Applied Macroeconomics
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Course Introduction
Applied Macroeconomics explores the practical application of macroeconomic theory and tools to real-world economic issues and policy questions. The course covers topics such as economic growth, inflation, unemployment, fiscal and monetary policy, international trade, and exchange rates, emphasizing how macroeconomic concepts inform government and business decision-making. Students analyze current economic data, examine policy debates, and utilize quantitative models to assess macroeconomic trends and their implications for the broader economy. The course prepares students to interpret economic indicators and evaluate the effectiveness of economic policy in addressing contemporary challenges.
Recommended Textbook
CoreMacroeconomics 3rd Edition by
Eric Chiang
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16 Chapters
4462 Verified Questions
4462 Flashcards
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Page 2
Chapter 1: Exploring Economics
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286 Verified Questions
286 Flashcards
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Sample Questions
Q1) In the equation S = 130 - 2T,where S is hot chocolate sales and T is temperature,sales:
A) decrease by 10 if temperature falls by 5 degrees.
B) decrease by 2 if temperature falls by 5 degrees.
C) increase by 10 if temperature falls by 5 degrees.
D) increase by 2 if temperature falls by 5 degrees.
Answer: C
Q2) Linear relationships show the same slope between any two points on a line.
A)True
B)False
Answer: True
Q3) Employers give full-time employees that have been on the job more than three years employee stock options.This is an example of:
A) people following incentives.
B) thinking on the margin.
C) irrational behavior.
D) opportunity costs.
Answer: A
Q4) Is understanding recessions a microeconomic or a macroeconomic issue? Explain.
Answer: Macroeconomic;it is a national issue.
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Chapter 2: Production, Economic Growth, and Trade
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Sample Questions
Q1) A study by the Organisation for Economic Co-operation and Development (OECD)on factors driving economic growth finds per capita GDP is:
A) unaffected by increases in average education levels.
B) positively affected by increased tax burdens.
C) negatively affected by higher levels of research and development.
D) positively affected by lower inflation rates.
Answer: D
Q2) (Figure: Interpreting PPF Shifts 2)The graph describes a situation in which:
A) both industries have experienced technological improvements.
B) only Industry 1 has had a technological improvement.
C) neither industry has had technological improvements.
D) only Industry 2 has had a technological improvement.
Answer: D
Q3) (Figure: Tanks and Health Care)The opportunity cost of moving from point c to point b is about $50 million in health care services.
A)True
B)False
Answer: False
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4
Chapter 3: Supply and Demand
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Sample Questions
Q1) A change in preferences causes a movement along the demand curve.
A)True
B)False
Answer: False
Q2) (Figure: Interpreting Market Equilibrium)The equilibrium price and quantity in this market are:
A) $5 and 1,000.
B) $5 and 6,000.
C) $15 and 3,000.
D) $15 and 6,000.
Answer: C
Q3) When economists refer to a "market demand" curve,we know that it represents:
A) the horizontal summation of individual demand curves.
B) the vertical summation of individual demand curves.
C) the quantity demanded by any individual consumer,multiplied by the number of consumers.
D) It represents none of these.
Answer: A
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5
Chapter 4: Markets and Government
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Sample Questions
Q1) (Figure: Determining Surplus and Loss)In the graph,producer surplus is _____ in equilibrium and _____ at a price of $5.
A) $120;$30
B) $30;$120
C) $120;$170
D) $120;210
Q2) (Figure: Interpreting Surplus)In the supply/demand graph:
A) consumer surplus is $50,000 and producer surplus is $100,000.
B) total market surplus is $200,000.
C) total market surplus is $50,000.
D) consumer surplus exceeds producer surplus.
Q3) (Figure: Determining Surplus 5)According to the graph,at equilibrium,total surplus is:
A) $600.
B) $200.
C) $1,200.
D) 80 units.
Q4) Will consumer surplus rise or shrink when prices rise above equilibrium?
Q5) Will producer surplus rise or shrink when prices rise above equilibrium?
Q6) Will consumer surplus rise or shrink when prices fall below equilibrium?
Page 6
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) Over the past 150 years,the U.S.economy has endured a recession on average about every:
A) one to two years.
B) four to five years.
C) 10 to 15 years
D) 50 years
Q2) Soy-beans produced in Brazil but eaten by cows in a Kansas feedlot will be included in the U.S.GDP.
