ANSWERS are included at the end of the document. (test yourself on what you don t know first before using them!)

Transcription

1 Final Exam Review : The review has 130 Multiple Choice questions from the 225 we did this semester. It also includes all 21 short answer questions which were used on the tests. ANSWERS are included at the end of the document (test yourself on what you don t know first before using them!) From this review I will select 65 Multiple Choice Questions + 3 Short Answer Questions to make up your final exam which is on Wednesday 12/18. You will have the full 2 hours to complete the Final Exam. Because of providing you this Study Guide with all the potential questions for your final exam, I don t believe it is necessary for us to hold the Saturday review session, if you want to ask me any questions on this study guide come by Monday after school. I Highly Recommend In Addition to these Questions that You Use the Link Below to Review Major Graphs and Concepts for Macroeconomics which you find difficult. w.html Good Luck -Davis AP Economics - Final Exam Review Semester 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The monetary base equals a. currency in circulation - reserves held in banks b. currency in circulation + reserves held by banks c. currency in circulation d. currency in circulation / reserves held by banks e. reserves held by banks 2. The quantity of money demanded rises (that is, there is a movement along the money demand curve) when a. new technology makes banking easier d. the aggregate price level falls b. real GDP increases e. the aggregate price level increases c. short-term interest rates fall

2 3. Which of the following changes would be the most likely to reduce the size of the money multiplier? a. an increase in cash holding by consumers d. a decrease in the required reserve ratio b. a decrease in excess reserves e. an increase in deposit insurance c. a decrease in bank runs 4. If the interest rate is zero, then the present value of a dollar received at the end of the year is a. equal to $1 d. zero b. less than $1 e. more than $1 c. infinite 5. Which of the following will increase the demand for loanable funds? a. a federal government budget surplus d. an increase in the perceived business opportunities b. positive capital inflows e. decreased private savings rates c. a decrease in the interest rate 6. Which of the following is NOT a type of financial asset? a. loans d. stocks b. bank deposits e. houses c. bonds 7. When the Fed makes a loan to a commercial bank, it charges a. the federal funds rate d. the prime rate b. the market interest rate e. the discount rate c. no interest 8. Which of the following financial services does the Federal Reserve provide for commercial banks? I. clearing checks II. holding reserves III. making loans a. III only d. I and II b. I only e. I, II, and III c. II only 9. Which of the folowing is NOT a role of the Federal Reserve System? a. controlling bank reserves d. printing currency (Federal Reserve notes) b. holding reserves for commercial banks e. supervising and regulating banks c. carrying out monetary policy 10. If the Fed purchases U.S. Treasury bills from a commercial bank, what happens to bank reserves and the money supply? Bank Reserves ; Money Supply a. decrease ; decrease d. decrease ; increase b. increase ; increase e. increase ; decrease c. increase; no change 11. A financial intermediary that provides liquid financial assets in the form of deposits to lenders and uses their funds to finance the illiquid investment spending needs of borrowers is called a a. mutual fund d. life insurance company b. bank e. pension fund c. corporation 12. Decreasing which of the following is a task of the financial system?

3 I. transaction costs II. risk III. liquidity a. II only d. I only b. I and II only e. I, II, and III c. III only 13. Which of the following is the best example of using money as a store of value? a. a customer pays in advance for $10 worth d. You use $1 bills to purchase soda from a of gasoline at a gas station vending machine b. a babysitter puts her earnings in a dresser e. travelers buy meals on board an airline drawer while she saves to buy a bicycle flight c. foreign visitors to the United States convert their currency to dollars at the airport. 14. If the interest rate is 5%, the amount received one year from now as a result of lending $100 today is a. $105 d. $100 b. $90 e. $95 c. $ Which of the following contributed to the financial crises of 2008? a. deleveraging d. all of the above b. subprime lending e. low interest rates leading to a housing boom c. securitization 16. Which of the following will decrease the demand for money? a. inflation d. an increase in the interest rate b. an increase in real GDP e. the adoption of Regulation Q c. an increase in the availability of ATMs 17. The real interest rate equals the a. nominal interest rate divided by the inflation rate b. nominal interest rate times the inflation rate c. federal funds rate d. nominal interest rate plus the inflation rate e. nominal interest rate minus the inflation rate 18. Who oversees the Federal Reserve System? a. the Reconstruction Finance Corporation d. the president of the United States b. the Board of Governors of the Federal e. the Federal Open Market Committee Reserve System c. the presidents of the Regional Federal Reserve Banks 19. Bank regulation includes which of the following? I deposit insurance II capital requirements III reserve requirements a. I only d. I, II, and III b. II only e. I and II c. III only

