Sunday, April 29, 2018
AP Released Macro Exam
Go to the following link https://apcentral.collegeboard.org/pdf/ap-macroeconomics-practice-exam-2012.pdf to the 2012 AP Macro Released Exam. Select a question that no one has done yet, copy the question, answer, and your rationale for why it is correct. There is an answer key at the end of the MC section. Once all of the MC questions have been taken, use a section of one of the FRQ questions.
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7) Hyperinflation is typically caused by
B.Continuous expansion of the money supply to finance government budget deficits.
Instead of tightening the money supply to stop inflation, the government keeps printing more money to pay for spending.
Gaby Bonus
P.2
27. Which of the following individuals is considered unemployed?
C) Pat, who recently left a job to look for a different job in another town.
Pat is considered unemployed because she is currently not working but actively seeking employment. Therefore she is considered unemployed.
Nikita
Damodaran
Period 2
17. An increase in which of the following would cause the aggregate demand curve to shift to the left?
D. Income taxes
when government spending decreases,regardless of tax policy, AD decreases.
Danielle Davis 6th
16. Which of the following will lead to a decrease in a nation's money supply?
D. An increase in reserve requirements
If the amount of cash banks are required to hold in reserves increases, less loans are being made to consumers and businesses which decreases the money supply.
Angie Mancino
period 6
4. Unlike a market economy, a command economy uses?
A. More centralized planning in economic decision making.
Command Economy is just opposite to the concept of Market Economy. While Market Economy tends to multiply the wealth of a nation through the gradual process of evolution, Command Economic system prefers deliberate planning of the entire money-making process for better results.
Maheen Meraj
6th period
11. Which of the following combinations of changes in government spending and taxes is necessarily expansionary?
B. Increase government spending; Decrease taxes
In order to initiate expansionary monetary policy, the government must keep spending money and reduce tax rates to allow the economy to expand.
Christopher Tilford
6th period
1. A country’s government runs a budget deficit when which of the following occurs in
a given year?
B) Government spending exceeds tax revenues.
Budget deficit occurs when an organization has greater spending than available revenue.
Jibimon Noby
Pd 1
52. An increase in which of the following would LEAST likely increase labor productivity?
E. Labor Force
Physical capital, Human capital, Technological improvements, Educational Achievement are all things that would increase labor productivity so Labor Force would be the odd one out.
Alan John
Period 2
5. The value of a country's currency will tend to appreciate if...
A) demand for the country's exports increase
This answer choice is correct because as more countries are buying foreign products (such as US cars for example) the dollar increases in value because exchange rates are slowly increasing as more people demand the dollar over the country's currency.
Angella Baby
Period 1
3. The transaction demand for money is very closely associated with money’s use as
D)medium of exchange
A medium of exchange is an intermediary instrument used to facilitate the sale, purchase or trade of goods between parties
Mykaela llacar
6th
31. If Country Alpha has been experiencing a higher
inflation rate than Country Beta over the past
decade, which of the following is true?
(B) Alpha’s currency will have depreciated
relative to Beta’s currency.
Since A has had a higher nominal inflation rate, the value of A currency is less than B's currency.
Henry Zhang
7th Period
41.The consumer price index (CPI) is designed to measure the changes in the:
Answer) E-cost of select market basket of goods and service
Reason) CPI is calculated by dividing the price of the basket of goods and services in a given year by the price of the same basket in the base year. The ratio is multiplied by 100. CPI is based on the overall cost of a fixed basket of goods and services by a typical consumers.
Reba George
Period 1
15. According to the short-run Phillips curve, lower
inflation rates are associated with
-(A) higher unemployment rates
-The Phillips Curve demonstrates the inverse relationship between unemployment and inflation rates. The higher inflation rate is the the lower unemployment is. The lower the inflation rate is the higher unemployment is. If both inflation and unemployment is high it is called stagflation.
