Intermediate Macroeconomics
Study Guide Questions
Course Introduction
Intermediate Macroeconomics builds upon foundational economic principles to explore the determinants of national income, employment, inflation, and economic growth. The course examines the theoretical frameworks of both classical and Keynesian economics, applying these to topics such as fiscal and monetary policy, business cycles, and the role of government in stabilizing the economy. Students will analyze models of aggregate demand and supply, the dynamics of consumption and investment, and open economy interactions, developing the analytical skills necessary to critically evaluate current macroeconomic issues and policy debates.
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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Page 2
Chapter 1: The Art and Science of Economic Analysis
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147 Flashcards
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Sample Questions
Q1) Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he
A)is correct only when the economy is in a recession
B)has mistakenly inferred causation from observed correlation
C)has ignored secondary effects
D)has committed the fallacy of composition
E)is correct only when the United States enjoys economic growth
Answer: B
Q2) A market
A)is often a physical place
B)facilitates exchanges between buyers and sellers
C)typically involves monetary transactions
D)might not have well-defined geographical limits
E)all of the above
Answer: E
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Page 3
Chapter 2: Understanding Graphs-Appendix
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Sample Questions
Q1) Suppose the cost of producing copper tubing is $1 per foot. If production costs were measured on the vertical axis and quantity of copper tubing were measured on the horizontal axis, which of the following lines would have the smallest slope?
A)a line representing the quantity of tubing measured in inches
B)a line representing the quantity of tubing measured in feet
C)a line representing the quantity of tubing measured in yards
D)the 45-degree line
E)any vertical line
Answer: A
Q2) The slope of an inverted U-shaped curve is infinity at the top of the curve.
A)True
B)False
Answer: False
Q3) If the dependent variable Y is directly related to the independent variable X, this means that changes in X cause changes in Y.
A)True
B)False
Answer: False
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4
Chapter 3: Economic Tools and Economics Systems
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195 Flashcards
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Sample Questions
Q1) The law of increasing opportunity cost reflects the fact that
A)the production possibilities frontier is bowed inward
B)resources are not perfectly substitutable
C)resources cannot always be used efficiently
D)an economy will operate at a point inside the production possibilities frontier
E)an economy will operate at a point along the production possibilities frontier
Answer: B
Q2) Helen gives up the opportunity to bake 40 cakes for each room she paints; Josh can paint one room in the time it takes him to bake 60 cakes. The opportunity cost of a cake for Josh is
A)painting one room
B)painting 1/40 of a room
C)painting 1/60 of a room
D)painting 2/3 of a room
E)painting 3/2 of a room
Answer: C
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Chapter 4: Economic Decision Makers
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Sample Questions
Q1) Imposing a tax on an activity that generates an external benefit will cause participants in the activity to increase the amount of the activity undertaken.
A)True
B)False
Q2) Goods and services produced by the government are sold at prices that are set to recover production costs.
A)True B)False
Q3) The movement in U.S. population from the farms to urban areas was caused primarily by
A)each member of a farm family specializing in a particular set of tasks
B)a sharp increase in farm productivity
C)a decline in the demand for labor in urban areas
D)a sharp decline in the demand for agricultural products
E)increased education among married women
Q4) The partnership is the least common form of business organization in the United States.
A)True B)False
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Chapter 5: Demand, Supply, and Markets
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232 Flashcards
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Sample Questions
Q1) Refer to Exhibit 4-8. A shift from demand curve D to demand curve D' would be caused by a(n)
A)decrease in the price of the product under consideration
B)significant decrease in population because of emigration
C)increase in consumer income
D)decrease in the number of producers of the product
E)increase in the price of a relevant resource
Q2) Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?
A)Both price and quantity should increase.
B)Both price and quantity should decrease.
C)Price should increase and quantity decrease.
D)Price should decrease and quantity increase.
E)Nothing.
Q3) If the price of labor increases, employers will hire more labor because it is more valuable.
A)True
B)False
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Page 7
Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) Refer to Exhibit 5-2. Which line or point represents aggregate supply?
A)line a
B)line b
C)line c
D)line d
E)point e
Q2) Stagflation is best described as
A)increasing output and decreasing prices
B)increasing output and increasing prices
C)no change in output or prices
D)decreasing output and decreasing prices
E)decreasing output and increasing prices
Q3) In Exhibit 5-1, which of the following might cause a shift in the aggregate demand curve from AD to AD'?
A)an increase in household wealth
B)a fall in domestic interest rates
C)an increase in government spending
D)an appreciation of the dollar relative to other currencies
E)a decrease in the nation's money supply
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Page 8
Chapter 7: Tracking the Us Economy
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Sample Questions
Q1) To accurately measure the growth rate of output between two years, one should use
A)gross domestic product
B)net domestic product
C)real net investment
D)real gross domestic product
E)disposable income
Q2) If real GDP for a particular year is $5 trillion and the GDP price index for that year is 136, the nominal GDP for that year is
A)$3.7 trillion
B)$4 trillion
C)$6.8 trillion
D)$27 trillion
E)$68 trillion
Q3) GDP is a good measure of social welfare since it includes the value of leisure time.