4 20. The federal government is said to be dissaving when a. savings does not equal investment d. national savings equals private savings spending b. there is a budget deficit e. there is a budget surplus c. there is no budget surplus or deficit 21. What is the present value of $100 realized two years from now if the itnerest rate is 10% a. $90 d. $83 b. $100 e. $110 c. $ Which of the following will increase the supply of loanable funds? a. an increase in perceived business d. decreased government borrowing opportunities b. an increased private savings rate e. a decrease in capital inflows c. an increase in the expected inflation rate 23. Which of the followign is the most liquid monetary aggregate? a. M2 d. near-moneys b. M1 e. M3 c. dollar bills 24. Suppose, for simplicity, that a bank uses a single interest rate for loans and deposits, there is no inflation, and all unspent money is deposited in the bank. The interest rate measures which of the following? I. the cost of using a dollar today rather than a year from now II. the benefit of delaying the use of a dollar from today until a year from now III. the price of borrowing money calculated as a percentage of the amount borrowed a. II only d. III only b. I and II only e. I only c. I, II, and III 25. Which of the following contributed to the creation of the Federal Reserve System? I. the bank panic of 1907 II. the Great Depression III. the savings and loan crisis of the 1980 s a. II only d. I, II, and III b. I and II only e. I only c. III only 26. If the interest rate is 10%, the present value of $1 paid to you one year from now is a. $.89 d. $0 b. $.91 e. more than $1 c. $1 27. The current account includes which of the following? I. payments for goods and services II. transfer payments III. factor income a. I only d. I and II only b. II only e. I, II, and III c. III only

5 28. The trade balance includes which of the following? I. imports and exports of goods II. imports and exports of services III. net capital flows a. I only d. I and II only b. II only e. I, II, and III c. III only 29. Which of the following will increase the demand for loanable funds in a country? a. economic growth d. decreased private savings rates b. decreased investment opportunities e. government budget surpluses c. a recession 30. When the U.S. dollar buys more Japanese yen, the U.S. dollar has I. become more valuable in terms of the yen II. appreciated III. depreciated a. I only d. I and II only b. II only e. I and III only c. III only 31. The nominal exchange rate at which a given basket of goods and services would cost the same in each country describes a. the international consumer price index d. purchasing power parity (ICPI). b. appreciation e. the balance of payments on the current account. c. depreciation 32. Which of the following would cause the real exchange rate between pesos and U.S. dollars (in terms of pesos per dollar) to decrease? a. an increase in net capital flows from d. a decrease in oil exports from Mexico to Mexico to the United States the United States b. an increase in the real interest rate in e. an increase in the balance of payments on Mexico relative to the United States the current account in the United States c. a doubling of prices in both Mexico and the United States 33. Which of the following methods can be used to fix a country s exchange rate at a predetermined level? I. using foreign exchange reserves to buy its own currency II. using monetary policy to change interest rates III. implementing foreign exchange controls a. I only d. I and II only b. II only e. I, II, and III c. III only 34. Which of the following interventions would be required to keep a country s exchange rate fixed if the equilibirum exchange rate in the foreign exchange market were below the fixed exchange rate (measured as units of foreign currency per unit of domestic currency)? The Government/ Central bank a. buys the domestic currency d. lowers domestic interest rates b. sells the domestic currency e. removes foreign exchange controls c. buys the foreign currency