Camryn Pugh 6th period
9. The official unemployment rate understates the unemployment level in the economy because the official unemployment rate
(B) ignores underemployed and discouraged workers
The definition of unemployment is the condition occurring when a worker who is not currently employed is searching for a job without success, which does not include the underemployed and discouraged workers.
Ashley Odstrcil
7th period
38.
An increase in the government budget deficit is most likely to result in an increase in which of the following?
C- The real interest rate
Increases in government budget deficit can result in many things but the most common result is that there will be an increase in the real interest rate. The real interest rate is the rate of interest an investor, saver or lender receives after allowing for inflation.
Linda Zhu
7th p
40.
A commercial bank's ability to create money depends on which of the following?
B.) a fractional reserve banking system.
A commercial bank is a bank that offers services to the general public and to companies, so in order to create more money, the bank would need a private depositors which are available for withdraw, which is why fractional reserve bank is the answer.
Katarina Shanar
6th period
12. The amount of money the public wants to hold in the form of cash will
(C.) decrease if interest rates increase
-Because it costs them more to borrow money, financial institutions often increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if these loans carry a variable interest rate.
Luke Leblanc
Period 6
25. Which of the following is likely to occur following the depreciation of the United States dollar?
B. US exports will increase
- This is because the depreciation of the US dollar means the price of exported goods becomes less for foreign customers, which increases the demand for exports.
Blesson Chacko
7th Period
2.A higher marginal propensity to consume complies to which of the following?
E)lower marginal propensity to save
A person with a higher income are less likely to save money and to spend the rest on goods and services so they don't save much for utilities.
Kenan Edwards
6th Period
51. The shifting of a country’s production possibilities curve to the right will most likely cause
(E) long-run aggregate supply curve to shift to the right
Improvements in productivity and efficiency or an increase in the stock of capital and labor resources cause the LRAS curve to shift right
Nia Eugene
Period 6
21. With an upward-sloping short-run aggregate supply curve, an increase in government expenditure will most likely
(C) increase real gross domestic product
The positive slope of the short-run aggregate supply curve indicates that increases in the economy's price level lead to an increase in the quantity of aggregate supply in the short-run.
Reeba Abraham
Period 2
56. In the narrowest definition of money, M1, savings accounts are excluded because they are
(A) not a medium of exchange
M1 is the money supply that includes physical currency and coin, demand deposits, etc. For an instrument to function as a medium of exchange, it must represent a standard of value accepted by all parties. In modern economies, the medium of exchange is currency.
Abel Abraham
6th Period
6. Which of the following best illustrates an improvement in a country's standard of living?
(A) An increase in real per capita gross domestic product
GDP measures the total output of an entire economy by adding up total consumption, investment, government expenditure and net exports. Thus, it provides a valid approximation of the income for an entire economy in a given time period. Additionally, in order to calculate per capita GDP, you would have to divide the total GDP by the country's population. Since real per capita GDP estimates the total economy's income using the entire country's population, it is a good tool to measure the standard of living.
Ashwini Prabhu
Period 6
24. A reduction in inflation can best be achieved by which of the following combination of fiscal and monetary policy?
(A) Fiscal: Increase taxes Monetary: Sell government bonds
To achieve a reduction in inflation, a contractionary policy must be put in place for the economy. In fiscal contractionary policy, an increase in taxes and a decrease government spending leads to a reduction in inflation. In monetary contractionary policy, selling government bonds, raising discount rates, and raising the required reserve ratio for banks all lead to a reduction in inflation.
Brandon Wong
7th
23. In the short run, an expansionary monetary policy would most likely result in which of the following changes in the price level and real gross domestic product (GDP)?
