AP Macroeconomics Exam Review Questions with correct answers 2023

AP Macroeconomics Exam Review Questions with correct answers 2023 M1 equals all of the following EXCEPT: A. Cash + checking accounts B. Currency + checking accounts C. Demand deposits + checking accounts D. Currency + demand deposits E. Cash + demand deposits - C. Demand deposits + checking accounts If there's a recession, A. government spending goes up and taxes are cut automatically because of automatic stabilizers without the need for legislation passed by congress B. built in stabilizers cause interest rates to fall. C. stabilizers cause interest rates to rise D. built in stabilizers cause government spending to go down and taxes to be automatically increased without the need for legislation passed by congress E. automatic stabilizers work best when there are regressive taxes, not progressive taxes - A. government spending goes up and taxes are cut automatically because of automatic stabilizers without the need for legislation passed by congress If during a recession, the government either cuts taxes or raises interest rates, the following is true: A. Nominal interest rates fall B. GDP, inflation, and employment all fall C. Government increases demand for money in the money market, crowding out private investment D. Net exports automatically rise due to the tax cuts E. The government budget moves towards surplus - C. Government increases demand for money in the money market, crowding out private investment If the US's largest trading partners fall into recession, A. Those trading partners will import more from the US. That will cause US exports to rise and will also increase US AD, GDP, PL, and employment. B. Those trading partners will import less from the US. That will cause US exports to fall and will also decrease US AD, GDP, PL, and employment. C. Keynesian economists in those countries will raise taxes or cut government spending to fight the recession D. Those countries' aggregate supply curve will fall, also causing their GDP and employment to fall and their price level to rise E. There will be no change in the trade balances between the US and those countries. - B. Those trading partners will import less from the US. That will cause US exports to fall and will also decrease US AD, GDP, PL, and employment. When the government does expansionary fiscal policy, A. In the money market, the money supply curve shifts left, causing nominal interest rates to rise B. In the money market, the money supply curve shifts right, causing nominal interest rates to fall C. In the money market, demand for money rises, causing nominal interest rates to rise D. In the money market, demand for money falls, causing nominal interest rates to fall E. In the money market, there is no change. - When the central bank sells government securities in the open market, A. This is loose monetary policy and causes money supply to increase, interest rates to decrease, and C and I to rise, and AD, GDP, PL, to rise and unemployment to fall. B. This is an easy money policy and causes money supply to increase, interest rates to fall, and C and I to rise, and AD, GDP, PL, to rise and unemployment to fall. C. This is tight monetary policy and causes money supply to fall and interest rates to rise, and C and I to fall, and AD, GDP, PL to fall and unemployment to rise D. This is contractionary fiscal policy and causes AD, GDP, PL to fall and unemployment to rise E. This is expansionary fiscal policy and causes AD, GDP, PL, to rise and unemployment to fall. - C. This is tight monetary policy and causes money supply to fall and interest rates to rise, and C and I to fall, and AD, GDP, PL to fall and unemployment to rise The quantity theory of money states A. As money supply goes up, there is no change in price level B. As money supply goes up, price level goes down C. As money supply goes up, price level goes up D. As money supply goes down, price level goes up E. As money supply goes down, there is no change to price level - C. As money supply goes up, price level goes up