Question 1

Which of the following best describes the difference between normative and positive statements in economics?

Accepted Answer

Positive statements can be tested and validated, while normative statements are value judgments.

Question 2

Suppose the price of coffee increases. According to the law of demand, what will most likely happen to the quantity demanded of coffee?

Accepted Answer

The quantity demanded will decrease.

Question 3

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology

Question 4

If the opportunity cost of producing one more car is 2 computers, what is the opportunity cost of producing one more computer?

Accepted Answer

$$0.5$$ cars

Question 5

Which of the following best describes the Production Possibilities Curve (PPC)?

Accepted Answer

It shows the maximum combinations of two goods that can be produced given available resources and technology.

Question 6

If the government increases spending without raising taxes, what is the most likely short-run effect on aggregate demand?

Accepted Answer

Aggregate demand will increase.

Question 7

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate is searching for his first job.

Question 8

If the marginal propensity to consume (MPC) is $$0.8$$, what is the value of the spending multiplier?

Accepted Answer

$$5$$

Question 9

Which of the following would cause the short-run aggregate supply (SRAS) curve to shift to the left?

Accepted Answer

An increase in business taxes

Question 10

If the Federal Reserve wants to decrease the money supply, which of the following actions would it most likely take?

Accepted Answer

Sell government securities in the open market

Question 11

Which of the following best explains why money is considered a store of value?

Accepted Answer

It allows people to transfer purchasing power into the future.

Question 12

If the U.S. dollar depreciates relative to the euro, what is the most likely effect on U.S. exports to Europe?

Accepted Answer

U.S. exports to Europe will increase.

Question 13

Which of the following is a likely consequence of a government running a persistent budget deficit?

Accepted Answer

An increase in the national debt

Question 14

If the real interest rate increases, what is the most likely effect on investment spending?

Accepted Answer

Investment spending will decrease.

Question 15

Which of the following best describes the crowding-out effect?

Accepted Answer

Government spending leads to higher interest rates, reducing private investment.

Question 16

If the reserve requirement is $$10\%$$ and a bank receives a new deposit of $$\1$$,000$, what is the maximum amount the bank can lend out?

Accepted Answer

$$\900$

Question 17

Which of the following would most likely cause a country's currency to appreciate in the foreign exchange market?

Accepted Answer

An increase in foreign investment in the country

Question 18

If the marginal propensity to save (MPS) is $$0.2$$, what is the value of the spending multiplier?

Accepted Answer

$$5$$

Question 19

Which of the following is an example of expansionary fiscal policy?

Accepted Answer

The government increases spending and/or decreases taxes.

Question 20

If the economy is experiencing high inflation, which monetary policy action is most appropriate?

Accepted Answer

The central bank sells government securities.

Comprehensive AP Macroeconomics Study Guide

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