E - Price Level will increase and Real GDP will Increase
The short-run is the time before the money supply can affect the price level in the economy. In expansionary monetary policy in the short-run, the money supply is expanded by increased government spending and decrease in taxes. This would in turn cause higher economic growth and lower unemployment that increases GDP. In addition, the increase in money supply would lead to movement up along the aggregate supply curve. This would lead to higher prices and more potential real output.
yee yee
Henry Feng
7th
36. A country can have an increased surplus in its balance of trade as a result of
B. Declining imports and rising exports
If a country that trades with another country receives the same total value of goods that it gives to the other country, it is engaging in balanced trade. If it receives more value than it gives away, it is gaining money (or losing less money) and is therefore in surplus.
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Samuel Shteyman
1st Period
Assume that the required reserve ratio is 10%, banks keep no excess reserves, and borrowers deposit all loans made by banks. Suppose you have saved $100 in cash at home and decided to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of
B. $900
Money multiplier = 1/r
1/.10= 10
10 ($100)= $1,000
$1,000-$100=$900
Lujayna Taha
2nd
27. Which of the following individuals is considered officially unemployed?
C. Pat, who recently left a job to look for a different job in another town.
A person is considered Officially Unemployed when they could be working, and want to work, but is not working. To be counted as unemployed you must be part of the eligible population, not working, and actively looking for work.
Anson Sam
6th Period
48. Under a flexible exchange-rate system, the Indian rupee will appreciate against the Japanese yen when
E, real interest rates in India increase relative to those in Japan.
Real interest rates are those that are accounted for inflation. If the real interest rate increases, then the value of the Rupee will increase to a decrease in spending.
Christian Toy
period 1
39. Increase in which of the following would be most likely to increase long-run growth?
C-Subsidies to business for purchases of capital goods
With the business getting Subsidies to buy capital goods allows them to be able to buy more supplies. This helps them to produce more at a greater rate moving the long-run to the right because of the increase.
Hannah Golding
1st
54. An increase in which of the following would LEAST likely increase labor productivity?
E. The Labor Force
The labor force is the number of people working and an increase the labor force does help the individual like the other four listed options.
Paul Manavalan
7th Period
34. Which of the following statements is true of unanticipated inflation?
D) It increases the economic well-being of net debtors.
This is because when inflation rises, money technically loses its value, so in turn, those who borrowed money (Net Debtors), are technically paying back less than what they borrowed which benefits them.
Mark Mufarreh 1st period
14. With an increase in the real interest rate, consumption and real domestic gross product will most likely change in which of the following ways?
D) decrease in consumption and GDP
Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall overall decreasing consumption and GDP
Matthew Manalel
2nd period
53. Which of the following is true about changes in tax rates, changes in level of government expenditures, and changes in the money supply?
(C) They have different lag times between the implementation of a policy and its effect of aggregate demand.
When these changes are enacted, each case will vary in the time it takes for it to be implemented therefore causing different lag times and different effect on the aggregate demand.
Erin John
2nd Period
30. Assume that an economy is currently in long run equilibrium and the short run aggregate supply curve is upward sloping. An adverse supply shock, such as a drought, will most likely cause which of the following in the short run?
E) An increase in price level and an increase in the real wage
Supply shocks shift the short run aggregate supply curve. Negative supply shocks raise production costs and reduces quantity supplied.
Lauryn Ewens
2nd period
7) Hyperinflation is typically caused by
Answer: B. Continuous expansion of the money supply to finance government budget deficits.
In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of inflation, rapidly eroding the real value of the local currency, and causing the population to minimize their holdings of local money.
Edward Joseph
Period 2
45. The diagram above shows the production possibilities curve for an economy that produces only consumption and capital goods. All of the following statements about this economy are true EXCEPT:
E) Point X represents the ost efficient combination of the two goods that can be produced by this economy.
E is incorrect because the production possibilities curve shows how efficient your combination of two goods are due to your limited amount of resources. The graph did not present how much resources there are, which makes E incorrect.
Angela Fang Period 6
35) A simultaneous increase in inflation and unemployment could be explained by an increase in which of the following?
E. Inflationary Expectations
If both inflation and unemployment rise this goes against the Philip's Curve. Thus, inflationary expectations can lead to a simultaneous increase in inflation and unemployment.
