Basic Macroeconomics
Test Bank
Course Introduction
Basic Macroeconomics introduces students to the fundamental concepts and principles that govern the economy as a whole. The course explores topics such as national income, gross domestic product (GDP), unemployment, inflation, monetary and fiscal policy, and international trade. Emphasis is placed on understanding how households, businesses, and governments interact within the macroeconomic framework to affect economic growth, stability, and development. Through real-world examples and analytical tools, students will develop the ability to evaluate current macroeconomic issues and policy debates.
Recommended Textbook
Principles of Macroeconomics A Streamlined Approach 3rd Edition by Robert H. Frank
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13 Chapters
2266 Verified Questions
2266 Flashcards
Source URL: https://quizplus.com/study-set/2479
Page 2
Chapter 1: Thinking Like an Economist
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135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/49257
Sample Questions
Q1) Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school-aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than:
A) $37,000 per year.
B) $25,000 per year.
C) $13,000 per year.
D) $12,000 per year.
Answer: C
Q2) Dividing the total cost of n units of an activity by n reveals the:
A) average benefit.
B) marginal cost.
C) units per cost.
D) average cost.
Answer: D
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3
Chapter 2: Supply and Demand
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _____ the quantity that maximizes total economic surplus.
A) more equitable
B) equal to C) lower than
D) higher than
Answer: D
Q2) When the current price of a good is below the equilibrium price:
A) buyers have an incentive to offer to pay sellers more than the current price.
B) there will be excess supply.
C) the price will tend to stay below the equilibrium price.
D) sellers will notice their inventories are growing.
Answer: A
Q3) Which of the following is NOT a characteristic of rent controls?
A) Greater availability of apartments.
B) Excess demand for apartments.
C) Fewer newly built apartment buildings.
D) Lower expenditures on maintenance.
Answer: A
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Page 4
Chapter 3: International Trade and Trade Policy
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Japan exports cars to the other countries of the world. In an open economy Japan is most likely to have a domestic price that is _____ the world price of cars.
A) less than
B) greater than C) equal to
D) close to
Answer: C
Q2) The United States generally has a comparative advantage in the development of technology because it has:
A) large amounts of natural resources.
B) a disproportionate share of the world's best research universities.
C) the greatest need for new technology.
D) patent laws, which no other country has.
Answer: B
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Chapter 4: Macroeconomics: the Birds-Eye View of the Economy
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) "If Congress cuts income taxes, demand for output is likely to increase" is a _______ statement about ______ policy.
A) positive; fiscal
B) normative; fiscal
C) positive; monetary
D) normative; monetary
Q2) Which of the following would be considered an example of monetary policy?
A) A broad government initiative to reduce the country's reliance on agriculture and promote high-technology industries.
B) A reduction in income tax rates.
C) Provision of additional cash to the banking system.
D) A decision by a developing country to reduce government control of the economy and to become more market-oriented.
Q3) When government revenue exceeds government spending, the nation has a:
A) government budget surplus.
B) trade surplus.
C) government budget deficit.
D) trade deficit.
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Chapter 5: Measuring Economic Activity: GDP, Unemployment,
and Inflation
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272 Verified Questions
272 Flashcards
Source URL: https://quizplus.com/quiz/49261
Sample Questions
Q1) Which of the following would increase the investment component of U.S. GDP?
A) You purchase a vacation at Disney World in Florida.
B) You purchase shares of Disney stock.
C) Disney World purchases tires for the monorail from a firm in Ohio.
D) A French man purchases a vacation at a Disney theme park in France.
Q2) Inflation makes it difficult to distinguish relative price changes from changes in the general level of prices. Consequently, inflation ______ the efficiency of the market system.
A) increases
B) decreases
C) does not change
D) may either increase or decrease
Q3) A drawback of using market values to aggregate the quantities of goods and services produced in an economy is that:
A) higher-priced items count more.
B) GDP increases when not all goods are produced in greater quantities.
C) market prices generally reflect the economic benefit consumers expect to receive from an item.
D) not all economically valuable goods and services are bought and sold in markets.
Page 7
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Chapter 6: Economic Growth, Productivity, and Living Standards
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the:
A) growth in productivity.
B) increase in the quantity of goods.
C) non-market production.
D) change in the price level.
Q2) The cost of a higher living standard in the future is giving up:
A) current consumption.
B) current investment.
C) future consumption.
D) future investment.
Q3) The major economic cost of growth is:
A) higher interest rates.
B) consumption sacrificed for capital formation.
C) higher inflation rates.
D) investment in stocks and bonds.
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Chapter 7: The Labor Market: Workers, Wages, and Unemployment
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The increased efficiency and specialization that results from globalization illustrates the:
A) scarcity principle.
B) principle of comparative advantage.
C) cost-benefit principle.
D) principle of increasing opportunity costs.
Q2) The growth rate of average annual earnings in the United States from 1973 to 1995 was:
A) higher than it was from 1960 to 1973.
