Global Macroeconomics Final Exam
Course Introduction
Global Macroeconomics examines the interconnectedness of national economies within the global landscape, focusing on the determinants and effects of economic growth, inflation, unemployment, trade, and financial flows across countries. The course explores theoretical frameworks and real-world policies that shape macroeconomic outcomes at an international level, addressing topics such as exchange rates, balance of payments, international capital markets, and the implications of monetary and fiscal policies. Students will analyze global economic crises, institutions like the IMF and World Bank, and the impact of globalization on economic stability and policy coordination among nations.
Recommended Textbook
Macroeconomics 5th Edition by R.
Glenn Hubbard
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19 Chapters
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Page 2
Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) The U.S.Health Resources and Services Administration (HRSA)forecasts that in 2020
A)there will be a shortage of doctors in the United States.
B)the number of doctors in the United States will decrease and the number of doctors needed will increase.
C)the number of doctors in the United States will increase and the number of doctors needed will decrease.
D)there will be a surplus of doctors in the United States.
Answer: A
Q2) Refer to Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental revenue received from the sale of the last 500 cigars?
A)gross earnings
B)marginal revenue
C)sales revenue
D)gross profit
Answer: B
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3
Chapter 2: Trade-Offs,comparative Advantage,and the Market System
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Q1) The idea underlying Adam Smith's "invisible hand" is that people tend to behave in ways that go unnoticed in society.
A)True
B)False
Answer: False
Q2) A worker is hired in a
A)goods and services market.
B)product market.
C)government market.
D)factor market.
Answer: D
Q3) Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 50 hot wings would appear
A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.
Answer: A
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis,economists assume that the most important determinant of the demand for a good is
A)consumer income.
B)consumer tastes and preferences.
C)the price of the good.
D)the quality of the good.
Answer: C
Q2) Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
A)a decrease in the price of apples
B)an increase in the price of apples
C)an increase in the price of orange juice,a substitute for apple juice
D)a decrease in the price of granola bars,a complement for apple juice
Answer: A
Q3) Explain the difference between substitutes and complements.
Answer: Substitutes are goods and services that can be used for the same purpose.Complements are goods and services that are used together.
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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Sample Questions
Q1) In the market for gasoline,an increase in the federal excise tax on gasoline would shift the supply curve up.
A)True
B)False
Q2) Refer to Figure 4-6.What is the value of the deadweight loss after the imposition of the price floor?
A)$600
B)$1,800
C)$2,700
D)$3,300
Q3) Equilibrium in a competitive market results in the greatest amount of economic surplus from the production of a good or service.
A)True
B)False
Q4) When ________ in a market,the total net benefit to society is maximized.
A)deadweight loss is maximized
B)a competitive equilibrium is achieved
C)consumer surplus is minimized
D)producer surplus is minimized
6
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Chapter 5: The Economics of Health Care
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Sample Questions
Q1) The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as adverse selection.
A)True
B)False
Q2) Refer to Figure 5-3.With insurance and a third-party payer system,what is the amount of the deadweight loss?
A)$0
B)$2,500
C)$5,000
D)$24,000
Q3) Refer to Figure 5-3.With insurance and a third-party payer system,the equilibrium quantity of medical services is A)400.
B)800.
C)1,200.
D)>1,200.
Q4) Briefly describe the types of health care systems in Canada,Japan,and the United Kingdom.
Q5) How can increases in a country's total income improve health?
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Chapter 6: Firms,the Stock Market,and Corporate Governance
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Sample Questions
Q1) What can be done to deal with the principal-agent problem?
A)threaten to liquidate the firm
B)link top manager salaries to the profits of the firm or the price of the firm's stock
C)have the CEO be a rotating position
D)forbid managers from owning any company stock
Q2) What is a corporate bond and what does it specify?
Q3) On a balance sheet,short-term debts such as accounts payable are listed as
A)current assets.
B)current liabilities.
C)stockholder's equity.
D)goodwill.
Q4) Which is the least common type of business?
A)corporation
B)partnership
C)sole proprietorship
D)impossible to determine without further information
Q5) What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?
Q6) How can a partnership raise funds needed for firm expansion?
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Chapter 7: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Refer to Table 7-6.Which country has a comparative advantage in producing swords?
A)Estonia
B)Morocco
C)both countries
D)neither country
Q2) Protection in the form of tariffs create winners and losers.Winners include ________ and losers include ________.
A)U.S.consumers and taxpayers; foreign firms that rely on U.S.exports
B)firms sheltered from foreign competition; U.S.consumers and taxpayers
C)U.S.firms that rely on exports to foreign countries; foreign manufacturers
D)the U.S.government; firms sheltered from foreign competition
Q3) Over the past several decades there has been a rapid growth in international trade.This growth has been due to all except one of the following factors.Which factor has not contributed to the growth of international trade?
A)the spread of reliable communications
B)a change in the tariffs charged on many goods
C)a reduction in shipping costs
D)favorable changes in government policies
Page 9
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Chapter 8: GDP: Measuring Total Production and Income
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Sample Questions
Q1) Why do we not count the value of intermediate goods and services in gross domestic product? Does the value of intermediate goods and services show up in gross domestic product? If so,how?
Q2) Real GDP is GDP in a given year
A)adjusted only for anticipated inflation.
B)adjusted only for unanticipated inflation.
C)valued in the prices of that year.
D)valued in the prices of the base year.
Q3) Which of the following could cause nominal GDP to increase,but real GDP to decrease?
A)The price level rises and the quantity of final goods and services produced rises.
B)The price level rises and the quantity of final goods and services produced falls.
C)The price level falls and the quantity of final goods and services produced rises.
D)The price level falls and the quantity of final goods and services produced falls.