Jerin Jose
Period 02
59. Advocates of a monetary rule recommend increasing the money supply at a rate that is equal to the rate of increase in which of the following?
E. Long-run real gross domestic product.
As the long run effects of an increase in the money supply is hard predict, it is better to increase money supply at the rate of the long run GDP.
Godwish Tom
Period 01
59. Advocates of a monetary rule recommend increasing the money supply at a rate that is equal to the rate of increase of which of the following?
E. long run real gdp
Increasing money supply should lower interest rates,leading to more spending and loaning which should lead to an increase in long run real gdp.
Andrew Yang
7th
26. The table below shows the production alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed. Which of the following is true according to the data in the table?
B. Country B has an absolute and comparative advantage in the production of computers.
B is the correct answer since the table given shows that Country B makes 45 computers while Country A can only make 24 when creating 0 cars, meaning that Country B has an absolute and comparative advantage when it comes to producing computers.
Ayush Singh
6th Period
55. Tariffs are different from assigned import quotas in that tariffs will
E) generate additional revenue for the domestic government
E is the correct answer since tariffs generate money and revenue for the domestic government whilst assigned import quotas do not, instead providing revenue for the importer's government instead.
Paul Nguyen
2nd period
49. Which of the following occurs as an investment becomes more responsive to changes in the interest rate?
A) Monetary Policy becomes more effective at changing real gross domestic product.
A is correct because interest rate is one of the things that monetary policy has to account for which in turn affects the gdp.
60. If economic agents perfectly anticipate policy changes and if all prices, including wages, are completely flexible, which of the following will be true in the long run?
(B) There will be no trade-off between inflation
and unemployment.
B is correct because all of the Long Run lines on every graph is vertical and all trade offs are eventually evened out.
50. If two nations specialize acording to the law of comparative advantage and then trade with each other, which of the following would be true?
D) Each nation would increase consumption possibilities.
D is correct because specialzing in one field will not spread the country thin, instead leading them to focus on a single set of products.
Dhilan Patel
Period 7
32. Based on the economic figures in the table above, What is the value of gross domestic product, in Billions of dollars.
A. 4,500
A. is correct because GDP: GDP = C + I + G + (X – M) or GDP = private consumption + gross investment + government investment + government spending + (exports – imports).
Peter Martin P.2
8. All of the following changes will shift the investment demand curve to the right EXCEPT
C. An increase in the real interest rate
C. is correct because higher real interest rates will make capital goods relatively more expensive and cause the demand curve shift to the left (not right)
Michael Ibay
Period 7
28) An increase in net investments leads to faster economic growth because capital per worker and output per worker will change in which of the following ways?
Capital Per worker Output Per worker
A) Increase Increase
A is correct because with increase in investments and economic growth more people are to benefit, workers can work longer and earn more, therefore produce more and increase the output per person
Jessica Neal
2nd
46. Assume that the required reserve ratio is 10 percent, banks keep no excess reserves, and borrowers deposit all loans made by banks. Suppose you have saved $100 in cash at home and decide to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of?
B.$900
B is the correct answer because since the required reserve ratio is 10 percent so there is $1000 then u have to subtract $100 since it is the required reserve ratio.
42. A barter economy is different from a money economy in that a barter economy
B. Involves higher costs for each transaction
B is the correct answer because a barter economy is based on what goods and services people can trade which can vary.
Angel Yeung
Period 6
33. which of the following best explains the increase in national income that results from equal increases in government spending and taxes?
A. consumers do not reduce their spending by the full amount of the tax increase.
a is correct because consumers continue to spend money even with higher tax rates and this spending contributes to the higher national income.
Matthew Benton
6th Period
57. For which of the following sets of unemployment and inflation rates will a central bank be most reluctant to increase the rate of growth in the money supply?
E. Unemployment rate 5%, Inflation Rate 10%
Unemployment rate and inflation is inversely related. Also, if the growth rate of the nominal money supply is equal to growth rate of money demand then inflation is equal to zero.
