Intermediate Macroeconomics
Exam Questions
Course Introduction
Intermediate Macroeconomics builds upon foundational economic principles to analyze the behavior of aggregate economic variables such as output, inflation, unemployment, and interest rates. The course explores classical and modern macroeconomic models, including the IS-LM model, aggregate demand and aggregate supply, and the Solow growth model. It examines the roles of government policy, central banking, and international factors in shaping macroeconomic outcomes. Through theoretical frameworks and real-world applications, students learn to critically assess economic data, understand economic fluctuations, and evaluate policy responses to macroeconomic challenges.
Recommended Textbook
Macroeconomics 2nd Edition by Daron Acemoglu
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Page 2
Chapter 1: The Principles and Practice of Economics
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Sample Questions
Q1) Which of the following is a topic studied by microeconomists?
A) Energy consumption by a firm
B) Nationwide inflation rate
C) Economic growth as a means to alleviate poverty
D) Aggregate demand and aggregate supply in an economy
Answer: A
Q2) Which of the following best describes equilibrium?
A) A situation where the government intervenes to allocate resources
B) A situation where only one individual or firm makes an optimal decision
C) A situation where no economic agent would benefit by changing his or her behavior
D) A situation where economic agents do not optimize as they do not have perfect information
Answer: C
Q3) Empiricism refers to the process of ________.
A) measuring variables
B) testing ideas using data
C) collecting and organizing data
D) making choices using values and beliefs
Answer: B
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Page 3
Chapter 2: Economic Methods and Economic Questions
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Sample Questions
Q1) A natural experiment is an empirical study ________.
A) in which the predictions of the model are not required to be tested with data
B) that can only be used to understand natural phenomena and is widely used in subjects such as physics and biology
C) in which the researcher assigns subjects to the control and treatment groups to verify a cause-effect relationship
D) in which some process, outside the control of the experimenter, has assigned subjects to the control and treatment groups in a random or nearly random way
Answer: D
Q2) Which of the following graphical representations is ideal for comparing a single variable across different groups?
A) A histogram
B) A bar chart
C) A scatter plot
D) A time series graph
Answer: B
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Chapter 3: Optimization: Doing the Best You Can
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Sample Questions
Q1) Which of the following statements is true?
A) It is easier for a person to optimize when he has less information.
B) Optimization implies choosing the best option from a set of alternatives.
C) People always successfully optimize given the limited information they have.
D) Optimization is an easy process, and all economic agents are perfect optimizers.
Answer: B
Q2) Refer to the scenario above.What is the total cost incurred per month if Ryan rents Apartment 3?
A) $2,000
B) $2,050
C) $2,150
D) $2,270
Answer: C
Q3) Refer to the scenario above.Which of the following is the optimum choice?
A) Apartment Very Close
B) Apartment Close
C) Apartment Far
D) Apartment Very Far
Answer: D
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Page 5
Chapter 4: Demand, Supply, and Equilibrium
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Sample Questions
Q1) Which of the following is likely to lead to a rightward shift in the supply curve of cotton?
A) An increase in labor productivity due to training programs
B) A rise in labor costs due to wage demands by labor unions
C) An increase in the price of cotton
D) A decrease in the price of cotton
Q2) The willingness to pay for a commodity ________.
A) decreases as consumption of the commodity increases
B) increases as consumption of the commodity increases
C) is always less than the market price of the commodity
D) is always greater than the market price of the commodity
Q3) Refer to the table above.What is the surplus in the market when the price of a notebook is $9?
A) 16 units
B) 20 units
C) 24 units
D) 26 units
Q4) If there is excess demand in a perfectly competitive market,does the government need to intervene to restore the equilibrium price and quantity? Why or why not?
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Chapter 5: The Wealth of Nations: Defining and Measuring
Macroeconomic Aggregates
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Sample Questions
Q1) The value of a country's exports during a particular year was $120,000 and the value of its imports was $85,000.Which of the following is true?
A) The country ran a trade deficit of $35,000 during that year.
B) The country ran a trade surplus of $35,000 during that year.
C) The country ran a budget surplus of $205,000 during that year.
D) The country ran a fiscal deficit of $205,000 during that year.
Q2) Refer to the table above.What is the size of the labor force in Caddyville for 2013?
A) 62,200
B) 67,000
C) 74,000
D) 88,000
Q3) Refer to the above table.What is nominal GDP for 2017?
