ap econ – final exam review – 2014 - · pdf filefinal exam review : the review has...

Final Exam Review :

The review has 130 Multiple Choice questions from the 225 we did this semester. It also includes all 21

short answer questions which were used on the tests.

ANSWERS are included at the end of the document

(test yourself on what you don’t know first before using them!)

From this review I will select 65 Multiple Choice Questions + 3 Short Answer Questions to make up your final

exam which is on Wednesday 12/18.

You will have the full 2 hours to complete the Final Exam .

Because of providing you this Study Guide with all the potential questions for your final exam, I don’t believe

it is necessary for us to hold the Saturday review session, if you want to ask me any questions on this study

guide come by Monday after school.

I Highly Recommend In Addition to these Questions that You Use the Link Below to Review

Major Graphs and Concepts for Macroeconomics which you find difficult.

http://www.reffonomics.com/TRB/INPROGRESS/MacroeconomicsAlltheGraphsYouNeedtoKno

w.html

Good Luck

-Davis

AP Economics - Final Exam Review - 2014 - Semester 1

Multiple Choice

Identify the choice that best completes the statement or answers the question.

____ 1. The monetary base equals

a. currency in circulation - reserves held in

banks

d. currency in circulation / reserves held by

banks

b. currency in circulation + reserves held by

banks

e. reserves held by banks

c. currency in circulation

____ 2. The quantity of money demanded rises (that is, there is a movement along the money demand curve) when

a. new technology makes banking easier d. the aggregate price level falls

b. real GDP increases e. the aggregate price level increases

c. short-term interest rates fall

http://www.reffonomics.com/TRB/INPROGRESS/MacroeconomicsAlltheGraphsYouNeedtoKnow.html

http://www.reffonomics.com/TRB/INPROGRESS/MacroeconomicsAlltheGraphsYouNeedtoKnow.html

____ 3. Which of the following changes would be the most likely to reduce the size of the money multiplier?

a. an increase in cash holding by consumers d. a decrease in the required reserve ratio

b. a decrease in excess reserves e. an increase in deposit insurance

c. a decrease in bank runs

____ 4. If the interest rate is zero, then the present value of a dollar received at the end of the year is

a. equal to $1 d. zero

b. less than $1 e. more than $1

c. infinite

____ 5. Which of the following will increase the demand for loanable funds?

a. a federal government budget surplus d. an increase in the perceived business

opportunities

b. positive capital inflows e. decreased private savings rates

c. a decrease in the interest rate

____ 6. Which of the following is NOT a type of financial asset?

a. loans d. stocks

b. bank deposits e. houses

c. bonds

____ 7. When the Fed makes a loan to a commercial bank, it charges

a. the federal funds rate d. the prime rate

b. the market interest rate e. the discount rate

c. no interest

____ 8. Which of the following financial services does the Federal Reserve provide for commercial banks?

I. clearing checks

II. holding reserves

III. making loans

a. III only d. I and II

b. I only e. I, II, and III

c. II only

____ 9. Which of the folowing is NOT a role of the Federal Reserve System?

a. controlling bank reserves d. printing currency (Federal Reserve notes)

b. holding reserves for commercial banks e. supervising and regulating banks

c. carrying out monetary policy

____ 10. If the Fed purchases U.S. Treasury bills from a commercial bank, what happens to bank reserves and the

money supply?

Bank Reserves ; Money Supply

a. decrease ; decrease d. decrease ; increase

b. increase ; increase e. increase ; decrease

c. increase; no change

____ 11. A financial intermediary that provides liquid financial assets in the form of deposits to lenders and uses their

funds to finance the illiquid investment spending needs of borrowers is called a

a. mutual fund d. life insurance company

b. bank e. pension fund

c. corporation

____ 12. Decreasing which of the following is a task of the financial system?

I. transaction costs

II. risk

III. liquidity

a. II only d. I only

b. I and II only e. I, II, and III

c. III only

____ 13. Which of the following is the best example of using money as a store of value?

a. a customer pays in advance for $10 worth

of gasoline at a gas station

d. You use $1 bills to purchase soda from a

vending machine

b. a babysitter puts her earnings in a dresser

drawer while she saves to buy a bicycle

e. travelers buy meals on board an airline

flight

c. foreign visitors to the United States

convert their currency to dollars at the

airport.

