Applied Macroeconomics Exam Review
Course Introduction
Applied Macroeconomics explores the practical applications of macroeconomic theories and models to real-world economic issues and policymaking. The course covers topics such as national income determination, inflation, unemployment, fiscal and monetary policy, economic growth, and international trade. Emphasis is placed on analyzing current economic data, understanding the implications of government interventions, and evaluating contemporary debates within macroeconomics. Through case studies and empirical analysis, students develop the skills to interpret economic indicators, assess policy effectiveness, and make informed recommendations on macroeconomic issues.
Recommended Textbook Macroeconomics 4th Edition by Glenn P. Hubbard
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19 Chapters
2659 Verified Questions
2659 Flashcards
Source URL: https://quizplus.com/study-set/1562
Page 2
Chapter 1: Economics: Foundations and Models
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146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/30908
Sample Questions
Q1) Productive efficiency is achieved when firms produce goods and services
A) most desired by society.
B) at the highest profit margin.
C) at the lowest cost.
D) of the highest quality.
Answer: C
Q2) When goods and services are produced at the lowest possible cost,________ occurs.
A) allocative efficiency
B) productive efficiency
C) equity
D) efficient central planning
Answer: B
Q3) Which of the following contributes to the efficiency of markets?
A) Governments play an active role in the day-to-day operations of markets.
B) Markets are able to bring about an equitable distribution of goods and services.
C) Markets promote equal standards of living.
D) Markets promote competition and voluntary exchange.
Answer: D
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Page 3
Chapter 2: Trade-Offs, comparative Advantage, and the Market System
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Published in 1776,________ was written by Adam Smith.
A) "The General Theory of Employment, Interest, and Money"
B) "The Communist Manifesto"
C) "The Declaration of Economics"
D) "An Inquiry into the Nature and Causes of the Wealth of Nations"
Answer: D
Q2) ________ shows that if all resources are fully and efficiently utilized,more of one good can be produced only by producing less of another good.
A) Comparative advantage
B) Absolute advantage
C) The mixed market system
D) The production possibilities frontier model
Answer: D
Q3) Refer to Table 2-4.If the two countries specialize and trade,who should export cell phones?
A) There is no basis for trade between the two countries.
B) Estonia
C) Finland
D) They should both be importing cell phones.
Answer: C
Page 4
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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147 Verified Questions
147 Flashcards
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Sample
Questions
Q1) If in the market for bananas the supply curve has shifted to the right,then
A) the supply of bananas increased.
B) the quantity of bananas supplied has increased.
C) the supply of bananas has decreases.
D) the quantity of bananas supplied has decreased.
Answer: A
Q2) Farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase?
A) an increase in the price of soybeans
B) a decrease in the price of corn
C) an increase in the demand for corn
D) an increase in the price of soybean seeds
Answer: B
Q3) An inferior good is a good for which the quantity demanded increases as the price decreases,holding everything else constant.
A)True
B)False
Answer: False
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) An efficient tax is
A) a tax that imposes an equal tax burden on buyers and sellers.
B) a tax that raises a maximum amount of revenue.
C) a tax that imposes a small excess burden relative to the tax revenue that it raises.
D) a tax that is used to fund research and development of new technology.
Q2) The division of the burden of a tax between buyers and sellers in a market is called tax incidence.
A)True
B)False
Q3) Economic efficiency is achieved when there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and
A) economic surplus plus consumer surplus equals producer surplus.
B) consumer surplus plus producer surplus is maximized.
C) economic surplus is minimized.
D) the difference between consumer surplus and producer surplus is maximized.
Q4) Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.
Page 6
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Chapter 5: The Economics of Health Care
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) The health care system in ________ is referred to as a universal health insurance system,under which every resident is required to enroll in either a private or the government-provided health insurance program.
A) Canada
B) Japan
C) the United Kingdom
D) the United States
Q2) Economists refer to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off as
A) bad faith.
B) economic inefficiency.
C) moral hazard.
D) market failure.
