AP MACROECONOMICS Scoring Guide

1. Which of the following is a cause of hyperinflation?

(A) Rapid growth of real gross domestic product
(B) Rapid growth of the money supply
(C) Unanticipated decrease in aggregate demand
(D) Unanticipated increase in aggregate supply
(E) Unanticipated rise in real interest rates

2. An increase in which of the following is most likely to increase the long-run growth rate of an economy's real per
capita income?
(A) Population growth
(B) The proportion of gross domestic product consumed
(C) The educational attainment of the population
(D) The supply of money in circulation
(E) Personal income taxes

3. Increases in human capital can be achieved by which of the following?

(A) Building more factories
(B) Reducing immigration of skilled workers
(C) Improving the quality of job-training programs
(D) Increasing the physical capital per worker
(E) Increasing government spending on infrastructure

4. Which of the following will happen if a country’s government reduces business taxes?
(A) The short-run Phillips curve will shift to the right.
(B) The short-run aggregate supply curve will shift to the right.
(C) The long-run aggregate supply curve will shift to the left.
(D) The aggregate demand curve will shift to the left.
(E) The demand curve for loanable funds will shift to the left.

5. Policymakers concerned about fostering long-run growth in an economy that is currently in a recession would most
likely recommend which of the following combinations of monetary and fiscal policy actions?

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Monetary Policy Fiscal Policy

(A)

Sell bonds Reduce taxes

Monetary Policy Fiscal Policy

(B)

Sell bonds Raise taxes

Monetary Policy Fiscal Policy

(C)

No change Raise taxes

Monetary Policy Fiscal Policy

(D)

Buy bonds Reduce spending

Monetary Policy Fiscal Policy

(E)

Buy bonds No change

6. If real output is $9,000, and the price level is 2, and the velocity of money is 3, then the money supply is
(A) $3,000
(B) $4,500
(C) $6,000
(D) $18,000
(E) $27,000

7. If nominal gross domestic product in a country is $1,600 and the money supply is $400, what is the velocity of
money?

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(A) 400
(B) 10
(C) 4
(D) 2
(E) 0.5

8. Which of the following will most likely cause an increase in real output in the long run?
(A) A decrease in the labor force participation rate
(B) An increase in the velocity of money
(C) An open-market sale of government bonds by the central bank
(D) An increase in immigration from abroad
(E) An increase in the price level

9. Country A’s growth rate in per capita real gross domestic product (GDP) has been consistently higher than that of
Country B. Which of the following factors can account for these differences in the per capita GDP growth rates?
(A) Country B’s government gives more investment tax credits.
(B) The labor force of Country A is becoming more skilled than the labor force of Country B.
(C) The natural rate of unemployment is higher in Country A.
(D) Country A’s central bank is less effective at controlling the inflation rate.
Although the populations of Countries A and B are the same, Country A has twice as many people who
(E)
are retired.

10. Economic growth is best defined as

(A) a reduction in the infant mortality rate
(B) a decrease in the unemployment rate
(C) an increase in the labor force participation rate
(D) a short-run increase in gross domestic product without inflation
(E) a sustained increase in real gross domestic product per capita

11. Human capital refers to which of the following?

(A) The skills and knowledge that enable a worker to be productive

(B) Machinery used by workers in production
(C) The accumulated financial wealth of households
(D) Physical capital owned by households rather than businesses
(E) Activities that lead to the substitution of physical capital for labor

12. Which of the following best describes human capital?

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(A) The number of workers in the labor force

(B) The physical capital used by workers
(C) The financial assets owned by workers
(D) The training and education of workers
(E) The spending by business for worker recruitment

13. Which of the following causes economic growth?

(A) A decrease in the money supply
(B) A decrease in the price level
(C) An increase in nominal output
(D) An increase in consumption spending
(E) An increase in labor productivity

14. If the velocity of money is constant and the aggregate supply curve is vertical, a doubling of the money supply
would most likely result in a doubling of
(A) the unemployment rate
(B) real output
(C) the price level
(D) nominal interest rates
(E) real interest rates