____ 14. If the interest rate is 5%, the amount received one year from now as a result of lending $100 today is

a. $105 d. $100

b. $90 e. $95

c. $110

____ 15. Which of the following contributed to the financial crises of 2008?

a. deleveraging d. all of the above

b. subprime lending e. low interest rates leading to a housing

boom

c. securitization

____ 16. Which of the following will decrease the demand for money?

a. inflation d. an increase in the interest rate

b. an increase in real GDP e. the adoption of Regulation Q

c. an increase in the availability of ATMs

____ 17. The real interest rate equals the

a. nominal interest rate divided by the

inflation rate

d. nominal interest rate plus the inflation rate

b. nominal interest rate times the inflation

rate

e. nominal interest rate minus the inflation

rate

c. federal funds rate

____ 18. Who oversees the Federal Reserve System?

a. the Reconstruction Finance Corporation d. the president of the United States

b. the Board of Governors of the Federal

Reserve System

e. the Federal Open Market Committee

c. the presidents of the Regional Federal

Reserve Banks

____ 19. Bank regulation includes which of the following?

I deposit insurance

II capital requirements

III reserve requirements

a. I only d. I, II, and III

b. II only e. I and II

c. III only

____ 20. The federal government is said to be “dissaving” when

a. savings does not equal investment

spending

d. national savings equals private savings

b. there is a budget deficit e. there is a budget surplus

c. there is no budget surplus or deficit

____ 21. What is the present value of $100 realized two years from now if the itnerest rate is 10%

a. $90 d. $83

b. $100 e. $110

c. $80

____ 22. Which of the following will increase the supply of loanable funds?

a. an increase in perceived business

opportunities

d. decreased government borrowing

b. an increased private savings rate e. a decrease in capital inflows

c. an increase in the expected inflation rate

____ 23. Which of the followign is the most liquid monetary aggregate?

a. M2 d. near-moneys

b. M1 e. M3

c. dollar bills

____ 24. Suppose, for simplicity, that a bank uses a single interest rate for loans and deposits, there is no inflation, and

all unspent money is deposited in the bank. The interest rate measures which of the following?

I. the cost of using a dollar today rather than a year from now

II. the benefit of delaying the use of a dollar from today until a year from now

III. the price of borrowing money calculated as a percentage of the amount borrowed

a. II only d. III only

b. I and II only e. I only

c. I, II, and III

____ 25. Which of the following contributed to the creation of the Federal Reserve System?

I. the bank panic of 1907

II. the Great Depression

III. the savings and loan crisis of the 1980’s

a. II only d. I, II, and III

b. I and II only e. I only

c. III only

____ 26. If the interest rate is 10%, the present value of $1 paid to you one year from now is

a. $.89 d. $0

b. $.91 e. more than $1

c. $1

____ 27. The current account includes which of the following?

I. payments for goods and services

II. transfer payments

III. factor income

a. I only d. I and II only

b. II only e. I, II, and III

c. III only

____ 28. The trade balance includes which of the following?

I. imports and exports of goods

II. imports and exports of services

III. net capital flows



c. III only

____ 29. Which of the following will increase the demand for loanable funds in a country?

a. economic growth d. decreased private savings rates

b. decreased investment opportunities e. government budget surpluses

c. a recession

____ 30. When the U.S. dollar buys more Japanese yen, the U.S. dollar has

I. become more valuable in terms of the yen

II. appreciated

III. depreciated


b. II only e. I and III only

c. III only

____ 31. The nominal exchange rate at which a given basket of goods and services would cost the same in each country

describes

a. the international consumer price index

(ICPI).

d. purchasing power parity

b. appreciation e. the balance of payments on the current

account.

c. depreciation

____ 32. Which of the following would cause the real exchange rate between pesos and U.S. dollars (in terms of pesos

per dollar) to decrease?

a. an increase in net capital flows from

Mexico to the United States

d. a decrease in oil exports from Mexico to

the United States

b. an increase in the real interest rate in

Mexico relative to the United States

e. an increase in the balance of payments on

the current account in the United States

c. a doubling of prices in both Mexico and

the United States

____ 33. Which of the following methods can be used to fix a country’s exchange rate at a predetermined level?

I. using foreign exchange reserves to buy its own currency

II. using monetary policy to change interest rates

III. implementing foreign exchange controls



c. III only

____ 34. Which of the following interventions would be required to keep a country’s exchange rate fixed if the

equilibirum exchange rate in the foreign exchange market were below the fixed exchange rate (measured as

units of foreign currency per unit of domestic currency)? The Government/ Central bank

