Yep it’s C, I got it when I reread it. I’m afraid I’m going to run out of time…ugh I’m really nervous. More so for the MC than the FRQ (really hoping #1 is one of those using the labeling on the graph type of questions and that we have a game theory question). Macro…it’s the opposite.</p>
@Theundertaken isn’t it D because in the long run monopolistically competitive firms don’t make any profit and they always produce at MR=MC.</p>
Can someone explain credit/capital account balances stuff?</p>
I put D as well. Answer was C.</p>
MR=MC @ current output for all firms that are maximizing profit/minimizing losses. LRATC is tangent to D @ P on the vertical line through MC=MR to current output. Some questions like to emphasize that the segment of ATC @ this point is downward sloping and that all monopolistically competitive firms experience economies of scale in the long run with their normal profit = to 0.</p>
When in doubt all questions are “MC=MR” in micro ;-)</p>
Good Luck</p>
it’s D</p>
graph on page 138 (5 steps)</p>
C wouldn’t make sense though…ATC isnt even involved</p>
Hey guys,
Can someone explain #1, C)iii, and Part D please!
I’m self studying this subject and I’m having trouble…</p>
Question: <a href=“Supporting Students from Day One to Exam Day – AP Central | College Board”>Supporting Students from Day One to Exam Day – AP Central | College Board;
Answer: <a href=“Supporting Students from Day One to Exam Day – AP Central | College Board”>Supporting Students from Day One to Exam Day – AP Central | College Board;
Help would really be appreciated…</p>
This is a very straight forward externality question presented in a simplified way in an effort to make the idea of the question more clear. (the success of the effort for clarity can be debated). Nevertheless the socially optimal output position/decision will occur @ MSB=MSC. With the socially optimal output @ Q2 and the MPC=MR profit maximizing point @ Q1 the output decision results in an output below the allocatively efficient/socially optimal output. In order to induce the firm to produce at Q2 they must be subsidized the difference between MPC and MR @ that output: 7-4 =3.</p>
The MPC = D point over allocates resources to the production of the good and a per unit tax of 12-7 = 5 would result in the optimal output position.</p>
I hope this helps!</p>
Could someone please PM me some practice tests for Macro? All I have is '95 and I would appreciate something that is more recent. Thanks!</p>
Alright macro time.
An appreciation of the US dollar on the foreign exchange market could be caused by a decrease in which of the following?
a) US interest rates
b) US CPI
c) Demand for dollar by US residents
d) Exports from US
e) Tariff on goods imported into the US</p>
I’m not too familiar with foreign exchange markets.</p>
This is very simplified, but:
The only things that can ever lead to appreciation of a currency are increase in r in the country or decrease PL in the country.</p>
These phenomona could be stated in clever ways such as decrease r in the other country which is an increase r in the country we are looking at relative to… or increase PL in the other country which is a decrease PL in the country we are looking at relative to…</p>
The answer to this question is B. A decrease in CPI in the country we are looking at will result in relatively less expensive goods. Foreigners will increase the S of their currency(increase D for our currency) to exchange for our currency in order to buy these relatively less expensive goods.</p>
Whoops. Read the problem wrong. :x</p>
I’d assume CPI. If CPI goes down then inflation goes down, prices go down, and foreigners can buy more us goods.</p>
Its not a, because low interest rates decrease demand for the dollar. Its not c because decreased demand lowers the exchange rate. Its not d because less exports means less demand for a dollar, and its not e because lower tariffs mean more imports, meaning a higher supply of the dollar, lowering the exchange rate.</p>
If US dollar appreciates on the foreign exchange market, it means that world investors are spending more on US products because of something that caused demand or the dollar to originally depreciate in value. Therefore, US CPI, which measures inflation, could explain this. If US CPI had increased, then there would be some degree of inflation in the US, depreciating the dollar and appreciating the US dollar on the foreign exchange model.</p>
If the federal government reduces its budget deficit when the economy is close to full employment, which of the following will most likely result?
(A) Inflation will increase.
(B) Tax revenues will increase.
(C) Interest rates will decrease.
(D) Unemployment will decrease.
(E) The international value of the dollar will increase.</p>
The answer is C. Maybe I am just a total ■■■■■■ and I am overlooking something, but I’m not sure what’s going on in this question.</p>
An unintended consequence of all fiscal policy (according to AP although debated in the field) is that a movement of AD eventually results in a movement of interest rates in the same direction. This is the basis for “crowding out” private expenditure after increases in public spending and lower interest rates after deficit reducing discretionary fiscal policies such as down G and up T. The fiscal to interest rate link is assumed in multiple choice, but must be explained in FRQs</p>
Thanks makes sense. What about this one.
Suppose that autonomous consumption is $400 and that the marginal propensity to consume is 0.8. If disposable income increases by $1,200, consumption spending will increase by
a)$1600
b)$1360
c)$1200
d)$960
e)$400
What is autonomous consumption?..and how do you even approach this?</p>
1200 x (1/(1-.8))= 960</p>
Marginal Propensity to consume means, how much of the next dollar will you spend. Marginal Propensity to Save is the exact opposite. So if your income increases by $1,200, you simply multiple that much by .8, and that’s how much of your income increase you will spend.</p>
1200 x .8********= 960</p>
Tenebrous Night, Are you sure the answer is C?
I got E. The federal government can reduce it’s budget deficit in two ways. 1.) Borrow money or 2.) Issue more bonds. All of which increase the interest rate.
When the interest rate is high, the US bond market becomes more lucrative and there will be an increase in US bonds. So the demand for US dollars increases and the US dollar will appreciate.</p>
Autonomous consumption(CA) is consumption independent of income. If you used a Keynesian Cross/Aggregate expenditure model it is the starting position of the AE curve. If you learned through algebra it is the y intercept in the consumption function: </p>
C = CA + b(y-T) : Consumption= Autonomous Consumption + MPC(income-Taxes)</p>
MPC is the fraction of the next/marginal income that is allocated towards consumption. It is also the slope of the consumption function. MPC+MPS =1 because all income must be either consumed or saved. The simple spending formula is 1/1-mpc= 1/mps.</p>
This type of question usually involves finding the multiplier and immediately multiplying something. This time it is simply to multiply the mpc x the marginal income resulting in .8x1200= 960</p>