Intermediate Macroeconomics
Question Bank
Course Introduction
Intermediate Macroeconomics offers an in-depth exploration of the principles governing aggregate economic activity, building on foundational macroeconomic concepts. The course delves into national income determination, economic growth, unemployment, inflation, and the effects of fiscal and monetary policy. Students engage with theoretical models such as the IS-LM framework, the AS-AD model, and the Solow growth model, applying them to analyze real-world economic issues. Emphasis is placed on understanding the empirical relevance of these models and interpreting macroeconomic data, equipping students to critically assess policy debates and macroeconomic trends in the global economy.
Recommended Textbook
Macroeconomics A Contemporary Introduction 9th Edition by William A. McEachern
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26 Chapters
3954 Verified Questions
3954 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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147 Flashcards
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Sample Questions
Q1) Which of the following is a normative statement?
A)The U.S. rate of unemployment was lower in 2004 than it was in 1994.
B)Savings accounts earn interest, whereas checking accounts do not.
C)Congress must recognize that the growing national debt is the most serious problem that the country faces.
D)The unemployment rate increases when the percentage of the labor force without jobs increases.
E)The unemployment rate among teenagers is higher than the rate among adults.
Answer: C
Q2) When economists refer to capital, they might mean
A)money
B)human skills used in production
C)stocks
D)bonds
E)bank loans
Answer: B
Q3) Economic theory allows us to predict the behavior of a specific person or firm.
A)True
B)False
Answer: False
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Chapter 2: Economic Tools and Economics Systems
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195 Flashcards
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Sample Questions
Q1) Eileen has a comparative advantage over Jan in piano tuning but not in shoe polishing. Therefore,
A)Jan must have an absolute advantage in piano tuning
B)Eileen must have an absolute advantage in shoe polishing
C)Jan must have a lower opportunity cost of shoe polishing
D)Eileen must have an absolute advantage in shoe polishing and in piano tuning
E)Eileen must have an absolute advantage in piano tuning
Answer: C
Q2) It is possible for one person to have an absolute advantage in something even if she has no comparative advantage in anything.
A)True
B)False
Answer: False
Q3) Points inside the production possibilities frontier represent
A)full and efficient use of all resources
B)inefficiency or unemployment (or both)
C)currently unattainable combinations of outputs
D)currently unattainable combinations of resources
E)the most desirable combinations of outputs
Answer: B
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Chapter 3: Economic Decision Makers
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200 Flashcards
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Sample Questions
Q1) What part of federal government spending has grown the most slowly in recent decades?
A)national defense
B)welfare
C)interest on the national debt
D)social security and medicare
E)all other forms of federal government spending
Answer: A
Q2) Which of the following did not occur during the Industrial Revolution?
A)Production became more reliant on highly specialized equipment.
B)A more efficient division of labor was promoted.
C)Workers bore much of the costs of production.
D)The transaction costs of contracting with individual resource owners were reduced.
E)Technological development increased the productivity of most workers.
Answer: C
Q3) Gasoline taxes illustrate the benefits-received principle of taxation.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand Supply and Markets
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232 Flashcards
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Sample Questions
Q1) Suppose demand decreases and supply decreases. Which of the following will happen?
A)equilibrium price will increase
B)equilibrium price will decrease
C)equilibrium quantity will increase
D)equilibrium quantity will decrease
E)neither the equilibrium price nor the quantity will change
Q2) In Exhibit 4-4, suppose a price floor is established at $20.00. What is the result?
A)a shortage of 10 units
B)a surplus of 10 units
C)a shortage of 20 units
D)a surplus of 20 units
E)there is no change from the situation that exists at the equilibrium price
Q3) The market supply curve of a particular product indicates the total quantities
A)that are actually sold during a given time period
B)that buyers are willing to purchase at alternative prices
C)that sellers are willing and able to offer at alternative prices
D)that sellers are willing to offer for sale
E)of complements offered for sale
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Page 6
Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) Fine-tuning the economy means
A)making government economic policy more "people oriented"
B)using government policies to adjust the economy and promote economic stability
C)tinkering with microeconomic problems such as externalities and losing sight of the big picture
D)placing fewer regulations on the private sector, thereby eliminating the need for government intervention
E)designing policies based exclusively on the leading economic indicators
Q2) Between the Troubled Asset Relief Program and the American Recovery and Reinvestment Act, the Federal budget deficit
A)doubled
B)tripled
C)stayed the same
D)was cut in half
E)quadrupled
Q3) Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.
