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AP Macro Unit 5: Long-Run Consequences of Stabilization Policies

Quiz by Molly Malin

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23 questions
Show answers
  • Q1

    If a government wanted to achieve a reduction in inflation, it should:

    B. increase taxes and buy government bonds

    C. increase taxes and sell government bonds

    A. decrease taxes and sell government bonds

    D. decrease taxes and buy government bonds

    30s
  • Q2

    During a severe recession, which combination of government policies would be most effective in correcting economic problems?

    C. increase taxes and decrease the money supply

    A. increase taxes and increase the money supply

    B. decrease taxes and decrease the money supply

    D. decrease taxes and increase the money supply

    30s
  • Q3

    If aggregate demand increased, which of the following would occur?

    B. movement along the long-run Phillips curve

    D. a rightward shift of the long-run Phillips curve

    A. movement along the short-run Phillips curve

    C. a leftward shift of the long-run Phillips curve

    30s
  • Q4

    The long-run Phillips curve . . .

    B. is horizontal at full employment

    D. has an inverse relationship with the aggregate demand curve

    C. is vertical at full employment

    A. is shifted left only when capital stock increases

    30s
  • Q5

    The short-run Phillips curve tells us that lower inflation rates are associated with . . .

    C. frictional unemployment

    B. lower unemployment rates

    D. higher unemployment rates

    A. the natural rate of unemployment

    30s
  • Q6

    Hyperinflation can be caused by:

    C. increased investment

    B. exponential growth of the money supply

    A. expanding aggregate demand

    D. sustainable economic growth

    30s
  • Q7

    If an expansion of the money supply creates an increase in aggregate demand, in the long run, the economy would see:

    A. a decrease in nominal output and price level

    B. an increase in nominal output and a decrease in price level

    D. a decrease in nominal output and an increase in price level

    C. an increase in nominal output and price level

    30s
  • Q8

    The quantity theory of money tells us that if the economy is operating at full employment output, and there is a substantial increase in the money supply, there would also be an increase in:

    D. investment

    C. unemployment

    A. price level

    B. nominal interest rates

    30s
  • Q9

    A budget deficit exists when . . .

    B. tax revenue exceeds government spending

    A. government spending ceases to occur

    D. government spending exceeds tax revenue

    C. tax revenue is magnified by the spending multiplier

    30s
  • Q10

    We can think of the US national debt as:

    D. money the US government owed to holders of US securities

    B. money the US government spends on healthcare and city planning

    A. money the US government keeps in required reserves

    C. money the US government pays to recipients of transfer payments

    30s
  • Q11

    Crowding out is when:

    C. the money supply is pushed to its maximum supply levels

    B. there is a decrease in consumption and/or private investment due to an increase in government spending

    D. businesses refuse to pay for transfer payments

    A. unemployment of older workers decreases because they are replaced by younger workers

    30s
  • Q12

    Which of the following would have to increase to result in an increase in a country's long-run growth rate of real per-capita income?

    D. deficit spending

    B. citizens' education level

    A. income taxes

    C. population

    30s
  • Q13

    The crowding-out scenario would usually occur with:

    D. government deficit spending

    B. stagflation

    C. a decrease in the availability of substitutes

    A. an increase in per-capita income

    30s
  • Q14

    Reducing demand-pull inflation in the short run will likely result in:

    C. investment spending

    D. unemployment

    A. inflation

    B. GDP per-capita

    30s
  • Q15

    An increase in which of the following would most likely cause an increase in worker productivity in the long run?

    D. deficit spending

    A. unemployment

    B. capital stock

    C. interest rate

    30s

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