AP Macroeconomics Review

Front

According to the concept of comparative advantage, which of the following is true when countries specialize and trade? Each country obtains an absolute advantage., Total world output increases., The production possibilities curve for both countries shifts inward., Prices fall in both countries., Deadweight loss is created.

Back

Total world output increases.

Front

If real gross domestic product is declining, the economy is most likely experiencing which of the following? increasing unemployment, negative long-run economic growth, inflationary pressures, an increase in aggregate demand, a recovery

Back

increasing unemployment

Front

Which of the following is not counted in a country's GDP?
goods exported to other countries,
changes in inventories,
domestically produced capital goods,
financial assets, such as stocks and bonds,
newly produced services

Back

financial assets, such as stocks and bonds

Front

If the real interest rate is 1% and the nominal interest rate is 4%, the expected rate of inflation is

Back

3%

Front

If the general price level doubles and at the same time a worker's real wage rate increases, what must be true of the worker's nominal wage rate?

Back

It increased by more than double.

Front

Which of the following is most likely to cause a leftward shift in the long-run aggregate supply curve? Options: a decrease in the wage rate, a decrease in short-run aggregate supply, contractionary fiscal policy, a permanent decrease in the size of the labor force, a long-term decrease in demand

Back

a permanent decrease in the size of the labor force

Front

An economy experiences inflationary pressures when the equilibrium level of output is

Back

above the full employment level of output

Front

If the interest rate is 2%, what is the present value of $1 paid to you in one year?

Back

less than $1

Front

Crowding out occurs when government borrowing leads to an increase in

Back

interest rates.

Front

An increase in expected inflation is likely to have which of the following effects? Options: shift the long-run Phillips curve to the right, shift the short-run Phillips curve downward, increase the actual inflation rate, decrease the natural employment rate, shift the short-run aggregate supply curve to the right

Back

increase the actual inflation rate