AP Macroeconomics
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AP Macroeconomics › AP Macroeconomics
Each of the following is included in the gross domestic product EXCEPT .
Transfer payments
Consumption
Government Expenditures
Net Exports
Explanation
To calculate the GDP, we add consumption, investment, government expenditures, and net exports.
Transfer payments, such as social security, welfare, and unemployment checks, on the other hand, are not included in the calculation of the GDP.
Which of the following is not a part of M1?
Money in a personal savings account
Paper money
Traveler's checks
A check that has been written but not yet deposited
All of these are a part of M1.
Explanation
Money in a personal savings account would not be considered a part of M1. The reason for this is that money in a savings account is considered to be lacking in liquidity - as a result, money in a savings account is considered to belong to M2.
If the income level in a given economy increases by $100 and spending increases by $80, the marginal propensity to save in that economy is equal to which of the following?
0.2
0.8
0.75
0.5
Explanation
The marginal propensity to consume is calcuated by the change in consumption over the change in income. In this example, the marginal propensity to consume is 80/100 = 0.8. However, the problem asks for the marginal propensity to save and not the marginal propensity to consume.
In any economy, whatever money is not used for consumption is considered savings. Therefore, to find the marginal propensity to save, subtract the marginal propensity to consume from 1. Thus, 1 - 0.8 = 0.2. The marginal propensity to consume in this problem would be 0.2.
Each of the following is included in the gross domestic product EXCEPT .
Transfer payments
Consumption
Government Expenditures
Net Exports
Explanation
To calculate the GDP, we add consumption, investment, government expenditures, and net exports.
Transfer payments, such as social security, welfare, and unemployment checks, on the other hand, are not included in the calculation of the GDP.
The long-run aggregate supply curve is likely to shift to the right when which of the following occurs?
An increase in worker productivity due to technological innovation
A decrease in interest rates due to action by the Federal Reserve
An increase in government spending due to government stimulus
A higher than estimated multipler effect
Explanation
An increase in worker productivity will result in the supply curve shifting, because it results in the economy having more potential output.
Which of the following is not a part of M1?
Money in a personal savings account
Paper money
Traveler's checks
A check that has been written but not yet deposited
All of these are a part of M1.
Explanation
Money in a personal savings account would not be considered a part of M1. The reason for this is that money in a savings account is considered to be lacking in liquidity - as a result, money in a savings account is considered to belong to M2.
The long-run aggregate supply curve is likely to shift to the right when which of the following occurs?
An increase in worker productivity due to technological innovation
A decrease in interest rates due to action by the Federal Reserve
An increase in government spending due to government stimulus
A higher than estimated multipler effect
Explanation
An increase in worker productivity will result in the supply curve shifting, because it results in the economy having more potential output.
Each of the following is included in the gross domestic product EXCEPT .
Transfer payments
Consumption
Government Expenditures
Net Exports
Explanation
To calculate the GDP, we add consumption, investment, government expenditures, and net exports.
Transfer payments, such as social security, welfare, and unemployment checks, on the other hand, are not included in the calculation of the GDP.
The long-run aggregate supply curve is likely to shift to the right when which of the following occurs?
An increase in worker productivity due to technological innovation
A decrease in interest rates due to action by the Federal Reserve
An increase in government spending due to government stimulus
A higher than estimated multipler effect
Explanation
An increase in worker productivity will result in the supply curve shifting, because it results in the economy having more potential output.
Which of the following explain why a production possibilities frontier would be bowed outward?
Increasing opportunity costs of producing more goods
Constant opportunity costs of producing more goods
Decreasing opportunity costs of producing more goods
Increasing and then decreasing opportunity costs of producing more goods
None of the other answers
Explanation
The bowed-outward shape of the PPF represents increasing opportunity costs of production because it indicates that it is becoming more and more costly to produce the good on the x-axis. This higher cost is represented by the increasingly steep slope of the PPF. The slope of the PPF corresponds to the costs of producing an extra unit of X. The steeper the slope, the steeper the cost.