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AP Macroeconomics Practice Questions

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Q:1-Which of the following is the best example of frictional unemployment?
Mark one answer:

A retail employee who was hired by a shopkeeper during the holiday season is let go once the holiday season is over.
An assembly line worker at a factory loses his job because the plant that he works at purchases a new machine to replace him.
A recent college graduate quits her job at a local coffee shop upon graduation. She is planning on applying for a salaried position with local banks in the area.
A major corporation announces that it is laying off 250 employees due to an economic recession which has caused weakening demand for their products.



Q:2-If the economy is in severe recession, which of the following fiscal policies would a Keynesian economist most likely recommend?
Mark one answer:

An increase in personal income taxes in order to help balance the budget.
An increase in government spending on public infrastructure, even if this spending results in greater budget deficits.
A decrease in government transfer payments.
A decrease in government spending in order to offset the decrease in tax revenues that result from an economy in recession.


Q:3-Which of the following is not a part of M1?
Mark one answer:

A check that has been written but not yet deposited
Traveler's checks
Money in a personal savings account
Paper money


Q:4-Which of the following is not a tool used by the Federal Reserve?
Mark one answer:

Adjusting the discount rate
Buying and selling bonds via open market operations
Increasing aggregate demand through fiscal policy
Adjusting the reserve requirements for banks


Q:5-If the Federal Reserve is trying to head off a recession, which of the following is the most likely action that it will take?
Mark one answer:

Decrease the reserve requirement for banks.
Buy bonds via open market operations.
Cut taxes in order to increase aggregate demand.
Increase the discount rate.


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Q:6-Which of the following are considered open-market activities?
Mark one answer:

Raising Bank Reserve Requirements
Decreasing Taxes
Increasing Government Spending
Selling Government Bonds


Q:7-According to Keynesian Economics, which of the following would weaken the multiplier effect?
Mark one answer:

An increase in government spending
Selling government bonds
High velocity of money
An increase in interest rates


Q:8-Which of the following is the best definition of the concept behind the Phillips Curve?
Mark one answer:

The relationship between government spending and the multiplier effect
The relationship between unemployment and inflation
The relationship between net exports and GDP
The relationship between worker pay and productivity.


Q:9-Which of the following is not one of the three main causes of inflation?
Mark one answer:

Built-in inflation
Hyperinflation
Cost push inflation
Demand pull inflation


Q:10-The long-run aggregate supply curve is likely to shift to the right when which of the following occurs?
Mark one answer:

An increase in worker productivity due to technological innovation
A higher than estimated multipler effect
An increase in government spending due to government stimulus
A decrease in interest rates due to action by the Federal Reserve



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