A)True
B)False
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Page 7
Chapter 6: Tracking the Us Economy
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Sample Questions
Q1) Which of the following would increase GDP?
A)More people walk to work rather than drive cars.
B)Consumers in rural areas switch from buying home heating oil to burning wood they collect on their own land.
C)Farm families grow more for themselves than for the market.
D)Neither the price nor the quantity of television sets changes, but the quality of sets improves.
E)The amount spent on vacuum cleaners does not change, but quality decreases so much that more is spent on their repair.
Q2) The value added at all production stages sums to the market value of the final good, and the value added for all final goods sums to GDP based on the income approach.
A)True
B)False
Q3) GDP understates total economic activity because it ignores household production of goods and services.
A)True
B)False
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) The labor force consists of all
A)the people in the economy who are not retired
B)people in the economy over 16 years of age
C)the adults in the economy between 18 and 65 years old who are able to work
D)the noninstitutionalized population over 16 in the economy who hold jobs or are looking for them
E)the citizens in the economy who are graduates of high school
Q2) If a new Ph.D. in philosophy finds work as a taxi driver, but continues to look for a college teaching position, he is counted as being employed.
A)True
B)False
Q3) Cyclical unemployment results from
A)a mismatch of skills
B)being in the wrong geographical location
C)taking the time to find the best job
D)seasonal decreases in demand for labor
E)a recession in the economy
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) Which of the following would be likely to cause a decrease in the labor productivity growth rate?
A)an increase in student achievement scores
B)a service sector that is growing as a percentage of GDP
C)increased spending on research and development
D)increases in capital formation
E)technological change
Q2) A country that has a higher percentage of younger adults with at least a college degree is
A)Norway
B)Canada
C)Japan
D)France
E)Italy
Q3) Since 1870, U.S. labor productivity growth has averaged roughly 2.1 percent annually.
A)True
B)False
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Chapter 9: Aggregate Expenditure
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187 Verified Questions
187 Flashcards
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Sample Questions
Q1) The most important determinant of a household's consumption spending is
A)its disposable income
B)its total wealth
C)the number of persons in the household
D)its net wealth
E)the ratio of wage to nonwage income the household earns
Q2) Which is true of disposable income?
A)it excludes transfer payments
B)the portion of income is used solely for consumption
C)it is that part of aggregate income that is taken in taxes by government
D)all of disposable income contributes directly to aggregate expenditure
E)disposable income equals consumption expenditures plus saving
Q3) Economists assume that the fundamental motive of investors is
A)to maximize profit
B)to maximize income
C)to maximize the firm's growth
D)to promote economic growth for the economy as a whole
E)the desire to save
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Chapter 10: Aggregate Expenditure and Aggregate Demand
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160 Flashcards
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Sample Questions
Q1) Anything that causes a movement along the aggregate expenditure curve will also cause a shift of the aggregate demand curve.
A)True
B)False
Q2) Suppose that a pair of graphs represents a situation in which both the aggregate expenditure line and the aggregate demand curve have shifted. You can conclude that the shift of the aggregate expenditure line was caused by a change in
A)disposable income
B)the price level
C)the level of income
D)autonomous investment
E)the level of real GDP
Q3) Only a change in the price level can cause shifts in both the aggregate expenditure line and the aggregate demand curve.
A)True
B)False
Q4) Aggregate expenditure means total or combined spending.
A)True
B)False
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Chapter 11: Aggregate Supply
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Sample Questions
Q1) In the long run, the aggregate demand curve determines the price level.