6 35. Devaluation of a currency occurs when which of the following happens? I. The supply of a currency with a floating exchange rate increases. II. The demand of a currency with a floating exchange rate decreases III. The government decreases the fixed exchange rate a. I only d. I and II only b. II only e. I, II, and III c. III only 36. Devaluation of a currency is used to achieve which of the following? a. an elimination of a surplus in the foreign d. a lower inflation rate exchange market b. an elimination of a shortage in the foreign e. a floating exchange rate currency market c. a reduction in aggregate demand 37. If the aggregate price level in Mexico decreases, what iwll happen to the real interest rate? a. it will increase d. it will stabilize b. it will decrease e. it cannot be determined c. it will be unchanged 38. If the Mexican government pursues expansionary fiscal policy in response to the recession, what will happen to aggregate demand and aggregate supply in the short-run? Aggregate Demand ; Short-Run Aggregate Supply a. increase ; increase d. decrease ; decrease b. increase ; decrease e. increase ; no change c. decrease ; increase 39. Suppose that you prefer reading a book you already own to watching TV and that you prefer watching TV to listening to music. If these are your only three choices, what is the opportunity cost of reading? a. watching TV and listening to music d. sleeping b. watching TV e. the price of the book c. listening to music 40. The labor force is made up of everyone who is a. employed d. employed or unemployed b. old enough to work e. employed or capable of working c. actively seeking work 41. A sustained increase in aggregate output over several decades represents a. an expansion d. a depression b. a recovery e. economic growth c. a recession 42. Which of the following is the most likely result of inflation? a. falling employment d. price stability b. a dollar will buy more than it did before e. low aggregate output per capita c. people are discouraged from the holding cash 43. The other things equal assumption allows economists to a. avoid making assumptions about reality d. allow nothing to change in their model b. focus on the effects of only one change at e. reflect all aspects of the real world in their a time model

7 c. oversimplify 44. Refer to the graph above to answer the following questions (3) 1. which point(s) on the graph represent efficiency in production a. B and C d. A,B,C,D and E b. A and D e. A,B,C,D,E and F c. A, B, C, and D An increase in unemployment could be represented by a movement from point a. D to point C. d. B to point E. b. B to point A. e. E to point B. c. C to point F The production possibilities curve shows the trade-off between consumer goods and capital goods. Since capital goods are a resource, an increase in the production of capital goods today will increase the economy s production possibilities in the future. Therefore, all other things equal (ceteris paribus), producing at which point today will result in the largest outward shift of the PPC in the future? a. A d. D b. B e. E c. C

8 47. Refer to the graph for the following questions (4) 1. Use the graph to determine which country has an absolute advantage in producing each good Absolute Advantage Wheat ; Absolute Advantage Textile Wheat;Textile a. Country A;Country B d. Country B;Country B b. Country A:Country A e. Country A; neither country c. Country B;Country A For country A, the opportunity cost of a bushel of wheat is a. 1/2 units of textiles d. 1 and 1/2 units of textiles b. 2/3 units of textiles e. 2 units of textiles c. 1 and 1/3 units of textiles Use the graph to determine which country has a comparative advantage in producing each good Comparative Advantage Wheat; Comparative Advantage Textile Wheat;Textile a. Country A;Country B d. Country B;Country B b. Country A;Country A e. Country A; Neither Country c. Country B;Country A What is the highest price Country B is willing to pay to buy wheat from Country A? a. 1/2 units of textiles d. 1 and 1/2 units of textiles b. 2/3 units of textiles e. 2 units of textiles c. 1 unit of textiles 51. Which of the following would increase demand for a normal good? A decrease in a. price d. consumer taste for a good b. income e. the price of a complement c. the price of a substitute 52. A decrease in the price of butter would most likely decrease the demand for a. margarine d. milk b. bagels e. syrup c. jelly

