AP Macro Unit 5

Which of the following is true about the Phillips curve?

• A change in aggregate demand does not shift the long-run Phillips curve (LRPC).

• A change in aggregate demand does not cause a movement along the short-run Phillips curve (SRPC).

• The LRPC shows the trade-off between unemployment and inflation but the SRPC does not.

• Changes in expected inflation affect the LRPC only.

• Negative supply shocks affect the LRPC only.

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

If the government implements an expansionary fiscal policy, what action can the central bank take to maintain a stable interest rate, assuming the banking system has limited reserves?

• Increase the required reserve ratio

• Increase personal income tax rates

• Decrease personal income tax rates

• Sell government bonds

• Buy government bonds

If real output is $9,000, and the price level is 2, and the velocity of money is 3, then the money supply is

• $3,000

• $4,500

• $6,000

• $18,000

• $27,000

If nominal gross domestic product in a country is $1,600 and the money supply is $400, what is the velocity of money?

• 400

• 10

• 4

• 2

• 0.5

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 in the short run?

• 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.

A reduction in inflation can best be achieved by which of the following combinations of fiscal and monetary policy?

• Fiscal Policy: Increase Taxes

  Monetary Policy: Increase administered interest rates

• Fiscal Policy: Decrease Taxes

  Monetary Policy: Increase administered interest rates

• Fiscal Policy: Decrease Taxes

  Monetary Policy: Decrease administered interest rates

• Fiscal Policy: Decrease government spending

  Monetary Policy: Decrease administered interest rates

• Fiscal Policy: Increase government spending

  Monetary Policy: Decrease administered rates

Which of the following policy choices represents a combination of fiscal and monetary policies designed to bring the economy out of a recession?

• Decreasing both taxes and the money supply

• Increasing both taxes and the money supply

• Increasing government spending and decreasing the policy rate

• Increasing both taxes and the policy rate

• Engaging in deficit spending and government bond sales

Which of the following monetary and fiscal policy mixes will reduce unemployment?

• Decreasing interest on reserves and increasing taxes

• Decreasing interest on reserves and decreasing taxes

• Increasing interest on reserves and increasing government spending

• Increasing interest on reserves and decreasing government spending

• Increasing interest on reserves and increasing taxes

In the long run, a decrease in the money supply will affect the price level and the level of output in which of the following ways?

• Price Level: Increase

  Output: Increase

• Price Level: Increase

  Output: No change

• Price Level: Decrease

  Output: Increase

• Price Level: Decrease

  Output: Decrease

• Price Level: Decrease

  Output: No change