Unit 5: Long-Run Consequences of Stabilization Policies

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Question 7 · Unit 5: Long-Run Consequences of Stabilization Policies · standard

In a closed-economy loanable-funds model, the government finances a larger deficit through increased borrowing. Private saving supply is unchanged and upward sloping; private investment demand is unchanged and downward sloping. Assume no monetary-policy offset. Which outcome illustrates crowding out?A. Real interest rates fall and private investment rises.B. Real interest rates and private investment both fall.C. Real interest rates remain fixed and private investment must rise.D. Real interest rates rise and private investment falls.

Question 8 · Unit 5: Long-Run Consequences of Stabilization Policies · foundation

An economy improves workforce skills and acquires additional productive capital. Assume these changes raise potential output, with other determinants constant. What happens to its long-run aggregate supply curve?A. It shifts left because all investment reduces capacity.B. It shifts right because productive capacity increases.C. It stays fixed because only the price level determines potential output.D. It becomes the aggregate demand curve.

Question 17 · Unit 5: Long-Run Consequences of Stabilization Policies · foundation

An economy's real GDP rises from $1,000 billion to $1,080 billion while its population rises from 50 million to 54 million. What is the percentage change in real GDP per capita?A. 0%B. 8%C. -8%D. 16%

Question 18 · Unit 5: Long-Run Consequences of Stabilization Policies · standard

In a long-run quantity-theory model, the money supply doubles. Assume velocity is constant, real output stays at unchanged potential output, and prices fully adjust. What happens to the price level and nominal GDP?A. Price level unchanged; nominal GDP doublesB. Price level doubles; nominal GDP doublesC. Price level doubles; nominal GDP unchangedD. Price level and nominal GDP both quadruple

AP Macroeconomics: Unit 5: Long-Run Consequences of Stabilization Policies