B) lower than it was from 1960 to 1973.
C) the same as it was from 1960 to 1973.
D) roughly equal to zero.
Q3) The minimum payment you are willing to accept to do a job is your:
A) nominal wage.
B) real wage.
C) reservation price.
D) value of marginal product.
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Page 9
Chapter 8: Saving and Capital Formation
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Joe's Taco Hut can purchase a delivery truck for $20,000 and Joe estimates it will generate a net income (after taxes, maintenance and operating costs) of $2,000 per year. He has no other opportunities. He should:
A) purchase the truck only if the real interest rate is less than 2%.
B) not purchase the truck if the real interest rate is greater than 2%.
C) purchase the truck if the real interest rate is greater than 10%.
D) purchase the truck if the real interest rate is less than 10%.
Q2) The costs of investment depend on the ______ and the _______.
A) marginal product of capital; relative price of the firm's output
B) price of new capital goods; real interest rate
C) relative price of the firm's output; real interest rate
D) taxes levied on the revenue generated; relative price of the firm's output
Q3) The impact of declining stock prices in the U.S. during the period 2000-2002 on U.S. household wealth was at least partially offset by:
A) an increase in the saving rate.
B) a decrease in the saving rate.
C) an increase in public saving.
D) increasing housing prices
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10
Chapter 9: Money, The Federal Reserve, and Global Financial Markets
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Your financial investments consist of U.S. government bonds maturing in twenty years and shares in a start-up internet company. If interest rates on newly-issued government bonds increase, then the price of your bonds will ______ and the price of the shares you own will ____.
A) increase; increase
B) decrease; decrease
C) increase; not change
D) decrease; not change
Q2) When the interest rate on newly issued bonds increases, the price of existing bonds: A) increases.
B) decreases.
C) increases only if the coupon rate is below the new rate. D) may either increase or decrease.
Q3) Deposit insurance is a system in which the government guarantees that:
A) depositors will not lose any money even if their bank goes bankrupt.
B) people can have deposits at commercial banks.
C) commercial banks will not go bankrupt.
D) commercial banks will not lose any deposits.
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Chapter 10: Short-Term Economic Fluctuations and Fiscal Policy
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190 Verified Questions
190 Flashcards
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Sample Questions
Q1) A decrease in stock prices alters the consumption function by:
A) increasing disposable income.
B) decreasing disposable income.
C) increasing autonomous consumption.
D) decreasing autonomous consumption.
Q2) Cyclical unemployment is equal to zero when:
A) there is no recessionary gap.
B) there is no expansionary gap.
C) actual GDP and potential GDP are equal.
D) frictional unemployment equals structural unemployment.
Q3) C + I + G + NX equals:
A) aggregate expenditure.
B) potential GDP.
C) the output gap.
D) the income-expenditure multiplier.
Q4) The duration of an expansion is measured from:
A) peak to trough.
B) trough to peak.
C) peak to peak.
D) trough to trough.
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Chapter 11: Stabilizing the Economy: The Role of the Fed
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163 Verified Questions
163 Flashcards
Source URL: https://quizplus.com/quiz/49267
Sample Questions
Q1) When the Fed engages in an open market sale, the money supply ____ and the nominal interest rate ______.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
Q2) A bank is able to make new loans equal to:
A) legal reserves of the bank
B) excess reserves of the bank
C) total reserves of the bank
D) required reserves of the bank
Q3) Three macroeconomic factors that affect the demand for money are:
A) the nominal interest rate, real income, and the price level.
B) the nominal interest rate, capital, and labor.
C) globalization, skill-biased technological change, and labor mobility.
D) capital, labor, and technology.
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Chapter 12: Inflation and Aggregate Supply
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) According to the Aggregate Demand Aggregate Supply diagram, policy makers face a short-term trade-off between _________ when implementing anti-inflation policies.
A) long-term equilibrium and short-term equilibrium
B) inflation and expansion
C) recession and stagflation
D) inflation and unemployment
Q2) A combination of inflation and recession is called:
A) deflation.
B) stagflation.
C) disinflation.
D) infusion.
Q3) Graphically the intersection of the aggregate demand curve and the short-run aggregate supply line determines:
A) potential output.
B) short-run equilibrium.
C) long-run equilibrium.
D) exogenous spending.
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Chapter 13: Exchange Rates and the Open Economy
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) The purchasing power parity theory is not a good explanation of how nominal exchange rates are determined in the short run because:
A) there is no evidence that low inflation is associated with less rapid nominal exchange rate depreciation.
B) most nominal exchange rates are fixed and foreign exchange markets do not bring the supply and demand for currencies into equilibrium.
C) most goods and services are traded internationally and are standardized.
D) many goods and services are not traded internationally and not all internationally-traded goods are standardized.
Q2) A country will have a balance-of- payments surplus when its exchange rate:
A) equals the market equilibrium value.
B) is flexible.
C) is overvalued.
D) is undervalued.
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