AP Macro unit 5 & 6

Which of the following is a cause of hyperinflation?

• Rapid growth of real gross domestic product

• Rapid growth of the money supply

• Unanticipated decrease in aggregate demand

• Unanticipated increase in aggregate supply

• Unanticipated rise in real interest rates

An appreciation of the United States dollar on the foreign exchange market could be caused by a decrease in which of the following? (Topic 6.4)

• United States interest rates

• The United States consumer price index

• Demand for the dollar by United States residents

• Exports from the United States

• The tariff on goods imported into the United States

Which of the following could cause a movement along a country’s short-run Phillips curve toward higher unemployment and lower inflation? (Topic 5.2)

• A significant reduction in energy prices

• A recession in the economies of the nation’s major trading partners

• A decrease in savings by the country’s consumers

• A movement of the economy from the recovery phase to the expansionary phase of the business cycle

• An improvement in technology

A country can have an increased surplus in its balance of trade as a result of

• an increase in domestic inflation

• declining imports and rising exports

• higher tariffs imposed by its trading partners

• an increase in capital inflow

• an appreciating currency

Suppose that Country A is experiencing high inflation relative to Country B, which is enjoying steady growth with a stable price level. Which of the following would occur in the foreign exchange market?

• An increase in the demand for Country A’s currency

• An increase in the supply of Country B’s currency

• A decrease in the supply of Country A’s currency

• A decrease in the demand for Country B’s currency

• A depreciation of Country A’s currency

Country A’s growth rate in per capita real gross domestic product (GDP) has been consistently higher than that of Country B. Which of the following factors can account for these differences in the per capita GDP growth rates? (Topic 5.6)

• Country B’s government gives more investment tax credits.

• The labor force of Country A is becoming more skilled than the labor force of Country B.

• The natural rate of unemployment is higher in Country A.

• Country A’s central bank is less effective at controlling the inflation rate.

• Although the populations of Countries A and B are the same, Country A has twice as many people who are retired.

If both contractionary monetary policy and contractionary fiscal policy are carried out, what will most likely happen to interest rates and real gross domestic product (GDP)(GDP) in the short run? (Topic 5.1)

• Both interest rates and real GDP will increase.

• Both interest rates and real GDP will decrease.

• Interest rates will decrease, and real GDP will stay the same.

• Interest rates will increase, and real GDP will decrease.

• Real GDP will decrease, and the change in interest rates will be indeterminate.

Which of the following is true about the national debt of the United States?

• It is the debt owed to foreign investors.

• It is the accumulation of past and current budget deficits and surpluses.

• It increases when gross domestic product increases.

• It increases when exports decrease, and decreases when exports increase.

• It did not exist before 1980.

The diagram shows the United States dollar-Chinese yuan foreign exchange market. If the current exchange rate is 6 yuan per dollar, which of the following describes the current state of the market and how the value of the dollar will change in a flexible exchange-rate system?

• There is a surplus of dollars and the dollar will appreciate.

• There is a surplus of dollars and the yuan will depreciate.

• There is a shortage of dollars and the dollar will appreciate.

• There is a shortage of dollars and the dollar will depreciate.

• There is a shortage of dollars and the yuan will appreciate.

If the value of the United States dollar increases on the foreign exchange market, which of the following is most likely to occur in the short run?

• Aggregate demand will decrease.

• Aggregate demand will increase.

• Aggregate supply will decrease.

• Both aggregate demand and aggregate supply will decrease.

• Both aggregate demand and aggregate supply will increase.