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AP Macroeconomics: Final Exam
Questions and Answers 100% Pass
What is the most fundamental issue that economics addresses? - ✔✔Use of scarce resources
Inflation occurs when there is a sustained increase in - ✔✔average price level
An increase in spending in an economy will cause a multiplied increase in GDP because -
✔✔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? - ✔✔Nominal Interest Rate- Increase, Aggregate Demand-
Decrease
If the economy is in a severe recession, what policy action is most appropriate? - ✔✔Increasing both the
money supply and government spending
The most liquid asset is - ✔✔currency
If nominal interest rate is 8% and the expected inflation is 3%, the real interest rate is - ✔✔5%
An increase in the international value of the US dollar will most likely benefit - ✔✔retired US citizens
living overseas on their social security checks
What group would most likely gain from unanticipated inflation? - ✔✔Individuals who have borrowed
money at fixed interest rates
The purchase of securities on the open market by the Federal Reserve will - ✔✔Increase the supply of
money
Emily Charlene © 2025, All Rights Reserved.
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Total spending in the economy is most likely to increase by the largest amount if what occurs to
government spending and taxes? - ✔✔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? - ✔✔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 - ✔✔20% (100/500=0.2)
An increase in what would cause the long-run aggregate supply curve to shift to the right? - ✔✔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? - ✔✔Purchases of government bonds by the
central bank
To counteract a recession, the Federal Reserve should - ✔✔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? -
✔✔US consumer price index
If the marginal propensity to consume (MPC) is 0.75, then a $100 increase in investment will result in a
maximum increase in equilibrium real GDP of - ✔✔$400 (Multiplier=4→4x100)
What would indicate that economic growth has occurred? - ✔✔LRAS curve shifts to the right
Crowding out refers to the decrease in - ✔✔private investment due to increased borrowing by the
government
Emily Charlene © 2025, All Rights Reserved.
AP Macroeconomics: Final Exam
Questions and Answers 100% Pass
What is the most fundamental issue that economics addresses? - ✔✔Use of scarce resources
Inflation occurs when there is a sustained increase in - ✔✔average price level
An increase in spending in an economy will cause a multiplied increase in GDP because -
✔✔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? - ✔✔Nominal Interest Rate- Increase, Aggregate Demand-
Decrease
If the economy is in a severe recession, what policy action is most appropriate? - ✔✔Increasing both the
money supply and government spending
The most liquid asset is - ✔✔currency
If nominal interest rate is 8% and the expected inflation is 3%, the real interest rate is - ✔✔5%
An increase in the international value of the US dollar will most likely benefit - ✔✔retired US citizens
living overseas on their social security checks
What group would most likely gain from unanticipated inflation? - ✔✔Individuals who have borrowed
money at fixed interest rates
The purchase of securities on the open market by the Federal Reserve will - ✔✔Increase the supply of
money
Emily Charlene © 2025, All Rights Reserved.
, 2|Page
Total spending in the economy is most likely to increase by the largest amount if what occurs to
government spending and taxes? - ✔✔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? - ✔✔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 - ✔✔20% (100/500=0.2)
An increase in what would cause the long-run aggregate supply curve to shift to the right? - ✔✔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? - ✔✔Purchases of government bonds by the
central bank
To counteract a recession, the Federal Reserve should - ✔✔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? -
✔✔US consumer price index
If the marginal propensity to consume (MPC) is 0.75, then a $100 increase in investment will result in a
maximum increase in equilibrium real GDP of - ✔✔$400 (Multiplier=4→4x100)
What would indicate that economic growth has occurred? - ✔✔LRAS curve shifts to the right
Crowding out refers to the decrease in - ✔✔private investment due to increased borrowing by the
government
Emily Charlene © 2025, All Rights Reserved.
