From the 2005 AP Macroeconomics test:</p>
<ol>
<li>Federal budget deficits occur when:
A: more money is being spent on entitlement programs than has been allocated
B: the interanl revenue service spends more than it collects in taxes in a given year
C: the federal government spends more than it collects in taxes in a given year
D: high levels of unemployment use up tax collections
E: interest payments on the national debt increase from one year to the next
(Correct answer: not C, but D) </p></li>
<li>The classical economists argued that involuntary unemployment would be eliminated by:
A: increasing government spending to increase aggregate demand
B: increasing money supply to stimulate investment spending
C: self-correcting market forces stemming from flexible prices and wages
D: maintaining the growth of the money supply at a constant rate
E: decreasing corporate income taxes to encourage investment
(Correct answer: not C, but A)</p></li>
<li>Which of the following can be considered a leakage from the circular flow of economic activity?
A: Investment
B: Government expenditures
C: Consumption
D: Exports
E: Saving
(Correct answer: not E, but B)</p></li>
</ol>
Any explanation appreciated.</p>