9 53. If an increase in income leads to a decrease in demand, the good is a. a complement d. abnormal b. a substitute e. normal c. inferior 54. Which of the following will occur if consumers expect the price of a good to fall in the coming months? a. the quantity demanded will rise today d. demand will decrease today b. the quantity demanded will remain the e. no change will occur today same today c. demand will increase today 55. Which of the following will decrease the supply of good X? a. There is a technological advance that d. the wage of workers producing good X affects the production of all goods. increase b. the price of good X falls e. the demand for good X decreases c. The price of good Y (which consumers regard as a substitute for good X ) decreases 56. An increase in the demand for steak will lead to an increase in which of the following? a. the supply of steak d. the supply of leather (a complement in production) b. the supply of hamburger (a substitute in e. the demand for leather production) c. the supply of chicken (a substitute in consumption) 57. Which of the following is true at equilibrium? a. The supply schedule is identical to the demand schedule at every price b. the quantity demanded is the same as the quantity supplied c. the quantity is zero d. every consumer who enjoys the good can consume it e. producers could not make any more of the product regardless of price. 58. Which of the following describes what will happen in the market for tomatoes if a salmonella outbreak is attributed to tainted tomatoes? a. supply will decrease and price will d. demand will decrease and price will increase decrease b. supply will decrease and the price will e. supply and demand will both decrease decrease c. demand will decrease and price will increase 59. Which of the following will lead to an increase in the equilibrium price of a product X A(n) a. increase in consumer incomes if product d. decrease in the price of good Y (a X is an inferior good substitute for good X ) b. increase in the price of machinery used to e. expectation by consumers that price of produce product X good X is going to fall. c. technological advance in the production of good X 60. The equilibrium price will rise, but equilibrium quantity may increase, decrease, or stay the same if a. demand increases and supply decreases d. demand decreases and supply decreases

10 b. demand increases and supply increases e. demand increases and supply does not change c. demand decreases and supply increases 61. Which of the following is certainly true if demand and supply increase at the same time? a. the equilibrium price will increase d. the equilibrium quantity will decrease b. the equilibrium price will decrease e. the equilibrium quantity may increase, decrease, or stay the same c. the equilibrium quantity will increase 62. Which of the following is true? The simple circular-flow diagram I. includes only the product markets II. includes only the factor markets. III. is a simplified representation of the macroeconomy. a. I only d. I and III only b. II only e. none of the above c. III only 63. Which of the following is included in GDP? a. changes to inventories d. financial assets (stocks and bonds) b. intermediate goods e. foreign-produced goods c. used goods 64. Which of the following is not included in GDP? a. capital goods such as machinery d. government purchases of goods and services b. imports e. the construction of structures c. the value of domestically produced services 65. To be considered unemployed, a person must I. not be working II. be actively seeking a job III. be available for work a. I only d. II and III b. II only e. I, II, and III c. III only 66. How many people are unemployed? a. 10,000 d. 100,000 b. 20,000 e. 110,000 c. 30, The unemployment problem in an economy may be understated by the unemployment rate due to a. people lying about seeking a job d. overemployed workers b. discouraged workers e. none of the above c. job candidates with one offer but waiting for more. 68. The best measure for comparing a country s aggregate ouput over time is a. nominal GDP d. real GDP per capita b. real GDP e. average GDP per capita c. nominal GDP per capita

11 69. Real GDP per capita is an imperfect measure of the quality of life in part because it a. includes the value of leisure time d. excludes expenditures on entertainment b. excludes expenditures on education e. includes the value of housework c. includes expenditures on natural disasters 70. A person who moved to anew state and took two months to find a new job experienced which type of unemployment? a. frictional d. natural b. structural e. none of the above c. cyclical 71. Which of the following is true regarding prices in an economy? I. An increase in the price level is called inflation. II. The level of prices doesn t matter. III. The rate of change in prices matters. a. I only d. II and III only b. II only e. I, II, and III c. III only 72. If your nominal wage doubles at the same time as prices double, your real wage will a. increase d. double b. decrease e. be impossible to determine c. not change 73. If inflation causes people to frequently convert their dollars into other assets, the economy experiences what type of cost? a. price level d. unit-of-account b. shoe-leather e. monetary c. menu 74. Because dollars are used as the basis for contractis, inflation leads to which type of cost? a. price level d. unit-of-account b. shoe-leather e. monetary c. menu 75. Changing the listed price when inflation leads to a price increase is an example of which type of cost? a. price level d. unit-of-account b. shoe-leather e. monetary c. menu 76. If the consumer price index increases from 80 to 120 from one year to the next, the inflation rate over that time period was a. 20% d. 80% b. 40% e. 120% c. 50% 77. Which of the following is true of the CPI? I. It is the most common measure of the price level. II. It measures the price of a typical market basket of goods. III. It currently uses a base period of a. I only d. I and II only b. II only e. I, II, and III