a. buys the domestic currency d. lowers domestic interest rates

b. sells the domestic currency e. removes foreign exchange controls

c. buys the foreign currency

____ 35. Devaluation of a currency occurs when which of the following happens?

I. The supply of a currency with a floating exchange rate increases.

II. The demand of a currency with a floating exchange rate decreases

III. The government decreases the fixed exchange rate



c. III only

____ 36. Devaluation of a currency is used to achieve which of the following?

a. an elimination of a surplus in the foreign

exchange market

d. a lower inflation rate

b. an elimination of a shortage in the foreign

currency market

e. a floating exchange rate

c. a reduction in aggregate demand

____ 37. If the aggregate price level in Mexico decreases, what iwll happen to the real interest rate?

a. it will increase d. it will stabilize

b. it will decrease e. it cannot be determined

c. it will be unchanged

____ 38. If the Mexican government pursues expansionary fiscal policy in response to the recession, what will happen

to aggregate demand and aggregate supply in the short-run?

Aggregate Demand ; Short-Run Aggregate Supply

a. increase ; increase d. decrease ; decrease

b. increase ; decrease e. increase ; no change

c. decrease ; increase

____ 39. Suppose that you prefer reading a book you already own to watching TV and that you prefer watching TV to

listening to music. If these are your only three choices, what is the opportunity cost of reading?

a. watching TV and listening to music d. sleeping

b. watching TV e. the price of the book

c. listening to music

____ 40. The labor force is made up of everyone who is

a. employed d. employed or unemployed

b. old enough to work e. employed or capable of working

c. actively seeking work

____ 41. A sustained increase in aggregate output over several decades represents

a. an expansion d. a depression

b. a recovery e. economic growth

c. a recession

____ 42. Which of the following is the most likely result of inflation?

a. falling employment d. price stability

b. a dollar will buy more than it did before e. low aggregate output per capita

c. people are discouraged from the holding

cash

____ 43. The other things equal assumption allows economists to

a. avoid making assumptions about reality d. allow nothing to change in their model

b. focus on the effects of only one change at

a time

e. reflect all aspects of the real world in their

model

c. oversimplify

____ 44.

Refer to the graph above to answer the following questions (3)

1. which point(s) on the graph represent efficiency in production

a. B and C d. A,B,C,D and E

b. A and D e. A,B,C,D,E and F

c. A, B, C, and D

____ 45. 2. An increase in unemployment could be represented by a movement from point

a. D to point C. d. B to point E.

b. B to point A. e. E to point B.

c. C to point F.

____ 46. 3. The production possibilities curve shows the trade-off between consumer goods and capital goods. Since

capital goods are a resource, an increase in the production of capital goods today will increase the economy’s

production possibilities in the future. Therefore, all other things equal (ceteris paribus), producing at which

point today will result in the largest outward shift of the PPC in the future?

a. A d. D

b. B e. E

c. C

____ 47.

Refer to the graph for the following questions (4)

1. Use the graph to determine which country has an absolute advantage in producing each good

Absolute Advantage Wheat ; Absolute Advantage Textile

Wheat;Textile

a. Country A;Country B d. Country B;Country B

b. Country A:Country A e. Country A; neither country

c. Country B;Country A

____ 48. 2. For country A, the opportunity cost of a bushel of wheat is

a. 1/2 units of textiles d. 1 and 1/2 units of textiles

b. 2/3 units of textiles e. 2 units of textiles

c. 1 and 1/3 units of textiles

____ 49. 3. Use the graph to determine which country has a comparative advantage in producing each good

Comparative Advantage Wheat; Comparative Advantage Textile

Wheat;Textile

a. Country A;Country B d. Country B;Country B

b. Country A;Country A e. Country A; Neither Country

c. Country B;Country A

____ 50. 4. What is the highest price Country B is willing to pay to buy wheat from Country A?

a. 1/2 units of textiles d. 1 and 1/2 units of textiles

b. 2/3 units of textiles e. 2 units of textiles

c. 1 unit of textiles

____ 51. Which of the following would increase demand for a normal good? A decrease in

a. price d. consumer taste for a good

b. income e. the price of a complement

c. the price of a substitute

____ 52. A decrease in the price of butter would most likely decrease the demand for

a. margarine d. milk

b. bagels e. syrup

c. jelly

____ 53. If an increase in income leads to a decrease in demand, the good is

a. a complement d. abnormal

b. a substitute e. normal

c. inferior

____ 54. Which of the following will occur if consumers expect the price of a good to fall in the coming months?

a. the quantity demanded will rise today d. demand will decrease today

b. the quantity demanded will remain the

same today

e. no change will occur today

c. demand will increase today

____ 55. Which of the following will decrease the supply of good “X”?

a. There is a technological advance that

affects the production of all goods.

