Intermediate Macroeconomics
Final Exam
Course Introduction
Intermediate Macroeconomics explores the fundamental principles and models that economists use to understand aggregate economic behavior. The course examines topics such as national income determination, economic growth, unemployment, inflation, and the role of fiscal and monetary policy in stabilizing the economy. Students will analyze the short-run and long-run performance of economies using models like the IS-LM framework and the AD-AS model, as well as discussing open economy considerations and contemporary macroeconomic challenges. Emphasis is placed on developing analytical skills and applying theoretical tools to real-world economic issues.
Recommended Textbook Principles of Macroeconomics 5th Edition by Robert Frank
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15 Chapters
1841 Verified Questions
1841 Flashcards
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Page 2
Chapter 1: Thinking Like an Economist
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. As a result:
A) attending State U. for four years is costless for Alex.
B) Alex has no incentive to work hard while at State U.
C) the cost of attending State U. is the amount of money Alex could have earned working for four years.
D) the cost of attending State U. is the sum of the benefits Alex would have had attending each of the four other schools to which Alex had been admitted.
Answer: C
Q2) The incentive principle is an example of:
A) an economic decision-making pitfall.
B) over-estimating the benefits of an action.
C) a positive economic principle.
D) a normative economic principle.
Answer: C
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Chapter 2: Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) The United States has a comparative advantage in producing books and movies because:
A) New York and Hollywood are the historic centers of book publishing and movie production.
B) wages for workers who print books and make movies are lower in the United States than elsewhere.
C) the English language is understood by many people all over the world.
D) the United States gives generous tax breaks to publishers and movie producers.
Answer: C
Q2) Suppose that a further increase in specialization allows a country to increase total output by 10%, but afterward it was discovered that work absenteeism increased by 30%.
This is likely an example of:
A) modern production.
B) too much specialization.
C) too little specialization.
D) inefficiencies caused by labor unions.
Answer: B
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Chapter 3: Supply and Demand
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Last summer, real estate prices in your town soared. You started noticing more "For Sale" signs in your neighbors' yards. You conclude that:
A) people don't like to live in your neighborhood anymore.
B) when housing prices rose, they started to exceed some of your neighbors' reservation prices.
C) the demand curve for housing in your town has shifted to the left while supply remained constant.
D) the supply curve for housing in your town has shifted to the right while demand has remained constant.
Answer: B
Q2) The entire group of buyers and sellers of a particular good or service makes up:
A) only the demand curve.
B) only the supply curve.
C) a market.
D) the equilibrium.
Answer: C
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Chapter 4: Macroeconomics: the Birds-Eye View of the Economy
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Government purchases include all of the following EXCEPT:
A) social security benefits paid by the federal government.
B) the construction of a new court house built by a county government.
C) the salary paid to an elementary school teacher employed by a local public school district.
D) the purchase of new military hardware by the U.S. Army.
Q2) To compare the change in physical production (GDP) between 2000 and 2006, we should compare ______ GDP in 2000 with ______ GDP in 2006.
A) real; real
B) real; nominal
C) nominal; nominal
D) current dollar; current dollar
Q3) Capital income in the U.S. equals approximately ______ of GDP.
A) one third
B) two fifths
C) one half
D) two thirds
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Page 6
Chapter 5: Measuring Economic Activity: Gdp and Unemployment
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) The consumer price index for the current year measures the cost of a standard basket in the ______ year relative to the cost of the same basket in the ______ year.
A) current; base
B) current; current
C) base; index
D) base; current
Q2) Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car is 10 percent higher than the discontinued model, but the new car also includes additional safety features. In this situation the CPI will tend to ______ inflation as a result of ______ bias.
A) overstate; substitution
B) understate; quality adjustment
C) accurately measure; substitution
D) overstate; quality adjustment
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Chapter 6: Measuring the Price Level and Inflation
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) If the existence of alternative opportunities makes people become less willing to work in poultry processing plants, then the real wage of unskilled workers in poultry processing plants is predicted to ______ and the employment of unskilled workers in poultry processing plants is predicted to ______.
A) increase; increase B) increase; decrease C) increase; not change D) decrease; decrease
Q2) If there is a floor on wages created by a minimum wage, union contracts, or other factors, then a decline in the marginal productivity of low-skilled workers will ______ the demand for low-skilled workers and ______ the number of unemployed workers. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase
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8
Chapter 7: Economic Growth, Productivity, and Living Standards
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) A government policy that allows retirement savings to accumulate tax-free is an example of a policy to promote economic growth by:
A) increasing human capital.
B) increasing physical capital.
C) improving technology.
D) increasing the availability of natural resources.
Q2) Over the period from 1870 to 2008, the growth of real GDP per capita tended to be more rapid between _____, particularly for _____.
A) 1870-1950; Japan
B) 1870-1950; the United States
C) 1870-1950; Canada
D) 1950-2008; Japan
Q3) Real GDP per person can increase:
A) only if the share of the population employed increases.
B) only if the share of the population employed decreases.
C) only if average labor productivity increases.
D) if the share of population employed and/or average labor productivity increases.
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Page 9
Chapter 8: Workers, Wages, and Unemployment
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) A flow is a measure defined:
A) per unit of time.
B) at a point in time.
C) in real terms.
D) in nominal terms.
Q2) National saving is saving by:
A) households for retirement.
B) the government.
C) households and firms.
D) the entire economy.