15. All of the following may result in increases in real gross domestic product in the long run EXCEPT
(A) technical progress
(B) investment in human capital
(C) discovery of new natural resources
(D) decrease in corporate taxes
(E) decrease in factor productivity

16. Economic growth is shown by a rightward shift in

(A) the aggregate demand curve
(B) the long-run Phillips curve
(C) the production possibilities curve
(D) the short-run aggregate supply curve
(E) the money supply curve

17. If wages and prices are perfectly flexible and inflation is correctly anticipated, then an expansionary monetary
policy will affect the real output and price level in which of the following ways?

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Real Output Price Level

(A)

Increase Increase

Real Output Price Level

(B)

Increase Decrease

Real Output Price Level

(C)

Increase Not change

Real Output Price Level

(D)

Not change Increase

Real Output Price Level

(E)

Not change Not change

18. In the long run, an increase in aggregate demand due to an expansion in the money supply will increase
(A) price level and real output
(B) nominal output and real output
(C) nominal output but not the price level
(D) nominal output and the price level
(E) real output but not the price level

19. For a given population and a given quantity of labor employed, what will happen to aggregate production and
income per capita if there is an increase in a nation’s capital stock?

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(A) Aggregate production will increase, and income per capita will decrease.
(B) Aggregate production will increase, and income per capita will increase.
(C) Aggregate production will decrease, and income per capita will be indeterminate.
(D) Aggregate production will decrease, and income per capita will increase.
(E) Aggregate production will decrease, and income per capita will be indeterminate.

20. If the government offers a tax credit to businesses, what will be the most likely effects of this action?
(A) An increase in consumption spending, an increase in aggregate demand, and an increase in real output
(B) An increase in consumption spending, a decrease in aggregate demand, and a decrease in real output
(C) An increase in investment spending, an increase in the capital stock, and an increase in real output
(D) A decrease in investment spending, a decrease in the capital stock, and an increase in real output
(E) A decrease in government spending, a decrease in aggregate demand, and a decrease in real output

21. The economy is currently operating at long-run equilibrium. The central bank engages in expansionary monetary
policy. How will the central bank’s action affect the economy’s real output and the price level in the short run?
(A) Real output will decrease, and the price level will increase.
(B) Real output will decrease, and the price level will not change.
(C) Real output will not change, and the price level will not change.
(D) Real output will increase, and the price level will increase.
(E) Real output will not change, and the price level will decrease.

22. In the long run, a fully anticipated expansion of the money supply will
(A) increase both the price level and real gross domestic product
(B) increase the price level and decrease the real wage
(C) increase both the price level and the real wage
(D) increase both the nominal gross domestic product and the price level
(E) increase both the nominal and real gross domestic product

23. Changes in which of the following factors would affect the growth of an economy?

I. Quantity and quality of human and natural resources

II. Amount of capital goods available

III. Technology

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(A) I only
(B) I and II only
(C) I and III only
(D) II and III only
(E) I, II, and III

24.
2015 Real Gross Domestic Product
Country Population

X 490,000 70
Y 200,000 20

Which conclusion can be supported by the data in the table above?

(A) Country X’s real growth rate is 7 percent.
(B) Country X’s real per capita is $4,000.
(C) Country X’s economy grew at a faster rate than Country Y’s economy did.
(D) Income is more equally distributed in Country X than in Country Y.
(E) Country Y’s real per capita is greater than Country X’s real per capita.

25. If subsidies for research and development on new technologies lead to an increase in the average productivity of
labor, what will most likely happen to real per capita and long-run aggregate supply for a given
population size?
(A) Real per capita will decrease, and will increase.
(B) Real per capita will decrease, and will decrease.
(C) Real per capita will increase, and will increase.
(D) Real per capita will increase, and will decrease.
(E) Real per capita will decrease, and will not change.

