Quantity supplied of Pounds would decrease

d)

British pound would appreciate

e)

British pound will depreciate

88.

An increase in net exports for country X will most likely be caused by which of the following?

a)

An increase in consumer spending

b)

An increase in direct foreign investment

c)

A decrease in the international value of the currency in country X

d)

An increase in the international value of the currency in country X

e)

An increase in the price level in country X

89.
In a mixed economy, what to produce and how much to produce are determined by
a)
a central planning agency
b)
a private planning agency
c)
large corporations and small entrepreneurs
d)
markets and the government
90.
Federal budget deficits occur when
a)
more money is being spent on entitlement programs than has been allocated
b)
the federal government spends more than it collects in taxes in a given year
c)
high levels of unemployment use up tax collections
d)
interest payments on the national debt increase from one year to the next 
91.
Which of the following best explains why many United States economists support free international trade?
a)
It is more important to reduce world inflation than to reduce United States unemployment.
b)
Workers are not affected; only businesses suffer.
c)
The long-run gains to consumers and some producers exceed the losses to other producers.
d)
Government can protect United States industries while encouraging free trade.
92.

According to the long-run Phillips curve, which of the following is true?

a)

Unemployment increases with an increase in inflation.

b)

Unemployment decreases with an increase in inflation.

c)

Increased automation leads to lower levels of frictional unemployment in the long run.

d)

Changes in the composition of the overall labor force tend to be deflationary in the long run.

e)

The natural rate of unemployment is independent of inflation

93.

The velocity of money is best described as:

a)

The number of times the average dollar is spent in a year

b)

Equivalent to nominal GDP

c)

Equivalent to the Price level

d)

Equivalent to real GDP

e)

Another term for the spending multiplier

94.

Which of the following will most likely result in economic growth?

a)

Increased wages

b)

Decreased savings

c)

Increased business taxes

d)

Increased labor productivity

e)

Decreased unemployment

95.
An economist would probably state that in a market economy, prices are generally determined by the interaction between 
a)
buyers and sellers
b)
wholesalers and retailers
c)
producers and labor unions
d)
consumers and government officials
96.
The resource that includes equipment, machinery, buildings, and tools.
a)
Land
b)
Labor
c)
Capital 
d)
Entrepreneur
97.

In economics, the pleasure, happiness, or satisfaction received from a product is called:

a)

status fulfillment

b)

marginal cost

c)

rational outcome

d)

utility

98.

Refer to the above diagram. This economy will experience cyclical unemployment if it produces at point:

a)

A

b)

B

c)

C

d)

D

99.
The Country of North Korea has a dictator that makes all of the economic decisions. What type of economy is this?
a)
Traditional 
b)
Market 
c)
Command 
d)
Centrally Planned 
100.
The special human resource, distinct from labor, which takes initiative, makes business decisions, innovates, and takes risk, the income from which is called profit.
a)
Productive Efficiency
b)
Entrepreneurship
c)
Utility
d)
Factors of Production

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9th - 12th Grade

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100 questions

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100 questions

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7th - 12th Grade

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100 questions

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101 questions

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