A)True
B)False
Q3) John earns $2,000.His taxes are $250 and he spends $1,500.Therefore,his savings must be:
A) $1,500.
B) $500.
C) $250.
D) His savings cannot be calculated from the data given.
Q4) The Leading Economic Index has successfully predicted the past seven recessions.
A)True
B)False
Q5) Describe the shortcomings of GDP as a measure of our standard of living.
Page 7
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Chapter 6: Measuring Inflation and Unemployment
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Sample Questions
Q1) The consumer price index is a cost-of-living index.
A)True
B)False
Q2) The mortgage crisis caused a lot of consumers to stop spending money.The decrease in spending led to a decrease in production.Which type of unemployment resulted?
A) structural
B) frictional
C) cyclical
D) statistical
Q3) If the structural unemployment rate is 3%,the frictional unemployment rate is 2%,and the cyclical unemployment rate is 4%,then the natural rate of unemployment is 9%.
A)True
B)False
Q4) For the purposes of calculating the unemployment rate,part-time workers are not included as employed.
A)True
B)False
Q5) What are the causes and consequences of hyperinflation?
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Chapter 7: Economic Growth
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Sample Questions
Q1) Economic growth improves only the lives of the richest citizens.
A)True
B)False
Q2) During the most recent global economic downturn,extreme poverty continued to fall.
A)True
B)False
Q3) Year-over-year growth data exclude seasonal variations in growth rates.
A)True
B)False
Q4) Increases in ___________ often lead to economic growth.
A) technology
B) public goods
C) money supply
D) government regulations
Q5) In general,the higher the capital-to-labor ratio:
A) the higher the wages.
B) the lower the wages.
C) the lower the productivity.
D) the lower the rate of investment.
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Chapter 8: Aggregate Expenditures
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Sample Questions
Q1) Equilibrium in the Keynesian model requires that withdrawals be the same as:
A) deposits.
B) debits.
C) credits.
D) injections.
Q2) Taxes are added to total income to form disposable income.
A)True
B)False
Q3) In the Keynesian framework,the way to fight a recession is to:
A) cut taxes and/or increase government spending.
B) reduce interest rates.
C) increase the population with more immigration.
D) do nothing and wait for the economy to return to full employment on its own.
Q4) If the amount of spending in an economy declines by $1,000 and the marginal propensity to consume is 0.8,the effect on the economy is a change of _____ in income or output.
A) -$800
B) -$1,000
C) $1,000
D) -$5,000
10
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Chapter 9: Aggregate Demand and Supply
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Sample Questions
Q1) Which of the following will NOT shift the aggregate supply curve to the left?
A) an increase in the minimum wage
B) a decrease in corporate taxes
C) an increase in the price of crude oil
D) an increase in the legislated amount of paid vacation
Q2) ________ inflation occurs when a supply shock reduces aggregate supply.
A) Cost-push
B) Demand-pull
C) Sticky
D) Demand-push
Q3) An increase in government spending will increase aggregate demand.
A)True
B)False
Q4) Other things equal,when the U.S.aggregate price level falls,U.S.exports _______ and U.S.imports ________.
A) fall;rise
B) fall;fall
C) rise;fall
D) rise;rise
Q5) Describe why the aggregate demand curve has a negative slope.
Page 11
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Chapter 10: Fiscal Policy and Debt
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Sample Questions
Q1) Mandatory spending comprises nearly ________ of the federal budget.
A) one-fourth
B) one-third
C) one-half
D) two-thirds
Q2) Policies that __________ will expand the economy but also generate price pressures.
A) increase transfer payments
B) encourage the development and transfer of new technologies
C) encourage investment in research and development
D) trim burdensome business regulations
Q3) Interest on the public debt is between 6% and 7% of GDP.
A)True
B)False
Q4) Discretionary spending is higher than mandatory spending at the federal government level.
A)True
B)False
Q5) Describe why tax changes have a smaller impact on the economy than changes in government spending.Use a numerical example to support your response.
Page 12
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Chapter 11: Saving, Investment, and the Financial System
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Sample Questions
Q1) When the price of bonds increases,general interest rates decrease.
A)True
B)False
Q2) The most important function of money is:
A) a medium of exchange.
B) a unit of account.
C) a store of value.
D) a standard of deferred payment.
Q3) New technologies that increase productivity tend to shift the supply of loanable funds curve rightward.
