ap macroeconomics MCQ

Test your knowledge with important ap macroeconomics MCQ and their applications. These MCQs are beneficial for competitive exams too. Explore 30 + more ap macroeconomics MCQs at Bissoy

• When a large increase in aggregate demand has an even greater increase in real GDP, economists refer to this as
  ক

  the balanced budget multiplier.

  খ

  the money multiplier.

  গ

  the foreign substitution effect.

  ঘ

  the wealth effect.

  ঙ

  the spending multiplier.
• Suppose the President plans to cut taxes for consumers and also plans to increase spending on the military. How does this affect real GDP and the price level?
  ক

  GDP increases and the price level decreases.

  খ

  GDP decreases and the price level increases.

  গ

  GDP stays the same and the price level increases.

  ঘ

  GDP decreases and the price level decreases.

  ঙ

  GDP increases and the price level increases.
• Which of the following is an example of contractionary monetary policy?
  ক

  The Fed lowers the reserve ratio.

  খ

  The Fed lowers the discount rate.

  গ

  The Fed increases taxes on household income.

  ঘ

  The Fed decreases spending on welfare programs.

  ঙ

  The Fed sells Treasury securities to commercial banks.
• Suppose that the federal government reclassified the purchase of a new home as consumption spending rather than investment spending. This decision would
  ক

  increase aggregate demand and decrease real GDP.

  খ

  decrease aggregate demand and decrease real GDP.

  গ

  decrease aggregate demand and increase real GDP.

  ঘ

  increase aggregate demand and increase real GDP.

  ঙ

  have no impact on aggregate demand and real GDP.
• The table above summarizes the local labor market. Based on this information, which of the following is an accurate statement?
  ক

  The number of discouraged workers has fallen from 2003 to 2004.

  খ

  Although the population has grown, the labor force has remained constant from 2003 to 2004.

  গ

  The unemployment rate fell from 33 percent in 2003 to 25 percent in 2004.

  ঘ

  The economic recession in 2003 worsened in 2004.

  ঙ

  The unemployment rate fell from 25 percent in 2003 to 20 percent in 2004.
• Suppose that the production possibility frontier (PPF) of this nation moves from PPF1 to PPF2. Which of the following could be the cause of this movement?
  ক

  Technological improvements in the production of tractors

  খ

  A long-lasting and destructive drought

  গ

  A more efficient use of steel, an important raw material in the production of tractors

  ঘ

  An economy-wide improvement in the productivity of the labor force

  ঙ

  More effective pesticides used to protect crops from insect damage
• A negative, or contractionary, supply shock will
  ক

  shift the Phillips curve to the left.

  খ

  shift the investment demand curve to the right.

  গ

  shift the money demand curve to the right.

  ঘ

  shift the money supply curve to the left.

  ঙ

  shift the Phillips curve to the right.
• Which of the following is a predictable consequence of import quotas?
  ক

  Increased competition and lower consumer prices

  খ

  Increased government tax revenue from imported goods

  গ

  Rising net exports and a rightward shift in aggregate supply

  ঘ

  An improved allocation of resources away from inefficient producers and lower consumer prices

  ঙ

  Higher consumer prices and a misallocation of resources away from efficient producers
• U.S. real GDP most likely falls when
  ক

  tariffs and quotas are removed.

  খ

  investment in human capital is high.

  গ

  the money supply is increased.

  ঘ

  there is a trade surplus in goods and services.

  ঙ

  the value of the dollar, relative to foreign currencies, is high.
• Higher levels of consumer wealth and optimism would likely have which of the following changes in the market for loanable funds?
  ক

  Increase in supply     Rising

  খ

  Increase in demand     Buying Rising

  গ

  Decrease in demand     Falling

  ঘ

  Decrease in supply     Falling

  ঙ

  Decrease in supply     Rising
• Which of the following represents a combination of contractionary fiscal and expansionary monetary policy?
  ক

  Higher taxes     Selling Treasury securities

  খ

  Lower taxes     Buying Treasury securities

  গ

  Lower government spending     Increasing the reserve ratio

  ঘ

  Lower government spending     Increasing the discount rate

  ঙ

  Higher taxes     Buying Treasury securities
• When both short-run aggregate supply and aggregate demand increase, which of the following can be said for certain?
  ক

  The price level rises, but real GDP falls.

  খ

  Both the price level and real GDP rise.

  গ

  The price level rises, but the change in real GDP is uncertain.

  ঘ

  The price level falls, but real GDP rises.

  ঙ

  Real GDP rises, but the change in the price level is uncertain.
• Which of the following best measures changes in the price level of national product?
  ক

  The consumer price index

  খ

  The real interest rate

  গ

  The unemployment rate

  ঘ

  The producer price index

  ঙ

  The GDP deflator
• If your nominal income rises 4 percent and your real income falls 1 percent, by how much did the price level change?
  ক

  5 percent decrease

  খ

  ¼ percent increase

  গ

  3 percent increase

  ঘ

  3 percent decrease

  ঙ

  5 percent increase
• Which of the following is a likely effect of a higher tariff imposed by the United States on imported automobiles?
  ক

  Net exports will fall and the dollar will appreciate in value.

