AP Macroeconomics
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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.
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.
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 explanations best represent the concept of opportunity costs?
It is the cost of the next best alternative that could be pursued with the resources used to produce a good
It is the sum of all explicit and implicit costs in all of the alternatives foregone to produce the good
It includes the explicit costs included in the production of a good, which include all the payments made to the factors of production.
It is the sum of all the implicit costs represented in all the alternative opportunities foregone in the production of a good
None of the other options
Explanation
The definition of the opportunity cost is the value of the highest valued alternative that is foregone in the production of a good. It is not the sum of all the alternative options, but rather only the most highly valued one.
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.
Which of the following explanations best represent the concept of opportunity costs?
It is the cost of the next best alternative that could be pursued with the resources used to produce a good
It is the sum of all explicit and implicit costs in all of the alternatives foregone to produce the good
It includes the explicit costs included in the production of a good, which include all the payments made to the factors of production.
It is the sum of all the implicit costs represented in all the alternative opportunities foregone in the production of a good
None of the other options
Explanation
The definition of the opportunity cost is the value of the highest valued alternative that is foregone in the production of a good. It is not the sum of all the alternative options, but rather only the most highly valued one.
According to Keynesian Economics, which of the following would weaken the multiplier effect?
An increase in interest rates
An increase in government spending
High velocity of money
Selling government bonds
Explanation
The correct answer is that an increase in interest rates would weaken the multiplier effect. The reason is that an increase in interest rates would make it more attractive for consumers to save money, so as a result, there would be less of a propensity to consume.
According to Keynesian Economics, which of the following would weaken the multiplier effect?
An increase in interest rates
An increase in government spending
High velocity of money
Selling government bonds
Explanation
The correct answer is that an increase in interest rates would weaken the multiplier effect. The reason is that an increase in interest rates would make it more attractive for consumers to save money, so as a result, there would be less of a propensity to consume.