A)True
B)False
Q4) Explain the difference between a traditional IRA and a Roth IRA.
Q5) Bond prices and their yields are ____ because the bond's _________ can fall below its __________.
A) positively related;sale price;face value
B) positively related;face value;sale price
C) negatively related;sale price;face value
D) negatively related;face value;sale price
Q6) Explain why households supply loanable funds to the market.
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Chapter 12: Money Creation and the Federal Reserve
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Sample Questions
Q1) The money multiplier is equal to one divided by checkable deposits.
A)True
B)False
Q2) The discount rate is the interest rate:
A) financial institutions charge each other for overnight loans used as reserves.
B) financial institutions charge their best loan customers.
C) the Fed charges depository institutions to borrow reserves from a regional Fed bank.
D) the Fed charges for loans made to members of Congress.
Q3) Which of the following items is NOT one of the primary tools of the Fed?
A) reserve requirements
B) open market operations
C) tax rates
D) discount rate
Q4) If the reserve requirement is 18.5%,what is the money multiplier?
A) 1.9
B) 20
C) 18.5
D) 5.4
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Chapter 13: Monetary Policy
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Sample Questions
Q1) One thing all expansionary monetary policies have in common is that they all include increasing excess reserves.
A)True
B)False
Q2) According to the monetarists:
A) an increase in the money supply will not affect the price level in the long run.
B) output can never be above its full employment level.
C) a decrease in the money supply will have no effect on output in the short run.
D) the economy will move to its full employment output level in the long run.
Q3) The Eurozone is the only monetary union whose members are so economically diverse that the monetary authorities must choose the economic concerns of one region over another in formulating monetary policy.
A)True
B)False
Q4) What are the assumptions of the classical quantity theory of money? How do these assumptions affect its conclusions?
Q5) What would the Federal Reserve likely do to rein in an overheating economy?
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15
Chapter 14: Macroeconomic Policy: Challenges in a Global Economy
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Sample Questions
Q1) Briefly explain the two major models of expectations formation.What are the implications for macroeconomic policy of assuming one model or the other?
Q2) An efficiency wage is:
A) equal to the market-clearing level.
B) above the market-clearing level.
C) below the market-clearing level.
D) equal to marginal productivity of labor.
Q3) Given that wages are often the highest cost a firm pays,is it possible for wages to rise and prices to fall? Explain.
Q4) The long-run Phillips curve shows:
A) a tradeoff between inflation and unemployment.
B) the relationship between unemployment and inflation when the inflation rate is zero.
C) the relationship between inflation and unemployment when the expected inflation rate exceeds the actual inflation rate.
D) the relationship between inflation and unemployment when the actual inflation rate and the expected inflation rate are equal.
Q5) Explain how recent increases in productivity drive jobless recoveries.
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Chapter 15: International Trade
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Sample Questions
Q1) Which of the following is a typical limitation in how an infant industry is protected?
A) The infant industry is coddled,preventing it from developing into a mature,internationally viable firm.
B) Protection is usually limited to consumer goods.
C) Most industries are not viable on their own,so protecting these industries would be an efficient use of resources.
D) Protection is never given to capital manufacturing.
Q2) A tax on imports is called a(n):
A) inbound tax.
B) tariff.
C) foreign-sourced tax.
D) trade equalization tax.
Q3) Some argue that select industries need protection to ensure they will exist for national defense reasons.
A)True
B)False
Q4) Compare and contrast tariffs and quotas.Use graphs to show how tariffs and quotas affect price and quantity.
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Chapter 16: Open Economy Macroeconomic
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Sample Questions
Q1) The capital account includes:
A) investments by foreign companies in U.S.plants.
B) profits repatriated to foreign countries from foreign-owned U.S.plants.
C) profits repatriated to U.S.companies from U.S.-owned plants in foreign countries.
D) investments in U.S.companies by U.S.companies.
Q2) In the case of an excess supply of dollars,which of the following events does NOT occur?
A) The value of the dollar depreciates.
B) U.S.exports rise.
C) U.S.imports decline.
D) The U.S.current account worsens.
Q3) Describe the implications for fiscal and monetary policies of fixed and flexible exchange rate systems.Given the flexible exchange rate system in use today,which type of policy has become more important?
Q4) Exchange rates are affected by each nation's relative position in the business cycle. A)True
B)False
Q5) Explain why interest rate differentials sometimes persist between two countries.
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