A)True
B)False
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Page 9
Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Which is true of cost-push inflation?
A)It occurs when the aggregate demand curve shifts rightward.
B)It occurs when the aggregate supply curve shifts rightward.
C)It results in a decrease in the unemployment rate.
D)It results in a movement along the aggregate demand curve.
E)It is caused by the same factors that lead to demand-pull inflation.
Q2) If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, the expected real interest rate is
A)13 percent
B)-5 percent
C)9 percent
D)-13 percent
E)5 percent
Q3) During periods of inflation, the real value (purchasing power) of a given amount of nominal dollars decreases.
A)True
B)False
Q4) If the expected inflation rate is high, the nominal interest rate will be low.
A)True
B)False
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) Declining growth in productivity means that the standard of living has been falling over time.
A)True
B)False
Q2) Labor productivity the United States has never fallen has never fallen from one year to the next.
A)True
B)False
Q3) Basic research
A)usually has a larger immediate payoff than applied research
B)is more practical than applied research
C)is a search for general knowledge without a specific product or procedure in mind
D)is research done by a firm to market a good
E)is research done by a firm during production of a good
Q4) Industrial policy involves governments using taxes, subsidies and regulations to nuture the development of specific industries.
A)True
B)False
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Chapter 10: Aaggregate Expenditure and Agregate Demand
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179 Flashcards
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Sample Questions
Q1) Fluctuations in consumption
A)are noticeably smaller during recessions than during expansions
B)are roughly similar to fluctuations in investment
C)are roughly similar to fluctuations in GDP
D)are closely followed by economic forecasters because those fluctuations often signal that a recession will occur
E)account for most of the variability in GDP
Q2) Which of the following would tend to shift the investment function upward?
A)higher interest rates
B)gloomy sales expectations
C)a cut in corporate taxes that raises after-tax profits
D)a decrease in the marginal propensity to consume
E)an increase in aggregate income
Q3) The current level of investment depends on the current level of income.
A)True
B)False
Q4) The primary determinant of saving is income.
A)True
B)False
To
12
and
Chapter 11: Aggregate Expenditure and Aggregate Demand
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) The larger the marginal propensity to save, other things constant,
A)the smaller the marginal propensity to consume
B)the larger the marginal propensity to consume
C)the larger the multiplier
D)the steeper the consumption function
E)the flatter the saving function
Q2) A fall in the price level will shift the aggregate expenditure curve
A)upward and shift the aggregate demand curve to the right
B)upward and shift the aggregate demand curve to the left
C)downward and shift the aggregate demand curve to the left
D)downward and shift the aggregate demand curve to the right
E)upward and cause a movement along the aggregate demand curve
Q3) Which of the following would cause a leftward shift of the aggregate demand curve?
A)an increase in planned investment
B)a drop in the price level
C)a rise in the price level
D)an increase in autonomous consumption
E)anything that causes an upward shift in the saving function
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Chapter 12: Aggregate Supply
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Sample Questions
Q1) Which of the following supply shocks would shift the long-run aggregate supply curve outward?
A)an increase in business taxes
B)an increase in gasoline taxes
C)an increase in the cost of raw materials
D)an increase in the amount and cost of government regulation
E)an increase in agricultural output
Q2) If the economy is at point M in Exhibit 11-5,
A)the actual price level is lower than expected with a $200 billion expansionary gap
B)the actual price level is lower than expected with a $200 billion contractionary gap
C)the actual price level is higher than expected with a $200 billion contractionary gap
D)the actual price level is higher than expected with a $200 billion expansionary gap
E)the economy is in equilibrium in the short run and the long run
Q3) In the long run, the aggregate demand curve determines the price level.
A)True
B)False
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Chapter 13: Fiscal Policy
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240 Verified Questions
240 Flashcards
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Sample Questions
Q1) Given the information in Exhibit 12-1, the government spending multiplier is equal to A)2
B)3
C)4
D)5
E)6
Q2) Which of the following is an example of an automatic stabilizer?
A)the Unemployment Compensation Program
B)the American Recovery and Reinvestment Act
C)a temporary elimination of the federal excise tax on gasoline
D)a federal income tax rebate
E)none of the above is an automatic stabilizer
Q3) A federal budget surplus occurs when
A)there is deflation
B)federal government net taxes exceed purchases
C)there is inflation
D)aggregate demand is greater than aggregate supply
E)aggregate supply is greater than aggregate demand
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Chapter 14: Federal Budgets and Public Policy
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158 Flashcards
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Sample Questions
Q1) When automatic stabilizers are the cause of higher deficits, we would expect to observe that
A)the economy has been contracting
B)the economy has been growing
C)interest rates must be rising
D)interest rates must be falling
E)net exports have been decreasing
Q2) If the government runs a cyclically balanced budget, its revenue will equal its expenditure
A)each year
B)at each phase of the business cycle
C)over the course of the business cycle
D)only during expansions
E)only during recessions
Q3) Until 1980, the national debt was mostly the result of
A)wartime borrowing
B)inflation
C)bad monetary policy
D)wasteful Congressional spending
E)Social Security obligations
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Chapter 15: Money and the Financial System
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Sample Questions
Q1) Which of the following is not thought to have contributed to the Great Depression?
