Applied Macroeconomics Study Guide Questions
Course Introduction
Applied Macroeconomics explores how macroeconomic theories and models are utilized to understand and address real-world economic issues. The course covers topics including national income determination, economic growth, unemployment, inflation, fiscal and monetary policy, and international trade and finance. Emphasis is placed on using data and case studies to analyze economic performance and to evaluate the effectiveness of policy interventions. Through practical applications and hands-on assignments, students develop skills in interpreting macroeconomic indicators and formulating policy recommendations for contemporary economic challenges.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn Hubbard
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15 Chapters
2116 Verified Questions
2116 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) The Coffee Korner, a small cafe near campus, sells lattes for $3.00 and biscotti for $1.50 each. What is the opportunity cost of buying a biscotti?
A)2 lattes
B)1/5 of a latte
C)$3.00
D)$1.50
Answer: B
Q2) An economic ________ is a simplified version of some aspect of economic life used to analyse an economic issue.
A)market
B)trade-off
C)variable
D)model
Answer: D
Q3) Scarcity is a problem that will eventually disappear as technology advances.
A)True
B)False
Answer: False
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Chapter 2: Choices and Trade Offs in the Market
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) Which statement is true about the slope of a 'production possibility frontier'?
A)It has no economic relevance or meaning.
B)It is always constant.
C)It measures the opportunity cost of producing one more unit of a good.
D)It is always varying.
Answer: C
Q2) Refer to Figure 2.3. Consider the following events:
A.an increase in the unemployment rate
B.general technological advancement
C.a decrease in consumer wealth
Which of the events listed above could cause a movement from X to V?
A)a only
B)a and b only
C)b and c only
D)a, b and c
Answer: A
Q3) The basis for trade is comparative advantage, not absolute advantage.
A)True
B)False
Answer: True
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) Olive oil producers can now sell more olive oil at a higher price. Which of the following events would have this effect?
A)An increase in the price of olive oil presses.
B)A decrease in the cost of transporting olive oil to markets.
C)An increase in the price of land used to plant olives.
D)Research finds that consumption of olive oil reduces the risk of heart disease.
Answer: D
Q2) If the price of downloadable apps was to decrease, then the:
A)demand for smart phones would decrease.
B)demand for smart phones increase.
C)supply of smart phones would increase.
D)quantity demanded of smart phones would decrease.
Answer: B
Q3) If the number of firms producing mouthwash increases and consumer preference for mouthwash increases, the equilibrium price of mouthwash will definitely increase.
A)True
B)False
Answer: False
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Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) Which of the following would increase gross private domestic investment in an economy?
A)An increase in the shares of Apple stock households own.
B)An increase in the number of workers Apple hires.
C)An increase in the level of Apple's inventory.
D)An increase in the number of highway construction projects the government is funding.
Q2) The circular-flow model demonstrates that the value of total production is equal to the value of total income in an economy.
A)True
B)False
Q3) Give reasons why measured GDP does not reflect total production in an economy.
Q4) Nominal GDP is GDP measured in current prices and can be smaller than real GDP. A)True
B)False
Page 6
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Chapter 5: Economic Growth, the Financial System and Business Cycles
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) A government budget surplus will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.
A)supply; right; fall
B)supply; left; rise
C)demand; right; rise
D)demand; left; fall
Q2) How do financial intermediaries affect risk in the financial market?
Q3) Explain how a decrease in the tax rate on interest earned on savings would affect saving, investment, the interest rate and economic growth.
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Page 7
Chapter 6: Long-Run Economic Growth: Sources and Policies
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) Given the fact that the productivity slowdown affected all industrial countries, which of the following explanations for the productivity slowdown in Australia is not likely to be correct?
A)a deterioration of Australia's education system causing a decline in the quality of labour
B)tariff protection
C)lack of sufficient technological change
D)highly regulated markets
Q2) The Soviet Union's economic growth rate slowed despite rapid increases in capital per hour worked.
A)True
B)False
Q3) Which of the following countries was identified as a newly industrialising country in the 1980s and1990s, but is not identified as high-income country?
A)United States
B)Australia
C)Hong Kong
D)Brazil
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Chapter 7: Unemployment
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120 Flashcards
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Sample Questions
Q1) Which groups of people in Australia are more likely to experience higher levels of unemployment?
Q2) What do economists call the short-term unemployment arising from the process of matching workers with jobs?
A)cyclical unemployment
B)structural unemployment
C)frictional unemployment
D)seasonal unemployment
Q3) Explain what economists mean by 'full employment' and why this rate of unemployment is not zero.
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Chapter 8: Inflation
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) The stated interest rate on a loan is the:
A)real interest rate.
B)nominal interest rate.
C)actual inflation rate.
D)expected inflation rate.
Q2) Hyperinflation occurred in Germany after World War I, when its inflation rate rose to 3.25 million per cent.
