AP Macroeconomics Practice Test 5

Test Information

Question 12 questions

Time 14 minutes

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1. Classical economists generally believe that

I. wages fluctuate quickly

II. Say's law does not hold

III. input and output prices will stay in line with each other

IV. the government should not worry about maintaining aggregate demand at an adequate level

2. When a bank's balance sheet shows that the bank has excess reserves

3. The real interest rate is

4. The formula for the money multiplier is

5. Which of the following would shift the aggregate demand curve to the right?

6. Which of the following is true when expansionary fiscal and expansionary monetary (easy money) policy are used at the same time?

7. Suppose an economy is in long-run equilibrium at the full-employment level of output. If government spending then increases,

8. Suppose that Tiger Woods buys a golf ball in England for $1 and the marginal propensity to consume in England is 0.75. What is the total increase in England's real GDP resulting from Mr. Woods' purchase?

9. If prices are expected to rise more slowly in the future,

10. A decrease in real investment stemming from higher interest rates due to government purchases is most commonly called


According to the theory of rational expectations, an increase in government spending to increase AD as illustrated in the figure will be met with which of the following?

12. A use of easy money (expansionary) policy by the Fed could result in which of the following?