AP Macroeconomics Unit 5: Long-Run Consequences of Stabilization Policies Practice Exam

1. Based on the graph, which of the following is true about the economy?

2. If policymakers take no action to address the situation at point A, which of the following will occur in the long run?

3. Which of the following policy actions could NOT cause a movement from point A towards the long-run Phillips curve along the existing short-run Phillips curve?

4. Which of the following would cause the shift in the demand for loanable funds from D1 to D2?

5. The change shown in the graph will most likely lead to which of the following?

6. What is the most likely long-run consequence of the change depicted in the graph?

7. According to the quantity theory of money, if the money supply is 500 billion dollars, the velocity of money is 4, and real GDP is 1,000 billion dollars, what is the price level?

8. Assume the velocity of money is constant and the economy is operating at full employment. If the central bank doubles the money supply, which of the following will happen in the long run according to the quantity theory of money?

9. Which of the following statements best distinguishes between the government budget deficit and the national debt?

10. An outward shift of a country's production possibilities curve (PPC) is analogous to which of the following changes in the aggregate demand-aggregate supply model?

11. Which of the following is an example of a supply-side fiscal policy?

12. A decrease in aggregate demand will cause which of the following in the short run?

13. The long-run Phillips curve would shift to the right if there were an increase in which of the following?

14. Suppose a country's economy is in a recession. The government increases spending to stimulate the economy, and at the same time, the central bank buys bonds on the open market. What is the likely effect on real GDP and the nominal interest rate?

15. The phenomenon of "crowding out" refers to the adverse effect of increased government borrowing that leads to

16. Which of the following is most likely to promote long-run economic growth?

17. In the long run, sustained inflation is primarily caused by

18. Which of the following best describes the relationship between a country’s national debt and the burden it places on the economy?

19. A country's real GDP was 2,000 billion dollars in Year 1 and its population was 100 million. In Year 2, its real GDP was 2,205 billion dollars and its population was 105 million. What was the growth rate of real GDP per capita between Year 1 and Year 2?

20. If the government implements a policy that successfully reduces structural unemployment, how will this affect the long-run Phillips curve (LRPC) and the production possibilities curve (PPC)?