Q3) The Hatfields and the McCoys both earn $50,000 per year in real terms in the labor market, and both families are able to earn a 25% real interest rate on their savings. In the year 2000, both families began to save. The Hatfields saved 8% of their income each year; the McCoys saved 10%. In 2000, the Hatfields consumed ______ more than the McCoys; in 2001, the Hatfields consumed ______ than the McCoys.
A) $1,000; $25 more
B) $2,000; $25 more
C) $1,000; $25 less
D) $2,000; $25 less
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Page 10
Chapter 9: Saving and Capital Formation
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Regular interest payments made to bondholders are called ______ payments.
A) diversification
B) reserve
C) coupon
D) dividend
Q2) When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as:
A) bank reserves.
B) a medium of exchange.
C) a unit of account.
D) a store of value.
Q3) In a fractional-reserve banking system the reserve/deposit ratio equals:
A) more than 100 percent.
B) currency held by the public divided by deposits.
C) 100 percent.
D) less than 100 percent.
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Chapter 10: Money, Prices, and the Federal Reserve
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) A country's actual output ______ potential output. A) can never exceed B) can never be below C) can temporarily exceed D) will always be approximately equal to
Q2) A period in which the economy is growing at a rate significantly above normal is called a(n):
A) depression.
B) expansion.
C) peak.
D) recession.
Q3) According to Okun's Law, each extra percentage point of ______ unemployment is associated with a ______ percentage point increase in the output gap.
A) frictional; 2
B) frictional; 4
C) cyclical; 2
D) cyclical; 4
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Page 12
Chapter 11: Financial Markets and International Capital Flows
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) The larger the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output.
A) larger; larger
B) larger; smaller
C) smaller; smaller
D) smaller; larger
Q2) The two parts of planned aggregate expenditure are ______ expenditures and ______ expenditures.
A) real; nominal
B) inflated; deflated
C) autonomous; induced
D) positive; normative
Q3) If planned aggregate expenditure (PAE) in an economy equals 3,000 + 0.75Y and potential output (Y*) equals 12,000, then this economy has:
A) an expansionary gap.
B) a recessionary gap.
C) no output gap.
D) no autonomous expenditure.
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Chapter 12: Short-Term Economics Fluctuations: An Introduction
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) The money demand curve will shift to the left if:
A) the nominal interest rate increases.
B) the nominal interest rate decreases.
C) price level increases.
D) real income decreases.
Q2) One of the serious drawbacks of the deposit insurance system instituted in the United States is that:
A) bank failures continue to occur regularly.
B) the system took away the Federal Reserve's ability to conduct open-market operations.
C) the system took away the Federal Reserve's ability to change reserve requirements.
D) if insured intermediaries make bad loans, the taxpayers may be responsible for covering the losses.
Q3) The interest rate that commercial banks charge each other for very short-term loans is called the:
A) prime rate.
B) federal funds rate.
C) Federal Reserve discount rate.
D) commercial paper rate.
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Chapter 13: Spending and Output in the Short Run
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Inflation inertia is the result of the behavior of ____ and the existence of ______.
A) the central bank; automatic stabilizers
B) real and nominal interest rates; an output gap
C) autonomous aggregate demand; the Fed's policy reaction function
D) inflation expectations; long-term wage and price contracts
Q2) When actual output equals potential output, there is ______ output gap and the inflation rate will ____.
A) an expansionary; exceed the expected rate of inflation
B) an expansionary; be lower than the expected rate of inflation
C) no; be equal to the expected rate of inflation
D) a recessionary; exceed the expected rate of inflation
Q3) Starting from potential output, if consumer confidence decreases and consumers decide to spend less, then this will shift the ______ curve to the left and generate ______.
A) aggregate demand; a recessionary output gap
B) aggregate supply; a recessionary output gap
C) aggregate demand; an expansionary output gap
D) aggregate supply; an expansionary output gap
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Chapter 14: Stabilizing the Economy: the Role of the Fed
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75 Verified Questions
75 Flashcards
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Sample Questions
Q1) Policymakers' use of stabilization policy to eliminate output gaps is more appropriate when an economy self corrects very ______ and when the output gap is very ____.
A) rapidly; large
B) rapidly; small
C) slowly; small
D) slowly; large
Q2) All of the following are characteristics of independent central banks EXCEPT:
A) long terms for central bankers.
B) no obligation to finance the national deficit.
C) budgetary independence.
D) ability of executive branch to overrule central bank actions.
Q3) Fiscal policy includes
A) tax policy only.
B) government expenditures only.
C) tax policy and government expenditures.
D) tax policy, government expenditures, and monetary policy.
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16
Chapter 15: Aggregate Demand, Aggregate Supply, and Inflation
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) A decrease in the value of a currency relative to other currencies is called a(n): A) revaluation.
B) devaluation.
C) appreciation.
D) depreciation.
Q2) A fixed exchange rate is an exchange rate whose value:
A) is established annually by the International Monetary Fund. B) varies according to the supply and demand for the currency in the foreign exchange market.
C) is set by official government policy.
D) reflects the comparative advantage of the home country versus other foreign countries.
Q3) The principal demanders of U.S. dollars in the foreign exchange market are:
A) foreigners wishing to purchase U.S. goods or assets.
B) the Federal Reserve.
C) U.S. households or firms wishing to purchase U.S. goods or assets.
D) U.S. households or firms wishing to purchase foreign goods or assets.
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Page 17