2012 Macro Multiple Choice (Balance of Payments)

2012 Macro Multiple Choice (Balance of Payments)

Cheat Sheet here.

Answer - (B)

Surplus = Exports > Imports

2012 Macro Multiple Choice (PPC, LRAS, Productivity, Growth)

2012 Macro Multiple Choice 

(PPC, LRAS, Productivity, Growth)

Answer - (E)

Answer - (E)

(A) Physical Capital - capital formation would increase labor productivity

(B) Human Capital - smarter/more skilled humans would increase labor productivity

(C) Technology - would increase labor productivity

(D) Educational Achievement - smarter/more skilled humans would increase labor productivity

(E) Labor Force -  is the least likely to increase productivity

2012 Macro Multiple Choice (Fiscal & Monetary Combo)

2012 Macro Multiple Choice (Fiscal & Monetary Combo)

Answer - (A)

First - you must know that fiscal = Taxes & Government spending

monetary = OMO, discount rate, reserve requirements

Second - Fiscal and Monetary policies - expansionary and contractionary

Third - inflation is the price level

So, a reduction in inflation (PL) is a contractional fiscal and monetary policy

Fiscal - Increase taxes (contractional) - AD decreases PL falls

Monetary - Sell Bonds (contractional) - MS decreases, interest rates rise, investment falls, PL falls

 Answer - (D)

Understand that demand-pull inflation is an increase in AD pushes the PL up.

Reducing Demand pull inflation, means lowering AD thus the PL

The fiscal policy to reduce Demand Pull inflation = Government spending decreases and taxes increase

If this Fiscal contractionary policy occurs
(A) GDP will decrease
(B) Labor force participation rate will decrease
(C) the PL price level will decrease
(D) Unemployment will increase
(E) Wage levels will fall

Answer - (C)

2012 Macro Multiple Choice (Reserve Requirements)

2012 Macro Multiple Choice (Reserve Requirements)

Cheat Sheet here.

Answer - (D)

Understand that excess reserves can be loaned out.

Understand the difference between required reserves and excess reserves.

Understand that both sides must equal.

Answer - (B)

$100 - 10%(RRR) = 90 x 10(1/.1) = $900

2012 Macro Multiple Choice (MPC/MPS)

2012 Macro Multiple Choice (MPC/MPS)

Cheat Sheet here

Answer - (E)

In AP econ you can choose to do two things with your money, spend it (MPC), or save it (MPS).

Answer - (D)

The multiplier is 1/1-.75 = 1/.25 = 4 x 2m = 8m change 

Answer - (B)

Tricky Bastards!!!

Ok, so the point is to know that the MPC is about how much is spent from an extra dollar of income.

The extra dollar is a percentage spent of an increase or decrease, specifically the change in income.

Here the change in income is from an income of $40,000 to $50,000

This is a $10,000 change in income

&

$10,000 x .8 = 8,000