Intermediate Macroeconomics
Exam Answer Key
Course Introduction
Intermediate Macroeconomics builds upon basic economic principles to deepen students' understanding of how economies function at the aggregate level. The course explores the dynamics of national income, output, and employment, examining theories such as the IS-LM model, aggregate demand and supply, and the intricacies of fiscal and monetary policy. Students analyze how economic shocks, policy interventions, and expectations influence macroeconomic stability, economic growth, inflation, and unemployment. Case studies and current events are often used to highlight real-world applications, enhancing students' analytical skills and their ability to interpret macroeconomic data and trends.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn Hubbard
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15 Chapters
2116 Verified Questions
2116 Flashcards
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2
Chapter 1: Economics: Foundations and Models
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Abigail's Auto Art is a company that applies pinstripes to vehicles. Abigail's cost for a basic 1-colour pinstriping job is $40, and she charges $100 for this service. For a total price of $185, Abigail will apply a fancier 3-colour pinstripe application to an automobile, a service that adds an additional $50 to the total cost of the package. Should Abigail continue to offer the 3-colour pinstripe application?
A)Yes, she still makes a profit by selling the 3-colour application.
B)Yes, but only if she lowers the price of the 1-colour application.
C)No, her marginal benefit is less than her marginal cost.
D)More information is needed for Abigail to make this decision.
Answer: A
Q2) The term 'market' refers to trading arrangements by which buyers and sellers come together.
A)True
B)False
Answer: True
Q3) Scarcity is a problem that will eventually disappear as technology advances.
A)True
B)False
Answer: False
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Page 3
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) A major factor contributing to the slow growth rate of less developed economies is:
A)the lack of well-defined and enforceable property rights.
B)the lack of natural resources.
C)the lack of workers.
D)the high rate of illiteracy.
Answer: A
Q2) The payment received by suppliers of entrepreneurial skills is called 'interest'.
A)True
B)False
Answer: False
Q3) Refer to Table 2.5. What is Barney's opportunity cost of making a pogo stick?
A)1/2 unicycle
B)2 unicycles
C)1/3 unicycle
D)1.4 pogo sticks
Answer: A
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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) Refer to Figure 3.1. An increase in population would be represented by a movement from:
A)A to B.
B)B to A.
C)D to D .
D)D to D .
Answer: C
Q2) The cost of raising beef cattle has risen at the same time as consumer preference for beef has fallen. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.
A)increasing; increasing or decreasing
B)increasing or decreasing; decreasing
C)decreasing; increasing or decreasing
D)increasing or decreasing; increasing
Answer: B
Q3) A 'surplus' occurs when the actual selling price is above the market equilibrium price. A)True
B)False
Answer: True
Page 5
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Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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123 Flashcards
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Sample Questions
Q1) What is usually the smallest component of spending in GDP in Australia?
A)consumption spending
B)net export spending
C)government spending
D)investment spending
Q2) If an Australian firm produces televisions in China, that production should count toward:
A)Australia's GDP.
B)China's GNI.
C)Australia's GNI.
D)It will not affect either Australia's GNI or Australia's GDP.
Q3) The components of the expenditure method of measuring GDP include all of the following except:
A)net exports.
B)changes in stocks of inventories.
C)government purchases.
D)unpaid household work.
Q4) Nominal GDP is GDP measured in current prices and can be smaller than real GDP.
A)True
B)False
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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) Refer to Figure 5.1. If the current real interest rate is 5%, which of the following is true?
A)The loanable funds market is in equilibrium.
B)There is a surplus of loanable funds in the market.
C)There is a shortage of loanable funds in the market.
D)The quantity of loanable funds being demanded in the market is less than $90 million.
Q2) Suppose you are an advisor to the federal government. You are asked to look at macroeconomic data to evaluate whether the economy has entered an economic contraction this year. Which data do you look at? How does the economy behave at the onset of an economic contraction?
Q3) The 'rule of 70' states that it takes approximately 70 years for a developing economy to become a developed economy once economic growth begins.
A)True
B)False
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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) Maxwell, a German citizen, just purchased 100 shares of stock in Ford Motor Company, an American company. This purchase is an example of:
A)foreign direct investment.
B)foreign portfolio investment.
C)foreign public investment.
D)contractual globalisation.
Q2) Which of the following policies does not promote savings in an economy?
A)deferring taxes on interest earned
B)making the interest on bonds tax-free
C)establishing a program of investment tax credits
D)lowering a sales tax
Q3) Which of the following countries actually experienced negative economic growth from 1960 to 2011?
A)Israel
B)South Korea
C)Niger
D)Malaysia
Q4) Technological change causes a movement along a per-worker production function.
A)True
B)False
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Chapter 7: Unemployment
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120 Flashcards
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Sample Questions
Q1) Joe just told his boss that he thinks his boss is stupid. What type of unemployment is Joe likely to experience in the near future?
A)frictional
B)cyclical
C)permanent
D)structural
Q2) Unemployment in Australia is:
A)significantly higher among older people than younger people.
