Intermediate Macroeconomics
Review Questions
Course Introduction
Intermediate Macroeconomics delves into the theories and models that explain the behavior of economies at an aggregate level. Building on introductory macroeconomic principles, this course examines topics such as national income determination, economic growth, unemployment, inflation, business cycles, fiscal and monetary policy, and the impact of government intervention. Students will analyze both classical and Keynesian frameworks, develop a deeper understanding of macroeconomic indicators, and explore contemporary macroeconomic issues using analytical and graphical tools. The course equips students with the skills to critically assess policy debates and apply macroeconomic concepts to real-world economic challenges.
Recommended Textbook
ECON MACRO4 4th Edition by William A. McEachern
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21 Chapters
3789 Verified Questions
3789 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Theory in economics
A)involves some simplification of reality
B)bears no relation to reality
C)approaches reality in all its complexity
D)involves so much distortion of reality that it is worthless
E)focuses on the unique aspects of each situation
Answer: A
Q2) Microeconomics is the study of
A)marginal or inferior products
B)the economic behavior of individual decision makers
C)the behavior of the economy as a whole
D)how to use the fewest natural resources to produce goods and services
E)government's role as a producer in the economy
Answer: B
Q3) Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Understanding Graphs-Appendix
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Sample Questions
Q1) One economic application of the slope of a line is
A)measuring unlimited wants
B)behavioral analysis
C)marginal analysis
D)allocative efficiency
E)rational self-interest
Answer: C
Q2) Refer to exhibit 1-16. Which of the graphs illustrates no relationship between variable X and variable Y?
A)a
B)b
C)c
D)d
E)e
Answer: E
Q3) The slope of an inverted U-shaped curve is infinity at the top of the curve.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Economic Tools and Economics Systems
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Sample Questions
Q1) According to Exhibit 2-1, if Hans types one fewer page, how many loads of laundry can he do in the time saved on typing?
A)12 loads
B)8 loads
C)3/2 of a load
D)2/3 of a load
E)it cannot be determined
Answer: D
Q2) According to Exhibit 2-1, if Maria does one fewer load of laundry, how many pages can she type in the time saved on laundry?
A)4 pages
B)6 pages
C)2/3 of a page
D)3/2 of a page
E)it cannot be determined
Answer: C
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Page 5
Chapter 4: Economic Decision Makers
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Sample Questions
Q1) An external benefit is a benefit from an activity that falls on a third party who is not a party to the activity.
A)True
B)False
Q2) A positive externality is one in which there is an external benefit bestowed on a third party>
A)True
B)False
Q3) Import quotas on sugar result in lower sugar prices in the United States.
A)True
B)False
Q4) The most common form of business organization in the United States is the sole proprietorship.
A)True
B)False
Q5) The personal income tax is based on the benefits-received principle of taxation.
A)True B)False
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Chapter 5: Demand, Supply, and Markets
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Sample Questions
Q1) An increase in the price of a good normally increases the A)demand for its substitutes
B)supply of complements for the good
C)purchasing power of consumers' dollar incomes
D)money income of the consumer
E)quantity demanded of all goods that are unrelated to the good in question
Q2) A shortage occurs whenever
A)quantity demanded exceeds quantity supplied at the equilibrium price
B)price is less than equilibrium price
C)quantity demanded is less than quantity supplied
D)goods are scarce
E)some of the people who need the product are not willing and able to buy it at the equilibrium price
Q3) Refer to Exhibit 4-2. A shift from demand curve D to D' illustrates a(n)
A)decrease in demand
B)decrease in quantity demanded
C)increase in quantity demanded
D)increase in demand
E)increase in supply
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Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) If the wealth of consumers increases substantially, this would shift
A)the aggregate supply curve outward
B)the aggregate demand curve outward
C)the aggregate demand curve inward
D)the aggregate supply curve inward
E)both the aggregate demand and supply curves inward
Q2) To control inflation, President Nixon
A)ordered wage and salary reductions for all government employees
B)increased government spending
C)dramatically reduced transfer payments such as Social Security
D)applied price floors to all goods and services
E)froze wages and prices
Q3) Which of the following events did not occur in the 1970s?
A)the U.S. inflation rate soared above 5 percent annually
B)crop failures in major grain-producing countries
C)substantial oil price increases
D)growing confidence that Keynesian policies could stabilize the economy
E)stagflation
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Chapter 7: Tracking the Us Economy
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Sample Questions
Q1) A chain-weighted index recognizes the fact that the composition of output changes over time.
A)True
B)False
Q2) Use the following data to calculate GDP: consumption = $5,000; gross investment = $800; government purchases = $700; exports = $30; imports = $60; transfer payments = $340.
A)GDP = $7,400
B)GDP = $7,740
C)GDP = $3,140
D)GDP = $6,470
E)GDP cannot be determined due to insufficient data
Q3) If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000, earns profits of $500, and sells its output for $14,000, the firm's value added is
A)$12,000
B)$8,000
C)$6,000
D)$2,000
E)$500
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Page 9
Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Which of the following people would be classified as unemployed?