d. the wage of workers producing good “X”

increase

b. the price of good “X” falls e. the demand for good “X” decreases

c. The price of good “Y” (which consumers

regard as a substitute for good “X”)

decreases

____ 56. An increase in the demand for steak will lead to an increase in which of the following?

a. the supply of steak d. the supply of leather (a complement in

production)

b. the supply of hamburger (a substitute in

production)

e. the demand for leather

c. the supply of chicken (a substitute in

consumption)

____ 57. Which of the following is true at equilibrium?

a. The supply schedule is identical to the

demand schedule at every price

d. every consumer who enjoys the good can

consume it

b. the quantity demanded is the same as the

quantity supplied

e. producers could not make any more of the

product regardless of price.

c. the quantity is zero

____ 58. Which of the following describes what will happen in the market for tomatoes if a salmonella outbreak is

attributed to tainted tomatoes?

a. supply will decrease and price will

increase

d. demand will decrease and price will

decrease

b. supply will decrease and the price will

decrease

e. supply and demand will both decrease

c. demand will decrease and price will

increase

____ 59. Which of the following will lead to an increase in the equilibrium price of a product “X”A(n)

a. increase in consumer incomes if product

“X” is an inferior good

d. decrease in the price of good “Y” (a

substitute for good “X”)

b. increase in the price of machinery used to

produce product “X”

e. expectation by consumers that price of

good”X” is going to fall.

c. technological advance in the production of

good “X”

____ 60. The equilibrium price will rise, but equilibrium quantity may increase, decrease, or stay the same if

a. demand increases and supply decreases d. demand decreases and supply decreases

b. demand increases and supply increases e. demand increases and supply does not

change

c. demand decreases and supply increases

____ 61. Which of the following is certainly true if demand and supply increase at the same time?

a. the equilibrium price will increase d. the equilibrium quantity will decrease

b. the equilibrium price will decrease e. the equilibrium quantity may increase,

decrease, or stay the same

c. the equilibrium quantity will increase

____ 62. Which of the following is true? The simple circular-flow diagram

I. includes only the product markets

II. includes only the factor markets.

III. is a simplified representation of the macroeconomy.

a. I only d. I and III only

b. II only e. none of the above

c. III only

____ 63. Which of the following is included in GDP?

a. changes to inventories d. financial assets (stocks and bonds)

b. intermediate goods e. foreign-produced goods

c. used goods

____ 64. Which of the following is not included in GDP?

a. capital goods such as machinery d. government purchases of goods and

services

b. imports e. the construction of structures

c. the value of domestically produced

services

____ 65. To be considered unemployed, a person must

I. not be working

II. be actively seeking a job

III. be available for work

a. I only d. II and III


c. III only

____ 66. How many people are unemployed?

a. 10,000 d. 100,000

b. 20,000 e. 110,000

c. 30,000

____ 67. The unemployment problem in an economy may be understated by the unemployment rate due to

a. people lying about seeking a job d. overemployed workers

b. discouraged workers e. none of the above

c. job candidates with one offer but waiting

for more.

____ 68. The best measure for comparing a country’s aggregate ouput over time is

a. nominal GDP d. real GDP per capita

b. real GDP e. average GDP per capita

c. nominal GDP per capita

____ 69. Real GDP per capita is an imperfect measure of the quality of life in part because it

a. includes the value of leisure time d. excludes expenditures on entertainment

b. excludes expenditures on education e. includes the value of housework

c. includes expenditures on natural disasters

____ 70. A person who moved to anew state and took two months to find a new job experienced which type of

unemployment?

a. frictional d. natural

b. structural e. none of the above

c. cyclical

____ 71. Which of the following is true regarding prices in an economy?

I. An increase in the price level is called inflation.

II. The level of prices doesn’t matter.

III. The rate of change in prices matters.

a. I only d. II and III only


c. III only

____ 72. If your nominal wage doubles at the same time as prices double, your real wage will

a. increase d. double

b. decrease e. be impossible to determine

c. not change

____ 73. If inflation causes people to frequently convert their dollars into other assets, the economy experiences what

type of cost?

