Intermediate Macroeconomics
Final Exam Questions
Course Introduction
Intermediate Macroeconomics explores the fundamental principles and analytical tools used to understand the functioning of national and global economies beyond the introductory level. This course examines topics such as economic growth, inflation, unemployment, monetary and fiscal policy, and the determinants of aggregate demand and supply. Students will engage with classical, Keynesian, and modern macroeconomic models to analyze real-world economic issues and policy debates. Emphasis is placed on developing the ability to interpret economic data, evaluate government policies, and understand the impact of various macroeconomic shocks on output, employment, and prices.
Recommended Textbook
ECON MACRO 6th Edition by William A. McEachern
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Chapter 1: The Art and Science of Economic Analysis
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Q1) Microeconomics is the study of:
A) the effect of an increase in money supply on interest rates.
B) the effect of an increase in interest rates on the level of investment in an economy.
C) the government's role as a distributor in an economy.
D) the economic behavior of individual decision makers.
E) the government's role as a producer in an economy.
Answer: D
Q2) In economics, capital refers to:
A) wages earned by workers.
B) dividends and interest earned by investors.
C) the foreign reserves held by governments.
D) machines, buildings, tools, and knowledge.
E) the net worth of firms.
Answer: D
Q3) A good economic theory brings clarity to chaos.
A)True
B)False
Answer: True
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Chapter 2: Economic Tools and Economic Systems
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Q1) In one week, Sami can knit 5 sweaters or bake 240 cookies. In one week, Leila can knit 15 sweaters or bake 480 cookies. Sami and Leila would produce the maximum quantities of both cookies and sweaters if _____
A) Sami knitted and baked and Leila did nothing.
B) Leila knitted and baked and Sami did nothing.
C) Sami knitted and Leila baked.
D) Leila knitted and Sami baked.
E) Sami knitted and baked and Leila just knitted.
Answer: D
Q2) The specialization of labor _____
A) increases productivity without creating any problems.
B) reduces productivity and is usually eliminated by business firms.
C) can create problems of boredom and repetitive motion injuries.
D) prevents the introduction of more sophisticated and efficient production techniques. E) ignores individual preferences and natural abilities.
Answer: C
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) The main source of revenue for local governments is _____
A) property taxes.
B) income and sales taxes.
C) individual income taxes.
D) corporate taxes.
E) foreign taxes.
Answer: A
Q2) Which of the following is not based on the benefits-received principle of taxation?
A) charging a fee for the use of public golf courses
B) differences between residential and out-of-state college tuition
C) tax on gasoline
D) toll booths on a highway
E) charging a fee per bag to haul away garbage
Answer: B
Q3) The fastest-growing component of U.S. personal consumption is services.
A)True
B)False
Answer: True
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Chapter 4: Demand, Supply, and Markets
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Sample Questions
Q1) Other things constant, the current supply curve of index cards is likely to shift to the right if _____
A) the price of the wood pulp used in the production of index cards increases.
B) the technology used in index card production becomes more expensive.
C) the price of index cards increases.
D) the price of its substitute good decreases.
E) the expected future price of index cards is lower than the current price.
Q2) Suppose the market for a good is in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good decrease during a particular point in time?
A) The equilibrium price will increase.
B) The equilibrium price will decrease.
C) The equilibrium quantity will increase.
D) The equilibrium quantity will decrease.
E) Both the equilibrium price and quantity will increase.
Q3) A price ceiling set above the equilibrium price of a good will result in a shortage.
A)True
B)False
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Chapter 5: Introduction to Macroeconomics
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Q1) The U.S. economy is ____ and most complex in world history.
A) the most volatile
B) the most stable
C) the largest
D) the most open
E) the most closed
Q2) One explanation for the slope of the aggregate demand curve is that _____
A) nominal income falls and so does the demand for goods and services as prices rise.
B) falling prices make people feel poorer and reduce spending.
C) the government spends less to drive the price level back to normal as prices rise.
D) businesses increase spending when inflation is high and rising.
E) domestic goods become more expensive relative to foreign goods when prices rise, reducing exports.
Q3) For a given aggregate supply curve, the price level and output will both increase when aggregate demand decreases.
A)True
B)False
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Chapter 6: Tracking the U S Economy
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Sample Questions
Q1) Chain-weighted indexes have less bias compared to fixed-weight indexes.
A)True
B)False
Q2) Which of the following is an example of a final good or service?
A) bricks purchased by a company for constructing houses
B) wheat purchased by a bakery
C) steel purchased by a company for manufacturing cars
D) a cup of coffee bought at a restaurant
E) a used car bought by a person
Q3) The base year for a price index is the year _____
A) in which prices were lowest.
B) in which prices were highest.
C) in which real output was the largest.
D) in which prices were stable.
E) that serves as a reference point.