12 c. III only 78. If government spending exceeds tax revenues, which of the following is necessarily true? There is a I. positive budget balance II. budget deficit III. recession a. I only d. I and II only b. II only e. I, II, and III c. III only 79. The cyclically adjusted budget deficit is an estimate of what the budget balance would be if real GDP were a. greater than potential output d. falling b. equal to nominal GDP e. calculated during a recession c. equal to potential output 80. Contractionary monetary policy attempts to aggregate demand by interest rates. a. decrease ; increasing d. increase ; increasing b. increase ; decreasing e. increase ; maintaing c. decrease ; decreasing 81. Which of the following is a goal of monetary policy? a. zero inflation d. increased potential output b. deflation e. decreased actual real GDP c. price stability 82. When implementing monetary policy, the Federal Reserve attempts to achieve a. an explicit target inflation d. a low, but positive inflation rate b. zero inflation e. 4-5% inflation c. a low rate of deflation 83. A 10% decrease in the money supply will change the aggregate price level in the long run by a. zero d. 20$ b. less than 10% e. more than 20% c. 10% 84. Monetary neutrality means that, in the long run, changes in the money supply a. can not happen d. increase real GDP b. have no effect on the economy e. change real interest rates c. have no real effect on the economy 85. A graph of percentage increases in the money supply and average annual increases in the price level for various countries provides evidence that a. changes in the two variables are exactly d. monetary policy is ineffective equal b. the money supply and aggregate price e. money is neutral in the long run level are unrelated c. money neutrality holds only in wealthy countries 86. The real quantity of money is I. equal to M/P II. the money supply adjusted for inflation III. highe rin the long run when the Fed buys government securities

13 a. I only d. I and II only b. II only e. I, II, and III c. III only 87. The classical model of the price level is most applicable in a. the United States d. recessions b. periods of high inflation e. depressions c. periods of low inflation 88. The long-run Phillips curve is I. the same as the short-run Phillips curve II. vertical III. the short-run phillips curve plus expected inflation a. I only d. I and II only b. II only e. I, II, and III c. III only 89. The short-run Phillips curve shows a relationship between. a. negative ; the aggregate price level and d. positive ; unemployment and aggregate aggregate output output b. positive ; the aggregate price level and e. positive ; unemployment and the aggregate output aggregate price level c. negative ; unemployment and inflation 90. An increase in expected inflation will shift a. the short-run phillips curve downward d. the long-run phillips curve downward b. the short-run phillips curve upward e. neither the short-run nore the long-run phillips curve c. the long-run phillips curve upward 91. Debt deflation is a. the effect of deflation in decreasing aggregate demand b. an idea proposed by Irving Fisher e. all of the above c. a contributing factor in causing the Great Depression d. due to differences in how borrowers/lenders respond to inflation losses/gains 92. Which of the following is a central point of monetarism? a. business cycles are associated with d. the Fed should follow monetary policy fluctuations in money demand rule b. activist monetary policy is the best way to e. all of the above address business cycles c. discretionary monetary policy is effective while discretionary fiscal policy is not 93. The main difference between the classical model of the price level and Keynesian economics is that a. the classical model assumes a vertical d. Keynesian economics assumes a vertical short-run aggregate supply curve long-run aggregate supply curve b. Keynesian economics assumes a vertical e. the classical model assumes aggregate short-run aggregate supply curve demand can not change in the long run c. the classical model assumes an upward sloping long-run aggregate supply curve