a. price level d. unit-of-account

b. shoe-leather e. monetary

c. menu

____ 74. Because dollars are used as the basis for contractis, inflation leads to which type of cost?



c. menu

____ 75. Changing the listed price when inflation leads to a price increase is an example of which type of cost?



c. menu

____ 76. If the consumer price index increases from 80 to 120 from one year to the next, the inflation rate over that

time period was

a. 20% d. 80%

b. 40% e. 120%

c. 50%

____ 77. Which of the following is true of the CPI?

I. It is the most common measure of the price level.

II. It measures the price of a typical market basket of goods.

III. It currently uses a base period of 1982-1984



c. III only

____ 78. If government spending exceeds tax revenues, which of the following is necessarily true? There is a

I. positive budget balance

II. budget deficit

III. recession



c. III only

____ 79. The cyclically adjusted budget deficit is an estimate of what the budget balance would be if real GDP were

a. greater than potential output d. falling

b. equal to nominal GDP e. calculated during a recession

c. equal to potential output

____ 80. Contractionary monetary policy attempts to ___________ aggregate demand by ____________ interest rates.

a. decrease ; increasing d. increase ; increasing

b. increase ; decreasing e. increase ; maintaing

c. decrease ; decreasing

____ 81. Which of the following is a goal of monetary policy?

a. zero inflation d. increased potential output

b. deflation e. decreased actual real GDP

c. price stability

____ 82. When implementing monetary policy, the Federal Reserve attempts to achieve

a. an explicit target inflation d. a low, but positive inflation rate

b. zero inflation e. 4-5% inflation

c. a low rate of deflation

____ 83. A 10% decrease in the money supply will change the aggregate price level in the long run by

a. zero d. 20$

b. less than 10% e. more than 20%

c. 10%

____ 84. Monetary neutrality means that, in the long run, changes in the money supply

a. can not happen d. increase real GDP

b. have no effect on the economy e. change real interest rates

c. have no real effect on the economy

____ 85. A graph of percentage increases in the money supply and average annual increases in the price level for

various countries provides evidence that

a. changes in the two variables are exactly

equal

d. monetary policy is ineffective

b. the money supply and aggregate price

level are unrelated

e. money is neutral in the long run

c. money neutrality holds only in wealthy

countries

____ 86. The real quantity of money is

I. equal to M/P

II. the money supply adjusted for inflation

III. highe rin the long run when the Fed buys government securities



c. III only

____ 87. The classical model of the price level is most applicable in

a. the United States d. recessions

b. periods of high inflation e. depressions

c. periods of low inflation

____ 88. The long-run Phillips curve is

I. the same as the short-run Phillips curve

II. vertical

III. the short-run phillips curve plus expected inflation



c. III only

____ 89. The short-run Phillips curve shows a __________ relationship between ______________.

a. negative ; the aggregate price level and

aggregate output

d. positive ; unemployment and aggregate

output

b. positive ; the aggregate price level and

aggregate output

e. positive ; unemployment and the

aggregate price level

c. negative ; unemployment and inflation

____ 90. An increase in expected inflation will shift

a. the short-run phillips curve downward d. the long-run phillips curve downward

b. the short-run phillips curve upward e. neither the short-run nore the long-run

phillips curve

c. the long-run phillips curve upward

____ 91. Debt deflation is

a. the effect of deflation in decreasing

aggregate demand

d. due to differences in how

borrowers/lenders respond to inflation

losses/gains

b. an idea proposed by Irving Fisher e. all of the above

c. a contributing factor in causing the Great

Depression

____ 92. Which of the following is a central point of monetarism?

a. business cycles are associated with

fluctuations in money demand

d. the Fed should follow monetary policy

rule

b. activist monetary policy is the best way to

address business cycles

e. all of the above

c. discretionary monetary policy is effective

while discretionary fiscal policy is not

____ 93. The main difference between the classical model of the price level and Keynesian economics is that

a. the classical model assumes a vertical

short-run aggregate supply curve

d. Keynesian economics assumes a vertical

long-run aggregate supply curve

b. Keynesian economics assumes a vertical

short-run aggregate supply curve

e. the classical model assumes aggregate

demand can not change in the long run

c. the classical model assumes an upward

sloping long-run aggregate supply curve

____ 94. That fluctuations in total factor productivity growth cause the business cycle is the main tenet of which theory

a. Kenesian d. real business cycle

b. classical e. natural rate

c. rational expectations

____ 95. Which of the following is an example of an opinion on which economists have reached a broad consensus?

I. the natural rate hypothesis holds true

II. discretionary fiscal policy is usually counterproductive

III. monetary policy is effective, especially in a liquidity trap



c. III only

____ 96. In the first FYI box of this module (p.357) you learned about supply-side economics. Which of the following

is stressed by supply siders?