26. Government investment in human capital is likely to shift

the aggregate demand curve to the right in the short run and the aggregate supply curve to the right in
(A)
the long run
the aggregate demand curve to the left in the short run and the aggregate supply curve to the left in the
(B)
long run
(C) the aggregate demand curve to the right in the short run and the long-run Phillips curve to the right
(D) the aggregate demand curve to the left in the long run
(E) the aggregate demand curve to the left in the short run and the long-run Phillips curve to the left

27. In the aggregate demand-aggregate supply model, economic growth can best be represented by a

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(A) leftward shift of the long-run aggregate supply curve

(B) rightward shift of the long-run aggregate supply curve
(C) rightward shift of the short-run aggregate supply curve
(D) rightward shift of the aggregate demand curve
(E) leftward shift of the aggregate demand curve

28. Which of the following will most likely contribute to long-run economic growth?
(A) High levels of household spending
(B) High levels of government spending
(C) High levels of investment in plant and equipment
(D) Low levels of immigration to the country
(E) Low levels of foreign investment in the country

29. Hyperinflation is typically caused by

(A) high tax rates that discourage work effort
(B) continuous expansion of the money supply to finance government budget deficits
(C) trade surpluses that are caused by strong protectionist policies
(D) bad harvests that lead to widespread shortages
(E) a large decline in corporate profits that leads to a decrease in production

30. In the long run, a decrease in the money supply will affect the price level and the level of output in which of the
following ways?

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Price Level Output

(A)

Increase Increase

Price Level Output

(B)

Increase No change

Price Level Output

(C)

Decrease Increase

Price Level Output

(D)

Decrease Decrease

Price Level Output

(E)

Decrease No change

31. If a country’s production possibilities curve is shifting outward, which of the following must be true?
(A) There is cyclical unemployment.
(B) The price level is increasing.
(C) The aggregate demand curve is shifting to the right.
(D) The long-run Phillips curve is shifting to the right.
(E) The long-run aggregate supply curve is shifting to the right.

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32. Increases in government subsidies to encourage investment in research and development will affect aggregate
demand (AD) and long-run aggregate supply (LRAS) in which of the following ways?

AD LRAS
(A)

Increase Increase

AD LRAS
(B)

Increase Decrease

AD LRAS
(C)

Increase No change

AD LRAS
(D)

Decrease Increase

AD LRAS
(E)

Decrease No change

33. An increase in which of the following is most likely to cause an improvement in the standard of living over time?
(A) Size of the population
(B) Size of the labor force
(C) Number of banks
(D) Level of taxation
(E) Productivity of labor

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34. Which of the following best illustrates an improvement in a country’s standard of living?

(A) An increase in real per capita gross domestic product

(B) An increase in nominal per capita gross domestic product
(C) Price stability
(D) A balanced budget
(E) An increase in the consumer price index

35. An increase in the money supply will affect the price level and real gross domestic product (GDP) in which of the
following ways in the long run?

Price Level Real GDP

(A)

Decrease No change

Price Level Real GDP

(B)

Increase Decrease

Price Level Real GDP

(C)

Increase No change

Price Level Real GDP

(D)

Decrease Increase

Price Level Real GDP

(E)

No change No change

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36. Which of the following combinations of changes in income taxes, real interest rate, and investment spending is most
likely to promote economic growth?

Income taxes Interest Rate Investment

(A)

Increase Increase Increase

Income taxes Interest Rate Investment

(B)

Increase Increase Decrease

Income taxes Interest Rate Investment

(C)

Increase Decrease Decrease

Income taxes Interest Rate Investment

(D)

Decrease Decrease Decrease

Income taxes Interest Rate Investment

(E)

Decrease Decrease Increase

37. An increase in which of the following would be most likely to increase long-run growth?
(A) Pension payments
(B) Unemployment compensations
(C) Subsidies to businesses for purchases of capital goods
(D) Tariffs on imported capital goods
(E) Tariffs on imported oil