Simran Kotak
Period 1
A high marginal propensity to consume implies which of the following?
E. A low marginal propensity to save.
A high marginal propensity to consume is a concept that explains that with more disposable income, comes more spending. If the likelihood to spend increases then the likelihood to save should decrease.
Bonita Hall
Period 6
FRQ #2c
Assuming that no loans are called in, how can the bank cover its required reserves?
-the bank can borrow from the federal reserve or from another bank because if he withdrawals an amount that exceeds the reserves, banks cannot simply create money, so they must borrow money from the federal reserve that will eventually get paid back.
Bailey corley
Period 6
47. Which of the following would be the initial impact on an economy if wages were to increase more than worker productivity?
D.The short-run aggregate supply curve would shift to the left, increasing the price level.
Increases and decreases in wages and company spending shifts the short- run aggregate supply curve either to the left or right. Since the wages are increasing, the curve shifts left. Ultimately resulting in the price level increasing as well because of the inverse relationship between PL and real GDP
13) For an economy consisting of households and businesses only, which of the following is consistent with a circular flow income and production?
C.Households are suppliers of Resources and consumers of goods and services.
The Basic Circular Flow Income model consists of two sectors: firms and households. The households spend all of their income on goods and services or consumption.All output produced by firms is purchased by households through their expenditure. Therefore, the households are the suppliers
Amaani Nazarali-6th Period.
FRQ #2a
What is the reserve requirement?
- 10% ($10,000/$100,000)
The reserve requirement is the percent of deposit in a bank that can not be loaned out. It can be calculated by reserves/demand deposits
Irene Gratil
pr. 2
FRQ #3c
As a result of the increase in exports, export-oriented industries in Andersonland increase expenditures on new container ships and equipment
What component of aggregate demand will change?
Gross investment component will change. The business increases the amount of money invested in capital goods, which corresponds with an increase in the value of money spent by businesses when calculating aggregate demand.
What is the impact on the long-run aggregate supply?
The long-run aggregate supply will shift to the right. The increase in expenditures will increase the amount of capital goods, which are investments that increase the capabilities of production. As a result, the line shifts right.
Bryanna Godfrey
Period 1
FRQ #1bi
(b) Assume that the Central Bank of Rankinland pursues an expansionary monetary policy.
(i) Identify the open-market operation that the Central Bank would use.
the central bank would buy bonds for expansionary plate.
Hunter Boyd
Period 6
FRQ #3b
Assume that there is an increase in exports from Andersonland. On your graph in part (a), show the effect of higher exports on the equilibrium in the short run, labeling the new equilibrium output and price level Y2 and PL2, respectively.
I would draw a graph that accurately shows the rightward shift of the aggregate demand curve, and I would make sure to label the Y2 and PL2. Higher exports on the equilibrium in the short run can result in the increase in AD and cause the present shift. A shift to the right of the aggregate demand curve means that at the same price levels the quantity demanded of real GDP has increased.
53. In the narrowest definition of money, M1, savings accounts are excluded because they are
A. Not a medium of exchange.
I feel this answer is correct because when looking at M1, the money needs to be liquid and savings accounts are not that liquid
Erek Castro
P.7
FRQ 1A
Assume that Rankinland only produces food and clothing. Draw a correctly labeled ppc for Rankinland. Show a point that could represent the current output combination and label it A.
Because Rankinland is in recession, the relationship between food and clothing should be of negative correlation with increase in food causing a decrease in clothing and vice versa.
Point A would be located inside the curve.
I gathered this answer because if the country is in a recession that means the demand is low therefore both objects can’t be prospering in the economy that much therefore signifying a negative correlation between them. Point a must be inside because of the recession meaning both are pretty low but obviously can’t be too low otherwise the other object would be of high demand.
Raza Muhammad
Period 2
(b) Assume that Luis withdraws $5,000 in cash from his checking account at Mi Tierra Bank.