A)a person who wants a job as a fashion model but cannot find work in that field
B)someone who quits a part-time job to attend school full-time
C)someone who gives up looking for a job
D)a person who works at a job that underemploys his or her skills
E)a person who works part-time and would rather work full-time
Q2) During which of the following decades was the U.S. inflation rate highest?
A)1920s
B)1930s
C)1950s
D)1970s
E)1980s
Q3) The labor force participation rate climbs with education.
A)True
B)False
Q4) The supply of loanable funds curve slopes downward to the right.
A)True
B)False
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) Which of the following is the most important backbone of market exchange?
A)laws
B)manners
C)customs
D)conventions
E)All the answers are equally important
Q2) Which of the following does not contribute to labor productivity growth?
A)a steepening of the per-worker production function
B)an increase in amount of capital per unit of labor
C)growth of the labor force
D)an improvement in the quality of capital
E)a decrease in the labor-capital ratio
Q3) If Q is total real output, K is capital in use, and L is labor employed, the productivity of labor is measured by
A)K/L
B)L/K
C)Q/L
D)Q/K
E)(Q + K)/L
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Page 11
Chapter 10: Aaggregate Expenditure and Agregate
Demand
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Sample Questions
Q1) Purchases of existing commodities, such as gold and precious gems, are considered investment spending by economists.
A)True
B)False
Q2) The slope of the consumption function equals the marginal propensity to consume.
A)True
B)False
Q3) The slope of the consumption function equals the A)MPC
B)MPS
C)APC
D)APS
E)ratio of the APC to the APS (i.e., APC divided by APS)
Q4) If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its
A)marginal propensity to consume is -0.67
B)marginal propensity to consume is 0.88
C)marginal propensity to consume is 0.20
D)marginal propensity to save is zero
E)marginal propensity to save is 0.12
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Chapter 11: Aggregate Expenditure and Aggregate Demand
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Sample Questions
Q1) If autonomous investment expenditures decline because of higher interest rates
A)income increases
B)the rate of return declines
C)autonomous consumption declines
D)aggregate demand increases
E)aggregate demand decreases
Q2) Consumption plus saving equals disposable income at every level of real GDP demanded.
A)True
B)False
Q3) Which of the following best describes the situation at point B in Exhibit 10-3?
A)consumption expenditures exceeds disposable income
B)real GDP exceeds aggregate expenditure
C)aggregate expenditure is exactly equal to real GDP
D)aggregate expenditure exceeds real GDP
E)producers are experiencing an unexpected accumulation of inventory
Q4) Movement along the aggregate expenditure curve is caused by a change in the level of income.
A)True
B)False
Page 13
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Chapter 12: Aggregate Supply
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Sample Questions
Q1) If an economy is at its potential output level, which of the following is not true?
A)The economy is at its full-employment output level.
B)Unemployment is at the natural level.
C)The price level is zero.
D)The output level being produced can be sustained indefinitely given the economy's resources and technology.
E)The only unemployment is frictional, structural, or seasonal.
Q2) In Exhibit 11-6, the distance between Y<sub>1</sub> and Y<sub>2</sub> is called
A)an expansionary gap
B)a contractionary gap
C)an increase in potential output
D)a decrease in potential output
E)the natural rate of unemployment
Q3) Increases in the costs of production will shift the short-run aggregate supply curve to the left.
A)True
B)False
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14
Chapter 13: Fiscal Policy
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Sample Questions
Q1) During World War II,
A)aggregate demand, income, and employment increased in the United States
B)aggregate demand, income, and employment declined in the United States
C)short-run aggregate supply, income, and employment declined in the United States
D)short-run aggregate supply fell and income and employment increased in the United States
E)potential output fell in the United States
Q2) The steepness of the short-run aggregate supply curve depends on
A)the price level
B)a larger than expected simple multiplier
C)a smaller than expected simple multiplier
D)the increase only in labor costs as output expands
E)how sharply production costs increase as output expands
Q3) The Golden Age of fiscal policy was
A)the years before the Great Depression
B)during the Great Depression
C)during World War II
D)during the Kennedy administration
E)during the Reagan administration
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Page 15
Chapter 14: Federal Budgets and Public Policy
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Sample Questions
Q1) If a budget is cyclically balanced, the government should run a surplus when the economy experiences an expansionary gap.
A)True
B)False
Q2) A continuing resolution
A)shuts down government agencies in the absence of an approved budget
B)allows agencies to spend at the rate of the previous year in the absence of an approved budget
C)enables Congress to override the President's budget
D)contributes to the efficiency of the federal budget process
E)is seldom used
Q3) Biannual budgets have replaced the annual budget process for the federal government.
A)True
B)False
Q4) The federal budget has been in deficit in all but 9 years since 1960.