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38. An increase in which of the following is most likely to increase the long-run growth rate of an economy’s real per
capita income?
(A) Population growth
(B) The proportion of gross domestic product consumed
(C) The educational attainment of the population
(D) The supply of money in circulation
(E) Personal income taxes

39. An increase in which of the following will most likely increase productivity?
(A) Population growth rate
(B) Aggregate demand
(C) Capital stock
(D) Consumption
(E) Employment

40. An increase in which of the following will most likely promote economic growth?
(A) Taxes on investment
(B) The price level
(C) Human capital
(D) Consumption of nondurable goods
(E) Interest rates

41. In an economy in which all prices, including wages, are completely flexible, an increase in labor productivity will
result in which of the following changes in output and real wages?

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Output Real Wages

(A)

Increase Increase

Output Real Wages

(B)

Increase Decrease

Output Real Wages

(C)

Decrease No change

Output Real Wages

(D)

Decrease Increase

Output Real Wages

(E)

Decrease Decrease

42. Increases in the real per capita income of a country are most closely associated with increases in which of the
following?
(A) The labor force
(B) The price level
(C) The money supply
(D) Productivity
(E) Tax rates

43. An increase in which of the following is most likely to lead to long-run economic growth?

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(A) The value of the domestic currency

(B) Transfer payments
(C) The money supply
(D) Labor productivity
(E) The minimum wage

44. An increase in net investment leads to faster economic growth because capital per worker and output per worker
will change in which of the following ways?

Capital per Worker Output per Worker

(A)

Increase Increase

Capital per Worker Output per Worker

(B)

Increase Decrease

Capital per Worker Output per Worker

(C)

No change Increase

Capital per Worker Output per Worker

(D)

Decrease Increase

Capital per Worker Output per Worker

(E)

Decrease Decrease

45. Assuming no change in the nominal wage and a significant increase in human capital, the output per worker will

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(A) increase and the real wage will decrease

(B) increase and the real wage will increase
(C) decrease and the real wage will decrease
(D) decrease and the real wage will increase
(E) increase and the real wage will remain unchanged

46. The economy is currently in long-run equilibrium. If the central bank increases the money supply, in the long run
the price level will

(A) increase, and output will remain at the full-employment level

(B) increase, and output will be above the full-employment level
(C) increase, and output will be below the full-employment level
(D) remain unchanged, and output will remain at the full-employment level
(E) remain unchanged, and output will be above the full-employment level

47. Economic growth refers to an increase in which of the following?

(A) Government spending
(B) Consumption spending
(C) Nominal gross domestic product
(D) Potential real gross domestic product
(E) Household wealth

48. A country’s infrastructure refers to its

(A) natural resources
(B) private financial institutions
(C) proportion of population with postsecondary education
(D) public capital goods such as highways
(E) internal, as opposed to external, debt

49. An increase in which of the following is most likely to increase long-run economic growth?
(A) Interest rate
(B) Income tax rate
(C) Marginal propensity to consume
(D) Investment in human capital
(E) Money demand

50. An increase in which of the following would LEAST likely increase labor productivity?

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(A) Physical capital

(B) Human capital
(C) Technological improvements
(D) Educational achievement
(E) The labor force

51. Which of the following is LEAST likely to promote economic growth?

(A) Investment in tools and machines
(B) Investment in training of labor
(C) Increase in consumption of nondurable goods
(D) Tax credit for technology improvement
(E) Increase in the labor force participation rate

52. Which of the following best illustrates rising productivity?

(A) An expansion of the labor force
(B) An increase in the value of financial capital
(C) A decrease in the amount of physical capital per worker
(D) A decrease in the amount of labor needed to produce a unit of output
(E) An increase in the amount of resources required to produce a certain level of output

53. An increase in the money supply would lead to which of the following in the long run?

(A) An increase in the aggregate price level

(B) A decrease in real gross domestic product
(C) A decrease in nominal gross domestic product
(D) A decrease in the real interest rate
(E) An increase in the unemployment rate

54. A leftward shift of the long-run aggregate supply curve is most likely consistent with an improvement in a country’s
standard of living if
(A) prices fall
(B) depreciation increases
(C) population decreases
(D) taxes decrease
(E) imports decline

55. If the money stock decreases but nominal gross domestic product remains constant, which of the following has
occurred?

