AP MACROECONOMICS TEST PAPER
QUESTIONS AND CORRECT ANSWERS
COMPREHENSIVE LEARNING GUIDE
●● Inflation occurs when there is a sustained increase in
Answer: average price level
●● An increase in spending in an economy will cause a multiplied
increase in GDP because
Answer: consumption increases as income increases
●● A contraction in the money supply will most likely change the
nominal interest rate and aggregate demand in what way in the short
run?
Answer: Nominal Interest Rate- Increase, Aggregate Demand- Decrease
●● If the economy is in a severe recession, what policy action is most
appropriate?
Answer: Increasing both the money supply and government spending
●● The most liquid asset is
Answer: currency
,●● If nominal interest rate is 8% and the expected inflation is 3%, the
real interest rate is
Answer: 5%
●● An increase in the international value of the US dollar will most
likely benefit
Answer: retired US citizens living overseas on their social security
checks
●● What group would most likely gain from unanticipated inflation?
Answer: Individuals who have borrowed money at fixed interest rates
●● The purchase of securities on the open market by the Federal
Reserve will
Answer: Increase the supply of money
●● Total spending in the economy is most likely to increase by the
largest amount if what occurs to government spending and taxes?
Answer: Government Spending- Increase, Taxes- Decrease
●● For an economy consisting of households and businesses only, what
is consistent with the circular flow of income and production?
Answer: Households are suppliers of resources and consumers of goods
and services
, ●● If a banking system's reserves are $100 billion, demand deposits are
$500 billion, and the system is fully loaned-up, the the reserve ratio must
be
Answer: 20% (100/500=0.2)
●● An increase in what would cause the long-run aggregate supply
curve to shift to the right?
Answer: Potential Output
●● If an economy is operating with significant unemployment, an
increase in what will most likely cause employment to increase and the
interest rate to decrease?
Answer: Purchases of government bonds by the central bank
●● To counteract a recession, the Federal Reserve should
Answer: Buy securities on the open market and lower the reserve
requirement
●● An appreciation of the US dollar on the foreign exchange market
could be caused by a decrease in what?
Answer: US consumer price index
QUESTIONS AND CORRECT ANSWERS
COMPREHENSIVE LEARNING GUIDE
●● Inflation occurs when there is a sustained increase in
Answer: average price level
●● An increase in spending in an economy will cause a multiplied
increase in GDP because
Answer: consumption increases as income increases
●● A contraction in the money supply will most likely change the
nominal interest rate and aggregate demand in what way in the short
run?
Answer: Nominal Interest Rate- Increase, Aggregate Demand- Decrease
●● If the economy is in a severe recession, what policy action is most
appropriate?
Answer: Increasing both the money supply and government spending
●● The most liquid asset is
Answer: currency
,●● If nominal interest rate is 8% and the expected inflation is 3%, the
real interest rate is
Answer: 5%
●● An increase in the international value of the US dollar will most
likely benefit
Answer: retired US citizens living overseas on their social security
checks
●● What group would most likely gain from unanticipated inflation?
Answer: Individuals who have borrowed money at fixed interest rates
●● The purchase of securities on the open market by the Federal
Reserve will
Answer: Increase the supply of money
●● Total spending in the economy is most likely to increase by the
largest amount if what occurs to government spending and taxes?
Answer: Government Spending- Increase, Taxes- Decrease
●● For an economy consisting of households and businesses only, what
is consistent with the circular flow of income and production?
Answer: Households are suppliers of resources and consumers of goods
and services
, ●● If a banking system's reserves are $100 billion, demand deposits are
$500 billion, and the system is fully loaned-up, the the reserve ratio must
be
Answer: 20% (100/500=0.2)
●● An increase in what would cause the long-run aggregate supply
curve to shift to the right?
Answer: Potential Output
●● If an economy is operating with significant unemployment, an
increase in what will most likely cause employment to increase and the
interest rate to decrease?
Answer: Purchases of government bonds by the central bank
●● To counteract a recession, the Federal Reserve should
Answer: Buy securities on the open market and lower the reserve
requirement
●● An appreciation of the US dollar on the foreign exchange market
could be caused by a decrease in what?
Answer: US consumer price index