Q3) Some economists and policymakers who are in favor of government-provided health care believe that providing health care will
A) generate additional moral hazard.
B) create negative externalities.
C) reduce asymmetric information.
D) generate more adverse selection.
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Page 7
Chapter 6: Firms, the Stock Market, and Corporate Governance
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) How does the owner of a corporation relate to the business?
A) The owners of the business have a separate legal distinction from the business.
B) The owners of the business have no separate legal distinction from the business.
C) The personal assets are part of the corporation's assets.
D) None of these describe the legal relationship of corporate owners to the business.
Q2) What is a secondary market?
A) a market where factory seconds and damaged merchandise are sold
B) a market where newly issued bonds are sold to initial buyers by the borrowing firm
C) a market where a newly issued stocks are sold to initial buyers by the borrowing firm
D) a market where you can sell any stocks you own as a private investor
Q3) Dividends are
A) financial securities which represent ownership in a corporation.
B) the yearly payments associated with bonds.
C) the interest rate paid on shares of stock.
D) payments by a corporation to its shareholders.
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8
Chapter 7: Comparative Advantage and the Gains From International Trade
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) Examples of comparative advantage often begin with two countries that each produce the same two goods.Each country is then shown to have a comparative advantage in producing the good it can produce at a lower opportunity cost,and specializes in the production of the good for which it has a comparative advantage.How do these examples prove that both nations are made better off as a result of trade than they would be without trade?
Q2) Many economists ________ protectionism because it ________ consumers and ________ jobs in domestic industries that use protected products. A) support; benefits; creates B) criticize; causes losses to; eliminates C) support; lowers prices for; raises wages for D) criticize; unfairly rewards; relocates
Q3) A tax imposed by a government on imports of a good into a country is called A) an import levy. B) an import fine. C) a tariff.
D) an import quota.
Q4) What are terms of trade?
Page 9
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Chapter 8: Gdp: Measuring Total Production and Income
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Refer to Table 19-5.What is nominal GDP in 2011?
A) $3,320
B) $3,690
C) $6,360
D) $7,035
Q2) In a small economy,gross investment in 2012 is $1,500,consumption spending is $6,000,net investment is $200,government spending is $1,500,exports are $2,000 and imports are $1,000.What is GDP for this economy in 2012?
A) $10,700
B) $10,300
C) $10,200
D) $10,000
Q3) An inflation rate of 5% between 2011 and 2012 would be implied by a change in the GDP deflator from ________ in 2011 to ________ in 2012.
A) 105; 115
B) 200; 205
C) 400; 420
D) 375; 390
Q4) Give two reasons why GDP does not reflect total production in an economy.
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Chapter 9: Unemployment and Inflation
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) What is the natural rate of unemployment,and what types of unemployment constitute the natural rate of unemployment?
Q2) The CPI in 1990 was 131,and the CPI in 2010 was 218.If you earned a salary of $40,000 in 1990,what would be a salary with equivalent purchasing power in 2010?
A) $45,977
B) $66,565
C) $87,200
D) $143,486
Q3) Refer to Table 20-12.The table above lists the actual minimum wage and CPI in 1974 and in 2010.Using the above table,calculate the real minimum wage for 1974 and 2010.Calculate the rate of growth of the real minimum wage from 1974 to 2010.Are workers better off in terms of the purchasing power of a dollar in 1974 or 2010? Explain why.
Q4) The CPI is also referred to as
A) the GDP deflator.
B) the inflation-consumption index.
C) the cost-of-living index.
D) the producer price index.
Q5) Describe the three types of unemployment.
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Chapter 10: Economic Growth, the Financial System, and Business Cycles
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130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/30917
Sample Questions
Q1) If,as economist Alwyn Young has suggested,high growth rates in Singapore are not a result of technological progress,how are growth rates in Singapore expected to change over time?
A) Without technological progress, the high growth rates cannot be sustained.
B) As long as the labor force participation rate is rising, growth can still continue, despite a lack of technological progress.
