AP AP Economics & Government 2 — Questions and Answers
Question 1: In AP U.S. Government, what is the purpose of the system of checks and balances?
- To allow each branch to monitor the federal budget
- To prevent any one branch of government from gaining too much power (Correct answer)
- To ensure laws are enforced equally
- To balance the federal budget
Correct answer: To prevent any one branch of government from gaining too much power
Checks and balances give each branch of government powers to limit the others, preventing any single branch from becoming too powerful.
Question 2: What is fiscal policy?
- Government use of taxation and spending to influence the economy (Correct answer)
- Central bank control of interest rates
- International trade agreements
- Regulation of private businesses
Correct answer: Government use of taxation and spending to influence the economy
Fiscal policy refers to government decisions about taxation and public spending used to influence macroeconomic conditions.
Question 3: In AP Government, what does the term 'federalism' describe?
- A system where only the national government has power
- A division of power between national and state governments (Correct answer)
- A system with no central government
- The process of amending the Constitution
Correct answer: A division of power between national and state governments
Federalism divides governmental authority between a national (federal) government and state governments, each with defined powers.
Question 4: What is a market externality in economics?
- A cost or benefit affecting parties not involved in a transaction (Correct answer)
- The price set by the government
- A tax on foreign goods
- The profit earned by a monopoly
Correct answer: A cost or benefit affecting parties not involved in a transaction
An externality is an unintended side effect of an economic activity that affects third parties not directly involved in the transaction.
Question 5: Which economic concept describes a situation where two nations can both benefit by each specializing in what they produce most efficiently?
- Absolute advantage
- Comparative advantage (Correct answer)
- Economies of scale
- Diminishing returns
Correct answer: Comparative advantage
Comparative advantage holds that nations benefit from trade by specializing in goods they can produce at the lowest opportunity cost.
Question 6: What is inflation?
- A decrease in the money supply
- A general rise in the price level of goods and services over time (Correct answer)
- A rise in unemployment
- A decrease in consumer spending
Correct answer: A general rise in the price level of goods and services over time
Inflation is the rate at which the general price level of goods and services rises, reducing the purchasing power of money.
AP AP Economics & Government 2
In AP U.S.
Government, what is the purpose of the system of checks and balances?