Q4) If the value added of a firm is positive,will the firm necessarily have positive profits?
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Chapter 9: Unemployment and Inflation
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Q1) Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?
Q2) Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?
Q3) Efficiency wage is another name for the minimum wage. A)True B)False
Q4) To understand why someone cannot get a job,it helps to know the three types of unemployment.List the three types of unemployment and explain what causes each type.What advice for finding a job would be appropriate for someone in each type of unemployment?
Q5) If inflation is positive and is perfectly anticipated, A)those that borrow money lose. B)those that lend money lose. C)those that hold paper money lose. D)no one in the economy loses.
Q6) Explain what economists mean by full employment and why this rate of unemployment is not zero.
Page 11
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Chapter 10: Economic Growth, the Financial System, and Business Cycles
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Sample Questions
Q1) Which of the following indicates that the U.S.economy has become more stable since 1950?
A)longer recessions
B)shorter expansions
C)less severe fluctuations in real GDP
D)All of the above indicate that the U.S.economy has become more stable since 1950.
Q2) Following the September 11,2001,terrorist attacks,the managers of many hotels expected a prolonged period of reduced travel and responded by laying off workers and postponing or canceling new construction.Isadore Sharp,the chairman and CEO of Four Seasons Hotels,decided to
A)continue expanding and was able to maintain or enhance the company's market share.
B)continue expanding and the company ended up losing significant market share.
C)curtail expansion plans,and by significantly cutting back on expansion was able to maintain the company's market share.
D)curtail expansion plans and the company ended up losing significant market share.
Q3) How are unemployment,inflation,and the business cycle related?
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Page 12
Chapter 11: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Refer to Figure 11-4.Which of the following combinations of points illustrates changes in the Soviet Union's economy from 1950 to 1980?
A)E to B
B)B to D
C)B to E
D)A to B to C
Q2) For how long does a patent give a firm the exclusive legal right to a product?
A)10 years
B)17 years
C)20 years
D)50 years
Q3) Your friend does not understand the benefits of globalization.Outline for your friend the positive economic aspects of globalization.
Q4) In the United States,the annual growth rate of real GDP per hour worked between 1996 and 2012 averaged
A)-0.3%.
B)1.9%.
C)6.9%.
D)10.2%.
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Chapter 12: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) Refer to the Article Summary.The increase in consumer spending discussed in the article summary was due in part to an improving housing market.This reason for the increase in consumer spending is most closely related to which of the following variables that determine the level of consumption?
A)the interest rate
B)current disposable income
C)household wealth
D)the price level
Q2) Refer to Figure 12-1.If the economy is at point L,what will happen?
A)Inventories have fallen below their desired level,and firms decrease production.
B)Inventories have fallen below their desired level,and firms increase production.
C)Inventories have risen above their desired level,and firms decrease production.
D)Inventories have risen above their desired level,and firms increase production.
Q3) The larger the MPS,the smaller the value of the multiplier.
A)True
B)False
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Chapter 14: Money, banks, and the Federal Reserve System
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Q1) In 2008,the Fed and the Treasury began attempting to stabilize the commercial banking system through the Troubled Asset Relief Program (TARP)by
A)allowing domestic banks to be taken over by foreign banks.
B)permitting banks to sell commercial bonds to the Federal Reserve Bank.
C)allowing banks to double any outstanding claims for federal deposit insurance reimbursements.
D)providing funds to banks in exchange for stock.
Q2) Liquidity increases as we move from the M1 to the M2 definition of the money supply.
A)True
B)False
Q3) 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.
Q4) How do open market operations work?
Q5) What is the principle monetary policy tool used by the Fed.Why?
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Chapter 15: Monetary Policy
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Sample Questions
Q1) If the Fed raises the interest rate,this will ________ inflation and ________ real GDP in the short run.
A)reduce; raise
B)increase; lower
C)increase; raise
D)reduce; lower
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)is a more narrow,focused measure of inflation.
B)is a chain-type price index that allows the mix of products to change each year.
C)includes the prices of industrial equipment.
D)includes the prices of goods,but not services.
Q3) The Fed can increase the federal funds rate by
A)selling Treasury bills,which increases bank reserves.
B)buying Treasury bills,which increases bank reserves.
C)selling Treasury bills,which decreases bank reserves.
D)buying Treasury bills,which decreases bank reserves.
Q4) What problems can high inflation rates cause for the economy?
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Page 17
Chapter 18: Macroeconomics in an Open Economy
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Sample Questions
Q1) What two measures of macroeconomic activity are often referred to as the "twin deficits"?
A)net capital flows and net exports
B)the foreign exchange deficit and net foreign investment
C)the budget deficit and the trade balance
D)the saving-investment deficit and the export deficit
Q2) If there is currently a shortage of dollars,which of the following would you expect to see in the foreign exchange market?
A)The dollar will appreciate.
B)The dollar will depreciate.
C)There will be an increase in the demand for dollars.
D)There will be an increase in the supply of dollars.
Q3) Refer to the Article Summary.All else equal,a depreciation of the Indian rupee relative to a currency such as the U.S.dollar should ________ Indian exports and ________ imports to India.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease
Q4) Why is the balance of payments always zero?
Page 20
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Chapter 19: The International Financial System
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Sample Questions
Q1) A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,what is the dollar cost of a Big Mac in Brazil?
A)$0.89
B)$2.25
C)$4.50
D)$8.00
Q2) If the rate of productivity growth in the United States exceeds the rate of productivity growth in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.
A)True
B)False
Q3) What are the three main exchange rate systems,and how do they operate?
Q4) A currency pegged at a value above the market equilibrium exchange rate is A)overvalued.
B)undervalued.
C)achieving purchasing power parity.
D)depreciating in value relative to its pegged currency.
Q5) What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?
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