(i) By how much will Mi Tierra Bank’s reserves change based on Luis’ withdrawal?
Mi Tierra Bank's reserve changes by having 0 excess reserves.
This is known because there will be $5,000 less in loans and the required reserves has to be $10,000.
Camila Ferrero
Period 1
10) If a reduction in aggregate supply decrease is followed by an increase in aggregate demand, which of the following will definitely occur.
D. The price level will increase
As the supply for a specific continues to decrease and you are the only one providing something that the majority of the public want then you can play with the price as you see fit.
Albert Tamdjo
Period 2
42. A barter economy is different from a money economy in that a barter economy
B) involves higher costs for each transaction
A barter economy involves higher costs with each transaction due to the fact that opportunity costs differ for each product and there is a double coincidence that must be met to allow for transactions to occur.
Sarah James
2nd period
18. Which of the following changes in the supply and demand for a good will definitely result in a decrease in both the equilibrium price and quantity for a good?
C. Supply: No change Demand: Decrease
A decrease in only demand will shift the chart to the left because if supply was to also shift then the equilibrium would be in the same place before and not lowered.
Kollin Chang
2nd Period
37. Policies intended to reduce demand-pull inflation are most likely to increase which of the following in the short run?
(D) Unemployment
To reduce demand, is to reduce production, and without as much production, jobs won't be needed and an increase in unemployment ensues
Chris Young
2nd period
14. Which of the following people is considered unemployed?
A) Pat, who recently left a job to look for a different job in another town.
Pat is considered unemployed because she is currently not working but actively seeking employment. Thus she is considered unemployed.
Sahib Oberoi
Period 2
30. Which of the following is true about changes in tax rates, changes in level of government expenditures, and changes in the money supply?
(C) They have different lag times between the implementation of a policy and its effect of aggregate demand.
All three of thee different types of government policy have different time lags in implementation due to the differences between them, and their different effects of aggregate demand.
Benjamin Sunny, 6th Period
58. Assume that Jane's marginal propensity to consume equals .8, and that in 2004 Jane spent $36,000 from her disposable income of $40,000. If her disposable income in 2005 increased to $50,000, her consumption spending increased by?
B) $8,000
This is a simple math question all you need to know if the formula and how to find marginal propensity and the equation for marginal propensity is ĪC / ĪY, where ĪC is change in consumption, and ĪY is change in income.
Sumeyye Islamoglu
Period 1
FRQ 3d. As a result of the increase in exports, export-oriented industries in Anderson land increase expenditures on new container ships and equipment.
(i) what component of aggregate demand will change
(ii) what is the impact on the long-run aggregate supply? Explain
(i) the investment component of AD will change - This is because expenditures are investments for Andersonland
(ii) The long-run aggregate supply will shift to the right because the capital stock has increased.- LRS always shifts to the right when there is an increase in any of the supply factors.
Roshni Jose
Period 1
FRQ 2c
Assume that the next day John withdraws from Mi Tierra Bank an amount that exceeds the bank’s excess reserves. Assuming that no loans are called in, how can Mi Tierra Bank cover its required reserves?
The bank can ask for money from the federal reserve or from another bank because if the money withdrawed exceeds the reserves, banks can’t just create money and must borrow instead.
Jeslin Johny
1st period
#1c) Assume the country of Rakinland is currently in recession. Suppose Rakinland has a current account deficit. Rakinland’s currency is called the bera.
i) What will initially happen to the current account deficit in Rakinland solely due to the change in the real GDP from part (b)(iv)? Explain.
The current account deficiency in Rakinland will increase due to government spending being high during a recession causing the deficit to increase since the decreased interest rates end up causing moral hazard.
ii) What will happen to the international value of the bera solely due to the change in the real GDP from part (b)(iv). Explain.
The international value of the bera will go up since the real GDP goes up, and as a result, people will start buying more of the bera currency.
Divya Aaloori
6th period
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