Unit 5 AP Macro

A decrease in government spending by a given amount accompanied by a decrease in taxes by the same amount will cause which of the following?

• Aggregate demand to increase

• Aggregate demand to decrease

• Aggregate demand to stay the same

• Aggregate supply to increase

• Aggregate supply to decrease

Which of the following is true regarding budget deficits?

• The national debt is the accumulation of budget deficits and surpluses over time

• Budget deficits occur when tax revenues are greater than government expenditures

• Budget deficits are often greater than the national debt

• Large budget surpluses can cause the crowding-out effect

• Budget deficits occur when imports are more than exports

Which of the following will most likely result in economic growth?

• Increased wages

• Decreased savings

• Increased business taxes

• Increased labor productivity

• Decreased unemployment

Suppose the Federal Reserve buys $400,000 worth of securities from the securities dealers on the open market. If the reserve requirement is 20% and the banks hold no excess reserves, what will happen to the total money supply?

• It will be unchanged.

• It will contract by $2,000,000.

• It will contract by $800,000.

• It will expand by $2,000,000.

• It will expand by $800,000.

Which of the following does the Federal Reserve use most often to combat a recession?

• Selling securities

• Buying securities

• Reducing the reserve requirement

• Increasing the discount rate

• Increasing the federal funds rate

Which of the following actions by the Federal Reserve will result in an increase in banks' excess reserves?

• buying bonds on the open market

• selling bonds on the open market

• increasing the discount rate

• increasing the reserve requirement

• increasing the federal funds rate

Reserves, the money supply, and interest rates are most likely to change in which of the following ways when the Federal Reserve sells bonds?

• Increase/Increase/Increase

• Increase/Increase/Decrease

• Decrease/Increase/Decrease

• Decrease/Decrease/Increase

• Decrease/Decrease/Decrease

Refer to Figure A (note: x axis should NOT be valued in $). At a price of $20, which of the following would occur?

• Shortage of 100

• Shortage of 150

• Surplus of 200

• Surplus of 50

• Surplus of 100

Which of the following is true for all economies regardless of their economic system?

• Every economy must determine what to produce and how it produces goods and services

• Every economy must find a way to distribute income equally

• Every economy must find ways to privatize markets to maximize efficiency

• Every economy must prevent unemployment through government intervention

• Every economy must open free trade with other economies

Which of the following is a primary tool of fiscal policy?

• A) Open market operations

• B) Taxation

• C) Reserve requirements

• D) Interest rates