ap exam

Question 1

circular flow

Answer 1

households provide land, labor and capital and buy goods and services
businesses buy land, labor, and capital and provide goods and services
government buys goods, services, and resources and provide public goods to households and businesses

Question 2

unexpected inflation helps who and hurts who

Answer 2

helps borrowers bc they pay back fewer real dollars
hurts banks bc they are paid back fewer real dollars

Question 3

MV=PY

Answer 3

M= mones
\y supply
V= velocity of money
P= price level
Y = real GDP

Question 4

MV+PY

Answer 4

nominal gdp

Question 5

expansionary monetary policy (scarce reserves)

Answer 5

OMO –> buy bonds
Discount Rate –> decrease
Reserve requirement –> decrease

Question 6

contractionary monetary policy (scarce reserves)

Answer 6

OMO –> sell bonds
Discount Rate –> increase
Reserve Requirement –> increase