A)True
B)False
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Chapter 15: Money and the Financial System
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Sample Questions
Q1) The first bankers were probably
A)carpenters
B)stock brokers
C)goldsmiths
D)sea captains
E)grain merchants
Q2) The primary purpose of the Federal Open Market Committee (FOMC) is to
A)set reserve requirements
B)extend loans to member banks of the Fed
C)buy and sell government securities
D)distribute Federal Reserve notes
E)enforce bank regulations
Q3) The banking crisis of the 1980s was due, in part, to all of the following except one. Which is the exception?
A)the rising interest rates of the 1970s and early 1980s
B)the existence of deposit insurance
C)the deregulation of deposit rates that allowed unsafe banks to grow
D)the deregulation of lending practices
E)the highly concentrated U.S. banking industry, where big banks had branches in nearly every state
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Chapter 16: Banking and the Money Supply
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Sample Questions
Q1) If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,
A)it forces banks to increase the money supply
B)it forces banks to decrease the money supply
C)it makes it possible for banks to increase the money supply but does not force them to do so
D)the money supply will not increase as much as if the Fed left the reserve ratio alone E)it is conducting open market operations but not changing the money supply
Q2) The Fed relies primarily on the discount rate to control the money supply.
A)True B)False
Q3) When the Fed buys U.S. government securities from a bank, that bank's excess reserves and total reserves increase, but there is no change in required reserves. A)True
B)False
Q4) A bank can increase the money supply by the amount of total reserves it holds. A)True
B)False
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Chapter 17: Monetary Theory and Policy
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Sample Questions
Q1) What is the opportunity cost of holding money rather than some other financial asset?
A)the forgone interest income
B)the forgone utility
C)time
D)the forgone leisure
E)the forgone profit
Q2) The velocity of money is the number of times per year that each dollar is used to purchase goods and services.
A)True
B)False
Q3) Which of the following is not assumed to be constant along the money demand curve?
A)the price level
B)the interest rate
C)real GDP
D)nominal GDP
E)individual's tastes and preferences
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Chapter 18: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) One implication of the Phillips curve analysis is that
A)unemployment rates below the natural rate are only possible in the long run
B)unemployment rates below the natural rate lead to falling rates of inflation in the long run
C)if inflationary expectations are accurate, the economy is on the short-run Phillips curve but not on the long-run Phillips curve
D)unemployment rates below the natural rate may be achieved only with rising inflation rates
E)the natural rate of unemployment is strictly a short-run phenomenon
Q2) A policy to increase aggregate demand to cure a recessionarly gap may succeed; however, inflation is a likely result.
A)True
B)False
Q3) If the price level increases by more than expected, output can be expected to decrease as a result.
A)True
B)False
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Chapter 19: International Trade
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Sample Questions
Q1) Which of the following is not an argument often made for the imposition of trade restrictions?
A)trade restrictions are necessary for national defense purposes
B)trade restrictions are necessary to improve economic efficiency
C)trade restrictions are necessary to protect fledgling industries
D)trade restrictions are necessary to protect against dumping
E)trade restrictions are necessary to protect jobs
Q2) Which of the following is true?
A)International trade makes it possible for a country's consumption possibilities to exceed its production possibilities.
B)International trade requires that a country's production possibilities exceed its consumption possibilities.
C)A country's production possibilities always equal its consumption possibilities.
D)A country's consumption possibilities can never equal its production possibilities because of leakages in the system.
E)As long as there is full employment of resources, a country's production possibilities will exceed its consumption possibilities even with trade.
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Chapter 20: International Finance
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Sample Questions
Q1) The demand for foreign currency in the United States
A)increases as the level of imports increases
B)increases as the level of exports increases
C)decreases with the lowering of the inflation rate abroad
D)decreases as foreign interest rates rise
E)is unaffected by U.S. demand for goods and services abroad
Q2) The current system of international finance is a
A)gold standard
B)fixed exchange rate system
C)floating exchange rate system
D)managed float exchange rate system
E)pooled currency exchange system
Q3) If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,
A)both the U.S. dollar and the yen have appreciated
B)both the U.S. dollar and the yen have depreciated
C)the U.S. dollar has appreciated and the yen has depreciated
D)the U.S. dollar has depreciated and the yen has appreciated
E)the yen has appreciated and the U.S. dollar has remained constant
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Page 22
Chapter 21: Economic Development
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Sample Questions
Q1) In 2011, high-income economies with only about one sixth of the world's population produced more than half of the world's output.
A)True
B)False
Q2) In a system of impersonal exchange,
A)bureaucratic ties on the production side are critical
B)the economy benefits from specialization and modern technology
C)inside connections on the consumption side are necessary
D)successful institutional evolution makes no difference
E)there is very little division of labor
Q3) Imagine that the best and the brightest professionals of the planet Venus migrate to Earth to work. The upside of this brain drain is
A)the remittances sent home to Venus
B)getting rid of snooty Venetians
C)not being able to afford the modern machinery that will help the Venetians become more productive
D)decreased labor supply on Venus
E)increased income inequality on Venus
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