  খ

  Net exports will fall and the dollar will depreciate in value.

  গ

  The price of automobiles in the United States will fall.

  ঘ

  Net exports will rise and the dollar will depreciate in value.

  ঙ

  Net exports will rise and the dollar will appreciate in value.
• Which of the following is an accurate statement of the money supply in the United States?
  ক

  The money supply is backed by gold reserves.

  খ

  The least liquid measure of money is M2.

  গ

  M1 is larger than M3.

  ঘ

  Paper money can be exchanged at commercial banks for an equal amount of gold.

  ঙ

  The most liquid measure of money is M1.
• Automatic stabilizers in the economy serve an important role in
  ক

  increasing the length of the business cycle.

  খ

  balancing the budget.

  গ

  increasing a budget surplus in a recession.

  ঘ

  decreasing net tax revenue during economic growth.

  ঙ

  lessening the impact of a recession.
• Of the following choices, the one most likely to be preferred by supply-side economists would be
  ক

  increased government spending.

  খ

  higher tariffs on imported goods.

  গ

  lower taxes on household income.

  ঘ

  higher welfare payments.

  ঙ

  a tax credit on capital investment.
• When government uses expansionary fiscal policy, the spending multiplier is often smaller than predicted because of
  ক

  lower taxes.

  খ

  increasing net exports.

  গ

  falling unemployment.

  ঘ

  lower interest rates.

  ঙ

  rising price levels.
• An increase in corporate optimism will have which of the following effects in the market for loanable funds?
  ক

  An increase in supply, lowering the interest rate.

  খ

  A decrease in demand, increasing the interest rate.

  গ

  An increase in both supply and demand, and an ambiguous change in interest rates.

  ঘ

  A decrease in supply, decreasing the interest rate.

  ঙ

  An increase in demand, increasing the interest rate.
• Using Figure below , which of the following movements would be described as economic growth?
  ক

  W to X

  খ

  X to Y

  গ

  W to Y

  ঘ

  Z to W

  ঙ

  X to Z
• Which of the following is the source of the supply of loanable funds?
  ক

  The stock market

  খ

  Investors

  গ

  Net exports

  ঘ

  Banks and mutual funds

  ঙ

  Savers
• Which of the following lists contains only Fed actions that will increase the money supply?
  ক

  Raise reserve requirements; lower the discount rate; sell bonds.

  খ

  Raise reserve requirements; lower the discount rate; buy bonds.

  গ

  Raise reserve requirements; raise the discount rate; sell bonds.

  ঘ

  Lower reserve requirements; lower the discount rate; sell bonds.

  ঙ

  Lower reserve requirements; lower the discount rate; buy bonds.
• GDP measures a country's level of
  ক

  I only.

  খ

  II only.

  গ

  III only.

  ঘ

  I and II.

  ঙ

  I and III.
• Suppose the real interest rate in a country rises. What can be expected to happen to the demand for this nation's currency and, therefore, the value of its currency and net exports?
  ক

  Decreases           Appreciate      Decreases

  খ

  Decreases           Depreciate      Decreases

  গ

  Decreases           Depreciate      Increases

  ঘ

  Increases           Appreciate      Increases

  ঙ

  Increases           Appreciate      Increases
• An increase in the price of forklifts imported into the United States from Belgium will
  ক

  increase the consumer price index and the GDP deflator.

  খ

  increase the consumer price index but not the GDP deflator.

  গ

  increase the GDP deflator but not the consumer price index.

  ঘ

  increase the GDP deflator and the producer price index.

  ঙ

  have no effect on the consumer price index or the GDP deflator.
• Economy X is an open economy with flexible exchange rates. Economy Y is closed. Ceteris paribus expansionary monetary policy is
  ক

  more effective in X because the policy will increase net exports.

  খ

  more effective in X because the policy will decrease net exports.

  গ

  equally effective in X and Y.

  ঘ

  less effective in X because the policy will increase net exports.

  ঙ

  less effective in X because the policy will decrease net exports.
• Suppose taxes are cut in an economy that is in equilibrium at full employment. In the long run the tax cut will
  ক

  raise real output and raise the price level.

  খ

  lower real output and raise the price level.

  গ

  raise real output and lower the price level.

  ঘ

  lower real output and lower the price level.

  ঙ

  raise the price level.
• According to Classical economic analysis, in the long run an increase in the money supply results in
  ক

  a proportional increase in the quantity of output.

  খ

  stagflation.

  গ

  an increase in the real rate of interest.

  ঘ

  an economic expansion.

  ঙ

  a proportional increase in the price level.
• One strategy a corporation may use to gain market share in a foreign market is
  ক

  raising the price of its product.

  খ

  convincing its government to put an import tariff on the product.

  গ

  convincing its government to place a quota on the product.

  ঘ

  cornering.

  ঙ

  dumping.