14 94. That fluctuations in total factor productivity growth cause the business cycle is the main tenet of which theory a. Kenesian d. real business cycle b. classical e. natural rate c. rational expectations 95. Which of the following is an example of an opinion on which economists have reached a broad consensus? I. the natural rate hypothesis holds true II. discretionary fiscal policy is usually counterproductive III. monetary policy is effective, especially in a liquidity trap a. I only d. I and II only b. II only e. I, II, and III c. III only 96. In the first FYI box of this module (p.357) you learned about supply-side economics. Which of the following is stressed by supply siders? a. Taxes should be increased d. the economy operates on the upward sloping section of the Laffer curve b. Lower taxes will lead to lower tax revenues c. It is important to increase incentives to work, save, and invest e. Supply side views are widely supported by empirical evidence 97. Which of the following is true regarding central bank targets? a. the Fed has an explicit inflation target d. The Fed clearly does not have an implicit inflation target b. All central banks have explicit inflation targets c. No central banks have explicit inflation targets e. Economists are split regarding the need for explicit inflation targets 98. The Fed s main concerns are a. inflation and unemployment d. asset prices and unemployment b. inflation and asset prices e. inflation and the value of the dollar c. inflation, asset prices, and unemployment 99. The clean little secret of macroeconomics is that a. microeconomics is even more contentious than macroeconomics d. macroeconomics has progressed much more than microeconomics in the past 70 years b. debate among macroeconomists has ended e. economists have identified how to prevent future business cycles c. economists havfe reached a significant consensus 100. Which of the following is true regarding growth rates for countries around the world compared to the United States? I. Fifty percent of the worlds people live in countries wtih a lower standard of living than the US in II. The US growth rate is six times the growth rate of the rest of the world. III. China has only just attained the same standard of living the U.S. had in 1908 a. I only d. I and III only b. II only e. I, II, and III

15 c. III only 101. Which of the following is the key statistic used to track economic growth? a. GDP d. median real GDP b. real GDP e. median real GDP per capita c. real GDP per capita 102. According to the Rule of 70, if a country s real GDP per capita grows at a rate of 1% per year, it will take how many years for real GDP per capita to double? a. 3.5 d. 70 b. 20 e. it will never double at that rate c Long-run economic growth depends almost entirely on a. technological change d. rising real GDP per capita b. rising productivity e. population growth c. increased labor force participation 104. Which of the following is a source of increased productivity growth? I. Increased physical capital II. Increased human capital III. technological progress a. I only d. I and II only b. II only e. I, II, and III c. III only 105. The following statement describes which are of the world? This area has experienced growth rates unprecedented in history and now looks like an economically advanced country. a. North America d. East Asia b. Latin America e. Africa c. Europe 106. Which of the following is cited as an important factor preventing long-run economic growth in Africa? a. political instability d. poor health b. lack of property rights e. all of the above c. unfavorable geographic conditions 107. Which of the following statements is true of environmental quality? a. It is typically not affected by government d. most economists believe it is not possible policy to reduce greenhouse gas emissions while b. other things equal, it tends to improve with economic growth c. there is broad scientific consensus that rising levels of carbon dioxide and other gases are raising the planets overall temperature economic growth continues e. most environmental success stories invovle dealing with global, rather than local impacts 108. According to the MIT study discussed in the module, a cap and trade system to reduce greenhouse gas emissions in the United States would lead to a. no significant costs d. a reduction in real GDP per capita of over