Q4) Taxes are injections into the circular flow of income and expenditure model.
A)True
B)False
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Why is the U.S. unemployment rate important?
A) It increases the incentives to find work and increases unemployment.
B) It reduces the opportunity cost of remaining employed.
C) It increases the need to accept the first job available after becoming unemployed.
D) It provides a useful measure of trends across demographic groups, regions, and over time.
E) Economists are undecided.
Q2) In recent times, there has been a decline in the sale of newspapers in the United States as people prefer to read the news on the internet. This has caused many newspaper journalists to lose their jobs. This is an example of _____
A) structural unemployment.
B) frictional unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) underemployment.
Q3) Hyperinflation refers to a period of extremely erratic inflation rates.
A)True
B)False
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) One of the important points of criticism of industrial policy is that _____
A) it can lead to stiff competition among the domestic firms in an economy.
B) small domestic firms will not be able to survive economic clustering.
C) government-sponsored research will end up benefitting foreign countries.
D) it can prohibit regional innovations.
E) the know-how in one firm will not spill over to other firms in an economy.
Q2) Long-term growth in production can be explained by _____
A) improvements in the rules of the game that facilitate production and exchange.
B) a gradual but consistent rise in the price level.
C) a rapid and accelerating increase in the price level.
D) a trade surplus that leads to the accumulation of gold.
E) the peaks and troughs of economic fluctuations.
Q3) Which of the following best describes productivity?
A) Productivity is nominal GDP to a specific measure of output.
B) Productivity is real GDP to a specific measure of output.
C) Productivity is economic growth to a specific measure of output.
D) Productivity is the ratio of total output to a specific measure of input.
E) Productivity is the ratio of total input to a specific measure of output.
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases by $200, the multiplier equals _____
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.
Q2) Refer to Table 9.2, which shows the values of different components of aggregate expenditure of an economy. The equilibrium level of gross domestic product (GDP) is _____
A) $5.0 trillion.
B) $5.5 trillion.
C) $6.0 trillion.
D) $6.5 trillion.
E) $7.0 trillion.
Q3) An increase in the interest rate will increase consumption spending.
A)True
B)False
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11
Chapter 10: Aggregate Supply
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Sample Questions
Q1) An expansionary gap generally creates inflationary pressure in an economy.
A)True
B)False
Q2) A recessionary gap develops _____
A) when actual output exceeds potential output.
B) when resource prices are "sticky" upward.
C) only when the economy is in a recession.
D) only when GDP grows by more than 4 percent.
E) only when unemployment exceeds its natural rate.
Q3) Refer to Exhibit 10.8, which shows the long-run equilibrium in an aggregate demand-aggregate supply model. Which of the following is indicated by the arrow given?
A) a decrease in capital stock
B) an increase in long-run aggregate supply
C) an increase in nominal wage
D) a decrease in long-run aggregate supply
E) a decrease in the aggregate quantity demanded
Q4) An adverse supply shock generally decreases the price level and real GDP.
A)True
B)False
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) Which of the following is an example of an automatic stabilizer?
A) a decrease in tax rates by Congress in times of unemployment
B) a decrease in tax rates by Congress in times of inflation
C) an increase in government defense spending during war
D) an increase in unemployment compensation during recession
E) a decrease in welfare programs during inflation
Q2) What effect did the financial crisis have on credit markets around the world?
A) It did not affect the U.S. credit markets.
B) It did not affect the global markets.
C) It made credit markets more liquid.
D) It froze credit markets.
E) The crises only affected the stock market, not the credit market.
Q3) Which of the following measures did President Bush adopt in 2001 to get the economy moving again?
A) a hike in the wages of workers
B) a ten-year tax cut
C) an increase in taxes on high-income households
D) liquidation of money supply
E) Aa decrease in government spending
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Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) Simplifying the budget document by concentrating only on major groupings and eliminating line items would _____
A) ensure that cabinet members spend more time administering an approved budget and defending a proposed budget.
B) require longer-term economic forecasts that are difficult to obtain.
C) prevent elected officials from including projects they prefer for their personal gains in the budget.
D) increase the flexibility of the discretionary fiscal policy implemented by the federal government.
E) require shorter-term economic forecasts that are easy to obtain.
Q2) Discretionary policy deficits are associated with _____
A) increases in national saving.
B) higher prices.
C) lower transfer payments.
D) lower interest rates.
E) higher taxes.
Q3) When there are large federal budget deficits, the trade deficit tends to shrink.
A)True
B)False
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Chapter 13: Money and the Financial System
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Q1) The Federal Open Market Committee was established to give the Fed the power to change reserve requirements.
A)True
B)False
Q2) Financial institutions _____
A) accumulate funds from savers and lend them to borrowers.
B) accumulate funds from borrowers and lend them to savers.
C) borrow funds from the government and lend them to borrowers.