A) $6,900
B) $7,400
C) $7,700
D) $7,900
Q4) Explain the difference between the GDP deflator and the Consumer Price Index.
Q5) How does the presence of negative externalities affect the calculation of GDP?
Q6) Why is home ownership a source of capital income?
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Chapter 6: Aggregate Incomes
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Sample Questions
Q1) Refer to the scenario above.Computing a hypothetical GDP per capita for Country Y allows us to ________.
A) compare output in the two countries if workers were equally educated
B) compare output in the two countries if they had equal access to physical resources
C) compare output in the two countries if they had access to equal technology
D) all statements are correct
Q2) Why might we want to use the Human Development Index to compare standards of living between countries?
A) Because countries may have different currencies, so that we cannot compare GDP per capita.
B) Because we need to adjust for purchasing power parity between countries.
C) Because other factors, such as schooling and life expectancy, might vary between countries even if they have the same GDP per capita.
D) Because GDP per capita is inaccurate when there is income inequality in a country.
Q3) Explain the concept of PPP.
Q4) Can unionization in an industry adversely affect productivity? Explain your answer.
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Chapter 7: Economic Growth
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Sample Questions
Q1) Refer to the scenario above.If the world sustains this growth rate,approximately what will world GDP per capita be in 2020?
A) $13,500
B) $15,000
C) $16,400
D) $19,000
Q2) Refer to the scenario above.How does the average level of income in Gallifrey compare to the subsistence level?
A) Citizens of Gallifrey currently have incomes above subsistence, on average.
B) Citizens of Gallifrey currently have incomes equal to subsistence, on average.
C) Citizens of Gallifrey currently have incomes below subsistence, on average.
D) It is impossible to answer this question without additional information.
Q3) If the aggregate saving in an economy is $1,750 and the GDP of the economy is $55,000,then the saving rate in the economy is ________.
A) 1.8 percent
B) 3.18 percent
C) 8.96 percent
D) 10 percent
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Chapter 8: Why Isn't the Whole World Developed?
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Sample Questions
Q1) Which of the following statements is true?
A) The government plays absolutely no role in economies characterized by communism.
B) The government plays absolutely no role in economies characterized by market economies.
C) Competition among firms is likely to be higher in communist economies than in market economies.
D) Competition among firms is likely to be higher in market economies than in communist economies.
Q2) What was the main cause for the reversal of fortune of many countries?
Q3) If an economy with extractive institutions allows for political creative destruction,then ________.
A) new leaders are likely to replace old leaders
B) poverty in the economy is likely to increase
C) the growth rate of the economy is likely to decrease
D) innovation in the economy is likely to decrease
Q4) Assume that you are in charge of an agrarian colony of a European nation.What are the different extractive policies that can be adopted to maximize the wealth of the home nation?
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Page 10
Chapter 9: Employment and Unemployment
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Sample Questions
Q1) As a firm hires more and more workers,________.
A) the marginal product of the additional workers remains the same
B) the value of the marginal product of the additional workers remains the same
C) the value of the marginal product of the additional workers eventually increases
D) the value of the marginal product of the additional workers eventually decreases
Q2) Refer to the scenario above.Which of the following situations would lead to the person no longer being considered unemployed?
A) Jim does not accept a job as a car salesman, because he wants to continue selling paper.
B) Michael is unable to find another company willing to hire him as a manager, so he starts looking for other employment opportunities.
C) Pam learns that she is pregnant and postpones her job search.
D) Angela turns down a job offer from Planned Parenthood because it goes against her moral principles.
Q3) Why is the labor demand curve downward-sloping?
Q4) What is downward wage rigidity?
Q5) How do efficiency wages help increase a firm's profits?
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Page 11
Chapter 10: Credit Markets
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Sample Questions
Q1) Which of the following statements is true?
A) If the opportunity cost of current consumption is high, people will save more.
B) If the opportunity cost of current consumption is high, people will save less.
C) If the opportunity cost of current consumption is high, the inflation rate will increase.
D) If the opportunity cost of current consumption is high, the unemployment rate will decrease.
Q2) Assuming all else equal,if the real interest rate increases,it will lead to ________.
A) a decrease in the quantity of credit demanded by a firm
B) an increase in the quantity of credit demanded by a firm
C) a right shift of the credit demand curve of a firm
D) a left shift of the credit demand curve of a firm
Q3) Refer to the table above.What is the value of demand deposits?