16 10% b. significant but not overwhelming costs e. a loss of 5th years worth of of economic growth over the next 40 years. c. a loss of roughly three year s real GDP over the next 40 years 109. Which of the following will shift the production possibilities curve outward? I. an increase in the production of investment goods II. an increase in the production of consumer goods III. technological progress a. I only d. I and III only b. II only e. I, II, and III c. III only 110. In the production possibilities curve (PPC) model, long-run economic growth is shown by a(n) a. outward shift of the PPC d. movement form a point on the PPC to a point below the PPC b. inward shift of the PPC e. movement form a point on the PPC to a point beyond the PPC c. movement form point below the PPC to a point on the PPC 111. The reduction in the value of an asset due to wear and tear is known as a. depreciation d. disinvestment b. negative investment e. net investment c. economic decline 112. Which of the following is listed among the key sources of growth in potential output a. expansionary fiscal policy d. investment in human capital b. expansionary monetary policy e. both a and b c. a rightward shift of the short-run aggregate supply curve 113. What will happen to the money supply and the equilibrium interest rate if the Federal Reserve sells Treasury securities? Money Supply ; Equilibrium Interest Rate a. increase ; increase d. decrease ; increase b. decrease ; decrease e. increase ; decrease c. decrease ; no change 114. A nonprofit institution collects the savings of its members and invests those funds in wide variety of assets in order to provide its members with income after retirement. This describes a a. bank d. mutual fund b. pension fund e. life insurance company c. savings and loan 115. In the United States, the dollar is a. commodity-backed money d. fiat money b. backed by gold and silver e. backed by silver c. commodity money 116. The balance of payments on the current account plus the balance of payments on the financial accont is equal to

17 a. zero d. net capital flows b. one e. the size of the trade deficit c. the trade balance 117. The financial account was previously known as the a. gross national product d. investment account b. capital account e. trade balance c. trade deficit 118. The United States has which of the following exchange rate regimes? a. fixed d. fixed, but managed b. floating e. floating within a target zone c. fixed, but adjusted frequently 119. Monetary policy that reduces the interest rate will do which of the following? a. appreciate the domestic currency d. depreciate the domestic currency b. decrease exports e. prevent inflation c. increase imports 120. Which of the following occurs as a result of the recession in Mexico? I. output in Mexico decreases II. Aggregate demand in the United States decreases III. Output in the United States decreases a. I only d. I and II only b. II only e. I, II, and III c. III only 121. An increase in the number of buyers and a technological advance will cause a. demand to increase and supply to increase d. demand to decrease and supply to decrease b. demand to increase and supply to decrease e. no change in demand and an increase in supply c. demand to decrease and supply to increase 122. Use the information for a hypothetical economy presented in the following table to answer questions 7, 8, and 9. What is the labor force participation rate? a. 70% d. 10% b. 50% e. 5% c. 20%

18 123. Year 1 & Year 2 a. $1,400 & $2,700 d. 1,900 & 2,000 b. 1,900 & 2,700 e. 1,400 & 1,900 c. 1,400 & 2, Which of the following can affect the natural rate of unemployment in an economy over time? a. labor force characteristics such as age and d. government job training programs work experience b. the existence of labor unions e. all of the above c. advances in technologies that help workers find jobs 125. If your wage doubles at the same time as the consumer price index goes from 100 to 300, your real wage a. doubles d. stays the same b. falls e. cannot be determined c. increases 126. Changes in which of the following leads to a shift of the aggregate consumption function? I. expected future disposable income II. aggregate wealth III. current disposable income a. I only d. I and II only b. II only e. I, II, and III c. III only 127. Refer to the graph for following question

19 Which of the following statements is true if this economy is operating at P1 and Y1? I. The level of aggregate output equals potential output II. It is in short-run macroeconomic equilibrium III. It is in the long-run macroeconomic equilibrium a. I only d. II and III b. II only e. I and III c. III only 128. Which of the following fiscal policies is expansionary? Taxes ; Government Spending a. increase by $100 million ; increases by $100 million d. decrease by $100 million ; decrease by $100 million b. decrease by $100 million ; decrease by e. both (a) and (d) $100 million c. increase by $100 million ; decrease by $100 million 129. During a recession in the United States, what happens automatically to tax revenues and government spending? Tax Revenues ; Government Spending a. increase ; increase d. decrease ; increases b. decrease ; decrease e. decrease ; does not change c. increase ; decrease 130. In the long run, changes in the quantity of money affect which of the following? I. real aggregate output II. interest rates III. the aggregate price level a. I only d. I and II only b. II only e. I, II, and III c. III only Short Answer

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29 151.