C) As long as the amount of capital per hour worked continues to expand, the growth rate in Singapore will continue to rise at an increasing rate.
D) Agricultural workers will continue to expand their productivity, thereby allowing Singapore to achieve growth rates above those of higher-income countries.
Q2) Equilibrium in the loanable funds market determines
A) the nominal interest rate.
B) the current interest rate.
C) the real interest rate.
D) the expected interest rate.
Q3) Using equations for public and private saving,show that saving must equal investment in a closed economy.Begin with the expression for total saving in the economy.
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Chapter 11: Long-Run Economic Growth: Sources and Policies
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Which of the following is an example of foreign portfolio investment?
A) the purchase of a U.S. stock by a U.S. citizen
B) the purchase of a U.S. Treasury bond by a German citizen
C) the purchase of a U.S. mutual fund by a U.S. citizen
D) the purchase of a Japanese factory by a Korean citizen
Q2) You have been hired as an economic advisor for a developing country.You have been asked to focus on education as a means for the country's development.Explain to the prime minister how improving education and training can contribute to his country's economic growth,and why it is important for the government to take a pro-active role in promoting education.
Q3) Globalization is defined as the process of countries becoming ________ open to foreign trade and ________ open to foreign investment.
A) more; less
B) more; more
C) less; more
D) less; less
Q4) The owner of a firm wants some advice on how to increase productivity.Suggest three ways the entrepreneur could increase labor productivity through improving technology.
Page 13
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Chapter 12: Aggregate Expenditure and Output in the Short Run
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) The marginal propensity to consume is defined as
A) consumption divided by disposable income.
B) disposable income divided by consumption.
C) the change in consumption divided by the change in disposable income.
D) the change in disposable income divided by the change in consumption.
Q2) Net exports usually ________ when the U.S.economy is in a recession and ________ when the U.S.economy is expanding.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
Q3) Consumption spending refers to ________ spending on goods and services.
A) household
B) business
C) government
D) foreign
Q4) A rising price level decreases consumption by decreasing the real value of household wealth.
A)True
B)False
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Chapter 13: Aggregate Demand and Aggregate Supply Analysis
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Stagflation occurs when inflation ________ and GDP ________.
A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls
Q2) The short-run aggregate supply curve has a
A) negative slope.
B) positive slope.
C) slope equal to infinity.
D) slope equal to zero.
Q3) According to the real business cycle model
A) increases in aggregate demand raise GDP.
B) increases in aggregate demand lower GDP.
C) increases in aggregate demand do not affect GDP.
D) increases in aggregate demand lower the price level.
Q4) Using aggregate demand and aggregate supply,explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Be sure to detail what happens to aggregate demand,the price level,the level of GDP,and unemployment.
Assume that the economy is at full employment before the interest rate increase.
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Chapter 14: Money, banks, and the Federal Reserve System
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146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/30921
Sample Questions
Q1) A central bank can help stop a bank panic by
A) raising the required reserve ratio.
B) calling in consumer loans.
C) acting as a lender of last resort.
D) decreasing income taxes.
Q2) How effective is discount policy as compared to open market operations in managing the money supply? Explain how The Federal Reserve uses discount policy today.
Q3) If the rate of growth in real GDP exceeds the rate of growth in the money supply,the quantity theory of money predicts inflation.
A)True
B)False
Q4) If households in the economy decide to take money out of checking account deposits and put this money into savings accounts,this will initially
A) decrease M1 and increase M2.
B) decrease M1 and decrease M2.
C) decrease M1 and not change M2.
D) increase M1 and decrease M2.
Q5) How do open market operations work?
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Chapter 15: Monetary Policy
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The Federal Reserve responded to the 2008 financial crisis in several ways. Which of the following is one of the ways the Fed responded?
A) The Fed banned investment banks from obtaining discount loans.
B) The Fed lent investment banks Treasury securities in exchange for mortgage-backed securities.
C) The Fed lowered the required reserve ratio on demand deposit accounts in order to increase the amount of bank reserves.