A) $500
B) $775
C) $1,000
D) $1,375
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Chapter 11: The Monetary System
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Sample Questions
Q1) Suppose the U.S.economy is recovering from a long recession.How will this affect the demand curve for reserves and the federal funds rate? Explain with a diagram.
Q2) Suppose that the money supply increases by 10 percent while real GDP increases by 6 percent.What does the quantity theory of money predict the inflation rate will be?
A) 4 percent
B) 6 percent
C) 10 percent
D) 16 percent
Q3) Suppose you have borrowed money from a bank to buy a house.Which of the following will happen if the inflation rate unexpectedly rises?
A) You will be better off.
B) You will be worse off.
C) The bank's shareholders will be better off.
D) The real cost of your mortgage will rise.
Q4) What can the central bank of Autarkia do to lower the rate that banks charge one another for overnight loans? How will this affect the economy if it is facing a downturn?
Q5) Is there any risk involved in using fiat money? How can it be minimized?
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Page 13
Chapter 12: Short-Run Fluctuations
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Sample Questions
Q1) The nominal interest rate in Autarkia has risen sharply after a change in a government policy.How will this affect the economy if the wages in the country are downwardly rigid?
Q2) Contractionary monetary policy causes ________.
A) the aggregate price level to rise
B) the aggregate price level to fall
C) real interest rates to fall
D) real output to rise
Q3) How is a firm's labor demand curve affected when the price of its product rises?
Q4) Agriculture is the primary occupation in Agraria,and agricultural products account for two-thirds of Agraria's GDP.How will a sharp fall in the price of agricultural products affect Agraria's economy if the demand for such products is unaffected by changes in their prices?
Q5) Which of the following is likely to happen if the level of technology used in an economy improves,assuming all else equal?
A) The economy's labor demand curve will shift to the right.
B) The economy's labor demand curve will shift to the left.
C) There will be an upward movement along the labor demand curve.
D) There will be a downward movement along the labor demand curve.
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Chapter 13: Countercyclical Macroeconomic Policy
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Sample Questions
Q1) The central bank conducts countercyclical ________ policies by manipulating
A) monetary; interest rates and inflation rates
B) monetary; interest rates and bank reserves
C) fiscal; interest rates and bank reserves
D) fiscal; interest rates and inflation rates
Q2) An increase in reserves held by the Fed ________.
A) reduces the federal funds interest rate
B) reduces the price level
C) increases the tax rates
D) increases unemployment
Q3) Suppose the inflation rate target is zero and the long-run federal funds target is also zero.Calculate the federal funds rate if the current inflation rate is 5 percent and real output is 4.5 percent below the trend output level.
A) 2.25 percent
B) 0.5 percent
C) 5.25 percent
D) 0.25 percent
Q4) What is "pork barrel spending"?
Q5) Explain the concept of the zero lower bound.
Page 15
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Chapter 14: Macroeconomics and International Trade
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Sample Questions
Q1) A U.S.company selling cameras to a Japanese company is an example of a(n)________.
A) export to the United States
B) import by Japan
C) foreign direct investment by the United States
D) transfer payment to the United States
Q2) Refer to the scenario above.Which of the following is true in this case?
A) Mark has both comparative and absolute advantage in making tables.
B) John has both comparative and absolute advantage in making tables.
C) Mark has both comparative and absolute advantage in making chairs
D) John has both comparative and absolute advantage in making chairs.
Q3) Why do current account deficits always match financial account inflows?
Q4) There exists a strong ________ correlation between GDP per capita and
A) positive; mortality rate
B) negative; child labor
C) positive; the unemployment rate
D) negative; life expectancy
Q5) International trade flows only in goods,not services.
A)True
B)False
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Chapter 15: Open Economy Macroeconomics
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Sample Questions
Q1) If 1,000 British pounds buy more U.S.dollars today than they did yesterday,then the British pound has ________ and the U.S.dollar has ________.
A) appreciated; appreciated
B) depreciated; appreciated
C) appreciated; depreciated
D) depreciated; depreciated
Q2) Refer to the figure above.When the real exchange rate is below R*,there is a trade surplus.
A)True
B)False
Q3) The government of country A has decided to maintain an exchange rate of 1 unit of its currency for 6 U.S.dollars in the long run.Country A can be said to have a ________.
A) nominal exchange rate system
B) fully flexible exchange rate system
C) fixed exchange rate system
D) managed exchange rate system
Q4) Are exchange rates and unemployment rates related? If so,how?
Q5) What is the definition of the real exchange rate?
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