A)True
B)False
Q3) If the anticipated rate of inflation is 3% but the subsequent actual rate of inflation is 5%, the likely outcome will be that the purchasing power of money will:
A)fall and lenders will benefit.
B)increase and borrowers will benefit.
C)fall and borrowers will benefit.
D)increase and lenders will benefit.
Q4) 'Anticipated inflation' increases the amount of taxation paid by firms and individuals. A)True
B)False
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Chapter 9: Aggregate Expenditure and Output in the Short Run
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) What is the difference between 'aggregate expenditure' and 'aggregate demand'?
Q2) Which is the smallest component of 'aggregate expenditure' in Australia?
A)planned investment expenditures
B)consumption expenditures
C)government expenditures
D)net export expenditures
Q3) The ratio of the increase in ________ to the increase in ________ is called the 'multiplier'.
A)equilibrium nominal GDP; autonomous expenditure
B)equilibrium real GDP; autonomous expenditure
C)autonomous expenditure; equilibrium real GDP
D)induced expenditure; equilibrium real GDP
Q4) A decrease in the price level in Australia will shift the aggregate expenditure line downward.
A)True B)False
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Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Which of the following models has as its central idea that workers and firms have rational expectations?
A)monetarist model
B)new classical model
C)real business cycle model
D)new Keynesian model
Q2) What is the result of an increase in the price level?
A)It will shift the short-run aggregate supply curve to the left.
B)It will shift the short-run aggregate supply curve to the right.
C)It will move the economy down along a stationary short-run aggregate supply curve.
D)It will move the economy up along a stationary short-run aggregate supply curve.
Q3) The interest-rate effect is described as an increase in the price level which:
A)raises the interest rate, thereby reducing government spending.
B)lowers the interest rate, thereby reducing government spending.
C)raises the interest rate, thereby reducing investment and consumption spending.
D)lowers the interest rate, thereby reducing investment and consumption spending.
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Chapter 11: Money, Banks and the Reserve Bank of Australia
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) If banks increase their reserve ratios, the deposit multiplier increases.
A)True
B)False
Q2) Suppose that you decide that you no longer want to hold currency. You transfer all of your currency holdings to your cheque account. Carefully explain how this affects M1.
Q3) Your demand deposit account balance is included in your bank's assets.
A)True
B)False
Q4) A cash withdrawal from the banking system:
A)lowers demand deposits to zero.
B)decreases demand deposits.
C)increases the money supply.
D)increases excess reserves.
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Chapter 12: Monetary Policy
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) The Reserve Bank of Australia has its independence from the government guaranteed by the Australian Constitution.
A)True
B)False
Q2) In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy?
A)The RBA believes that aggregate demand was growing too slowly to keep up with potential GDP.
B)The RBA fears that unemployment is climbing above the natural rate of unemployment.
C)The RBA is concerned that aggregate demand would continue to exceed the growth in potential GDP.
D)The RBA is worried that deflation will become a problem.
Q3) The policy aimed at managing interest rates to pursue macroeconomic objectives is called:
A)fiscal policy.
B)interest rate policy.
C)monetary policy.
D)exchange rate policy.
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Page 14
Chapter 13: Fiscal Policy
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.
A)decreases; increases
B)increases; decreases
C)increases; increases
D)decreases; decreases
Q2) An equal decrease in government purchases and taxes will cause:
A)a decrease in real GDP.
B)no change in real GDP.
C)an increase in the budget surplus because real GDP increases.
D)a reduction in the structural budget surplus.
Q3) Refer to Figure 13.5. If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph, the difference in real GDP between point A and point B will be:
A)$100 billion.
B)less than $100 billion.
C)more than $100 billion.
D)There is insufficient information given here to make a conclusion.
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15
Chapter 14: Macroeconomics in an Open Economy
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) A decrease in capital outflows from Australia will:
A)decrease the balance on the financial account.
B)increase the balance on the financial account.
C)increase the balance on the capital account.
D)decrease the balance on the current account.
Q2) In 2015/2016, Australia:
A)had a trade surplus due to the booming mining sector.
B)had less income flowing overseas than was coming into Australia.
C)had a trade deficit due to a fall in commodity prices.
D)imported more services than it exported.
Q3) What is the difference between 'net exports' and the 'current account balance'?
Q4) When compared to a closed economy, fiscal policy is more effective and monetary policy is less effective in an open economy.
A)True
B)False
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Chapter 15: The International Financial System
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) In a pegged exchange rate system, a country will peg the value of its currency to:
A)an index of the world's major currencies determined by the International Monetary Fund.
B)an average of the historic values of its own currency.
C)a major currency.
D)the currencies of the countries with which it trades most frequently.
Q2) According to the 'theory of purchasing power parity', if the inflation rate in the United States of America is greater than the inflation rate in Australia, explain what should happen to the exchange rate between the United States (US)dollar and the Australian dollar.
Q3) The European Union countries that have adopted the euro still conduct independent monetary policies within their countries.
A)True
B)False
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