a. Taxes should be increased d. the economy operates on the upward

sloping section of the Laffer curve

b. Lower taxes will lead to lower tax

revenues

e. Supply side views are widely supported by

empirical evidence

c. It is important to increase incentives to

work, save, and invest

____ 97. Which of the following is true regarding central bank targets?

a. the Fed has an explicit inflation target d. The Fed clearly does not have an implicit

inflation target

b. All central banks have explicit inflation

targets

e. Economists are split regarding the need

for explicit inflation targets

c. No central banks have explicit inflation

targets

____ 98. The Fed’s main concerns are

a. inflation and unemployment d. asset prices and unemployment

b. inflation and asset prices e. inflation and the value of the dollar

c. inflation, asset prices, and unemployment

____ 99. The “clean little secret of macroeconomics” is that

a. microeconomics is even more contentious

than macroeconomics

d. macroeconomics has progressed much

more than microeconomics in the past 70

years

b. debate among macroeconomists has ended e. economists have identified how to prevent

future business cycles

c. economists havfe reached a significant

consensus

____ 100. Which of the following is true regarding growth rates for countries around the world compared to the United

States?

I. Fifty percent of the worlds people live in countries wtih a lower standard of living than the US in 1908.

II. The US growth rate is six times the growth rate of the rest of the world.

III. China has only just attained the same standard of living the U.S. had in 1908



c. III only

____ 101. Which of the following is the key statistic used to track economic growth?

a. GDP d. median real GDP

b. real GDP e. median real GDP per capita

c. real GDP per capita

____ 102. According to the “Rule of 70,” if a country’s real GDP per capita grows at a rate of 1% per year, it will take

how many years for real GDP per capita to double?

a. 3.5 d. 70

b. 20 e. it will never double at that rate

c. 35

____ 103. Long-run economic growth depends almost entirely on

a. technological change d. rising real GDP per capita

b. rising productivity e. population growth

c. increased labor force participation

____ 104. Which of the following is a source of increased productivity growth?

I. Increased physical capital

II. Increased human capital

III. technological progress



c. III only

____ 105. The following statement describes which are of the world?

“This area has experienced growth rates unprecedented in history and now looks like an economically

advanced country.”

a. North America d. East Asia

b. Latin America e. Africa

c. Europe

____ 106. Which of the following is cited as an important factor preventing long-run economic growth in Africa?

a. political instability d. poor health

b. lack of property rights e. all of the above

c. unfavorable geographic conditions

____ 107. Which of the following statements is true of environmental quality?

a. It is typically not affected by government

policy

d. most economists believe it is not possible

to reduce greenhouse gas emissions while

economic growth continues

b. other things equal, it tends to improve

with economic growth

e. most environmental success stories

invovle dealing with global, rather than

local impacts

c. there is broad scientific consensus that

rising levels of carbon dioxide and other

gases are raising the planets overall

temperature

____ 108. According to the MIT study discussed in the module, a cap and trade system to reduce greenhouse gas

emissions in the United States would lead to

a. no significant costs d. a reduction in real GDP per capita of over

10%

b. significant but not overwhelming costs e. a loss of 5th years’ worth of of economic

growth over the next 40 years.

c. a loss of roughly three year’s real GDP

over the next 40 years

____ 109. Which of the following will shift the production possibilities curve outward?

I. an increase in the production of investment goods

II. an increase in the production of consumer goods

III. technological progress



c. III only

____ 110. In the production possibilities curve (PPC) model, long-run economic growth is shown by a(n)

a. outward shift of the PPC d. movement form a point on the PPC to a

point below the PPC

b. inward shift of the PPC e. movement form a point on the PPC to a

point beyond the PPC

c. movement form point below the PPC to a

point on the PPC

____ 111. The reduction in the value of an asset due to wear and tear is known as

a. depreciation d. disinvestment

b. negative investment e. net investment

c. economic decline

____ 112. Which of the following is listed among the key sources of growth in potential output

a. expansionary fiscal policy d. investment in human capital

b. expansionary monetary policy e. both a and b

c. a rightward shift of the short-run

aggregate supply curve

____ 113. What will happen to the money supply and the equilibrium interest rate if the Federal Reserve sells Treasury

securities?