B)one of the main causes of poverty.
C)not the cause of an increase in poverty as unemployed people receive unemployment benefits from the government.
D)equally distributed across all age groups in society.
Q3) The 'labour force' is the sum of:
A)employed workers and unemployed workers.
B)employed workers and individuals not looking for work.
C)employed workers and the working-age population.
D)unemployed workers and the working-age population.
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Chapter 8: Inflation
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110 Flashcards
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Sample Questions
Q1) If nominal wages rise slower than the price level, then real wages have ________ and the purchasing power of income has ________.
A)fallen; fallen
B)fallen; risen
C)risen; risen
D)risen; fallen
Q2) The 'GDP deflator includes the price changes of all newly produced goods and services while the 'consumer price index' only includes the price changes of some newly produced goods and services.
A)True
B)False
Q3) There is a negative relationship between real interest rates and inflation rates.
A)True B)False
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 happened to government purchases between 1960 and 2016?
A)they generally fell
B)they generally grew
C)they grew steadily but declined during recessions
D)they fluctuated significantly
Q2) If the economy is currently at point N in Figure 9.2, which of the following could cause it to move to point K?
A)households expect future income to decline
B)household wealth rises
C)the firm's cash flow rises as profits rise
D)government expenditures increase
Q3) If an increase in investment spending of $30 million results in a $300 million increase in equilibrium real GDP, then the multiplier is:
A)1.0.
B)10.
C)100.
D)0.1.
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Page 11
Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) In Figure 10.2, given the economy is at point A in year 1 and point B in year 2, what will happen to the unemployment rate in year 2?
A)It will rise.
B)It will fall.
C)It will remain constant.
D)There is not enough information to answer the question.
Q2) Along a short-run aggregate supply curve, a decrease in the price level causes:
A)firms to increase their production levels, as the lower prices will increase consumer demand.
B)no change in output to occur, as at the macroeconomic level, the price level does not affect supply.
C)firms to reduce their production levels.
D)production levels to rise as the price of inputs become cheaper.
Q3) Explain how the aggregate demand and supply model can be made more dynamic.
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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) Among potential stores of value, money:
A)offers the highest rate of return.
B)increases in value during periods of inflation.
C)has the advantage of being the most liquid asset.
D)provides more services than other assets.
Q2) Which of the following is not a function of money?
A)medium of exchange
B)unit of account
C)store of value
D)standard of barter
Q3) If you open a savings account at a bank, the bank will record the transaction by increasing its ________ account and increasing its ________ account.
A)deposit; reserve
B)deposit; liability
C)reserve; loan
D)loan; deposit
Q4) An economy without money would have no exchanges of goods and services.
A)True
B)False
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Chapter 12: Monetary Policy
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116 Flashcards
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Sample Questions
Q1) An increase in the supply of cash on the overnight money market will lead to a(n)____________ in interest rates and a(n)_________ in investment expenditure. A)decrease; decrease B)increase; decrease C)decrease; increase D)increase; increase
Q2) If the Reserve Bank of Australia buys bonds and securities in the open market, this is likely to lead to a ______ in interest rates and a(n)_______ of the Australian dollar.
A)rise; appreciation
B)rise; depreciation
C)fall; appreciation
D)fall; depreciation
Q3) Explain how the Reserve Bank of Australia maintains its targeted cash rate on a daily basis.
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14
Chapter 13: Fiscal Policy
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Suppose that the current equilibrium GDP for a country is $14.5 trillion and that potential GDP is $14.3 trillion. Will decreasing government purchases by $200 billion or raising taxes by $200 billion restore the economy to potential GDP? Briefly explain why.
Q2) Which of the following is a government 'expenditure' and not a government 'purchase'?
A)The federal government buys a new ship for the defence force.
B)The federal government pays the salary of police.
C)The federal government pays unemployment benefits.
D)The federal government pays to support medical research on AIDS.
Q3) 'Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand.
A)True B)False
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Chapter 14: Macroeconomics in an Open Economy
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) If S = national saving, I = private investment and NFI = net foreign investments, then:
A)S + I = NFI.
B)S = I + NFI.
C)S = I - NFI.
D)S + NFI = I.
Q2) Since the 1970s in Australia, net primary income has been:
A)positive due to export earnings.
B)mostly negative, but occasionally positive due to dividends on shares going overseas.
C)negative as imports have usually exceeded exports.
D)negative due to interest repayments on foreign debt.
Q3) When Australia sends money to the Philippines to help typhoon survivors, the transaction is recorded in the:
A)capital account.
B)current account.
C)financial account.
D)foreign exchange account.
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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) A currency exchange rate system under which the currency is determined by demand and supply, and occasional government intervention is a:
A)floating currency system.
B)fixed currency system.
C)managed float exchange rate system.
D)gold standard system.
Q2) The United States capital market is larger than all other capital markets combined.
A)True
B)False
Q3) Foreign currency prices of the Australian dollar are currently determined by a managed float exchange rate system.
A)True
B)False
Q4) The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.
A)True
B)False
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