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(A) Income velocity of money has increased.

(B) Income velocity of money has decreased.
(C) Price level has increased.
(D) Price level has decreased.
(E) Real output has decreased.

56. Which of the following is true when the velocity of money falls?

(A) An increase in the money supply will have less effect on nominal gross national product.
(B) A change in the money supply will affect output only.
(C) The Federal Reserve will decrease the money supply.
(D) Output will be greater for a given money supply.
(E) The public will increase its holdings of assets other than money.

57. An increase in which of the following leads to an increase in output per worker?
(A) Income tax rates
(B) Real interest rate
(C) The labor-force participation rate
(D) The stock of physical capital per worker
(E) The number of workers per unit of capital

58. Which of the following policy actions will promote long-run economic growth?
(A) Decreasing the investment tax credit
(B) Decreasing the money supply
(C) Increasing unemployment compensation
(D) Increasing investment in human capital
(E) Increasing tax rates on savings income

59. An economy’s full-employment real output will decrease when

(A) price level increases
(B) price level decreases
(C) technological change increases labor productivity
(D) workers choose shorter weeks to enjoy more leisure time
(E) the stock of physical capital is growing at a constant rate

60. Which of the following will most likely promote long-run economic growth?

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(A) Increasing taxes on interest earned from savings

(B) Increasing consumption spending on food and entertainment
(C) Increasing funding for research and development
(D) Decreasing funding for law enforcement and judicial systems
(E) Rapidly harvesting timber and mineral resources

61. An increase in the money supply will result in an increase in

(A) output in the short run and in the long run
(B) inflation in the short run and an increase in output in the long run
(C) inflation in the short run and no change in output in the long run
(D) output in the long run but not in the short run
(E) output in the long run and no change in inflation in the short run

62. Which of the following would best explain a decline in potential gross domestic product?

(A) Negative net investment

(B) The discovery of vast new oil deposits
(C) A lower price level
(D) A decrease in the infant mortality rate
(E) A decrease in wages and profits

63. An increase in which of the following is consistent with an outward shift of the production possibilities curve?
(A) Transfer payments
(B) Aggregate demand
(C) Long-run aggregate supply
(D) Income tax rates
(E) Exports

64. Which of the following policy changes is most likely to promote economic growth?
(A) An increase in tariffs on imported consumer goods
(B) A decrease in investment tax credits for businesses
(C) An increase in taxes on foreign financial inflows
(D) A decrease in tuition fees at public colleges
(E) An increase in tax rates on savings

65. If an economy experiences an improvement in technology, what will happen to its production possibilities curve
and its long-run aggregate supply curve?

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(A) Both curves shift inward.

(B) Both curves shift outward.
(C) The shifts inward, and the curve stays the same.
(D) The shifts outward, and the curve shifts inward.
(E) The stays the same, and the curve shifts outward.

66. The shifting of a country’s production possibilities curve to the right will most likely cause
(A) net exports to decline
(B) inflation to increase
(C) the aggregate demand curve to shift to the left
(D) the long-run aggregate supply curve to shift to the left
(E) the long-run aggregate supply curve to shift to the right

67. If the velocity of money is stable, the quantity theory of money predicts that an increase in the money supply will
lead to a proportional

(A) increase in the nominal output

(B) decrease in the price level
(C) decrease in the nominal interest rate
(D) decrease in the real interest rate
(E) decrease in the unemployment rate

68. An economy is in long-run equilibrium. If the central bank reduces the growth rate of the money supply, which of
the following must occur in the long run?
(A) The rate of inflation will decrease.
(B) The unemployment rate will decrease.
(C) The long-run aggregate supply curve will shift to the left.
(D) The production possibilities curve will shift to the left.
(E) The long-run Phillips curve will shift to the left.