A)True
B)False
Q2) Potential output depends on all of the following except one. Which is the exception?
A)the supply of labor
B)labor productivity
C)household choices regarding labor and leisure
D)the technology in current use
E)the number of consumers in the market
Q3) The graph in Exhibit 11-4, when aggregate supply is AS, the equilibrium output and price level will be Y<sub>2</sub> and P<sub>2</sub>.
A)True
B)False
Q4) Real wages are nominal wages adjusted for price changes.
A)True
B)False
Q5) In the short run, the price level is determined solely by aggregate supply.
A)True
B)False
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Chapter 12: Fiscal Policy
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Sample Questions
Q1) If policy makers think the natural rate of unemployment is higher than it really is, then their policies designed to move the economy to the estimated natural rate, if continued over the long run, will
A)cause continuing inflation
B)shift the long-run aggregate supply curve to the left
C)shift the supply curve of labor to the left
D)reduce unemployment more than they had intended
E)keep the economy below its potential GDP level
Q2) If policy makers estimate the natural rate of unemployment incorrectly,
A)their policies will cause deflation in the long run
B)their policies will cause even more unemployment in the long run
C)the economy will stay below its potential GDP level in the long run
D)the economy will tend toward that level of unemployment the policy makers believe is correct
E)policies that appear to be successful in the short run will lead to further economic problems
Q3) Government transfer payments are a good example of an automatic stabilizer.
A)True
B)False
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Page 14
Chapter 13: Federal Budgets and Public Policy
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) If a federal budget deficit causes crowding out,
A)real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because bondholders' saving declines
B)real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because investment declines
C)interest rates fall, reducing the burden of the debt
D)interest rates fall, bringing the current deficit back down
E)interest rates fall, so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit
Q2) Social Security reforms adopted in 1983 included
A)privatization of part of the program
B)a cap on the Medicare tax rate
C)expanding coverage to include government employees
D)a reduction in benefits for retired workers with high incomes
E)a higher tax rate, an expanded tax base, and an increase in the retirement age from 65 to 67
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Chapter 14: Money and the Financial System
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Sample Questions
Q1) One characteristic of houses that makes them unsuitable as a medium of exchange is that they are not easily divisible.
A)True
B)False
Q2) Which of the following was the earliest type of money?
A)coins
B)barter
C)commodity money
D)token money
E)fiat money
Q3) A subprime mortgage is
A)a mortgage in which the borrower gets an interest rate below the prime rate
B)a mortgage in which the interest rate is adjustable
C)a mortgage for which the home is valued below its true market value
D)a mortgage in which the borrower has a poor credit rating
E)a mortgage for a home that was in foreclosure
Q4) People came to accept fiat money because they believed that others would accept it as well.
A)True
B)False
Page 16
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Chapter 15: Banking and the Money Supply
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229 Flashcards
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Sample Questions
Q1) The money expansion process continues until there are no more
A)required reserves in the system
B)demand deposits in the system
C)excess reserves in the system that banks are willing to lend
D)liabilities in the system
E)assets in the system
Q2) The ability to convert a store of value into a medium of exchange with little loss of value is known as
A)arbitrage
B)solvency
C)liquidity
D)liability
E)currency
Q3) Banks have more expertise than individual households in making loans because banks
A)lend larger amounts of money
B)are regulated by the government
C)also pay interest to savers
D)are subject to severe penalties if they make bad loans
E)make many more loans than individual households do
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Chapter 25: The Algebra of Income and Expenditure
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Sample Questions
Q1) If Y = C + I + G + (X - M) (where C = $100, I = $50, G = $50, and X - M = -$10) the equilibrium level of Y equals
A)$150
B)$180
C)$190
D)$200
E)$210
Q2) If the marginal propensity to import increases, the spending multiplier increases. A)True
B)False
Q3) If C = 10 + 0.8Y, a $100 increase in Y would increase consumption by
A)$10
B)$20
C)$50
D)$80
E)$100
Q4) Investment is the only autonomous spending component in aggregate expenditure. A)True B)False
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Chapter 16: Monetary Theory and Policy
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Sample Questions
Q1) Planned investment expenditures will eventually increase after
A)the money supply decreases
B)the demand for money increases
C)the interest rate falls
D)the Fed sells government securities
E)business managers are pessimistic about future market conditions for their product
Q2) An increase in the price level will
A)shift the money demand curve to the right
B)shift the money demand curve to the left
C)increase the quantity of money people want to hold
D)decrease the quantity of money people want to hold
E)have no impact on the money demand curve
Q3) If the money supply is $300, the price level is $4, and real GDP is $1,500, what is the nominal value of output?
