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Pre AP Economics Final

Name__________________
Date___________________

1. What do you need to know to calculate the GDP


deflator? (1 point)
a. Nominal GDP only
b. Nominal GDP and real GDP
c. Real GDP only
d. Neither nominal GDP nor real GDP
2. If the CPI in period 2 is 140 and the CPI in period 5 is 220, what is the inflation rate from
period 2 to period 5 given that the CPI's are based on the same base year? Show your
work. (1 point)

3. What is the rate of inflation from period 1 to period 3, using the GDP deflator method,
given that the nominal GDP in period 3 is $38,900 and real GDP in period 3 using period
1 as the base year is $40, 820? Show your work. (1 point)

4. What does aggregate demand represent? (1 point)


a. The total demand for goods and services in an economy
b. The partial demand for goods and services in an economy
c. The total demand for goods in an economy
d. The partial demand for goods in an economy
e.
5. If Congress decreases government spending, (1 point)
a. The aggregate demand curve will shift to the left
b. The aggregate demand curve will shift to the right
c. The aggregate supply curve will shift to the left
d. The aggregate supply curve will shift to the right
e. No change
6. A relaxation of immigration laws will result in, (1 point)
a. The aggregate demand curve will shift to the left

b.
c.
d.
e.

The aggregate demand curve will shift to the right


The aggregate supply curve will shift to the left
The aggregate supply curve will shift to the right
No change

7. A decrease in personal taxes will result in, (1 point)


a. The aggregate demand curve will shift to the left
b. The aggregate demand curve will shift to the right
c. The aggregate supply curve will shift to the left
d. The aggregate supply curve will shift to the right
e. No change
8. An increase in the price of an imported natural resource will result in, (1 point)
a. The aggregate demand curve will shift to the left
b. The aggregate demand curve will shift to the right
c. The aggregate supply curve will shift to the left
d. The aggregate supply curve will shift to the right
e. No change
9. Name 3 things the Fed could do to in order to increase the money supply (1 point)

10. Name 3 things the Fed could do in order to decrease the money supply (1 point)

11. Define the 3 functions of money and give an example of each (2 points)

12. Fiscal policy refers to (1 point)


a. Increases in taxes to fight recessions
b. Decreases in taxes to fight inflations
c. Changes in government spending to fight recessions or inflations
d. Federal deficits

e. Federal surpluses
13. Name 2 things the government can do to remedy a recession (2 points)

14. Name 2 things the government can do to remedy an inflation (2 points)

15. Explain what the graph represents and why it is occurring.


(2 points)

16. Which of the following is not included in M1? (1 point)


a. Coins
b. Paper money
c. Travelers checks
d. Credit cards
e. Transaction accounts
17. If the reserve requirement is 12%, the money multiplier is.
Show your work. (1 point)

18. Fiat money (1 point)


a. Is not backed by any precious commodity
b. Can be exchanged for gold
c. Is backed by gold, but cannot be exchanged for it
d. Is not legal tender

e. Can be backed by gold or silver


19. Assume the reserve requirement is 15%. If the Fed sells $25 million in an open market
operation, what will happen to the money supply? Show your work. (1 point)

20. Assume the reserve requirement is 20%. If the Fed buys $40 million in an open market
operation, what will happen to the money supply? Show your work. (1 point)

21. Economic growth is (1 point)


a. Measured by the number of business in the economy
b. Shared equally among the population
c. Critical in determining the standard of living in a nation
d. Measured by the amount of government spending
e. Measure by the unemployment rate
22. Which of the following will promote economic growth? (1 point)
a. An increase in the amount of capital
b. Lower wages
c. Price controls that keep prices low
d. Increased government spending
e. A decrease in the money supply
23. The government can promote economic growth by (1 point)
a. Setting minimum wage
b. Regulating industry
c. Taxing firms that waste resources
d. Job training programs
e. Restricting imports
24. Using the PPF, illustrate the effects of the depletion of a resource in the economy. Use
guns and butter as your example. (1 point)

25. If a nations exports exceed its imports, we call this a (1 point)


a. Trade benefit
b. Trade surplus
c. Trade deficit
d. Net exports
26. If a nations imports exceed its imports, we call this a (1 point)
a. Trade benefit
b. Trade surplus
c. Trade deficit
d. Net exports
27. Describe the 4 arguments for trade restrictions (4 points)

28. Exchange rates are determined by (1 point)


a. Aggregate demand and supply
b. The government
c. Supply and demand
d. The top exporters and importers of a country
e. The IMF

29. What are the 3 types of trade restrictions? Describe each one. (3 points)

30. Using a graph, show the effect on equilibrium price after an import tariff has put in place.
You may use any good as an example. (2 points)