69. According to the quantity theory of money, if a percent increase in the money supply leads to a percent increase
in nominal , which of the following is true?
(A) Real output increases by percent.
(B) The price level decreases by percent.
(C) The velocity of money does not change.
(D) The nominal interest rate does not change.
(E) The government budget deficit increases by percent.

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70. If the economy is operating at full employment and there is a substantial increase in the money supply, the quantity
theory of money predicts an increase in
(A) the velocity of money
(B) real output
(C) interest rates
(D) unemployment
(E) the price level

71. Assume that a nation’s real gross domestic product (GDP) grows at a higher rate than its population over a given
period of time. It can be concluded that
(A) the population will grow at a faster rate in the future
(B) the price level has decreased
(C) real GDP per capita has increased
(D) real GDP will rise at a slower rate in the future
(E) real GDP will rise at a faster rate in the future

72. Country X’s economy is currently at full employment. Assume Country X’s central bank increases the money
supply by 2 percent over a prolonged period. According to the quantity theory of money, which of the following
will happen in the long run for a given velocity of money?
(A) Unemployment will increase by 2%.
(B) Real output will increase by 2%.
(C) Nominal output will increase by 2%.
(D) The price level will decrease by 2%.
(E) The natural rate of unemployment will decrease by 2%.

73. If an economy is currently in a recessionary gap, which of the following changes would result in an increase in real
in the short run and a decrease in the price level in the long run?
(A) The government begins running a budget surplus.
(B) There is an increase in real interest rates.
(C) The government increases income tax rates.
(D) There is an increase in the prices of the economy’s productive resources.
(E) There is an increase in the productivity of the economy’s resources.

74. According to the quantity theory of money, the quantity of money is related

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(A) negatively to the nominal interest rate

(B) negatively to the price level
(C) positively to the velocity of money
(D) positively to the unemployment rate
(E) positively to the nominal gross domestic product

75. The long-run aggregate supply curve is likely to shift to the right when there is
(A) an increase in the cost of productive resources
(B) an increase in productivity
(C) an increase in the federal budget deficit
(D) a decrease in the money supply
(E) a decrease in the labor force

76.

Given the aggregate demand and aggregate supply curves shown above, if policy makers want to increase real
output without causing inflation, they can pursue a policy that will
(A) increase aggregate demand and decrease aggregate supply by equal amounts
(B) decrease aggregate demand only
(C) decrease aggregate supply only
(D) increase aggregate demand only
(E) increase aggregate supply only

77. Which of the following policy changes will most likely shift the long-run aggregate supply curve to the right?

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(A) An increase in income taxes

(B) An increase in the money supply
(C) An increase in the required reserve ratio
(D) An increase in the government budget deficit financed by borrowing
(E) An increase in government spending on public education

78. An increase in which of the following is most likely to increase employment and promote long-run economic
growth?

(A) Government spending on education

(B) Transfer payments
(C) Reserve requirements
(D) Income tax rates
(E) Unemployment compensation

79. Increased spending on which of the following contributes most to long-term economic growth?
(A) Social security and other transfer payments
(B) New automobiles and homes
(C) Education and infrastructure
(D) Imported consumer goods
(E) Interest payments on national debt

80. Supply-side economists are most likely to favor which of the following short-run policies?
(A) Increasing government spending on social welfare
(B) Increasing government spending to help promote the country’s business abroad
(C) Cutting marginal tax rates to promote savings, investment, and work
Financing government spending on infrastructure by increasing sales tax rather than increasing income
(D)
tax
(E) Increasing corporate profit tax rates

81. If marginal business tax rates are decreased, how will aggregate supply and employment change in the long run?

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Aggregate Supply Employment

(A)

Increase Increase

Aggregate Supply Employment

(B)

Increase Decrease

Aggregate Supply Employment

(C)

Decrease Increase

Aggregate Supply Employment

(D)

Decrease Decrease

Aggregate Supply Employment

(E)

