AP Macroeconomics
MR. Graham
Unit Four Review
National Income and Price Determination
Changes in which of the following leads to
a shift of the aggregate consumption
function?
I. expected future disposable income
II. aggregate wealth
III. current disposable income
a.
b.
c.
d.
e.
I only
II only
III only
I and II only
I, II and III
The slope of a family’s consumption
function is equal to
a.
b.
c.
d.
the real interest rate
the inflation rate
the marginal propensity to consume
the rate of increase in household current
disposable income
e. the tax rate
Given the consumption function
c = $16,000 + 0.5 yd, if individual household
current disposable income is $20,000,
individual household consumer spending
will equal
a.
b.
c.
d.
e.
$36,000
$26,000
$20,000
$16,000
$6,000
The level of planned investment
spending is negatively related to the
a.
b.
c.
d.
e.
rate of return on investment
level of consumer spending
level of actual investment spending
interest rate
all of the above
Actual investment spending in any
period is equal to
a. planned investment spending +
unplanned inventory investment
b. planned investment spending −
unplanned inventory investment
c. planned investment spending +
inventory decreases
d. unplanned inventory investment +
inventory increases
e. unplanned inventory investment −
inventory increases
Which of the following explains the slope of the
aggregate demand curve?
I. the wealth effect of a change in the
aggregate price level
II. the interest rate effect of a change in the
aggregate price level
III. the product-substitution effect of a
change in the aggregate price level
a. I only
b. II only
c. III only
d. I and II only
e. I, II and III
Which of the following will shift the
aggregate demand curve to the right?
a.
b.
c.
d.
e.
a decrease in wealth
pessimistic consumer expectations
a decrease in the existing stock of capital
contractionary fiscal policy
a decrease in the quantity of money
The Consumer Confidence Index is used
to measure which of the following?
a.
b.
c.
d.
e.
the level of consumer spending
the rate of return on investments
consumer expectations
planned investment spending
the level of current disposable income
Decreases in the stock market
decrease aggregate demand by
decreasing which of the following?
a.
b.
c.
d.
e.
consumer wealth
the price level
the stock of existing physical capital
interest rates
tax revenues
Which of the following government
policies will shift the aggregate
demand curve to the left?
a. a decrease in the quantity of money
b. an increase in government purchases of goods
and services
c. a decrease in taxes
d. a decrease in interest rates
e. an increase in government transfers
Which of the following will shift the
short-run aggregate supply curve? A
change in
a.
b.
c.
d.
e.
profit per unit at any given price level
commodity prices
nominal wages
productivity
all of the above
Because changes in the aggregate
price level have no effect on aggregate
output in the long run, the long-run
aggregate supply curve is
a.
b.
c.
d.
e.
vertical
horizontal
fixed
negatively sloped
positively sloped
The horizontal intercept of the longrun aggregate supply curve is
a.
b.
c.
d.
e.
at the origin
negative
at potential output
equal to the vertical intercept
always the same as the horizontal intercept of
the short-run aggregate supply curve
A decrease in which of the following
will cause the short-run aggregate
supply curve to shift to the left?
a. commodity prices
b. the cost of health care insurance premiums
paid by employers
c. nominal wages
d. productivity
e. the use of cost-of-living allowances in labor
contracts
That employers are reluctant to decrease
nominal wages during economic
downturns and raise nominal wages during
economic expansions leads nominal wages
to be described as
a.
b.
c.
d.
e.
long-run
unyielding
flexible
real
sticky
Which of the following causes a
negative supply shock?
I. a technological advance
II. increasing productivity
III. an increase in oil prices
a.
b.
c.
d.
e.
I only
II only
III only
I and III only
I, II and III
Which of the following causes a
positive demand shock?
a.
b.
c.
d.
e.
an increase in wealth
pessimistic consumer expectations
a decrease in government spending
an increase in taxes
an increase in the existing stock of capital
During stagflation, what happens to the
aggregate price level and real GDP?
Aggregate price level
a. decreases
b. decreases
c. increases
d. increases
e. stays the same
Real GDP
increases
decreases
increases
decreases
stays the same
Which of the following statements is true if this
economy is operating at P1 and Y1?
I. The level of aggregate output equals
potential output.
II. It is in short-run macroeconomic equilibrium.
III. It is in long-run macroeconomic equilibrium.
a.
b.
c.
d.
e.
I only
II only
III only
II and III only
I and III only
The economy depicted in the graph is
experiencing a(n)
a.
b.
c.
d.
e.
contractionary gap.
recessionary gap.
inflationary gap.
demand gap.
supply gap.
Which of the following contributes to the lag in
implementing fiscal policy?
I. It takes time for Congress and the President
to pass spending and tax changes.
II. Current economic data take time to collect
and analyze.
III. It takes time to realize an output gap exists.
a.
b.
c.
d.
e.
I only
II only
III only
I and III only
I, II, and III
Which of the following is a
government transfer program?
a.
b.
c.
d.
e.
Social Security
Medicare/Medicaid
unemployment insurance
food stamps
all of the above
Which of the following is an example
of expansionary fiscal policy?
a.
b.
c.
d.
e.
increasing taxes
increasing government spending
decreasing government transfers
decreasing interest rates
increasing the money supply
Which of the following is a fiscal policy
that is appropriate to combat
inflation?
a.
b.
c.
d.
e.
decreasing taxes
decreasing government spending
increasing government transfers
increasing interest rates
expansionary fiscal policy
An income tax rebate is an example of
a.
b.
c.
d.
e.
an expansionary fiscal policy.
a contractionary fiscal policy.
an expansionary monetary policy.
a contractionary monetary policy.
none of the above.
The marginal propensity to consume
I. has a negative relationship to the multiplier
II. is equal to 1
III. Represents the proportion of a change in
consumers’ disposable income that is spent
a.
b.
c.
d.
e.
I only
II only
III only
I and III only
I, II and III
Assume that taxes and interest rates remain
unchanged when government spending
increases, and that both savings and consumer
spending increase when income increases. The
ultimate effect on real GDP of a $100 million
increase in government purchases of goods and
services will be
a.
b.
c.
d.
An increase of $100 million.
An increase of more than $100 million.
An increase of less than $100 million.
An increase of either more than or less than $100
million, depending on the MPC.
e. A decrease of $100 million .
The presence of taxes has what effect
on the multiplier? They
a.
b.
c.
d.
e.
increase it.
decrease it.
destabilize it.
negate it.
have no effect on it.
A lump-sum tax is
a.
b.
c.
d.
e.
higher as income increases.
lower as income increases.
independent of income.
the most common form of tax.
a type of business tax.
Which of the following is NOT an
automatic stabilizer?
a.
b.
c.
d.
e.
Income taxes
unemployment insurance
Medicaid
food stamps
monetary policy