<p>lol, well maybe it’ll be free response then. Is it true that if you correctly draw and label a curve/graph that’s wrong like we do AD/AS instead of supply and demand, we still get some credit?</p>
<p>Which of the following is most likely to occur if the Fed engages in open market operations to reduce inflation???</p>
<p>Answer: A decrease in reserves in banking system</p>
<p>Why is it not “a decrease in government deficit” since the Fed is selling bonds.</p>
<p>Since the Fed is selling bonds, there will be a decrease in money supply, and therefore result in a decrease in reserves in the banks because everyone will be using that money to buy the bonds (monetary policy).
A decrease in government deficit is only when the government increases taxes or decreases government spending (fiscal policy).</p>
<p>we should start a chatroom</p>
<p>If Fed government reduces its budget deficit when economy is close to full employement, which of the following will most likely result?</p>
<p>Answer: interest rates will decrease.</p>
<p>Why is it not “international value of dollar will increase” since the price level falls, interest rates rise, and the value appreciates…</p>
<p>
I’m pretty sure that the answer you gave is wrong. That is, if “income velocity of money” just means the velocity of money.</p>
<p>Equation is MV = PQ where
M = money supply
V = velocity of money
P = price level
Q = quantity of goods (nominal gdp)</p>
<p>If M goes down and Q is constant, that means that either V must rise, or P must decrease. So the answer is indeterminant, though most likely the answer is that if M goes down and Q is constant, that means that P went down. But two overriding reasons why I’m skeptical of it being a change in V, rather than the quite plausible change in P:</p>
<p>1) Velocity is always assumed constant by monetarists (creators of the MV=PQ theory and equation), like, it never changes.</p>
<p>2) The equation can basically be rewritten, in AD-AS terms, as Aggregate Demand=Real GDP. So a decrease in the money supply is a decrease in aggregate demand, which is a decrease in real gdp and a decrease in the Price level. It works; the decrease in the money supply caused the price level to go down.</p>
<p>apmacro on aim</p>
<p>^Well MV=PQ can be rewritten as M*V=nominal GDP. When the money supply increases with a constant nGDP then V has to decrease not increase.</p>
<p>uh…no it can’t…</p>
<p>Q = GDP
PQ = Real GDP</p>
<p>I don’t see how it could possibly be rewritten MV=Q, especially when Price Level is such a fluctuating variable</p>
<p>M might represent currency plus deposits in checking and savings accounts held by the public, Q real output with P the corresponding price level, and P*Q the nominal (money) value of output - From wikipedia</p>
<p>[Quantity</a> theory of money - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Quantity_theory_of_money]Quantity”>Quantity theory of money - Wikipedia)</p>
<p>My textbook says that a point outside the PPC can be reached through international trade, however the McGrawhill website says “Specialization and international trade allow for consumption bundles outside the curve, but not production.” </p>
<p>But aren’t production costs affected by international trade of resources?</p>
<p>ugh, my teacher was suckish. she’s good i guess but she spent to much time making calendars, assigning readings, yelling at the class for not reading, and then teaching the easy concepts everyone knew. and then she totally forgot what she did the last class, and did th SAME THING ALL OVER AGAIN, despite us telling her that she already did it. And then the dumb kids (most of our class) would tell her she didn’t because they didn’t care about the AP test, and so she believed them (grr) and the worst part is that I wouldve just self studied during class during her stint of deja vu, but she constantly calls on you, putting on the spot, and thus, I had to pay attention to her repeat lesson. And honestly, no one has time to self study an entire course like economics, especially if you happen to be wasting time in the class itself.</p>
<p>grrrr. she said i can score a 5. with her teaching, chya right. shes my gov teacher to. self studied for that, so i’l do well.</p>
<p>MACROECONOMICS?!?!?!?!</p>
<p>WHY so serioussssssssssssssssss?</p>
<p>graph of SERIOUS DEMAND vs SERIOUS SUPPLY…o_O</p>
<p>@devoted: I am pretty sure you can reach production outside the curve through trade. That is what we learned at least so just remember international trade increases efficiency and opens greater resources and such. (Basically that its good)</p>
<p>EDIT:Well not all cases, but more often than not it’s provides benefit to all of society while it may harm certain industries or individuals.</p>
<p>Hmm, vasudevank, I guess you’re right, Q=Real GDP, PQ=Nominal GDP, guess i got it backwards</p>
<p>Where can I find some examples of actual AP Macro questions? Thanks.</p>
<p>[AP:</a> Macroeconomics](<a href=“AP Macroeconomics Exam – AP Students | College Board”>AP Macroeconomics Exam – AP Students | College Board)</p>
<p>It has past FRQ’s and if you go to the course description there is a small sample of multiple choice questions.</p>
<p>Can anyone summarize the different schools of macroeconomic thought?</p>
<p>Mainstream, monetarist, RET, supply-side.</p>
<p>What do they view as main cause of instability, what do they use to correct instability, anything else that has been traditionally been on the tests?</p>
<p>Well I know that monetarists believe that monetary policy is much more effective than fiscal policy. They believe that monetary policy is a great way of dealing with inflation or recession, even if there is cyclical asymmetry.</p>
<p>Also monetarists believe that changing fiscal policy will cause crowding out and lower investments…</p>