D) borrow funds from the government and lend them to savers.
E) print money.
Q3) The only money that can be used as a standard of value is fiat money.
A)True
B)False
Q4) Between 2006 and the middle of 2008, U.S. home prices plunged _____ on average.
A) 5 percent
B) 10 percent
C) 17 percent
D) 22 percent
E) 50 percent
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) Suppose the required reserve ratio is 0.2 and the Fed buys $5,000 of U.S. government securities from Bank A, which lends $4,000 and keeps $1,000 in its vault as cash. In this round of the money-creation process, the M1 money supply has increased by _____
A) $1,000.
B) $4,000.
C) $5,000.
D) $10,000.
E) $3,000.
Q2) About ____ of Federal Reserve notes are held abroad.
A) one-tenth
B) one-fifth
C) one-third
D) quarter
E) half
Q3) The narrow definition of the money supply includes only currency held by the nonbanking public.
A)True
B)False
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Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) In the aggregate demand-aggregate supply model in the short run, an increase in the money supply will lead to a(n) _____
A) increase in both the price level and real GDP.
B) increase in the price level only.
C) increase in real GDP and a decrease in the price level.
D) decrease in real GDP and an increase in the price level.
Q2) If the Fed adopts a contractionary monetary policy, eventually we can expect
A) aggregate demand to increase.
B) short-run aggregate supply to decrease.
C) interest rates to decrease.
D) planned investment expenditures to decrease.
E) real gross domestic product to increase.
Q3) The demand for money is a relationship between _____
A) the price level and the amount of cyclical unemployment.
B) the price level and the actual output produced in an economy.
C) the interest rate and how much money people choose to hold.
D) the interest rate and how much money people earn during a certain time period.
E) the interest rate and the rate of inflation.
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Chapter 16: Macro Policy Debate: Active or Passive?
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Sample Questions
Q1) According to rational expectations theory, people's predictions about the future course of governmental economic policy influence the position of the short-run aggregate supply curve.
A)True
B)False
Q2) The _____ lag is typically longer for fiscal policy than monetary policy.
A) supply
B) cyclical
C) effectiveness
D) implementation
E) recognition
Q3) The natural rate hypothesis states that _____
A) in the long run, the economy tends toward the natural rate of unemployment.
B) better discretionary policy can be expected to work.
C) the adjustment of the short-run Phillips curve is slow.
D) less macro policy can influence unemployment.
E) a passive policy can influence unemployment.
Q4) The long-run Phillips curve is located at the natural rate of unemployment.
A)True
B)False
Page 18
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Chapter 17: International Trade
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Q1) Exports account for _____ of the gross domestic product (GDP) in Germany, Sweden, and Switzerland.
A) one-sixth
B) one-third
C) one-quarter
D) half
E) two-thirds
Q2) The fourth largest category of U.S. exports in 2016 was _____, which accounted for _____ of total exports.
A) capital goods; 24 percent
B) services; 31 percent
C) industrial supplies; 18 percent
D) consumer goods; 11 percent
E) food; 6 percent
Q3) If resources are equally adaptable to the production of different goods, the production possibilities frontier of a country will be an upward-sloping concave curve.
A)True
B)False
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Chapter 18: International Finance
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Sample Questions
Q1) Suppose U.S. consumers start buying more English shoes and fewer American shoes. Which of the following will be a likely impact on the foreign exchange market?
A) U.S. demand for British pounds will increase.
B) U.S. demand for British pounds will decrease.
C) U.S. demand for British pounds will increase, but the demand for foreign exchange will decrease.
D) U.S. demand for British pounds will decrease, but the demand for foreign exchange will increase.
E) There would be no effect on the demand for foreign exchange in the United States.
Q2) The exchange rate is the _____
A) ratio of exports to imports.
B) interest rate the U.S. government charges on international loans.
C) percentage of domestic goods that are exported.
D) cost of one nation's currency in terms of another nation's currency.
E) rate that central banks charge commercial banks for currency exchanges.
Q3) Flexible exchange rates do not allow for discretionary monetary policy.
A)True
B)False
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Chapter 19: Economic Development
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Q1) More than half of the labor force in India is engaged in the manufacturing sector.
A)True
B)False
Q2) On average, about half of the labor force in developing countries works in agriculture, versus only about 3 percent in industrial market countries.
A)True
B)False
Q3) Most developing countries are in trouble whenever oil prices rise because _____
A) they are the major exporters of oil, and their export income falls.
B) it causes political instability in the countries.
C) it causes an increase in frictional unemployment.
D) higher oil prices drain the developing countries of foreign exchange.
E) it causes deflation in domestic economies.
Q4) An aging population poses fiscal problems for any country.
A)True
B)False
Q5) Most countries have received foreign aid for industrialization.
A)True
B)False
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