Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

2. A change in which of the following will cause the aggregate 2. A change in which of the following will cause the aggregate demand curve to shift?demand curve to shift?

A.A.Energy pricesEnergy prices

B.B.Productivity ratesProductivity rates

C.C.Consumer wealthConsumer wealth

D.D.Prices of inputsPrices of inputs

E.E.Prices of consumer goodsPrices of consumer goods

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

3. The short-run aggregate supply curve will shift to the right 3. The short-run aggregate supply curve will shift to the right whenwhen

A.A.Energy prices increaseEnergy prices increase

B.B.Government regulation increasesGovernment regulation increases

C.C.Prices of inputs decreasePrices of inputs decrease

D.D.Investment spending decreasesInvestment spending decreases

E.E.Productivity rates decreaseProductivity rates decrease

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

24. A severe, sustained increase in oil prices would most likely 24. A severe, sustained increase in oil prices would most likely cause short-run and long-run aggregate supply curves and the cause short-run and long-run aggregate supply curves and the production possibilities curve to change in which of the following production possibilities curve to change in which of the following ways?ways?

Short-Run Aggregate Short-Run Aggregate Supply CurveSupply Curve

Long-Run Aggregate Long-Run Aggregate Supply CurveSupply Curve

Production Production Possibilities CurvePossibilities Curve

A.A. DecreaseDecrease No changeNo change Shift outwardShift outwardB.B. DecreaseDecrease DecreaseDecrease Shift outwardShift outwardC.C. DecreaseDecrease DecreaseDecrease Shift inwardShift inwardD.D. IncreaseIncrease No changeNo change No changeNo changeE.E. IncreaseIncrease IncreaseIncrease Shift inwardShift inward

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

25. A decrease in lump sum personal income taxes will most likely 25. A decrease in lump sum personal income taxes will most likely result in an increase in real GDP because which of the following result in an increase in real GDP because which of the following occurs?occurs?

I.I.Government spending decreases to maintain a balanced budgetGovernment spending decreases to maintain a balanced budgetII.II.Consumption spending increases because disposable personal Consumption spending increases because disposable personal income increasesincome increasesIII.III.Investment spending decreases because disposable personal Investment spending decreases because disposable personal income increasesincome increases

A.A.I onlyI onlyB.B.II onlyII onlyC.C.III onlyIII onlyD.D.I and III onlyI and III onlyE.E.I, II and IIII, II and III

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

1.1. In the 1960’s many newspaper reporters were accustomed to In the 1960’s many newspaper reporters were accustomed to reporting a decrease in the unemployment rate when the overall reporting a decrease in the unemployment rate when the overall price level increased. However, in the 1970’s,when increases in the price level increased. However, in the 1970’s,when increases in the overall price level were accompanied by increases, not decreases, in overall price level were accompanied by increases, not decreases, in the unemployment rate, some reporters went so far as to declare the unemployment rate, some reporters went so far as to declare macroeconomics “bankrupt” and unable to explain this “mystery”.macroeconomics “bankrupt” and unable to explain this “mystery”.

Using short run aggregate demand and aggregate supply analysis, Using short run aggregate demand and aggregate supply analysis, explain the “mystery” of why the increases in the overall price level explain the “mystery” of why the increases in the overall price level during the 1960’s might have been accompanied by decreases in the during the 1960’s might have been accompanied by decreases in the unemployment rate and the increases in the overall price level unemployment rate and the increases in the overall price level during the 1970’s might have been accompanied by increases in the during the 1970’s might have been accompanied by increases in the unemployment rate.unemployment rate.

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

2. The U.S. Stock market declined dramatically from 2000 to 2003.2. The U.S. Stock market declined dramatically from 2000 to 2003.

A.A.What did this decline mean?What did this decline mean?

B.B.What were the possible effects of this decline on the U.S. What were the possible effects of this decline on the U.S. economy’s output, prices and employment?economy’s output, prices and employment?

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

5. Recently, an economist was asked if the Great Depression could 5. Recently, an economist was asked if the Great Depression could occur again. The reply was, “It is possible, but we have many more occur again. The reply was, “It is possible, but we have many more automatic stabilizers today than we did in 1929.” Describe three automatic stabilizers today than we did in 1929.” Describe three automatic stabilizers and explain how they might prevent a automatic stabilizers and explain how they might prevent a depression.depression.

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

4. Assume that political problems restrict the supply of oil in 4. Assume that political problems restrict the supply of oil in international markets. Consequently, increased production costs international markets. Consequently, increased production costs result in the following economic conditions in the United States:result in the following economic conditions in the United States:

•The unemployment rate is 8 percent and risingThe unemployment rate is 8 percent and rising•The CPI is rising 9 percent annually and acceleratingThe CPI is rising 9 percent annually and accelerating•The annual rate of growth of real GDP is – 1.5 percentThe annual rate of growth of real GDP is – 1.5 percent

A. Identify and describe the major macroeconomic problems in A. Identify and describe the major macroeconomic problems in the economy. Using correctly labeled aggregate demand and the economy. Using correctly labeled aggregate demand and aggregate supply graphs, show the condition of the economy.aggregate supply graphs, show the condition of the economy.

Long

Mr. Weiss

APE/Honors Economics – Test Study Questions – Macro – APE/Honors Economics – Test Study Questions – Macro – Unit 3

B. With a federal budget deficit of nearly $350 billion, fiscal authorities are B. With a federal budget deficit of nearly $350 billion, fiscal authorities are considering the following policy actions to address the existing economic considering the following policy actions to address the existing economic problems:problems:

Policy 1: Increase government expendituresPolicy 1: Increase government expendituresPolicy 2: Increase personal income taxesPolicy 2: Increase personal income taxesPolicy 3: Decrease business taxes and regulationsPolicy 3: Decrease business taxes and regulations

Describe the effect of each of the policies on the economy, and Describe the effect of each of the policies on the economy, and demonstrate each on an individual aggregate demand and aggregate demonstrate each on an individual aggregate demand and aggregate supply graph. Be sure to include each of the following in your supply graph. Be sure to include each of the following in your description:description:

i. Outputi. Outputii. Employmentii. Employmentiii. The price leveliii. The price level