Not change Increase

82. Economic growth is best measured by a sustained increase in which of the following?

(A) Per capita real gross domestic product

(B) Government budget deficits
(C) Unemployment in unskilled labor markets
(D) Production of public goods
(E) Nominal gross domestic product

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

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(A) An increase in government transfer payments

(B) An increase in income taxes for middle-class households
(C) An increase in tax credits for business spending on research and development
(D) An increase in unemployment compensation
(E) An increase in financial capital outflow

84. Which of the following is LEAST likely to affect the long-run growth of an economy?
(A) Investment in physical capital
(B) Research and development
(C) Education and training
(D) A specific tax on luxury goods
(E) Stable and efficient institutions

85. Technological progress promotes long-run economic growth primarily by

(A) increasing the supply of financial capital
(B) increasing labor productivity
(C) decreasing national savings
(D) decreasing budget deficit
(E) decreasing nominal wages

86. Which of the following is a supply-side fiscal policy that could stimulate economic growth?
(A) A decrease in income tax credits
(B) A decrease in marginal income tax rates
(C) A decrease in the sales taxes imposed on household goods
(D) An increase in the discount rate
(E) An increase in the money supply

87. In the long run, government subsidies that promote the development of technology with widespread business
applications will have which of the following effects?
(A) A negative supply shock and lower price level
(B) A negative supply shock and lower economic growth rate
(C) A positive supply shock and lower price level
(D) A positive supply shock and lower economic growth rate
(E) A lower aggregate demand and lower price level

88. An advance in technology will cause the

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(A) aggregate demand curve to shift to the right

(B) aggregate demand curve to shift to the left
(C) short-run aggregate supply curve to shift to the left
(D) long-run aggregate supply curve to shift to the left
(E) long-run aggregate supply curve to shift to the right

89. Which of the following would most likely stimulate economic growth?
(A) Decreased savings
(B) Decreased wages
(C) Increased transfer payments
(D) Increased personal income taxes
(E) Technological progress

90. Which of the following is a best example of an investment in human capital?

(A) Decreasing the wage rate
(B) Training workers
(C) Hiring new workers
(D) Buying new equipment
(E) Updating technology

91. Given a constant velocity of money, in the short run a 5 percent increase in money supply will translate to a 5
percent increase in
(A) government budget deficit
(B) real gross domestic product
(C) nominal gross domestic product
(D) real interest rates
(E) nominal interest rates

92. According to the quantity theory of money, if the money supply is $40 billion, real output is $100 billion, and the
price level is 1.2, what is the velocity of money?
(A) 1.2
(B) 2.5
(C) 3.0
(D) 3.5
(E) 4.8

93. The long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT

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(A) capital stock

(B) labor supply
(C) real interest rate
(D) rate of technological change
(E) spending on education and training

94. Which of the following would cause both the aggregate demand and aggregate supply curves to shift to the right?

(A) A decrease in corporate income taxes

(B) A decrease in government spending
(C) A decrease in natural resource prices
(D) A decrease in the stock market prices
(E) An increase in the international value of the domestic currency

95. A change in which of the following can affect the long-run economic growth of a country?

I. The quantity and quality of a country’s labor force

II. Technology

III. Spending on capital goods

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II, and III

96. Which of the following will most likely lead to a decrease in inflationary expectations?
(A) A decrease in the marginal propensity to save
(B) A decrease in imports
(C) A decrease in the money supply
(D) An increase in the government budget deficit
(E) An increase in the prices of raw materials

97. An increase in which of the following is most likely to promote economic growth?

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(A) Consumption spending

(B) Investment tax credits
(C) The natural rate of unemployment
(D) The trade deficit
(E) Real interest rates

98. Which of the following would directly increase the capital stock of an economy?
(A) An individual purchases shares of corporate stock.
(B) An individual purchases high-risk corporate bonds.
(C) A business firm expands its production facilities.
(D) A bank uses cash reserves to purchase short-and long-term government securities.
(E) The government implements a spending program to cover prescription drugs for Medicare recipients.

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