D) The Fed helped Citibank to acquire General Motors and Chrysler.
Q2) An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE
A) includes the prices of more consumer goods and services.
B) includes the prices of consumer goods, but not consumer services.
C) includes the prices of consumer services, but not consumer goods.
D) is a fixed market-basket price index that does not allow the mix of products to change each year.
Q3) Describe how the Fed uses open market operations to change short-term and long-term interest rates.
Q4) What problems can high inflation rates cause for the economy?
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Page 17
Chapter 16: Fiscal Policy
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) Tax increases on business income decrease aggregate demand by decreasing A) business investment spending.
B) consumption spending.
C) government spending.
D) wage rates.
Q2) Included in government expenditures are government purchases and transfer payments.
A)True
B)False
Q3) When President Obama took office in January 2009,he pledged to pursue an expansionary fiscal policy to try to pull the economy out of the recession.The next month,Congress passed the American Recovery and Reinvestment Act of 2009,a $787 billion package of ________ that was the largest fiscal policy action in U.S.history.
A) spending increases and tax cuts
B) interest rate reductions and increases in the money supply
C) treasury bond purchases and mortgage-backed securities purchases
D) commercial and investment bank bailouts
Q4) Explain why the tax multiplier is different from the government purchases multiplier,in both sign and relative magnitude.
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Chapter 17: Inflation, unemployment, and Federal Reserve Policy
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) If actual inflation is less than expected inflation,what is the relationship between the actual real wage and the expected real wage?
A) The actual real wage is lower than the expected real wage.
B) The actual real wage is higher than the expected real wage.
C) The actual real wage is equal to the expected real wage.
D) The relationship between the actual real wage and the expected real wage cannot be predicted.
Q2) The actual real wage is lower than the expected real wage if
A) actual inflation is less than expected inflation.
B) expected inflation is less than actual inflation.
C) actual unemployment is less than expected unemployment.
D) actual unemployment is less than actual inflation.
Q3) The curve showing the short-run relationship between ________ and the ________ is called the Phillips curve.
A) nominal interest rate; real interest rate
B) the unemployment rate; the inflation rate
C) price level; real GDP
D) exchange rate; real interest rate
Q4) What does it mean to say that workers and firms have rational expectations?
Page 19
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Chapter 18: Macroeconomics in an Open Economy
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) How will contractionary monetary policy in Japan affect the demand for the yen and the supply of the yen in the foreign exchange market?
A) The demand for the yen will fall, and the supply of the yen will increase.
B) The demand for the yen will increase, and the supply of the yen will fall.
C) The demand for the yen will fall, and the supply of the yen will fall.
D) The demand for the yen will increase, and the supply of the yen will increase.
Q2) Ceteris paribus,a real depreciation of the dollar will decrease net exports in the United States.
A)True
B)False
Q3) If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion,what is the balance on the capital account,assuming no statistical discrepancy?
A) $1,445 billion
B) $239 billion
C) $0
D) -$239 billion
Q4) What is the difference between net exports and the current account balance?
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Page 20
Chapter 19: The International Financial System
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Refer to Figure 30-7.The graph above depicts supply and demand for U.S.dollars during a trading day,where the quantity is millions of dollars. In order to support a fixed exchange rate of 0.30 pounds per dollar,the British central bank must
A) buy 0.4 million dollars per trading day.
B) sell 0.4 million dollars per trading day.
C) buy 0.8 million dollars per trading day.
D) sell 0.8 million dollars per trading day.
Q2) Refer to Figure 30-4.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D . After the shift,
A) there is a shortage of euro equal to 1,000 million. B) there is a surplus of euro equal to 400 million.
C) there is a shortage of euro equal to 800 million.
D) there is a surplus of euro equal to 500 million.
Q3) Refer to Table 30-1.Fill in the missing values in the above table.Assume the Big Mac is selling for $4.07 in the United States.Explain whether the U.S.dollar is overvalued or undervalued relative to each of the other currencies and predict what will happen in the future to each exchange rate.
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