30 AP Economics - Final Exam Review Semester 1 Answer Section MULTIPLE CHOICE 1. ANS: B PTS: 1 2. ANS: C PTS: 1 3. ANS: A PTS: 1 4. ANS: A PTS: 1 5. ANS: D PTS: 1 6. ANS: E PTS: 1 7. ANS: E PTS: 1 8. ANS: E PTS: 1 9. ANS: D PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: A PTS: ANS: D PTS: ANS: C PTS: ANS: E PTS: ANS: B PTS: ANS: D PTS: ANS: B PTS: ANS: D PTS: ANS: B PTS: ANS: B PTS: ANS: C PTS: ANS: E PTS: ANS: B PTS: ANS: E PTS: ANS: A PTS: ANS: A PTS: ANS: D PTS: ANS: D PTS: ANS: B PTS: ANS: E PTS: ANS: A PTS: ANS: C PTS: ANS: A PTS: ANS: E PTS: ANS: E PTS: ANS: B PTS: ANS: D PTS: ANS: E PTS: 1

31 42. ANS: C PTS: ANS: B PTS: ANS: C PTS: ANS: D PTS: ANS: A PTS: ANS: A PTS: ANS: A PTS: ANS: A PTS: ANS: D PTS: ANS: E PTS: ANS: A PTS: ANS: C PTS: ANS: D PTS: ANS: D PTS: ANS: D PTS: ANS: B PTS: ANS: E PTS: ANS: B PTS: ANS: A PTS: ANS: C PTS: ANS: C PTS: ANS: A PTS: ANS: B PTS: ANS: D PTS: ANS: A PTS: ANS: B PTS: ANS: B PTS: ANS: C PTS: ANS: A PTS: ANS: E PTS: ANS: C PTS: ANS: B PTS: ANS: D PTS: ANS: C PTS: ANS: C PTS: ANS: E PTS: ANS: B PTS: ANS: C PTS: ANS: A PTS: ANS: C PTS: ANS: D PTS: ANS: C PTS: ANS: C PTS: ANS: E PTS: ANS: D PTS: ANS: B PTS: ANS: B PTS: 1

32 89. ANS: B PTS: ANS: B PTS: ANS: E PTS: ANS: D PTS: ANS: A PTS: ANS: D PTS: ANS: D PTS: ANS: D PTS: ANS: B PTS: ANS: A PTS: ANS: D PTS: ANS: D PTS: ANS: C PTS: ANS: D PTS: ANS: B PTS: ANS: E PTS: ANS: D PTS: ANS: E PTS: ANS: C PTS: ANS: B PTS: ANS: D PTS: ANS: A PTS: ANS: A PTS: ANS: D PTS: ANS: D PTS: ANS: B PTS: ANS: D PTS: ANS: A PTS: ANS: B PTS: ANS: B PTS: ANS: D PTS: ANS: E PTS: ANS: A PTS: ANS: B PTS: ANS: C PTS: ANS: E PTS: ANS: B PTS: ANS: D PTS: ANS: B PTS: ANS: D PTS: ANS: D PTS: ANS: C PTS: 1 SHORT ANSWER 131. ANS:

33

34 PTS: ANS: PTS: 1

35 133. ANS: PTS: ANS:

36 PTS: ANS:

37 PTS: ANS:

38 PTS: ANS: PTS: ANS:

39 PTS: ANS:

40 PTS: ANS:

41 PTS: ANS: PTS: 1

42 142. ANS: PTS: ANS: PTS: 1

43 144. ANS: PTS: ANS: PTS: ANS:

44 PTS: ANS:

45 PTS: ANS:

46 PTS: ANS: PTS: ANS: PTS: ANS:

47 PTS: 1