Money Supply ; Equilibrium Interest Rate

a. increase ; increase d. decrease ; increase

b. decrease ; decrease e. increase ; decrease

c. decrease ; no change

____ 114. A nonprofit institution collects the savings of its members and invests those funds in wide variety of assets in

order to provide its members with income after retirement. This describes a

a. bank d. mutual fund

b. pension fund e. life insurance company

c. savings and loan

____ 115. In the United States, the dollar is

a. commodity-backed money d. fiat money

b. backed by gold and silver e. backed by silver

c. commodity money

____ 116. The balance of payments on the current account plus the balance of payments on the financial accont is equal

to

a. zero d. net capital flows

b. one e. the size of the trade deficit

c. the trade balance

____ 117. The financial account was previously known as the

a. gross national product d. investment account

b. capital account e. trade balance

c. trade deficit

____ 118. The United States has which of the following exchange rate regimes?

a. fixed d. fixed, but managed

b. floating e. floating within a target zone

c. fixed, but adjusted frequently

____ 119. Monetary policy that reduces the interest rate will do which of the following?

a. appreciate the domestic currency d. depreciate the domestic currency

b. decrease exports e. prevent inflation

c. increase imports

____ 120. Which of the following occurs as a result of the recession in Mexico?

I. output in Mexico decreases

II. Aggregate demand in the United States decreases

III. Output in the United States decreases


b. II only e. I , II, and III

c. III only

____ 121. An increase in the number of buyers and a technological advance will cause

a. demand to increase and supply to increase d. demand to decrease and supply to

decrease

b. demand to increase and supply to decrease e. no change in demand and an increase in

supply

c. demand to decrease and supply to increase

____ 122. Use the information for a hypothetical economy presented in the following table to answer questions 7, 8, and

9.

What is the labor force participation rate?

a. 70% d. 10%

b. 50% e. 5%

c. 20%

____ 123.

Year 1 & Year 2

a. $1,400 & $2,700 d. 1,900 & 2,000

b. 1,900 & 2,700 e. 1,400 & 1,900

c. 1,400 & 2,000

____ 124. Which of the following can affect the natural rate of unemployment in an economy over time?

a. labor force characteristics such as age and

work experience

d. government job training programs

b. the existence of labor unions e. all of the above

c. advances in technologies that help

workers find jobs

____ 125. If your wage doubles at the same time as the consumer price index goes from 100 to 300, your real wage

a. doubles d. stays the same

b. falls e. cannot be determined

c. increases

____ 126. 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



c. III only

____ 127. Refer to the graph for following question

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 the long-run macroeconomic equilibrium

a. I only d. II and III

b. II only e. I and III

c. III only

____ 128. Which of the following fiscal policies is expansionary?

Taxes ; Government Spending

a. increase by $100 million ; increases by

$100 million

d. decrease by $100 million ; decrease by

$100 million

b. decrease by $100 million ; decrease by

$100 million

e. both (a) and (d)

c. increase by $100 million ; decrease by

$100 million

____ 129. During a recession in the United States, what happens automatically to tax revenues and government

spending?

Tax Revenues ; Government Spending

a. increase ; increase d. decrease ; increases

b. decrease ; decrease e. decrease ; does not change

c. increase ; decrease

____ 130. In the long run, changes in the quantity of money affect which of the following?

I. real aggregate output

II. interest rates

III. the aggregate price level



c. III only

Short Answer

131.

132.

133.

134.

135.

137.

138.

139.

140.

141.

142.

143.

144.

145.

146.

147.

148.

149.

150.

