AP Macro Review
Unit 3
National Income and Price
Determination
1. The aggregate demand curve is
downward sloping because of:
a)
b)
c)
d)
e)
The real-balances effect
The interest rate effect
The substitute effect
The crowding out effect
Both A and B
2. All of the following will cause the
aggregate demand curve to shift EXCEPT:
a)
b)
c)
d)
e)
Change in consumer income
Change in price level
A decrease in government spending
An increase in net exports
An increase in net imports
3. Which of the following factors will shift
the aggregate supply curve to the right?
a)
b)
c)
d)
e)
An increase in productivity
Increased wages for workers
An increase in government regulations
Consumer income increases
None of the above
4. Other things being equal, a shift of the
aggregate supply curve to the left involves all of
the following EXCEPT:
a) An increase in government regulation
b) A decrease in workers’ wages
c) A decrease in the labor force
d) An increase in taxes
e) A decrease in productivity
5. The interest rate effect suggests:
a) A decrease in the money supply will increase interest
rates
b) An increase in the price level will decrease the demand for
money
c) An increase in the price level will lead consumers and
businesses to borrow more money, which increases the
interest rate
d) A decrease in the price level will lead consumers and
businesses to borrow more money, which increases the
interest rate
e) An increase in the price level will lead consumers and
businesses to borrow less money, which increases the
interest rate
6. Imagine that investment increases by
$10 billion and the MPC is 0.8. The
aggregate demand curve will shift:
a)
b)
c)
d)
e)
Leftward by $30 billion at each price level
Rightward by $5 billion at each price level
Rightward by $80 billion at each price level
Leftward by $18 billion at each price level
Rightward by $50 billion at each price level
7. Macroeconomic equilibrium occurs
when:
a) Full-employment GDP exceeds equilibrium
GDP
b) Equilibrium GDP exceeds full-employment
GDP
c) The quantity of real output demanded is
equal to the quantity of real output supplied
d) There is a sustained falling price level
e) GDP falls for a consecutive six months
8. When the full-employment level exceeds the
level of aggregate expenditures, which of the
following most likely develops?
a) An inflationary gap
b) A recessionary gap
c) Hyperinflation
d) Stagflation
e) recession
9. The full-employment equilibrium
occurs at the intersection of:
a) The aggregate demand curve and the shortrun and long-run aggregate supply curves
b) The Phillips curve and the aggregate demand
curve
c) The aggregate demand curve and the longrun aggregate supply curve
d) The aggregate demand curve and the shortrun aggregate supply curve
e) None of the above
10. A change in spending may generate
even larger or smaller changes in real GDP.
This is known as the:
a)
b)
c)
d)
e)
Crowding out effect
Velocity of money
Quantity theory of money
Multiplier effect
Marginal propensity to save
11. The crowding out effect refers to
the relationship between:
a) Government spending/borrowing and private
investment/consumption
b) Full-employment and inflation
c) Unemployment and inflation
d) Government spending/borrowing and net
exports/imports
e) None of the above
12. Which of the following will cause the
aggregate demand curve to shift to the
right?
a)
b)
c)
d)
e)
An increase in the price level
An increase in interest rates
An increase in government spending
A decrease in government spending
A decrease in personal consumption
13. If the MPC is 0.6, how much would the
government need to spend if it desired a $25
billion increase in national income?
a)
b)
c)
d)
e)
$2.5 billion
$50 billion
$15 billion
$5.2 billion
$10 billion
Answer Key
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
E
B
A
B
C
E
C
B
A
D
A
C
E