A)$1,200
B)$4,500
C)$6,000
D)$180,000
E)$500
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Page 19
Chapter 17: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Time required __________ is not a time lag associated with using discretionary policy to correct an economic problem.
A)to recognize the problem
B)to decide how to handle the problem
C)to set a policy change in action
D)for a policy to affect economic variables
E)to coordinate monetary and fiscal policy
Q2) An effective policy of governmental intervention in the economy requires all of the following except one. Which is the exception?
A)the will to reject sound policy if it gets in the way of political considerations
B)the ability to estimate the economy's potential level of output
C)the ability to predict what would happen without intervention
D)an assortment of effective tools of discretionary policy
E)the ability to achieve effective cooperation between fiscal and monetary policy makers
Q3) The effectiveness lag for monetary policy is short.
A)True
B)False
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Chapter 26: The Algebra of Demand-Side Equilibrium
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Sample Questions
Q1) The __________ the proportional tax rate, t, or the __________ the marginal propensity to import, m, the __________ the spending multiplier.
A)higher, higher, larger
B)higher, higher, smaller
C)higher, lower, smaller
D)lower, lower, smaller
E)lower, higher, larger
Q2) If the MPC equals the 2/3, then the net tax multiplier equals
A)-2
B)-1/2
C)-3
D)-2/3
E)-1/3
Q3) With a proportional income tax,
A)each individual pays whatever he/she is able to pay
B)each individual pays the same amount of money to the government
C)each individual pays the same percent of income in the form of taxes
D)the spending multiplier is unaffected by the tax rate
E)the spending multiplier increases as the tax rate increases
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Chapter 18: International Trade
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Sample Questions
Q1) In Exhibit 18-1, the opportunity cost of a ton of rice in the United States is
A)0
B)1/3 of a t-shirt
C)1/2 of a t-shirt
D)1 t-shirt
E)2 t-shirts
Q2) Which of the following is not correct concerning quotas?
A)The enactment of quotas rewards domestic producers with higher prices.
B)The enactment of quotas creates opportunities for lobbyists to seek the perpetuation of quotas.
C)Quotas on steel, textiles and apparel, and sugar have been in effect for several decades.
D)Lobbying efforts by domestic producers and foreign exporters are vigorously fought by domestic consumers.
E)The auctioning of quotas would reduce their attractiveness to foreign exporters.
Q3) A tariff is a tax on either imports or exports.
A)True
B)False
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22
Chapter 19: International Finance
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Sample Questions
Q1) Contractionary policies help correct a balance of payments deficit by
A)lowering domestic incomes but raising demand for imports
B)raising domestic incomes but lowering demand for imports
C)raising both domestic incomes and demand for imports
D)lowering both domestic incomes and demand for imports
E)lowering interest rates and increasing aggregate spending
Q2) Imagine that there are only two nations in the world, Canada and Switzerland. Which of the following is true of the suppliers and demanders in this market, as represented in Exhibit 19-4?
A)The demanders want Canadian dollars and are offering Swiss francs.
B)The suppliers want Canadian dollars and are offering Swiss francs.
C)Both the suppliers and the demanders are offering Canadian dollars.
D)Both the suppliers and the demanders are offering Swiss francs.
E)Francs are being exchanged by unknown suppliers and demanders in a money market in Switzerland; anyone could be trading.