AP Economics - Final Exam Review - 2014 - Semester 1

Answer Section

MULTIPLE CHOICE

1. ANS: B PTS: 1

2. ANS: C PTS: 1

3. ANS: A PTS: 1

4. ANS: A PTS: 1

5. ANS: D PTS: 1

6. ANS: E PTS: 1

7. ANS: E PTS: 1

8. ANS: E PTS: 1

9. ANS: D PTS: 1

10. ANS: B PTS: 1

11. ANS: B PTS: 1

12. ANS: B PTS: 1

13. ANS: B PTS: 1

14. ANS: A PTS: 1

15. ANS: D PTS: 1

16. ANS: C PTS: 1

17. ANS: E PTS: 1

18. ANS: B PTS: 1

19. ANS: D PTS: 1

20. ANS: B PTS: 1

21. ANS: D PTS: 1

22. ANS: B PTS: 1

23. ANS: B PTS: 1

24. ANS: C PTS: 1

25. ANS: E PTS: 1

26. ANS: B PTS: 1

27. ANS: E PTS: 1

28. ANS: A PTS: 1

29. ANS: A PTS: 1

30. ANS: D PTS: 1

31. ANS: D PTS: 1

32. ANS: B PTS: 1

33. ANS: E PTS: 1

34. ANS: A PTS: 1

35. ANS: C PTS: 1

36. ANS: A PTS: 1

37. ANS: E PTS: 1

38. ANS: E PTS: 1

39. ANS: B PTS: 1

40. ANS: D PTS: 1

41. ANS: E PTS: 1

42. ANS: C PTS: 1

43. ANS: B PTS: 1

44. ANS: C PTS: 1

45. ANS: D PTS: 1

46. ANS: A PTS: 1

47. ANS: A PTS: 1

48. ANS: A PTS: 1

49. ANS: A PTS: 1

50. ANS: D PTS: 1

51. ANS: E PTS: 1

52. ANS: A PTS: 1

53. ANS: C PTS: 1

54. ANS: D PTS: 1

55. ANS: D PTS: 1

56. ANS: D PTS: 1

57. ANS: B PTS: 1

58. ANS: E PTS: 1

59. ANS: B PTS: 1

60. ANS: A PTS: 1

61. ANS: C PTS: 1

62. ANS: C PTS: 1

63. ANS: A PTS: 1

64. ANS: B PTS: 1

65. ANS: D PTS: 1

66. ANS: A PTS: 1

67. ANS: B PTS: 1

68. ANS: B PTS: 1

69. ANS: C PTS: 1

70. ANS: A PTS: 1

71. ANS: E PTS: 1

72. ANS: C PTS: 1

73. ANS: B PTS: 1

74. ANS: D PTS: 1

75. ANS: C PTS: 1

76. ANS: C PTS: 1

77. ANS: E PTS: 1

78. ANS: B PTS: 1

79. ANS: C PTS: 1

80. ANS: A PTS: 1

81. ANS: C PTS: 1

82. ANS: D PTS: 1

83. ANS: C PTS: 1

84. ANS: C PTS: 1

85. ANS: E PTS: 1

86. ANS: D PTS: 1

87. ANS: B PTS: 1

88. ANS: B PTS: 1

89. ANS: B PTS: 1

90. ANS: B PTS: 1

91. ANS: E PTS: 1

92. ANS: D PTS: 1

93. ANS: A PTS: 1

94. ANS: D PTS: 1

95. ANS: D PTS: 1

96. ANS: D PTS: 1

97. ANS: B PTS: 1

98. ANS: A PTS: 1

99. ANS: D PTS: 1

100. ANS: D PTS: 1

101. ANS: C PTS: 1

102. ANS: D PTS: 1

103. ANS: B PTS: 1

104. ANS: E PTS: 1

105. ANS: D PTS: 1

106. ANS: E PTS: 1

107. ANS: C PTS: 1

108. ANS: B PTS: 1

109. ANS: D PTS: 1

110. ANS: A PTS: 1

111. ANS: A PTS: 1

112. ANS: D PTS: 1

113. ANS: D PTS: 1

114. ANS: B PTS: 1

115. ANS: D PTS: 1

116. ANS: A PTS: 1

117. ANS: B PTS: 1

118. ANS: B PTS: 1

119. ANS: D PTS: 1

120. ANS: E PTS: 1

121. ANS: A PTS: 1

122. ANS: B PTS: 1

123. ANS: C PTS: 1

124. ANS: E PTS: 1

125. ANS: B PTS: 1

126. ANS: D PTS: 1

127. ANS: B PTS: 1

128. ANS: D PTS: 1

129. ANS: D PTS: 1

130. ANS: C PTS: 1

SHORT ANSWER

131. ANS:

PTS: 1

132. ANS:

PTS: 1

133. ANS:

PTS: 1

134. ANS:

PTS: 1

135. ANS:

PTS: 1

136. ANS:

PTS: 1

137. ANS:

PTS: 1

138. ANS:

PTS: 1

139. ANS:

PTS: 1

140. ANS:

PTS: 1

141. ANS:

PTS: 1

142. ANS:

PTS: 1

143. ANS:

PTS: 1

144. ANS:

PTS: 1

145. ANS:

PTS: 1

146. ANS:

PTS: 1

147. ANS:

PTS: 1

148. ANS:

PTS: 1

149. ANS:

PTS: 1

150. ANS:

PTS: 1

151. ANS:

PTS: 1

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