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# AP-« Macroeconomics National Income and Price Determinant Review

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AP&reg; Macroeconomics: National Income and Price Determination &shy; Practice Quiz on Learningpod
Practice Questions
POD
AP&reg; Macroeconomics: National Income and Price Determination
1.
Assuming that other factors are held constant, nationwide improvements in productivity will
ANSWER (Choose the correct answer)
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A
B
C
D
E
shift the aggregate demand curve to the left.
shift the aggregate demand curve to the right.
shift the aggregate supply curve to the right.
shift the aggregate supply curve to the left
increase the price level.
by Kaplan Test Prep
2.
When a government increases the amount of money spent on infrastructure, such as roads and bridges, this is
ANSWER (Choose the correct answer)
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A
B
C
D
E
a monetary policy.
an income policy.
an inflationary policy.
a deflationary policy.
a fiscal policy.
by Kaplan Test Prep
3.
When the government sector is included in the circular flow of income, disposable income is exactly equal to
ANSWER (Choose the correct answer)
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A
B
C
D
E
consumption minus saving.
saving plus taxes.
national income minus net taxes.
net taxes plus total income.
net taxes minus total income.
by Kaplan Test Prep
4.
A supply shock that increased costs with no change in monetary or fiscal policy would
ANSWER (Choose the correct answer)
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A
B
C
D
E
shift the aggregate supply curve to the right, increase RGDP, and decrease the price level.
shift the aggregate supply curve to the left, decrease RGDP, and increase the price level.
shift the aggregate demand curve to the left, increase RGDP, and increase the price level.
shift the aggregate demand curve to the right, decrease RGDP, and decrease the price level.
shift the aggregate demand curve to the left, decrease RGDP, and decrease the price level.
by Kaplan Test Prep
5.
If the tax multiplier is &shy;2 and net taxes are reduced by \$300 billion, output will
ANSWER (Choose the correct answer)
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A
B
C
D
E
increase by \$150 billion.
decrease by \$150 billion.
increase by \$300 billion.
increase by \$600 billion.
decrease by \$600 billion.
by Kaplan Test Prep
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6.
AP&reg; Macroeconomics: National Income and Price Determination &shy; Practice Quiz on Learningpod
If the MPC is 0.9, then the tax multiplier equals which of the following?
ANSWER (Choose the correct answer)
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A
B
C
D
E
&shy;9
&shy;6
&shy;3
&shy;7
&shy;4
by Kaplan Test Prep
7.
If the MPC is 0.8 and government spending decreases by \$10 billion, how would this affect the nation's income?
ANSWER (Choose the correct answer)
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A
B
C
D
E
Income would decrease by
Income would decrease by
Income would decrease by
Income would decrease by
Income would decrease by
\$62.5 billion.
\$50 billion.
\$10 billion.
\$8 billion.
\$40 billion.
by Kaplan Test Prep
8.
Which one of the following would shift the aggregate demand curve to the right?
ANSWER (Choose the correct answer)
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A
B
C
D
E
A higher price level
An increase in investment spending
An increase in the interest rate at each possible price level
An increase in the personal income tax rates
A decrease in government spending directed to education
by Kaplan Test Prep
AP&reg; Macroeconomics: National Income and Price Determination
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AP&reg; Macroeconomics: National Income and Price Determination &shy; Practice Quiz on Learningpod
Answers &amp; Explanations
POD
AP&reg; Macroeconomics: National Income and Price Determination
1.
Answer (C) is correct.
shift the aggregate supply curve to the right.
The AS curve will shift to the right if any of the factors that can move the AS curve change. Lower input prices or lower prices
for goods that use the same resources are two of these shift movers. Increases in productivity (the measure of increasing
output with the same inputs) will always move the AS curve to the right. Choice (C) is correct. Remember, productivity deals
with inputs and the supply curve. Know that, and you can eliminate answer choices (A) and (B) right off the bat.
by Kaplan Test Prep
2.
Answer (E) is correct.
a fiscal policy.
Government spending and taxes are two tools of fiscal policy. When the government changes its expenditure or changes the
level of taxes in the economy, we say that the government is using fiscal policy (E). Monetary policy (A) is when the amount of
money circulating in the economy changes. That can only happen when the Federal Reserve changes the money supply.
Expenditure by the government does not change the amount of money circulating in the economy and is, hence, not a
monetary policy. Also, monetary policy is only in the hands of the Federal Reserve, just as fiscal policy is only in the hands of
the president and the Congress.
by Kaplan Test Prep
3.
Answer (C) is correct.
national income minus net taxes.
The introduction of the government sector implies that the income left to spend on consumption (or saving) is income after
paying taxes (net of transfer payments). Hence, disposable income is national income minus net taxes, (C).
by Kaplan Test Prep
4.
Answer (B) is correct.
shift the aggregate supply curve to the left, decrease RGDP, and increase the price level.
An increase in the cost of inputs would lower the short&shy;run AS and shift the curve to the left. The price level would increase,
and the RGDP would decrease. Thus, (B) is the correct answer.
by Kaplan Test Prep
5.
Answer (D) is correct.
increase by \$600 billion.
If taxes go down, then consumers will spend more, AD will increase, and output will increase. In this example, net taxes
decrease by \$300 billion, and the tax multiplier is &shy;2. Therefore, we can determine the change in output by applying the tax
multiplier to the change in net taxes: &shy;2(&shy;\$300 billion) = \$600 billion. Choice (D) is correct.
by Kaplan Test Prep
6.
Answer (A) is correct.
&shy;9
7.
Answer (B) is correct.
Income would decrease by \$50 billion.
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8.
AP&reg; Macroeconomics: National Income and Price Determination &shy; Practice Quiz on Learningpod
Answer (B) is correct.
An increase in investment spending
AP&reg; Macroeconomics: National Income and Price Determination
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