Q3) Current account transactions are records of the income and expenditures from exports and imports, plus international financial investments and borrowing.
A)True
B)False
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Page 23
Chapter 20: Economic Development
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110 Flashcards
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Sample Questions
Q1) A firm should be transparent, meaning
A)the windows at headquarters should be cleaned regularly
B)if executives lie during a stockholder meeting, people should be able to see right through them
C)someone should be able to look at the books and the balance sheet and tell exactly what's going on
D)None of the answers is correct
E)All of the answers are correct
Q2) At the end of the production chain that a typical economy moves up along is
A)raw material
B)agriculture
C)hunting and gathering
D)services
E)manufacturing
Q3) Unemployment is measured primarily in urban areas because in rural areas farm work is usually an outlet for labor.
A)True
B)False
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Chapter 21: National Income Accounts
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Sample Questions
Q1) National income captures all income earned by American-owned resources, whether located in the United States or abroad.
A)True
B)False
Q2) National Income is best defined as sum of all income earned by
A)American-owned resources, located in the U.S. and abroad
B)resources located in the U.S.
C)American-owned resources located abroad
D)American-owned resources minus income earned by foreign owned resources located in the U.S.
E)American owned resources in the U.S. minus income earned by American owned resources located abroad
Q3) Disposable income is personal income after taxes.
A)True
B)False
Q4) In Exhibit 6-4, National Income equals
A)$375 billion
B)$420 billion
C)$365 billion
D)$385 billion
Page 25
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Chapter 22:Understanding Graphs
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Sample Questions
Q1) A graph is a
A)lengthy, inefficient, and inconvenient way to illustrate information
B)diagram illustrating a relationship between variables
C)method of proving causation
D)tool for incorporating all major and minor variables in one illustration
E)clear way to see how the fallacy of composition works
Q2) A functional relationship exists between two variables if the value of one variable depends on the value of the other variable.
A)True
B)False
Q3) According to the curve in Exhibit 1-4,
A)if P = $8, then Q = 8
B)if P = $10, then Q = 10
C)Q increases as P increases
D)Q decreases as P decreases
E)there is a positive relation between Q and P
Q4) A downward-sloping straight line has a decreasing slope.
A)True
B)False
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Chapter 23:Variable Net Exports
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Sample Questions
Q1) An increase in U.S. income would lead to
A)an increase in U.S. exports and a decrease in U.S. imports
B)a decrease in U.S. exports and an increase in U.S. imports
C)an increase in both U.S. imports and U.S. exports
D)a decrease in both U.S. exports and U.S. imports
E)no change in U.S. exports and an increase in U.S. imports
Q2) An increase in the value of the U.S. dollar relative to foreign currencies would lead to
A)an increase in U.S. exports and a decrease in U.S. imports
B)a decrease in U.S. exports and an increase in U.S. imports
C)an increase in both U.S. imports and U.S. exports
D)a decrease in both U.S. exports and U.S. imports
E)no change in exports and an increase in U.S. imports
Q3) Which of the following would shift the U.S. net export function upward?
A)an increase in the value of the dollar relative to other currencies
B)a decrease in the value of the dollar relative to other currencies
C)an increase in incomes in the U.S. relative to other economies
D)an increase in the U.S. price level relative to other economies
E)a decrease in foreign incomes relative to U.S. incomes
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Chapter 24: Variable Net Exports Revisited
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Sample Questions
Q1) When variable net exports are added to the aggregate expenditure line, the resulting planned aggregate expenditure line becomes
A)steeper because net exports increase as real domestic income increases
B)flatter because net exports increase as real domestic income increases
C)steeper because net exports decrease as real domestic income increases
D)flatter because net exports decrease as real domestic income increases
E)flatter because imports decrease as real domestic income increases
Q2) The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).
A)True
B)False
Q3) Since imports are positively related to domestic income, a trade deficit will grow as domestic income expands.
A)True
B)False
Q4) In a model which includes variable net exports, the spending multiplier equals 1/(MPS + MPM).
A)True
B)False
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