A)interest rate competition
B)banks selling corporate stocks and bonds
C)fears about the safety of deposits
D)lack of bank liquidity
E)bank holiday
Q2) Coins were minted with serrated edges
A)to make it obvious that they were made of cheap alloys
B)so that cheaper metals did not have to be used
C)to allow words to be printed on the border
D)to prevent the coins from being clipped
E)to make them jingle less when they rub together
Q3) Whatever serves as a medium of exchange is
A)money
B)money, so long as it also is the best such medium of exchange available
C)money, so long as it is not also a commodity
D)money, so long as it is not also legal tender
E)not money unless it continues to be backed by its issuing institution
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Chapter 16: Banking and the Money Supply
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Sample Questions
Q1) Suppose you borrow $1,000 to purchase a car. Which of the following correctly represents the changes in your personal balance sheet after the bank lends the money but before you spend it?
A)assets: loan, +$1,000; liabilities and net worth: checking deposit, +$1,000
B)assets: loan, -$1,000, checking deposit, +$1,000; liabilities and net worth: no change
C)assets: loan, +$1,000, checking deposit, -$1,000; liabilities and net worth: no change
D)assets: checking deposit, +$1,000; liabilities and net worth: loan, +$1,000
E)assets: checking deposit, +$1,000; liabilities and net worth: loan, -$1,000
Q2) If each bank in the United States had to keep 100 percent of checkable deposits as reserves, each $1 the Fed injected into new reserves could increase the money supply by as much as
A)$1
B)$2
C)$100
D)zero
E)a penny
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Chapter 17: Monetary Theory and Policy
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Sample Questions
Q1) According to the equation of exchange, increases in the money supply are translated into
A)increases in the velocity of money
B)decreases in real GDP
C)incrreases in real GDP
D)increases in the price level
E)increases in inflation
Q2) If the price level rises, the money demand curve will shift to the right.
A)True
B)False
Q3) If interest rates are __________ to changes in the money supply and planned investment expenditures are __________ to interest rates, then monetary policy will be __________ in changing Gross Domestic Product.
A)sensitive; sensitive; effective
B)responsive; insensitive; ineffective
C)responsive; insensitive; effective
D)not responsive; sensitive; effective
E)not responsive; insensitive; effective
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19
Chapter 18: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) When self-correcting forces cure a recessionary gap,
A)money wages and real wages both increase
B)money wages remain constant while real wages fall
C)money wages and real wages both decrease
D)money wages fall while real wages increase
E)real wages must increase regardless of what happens to money wages
Q2) Some of those who favor a passive approach to policy disapprove of government intervention in the economy because they think government policy makers do not know which policy is correct.
A)True
B)False
Q3) The long-run Phillips curve is located at the natural rate of unemployment.
A)True
B)False
Q4) Discretionary policy advocates believe
A)both c and d
B)that self-correction forces work slowly
C)that rules are effective in changing output
D)in rational expectations
E)none of the above
Page 20
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Chapter 19: International Trade
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Sample Questions
Q1) If the United States has an absolute advantage in producing computer components, it should export them worldwide.
A)True
B)False
Q2) Which of the following is not a type of trade restriction?
A)low-interest loans to foreign buyers
B)export subsidies for domestic firms
C)domestic content requirements
D)restrictive health and safety standards
E)economies of scale
Q3) Which of the following is not a problem with trade restrictions?
A)the high cost of rent-seeking activities such as lobbying
B)the high cost of enforcement
C)the unintended effects on related industries
D)the inability to save U.S. jobs in the short run in industries that compete with imports
E)the possibility of retaliation
Q4) Dumping refers to selling a product abroad for less than the cost of production.
A)True
B)False
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Chapter 20: International Finance
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Sample Questions
Q1) If the U.S. dollar depreciates in the foreign exchange market, American exports will be __________ and American imports will be __________.
A)more expensive; more expensive
B)cheaper; cheaper
C)less expensive; less expensive
D)less expensive; more expensive
E)there will be no change
Q2) From the U.S. perspective, a drop in the price of foreign exchange means that
A)fewer U.S. dollars are needed to purchase foreign currency
B)more U.S. dollars are needed to purchase foreign currency
C)worldwide, imports will become more expensive
D)worldwide, exports will become cheaper
E)transaction costs on international markets will decrease
Q3) What replaced the Bretton Woods system?
A)the gold standard
B)a pooled currency system
C)a free float system
D)a managed float system
E)fixed exchange rates
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Chapter 21: Economic Development
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Sample Questions
Q1) Which of the following is not true about migration?
A)Migration plays an important role in the economies of developing countries
B)A major source of foreign exchange in some countries is the money sent home by migrants
C)Migration provides a valuable safety valve for poor countries
D)The best and brightest professionals are very unlikely to migrate to developed countries
E)Every year thousands of nurses migrate from countries such as Kenya and the Philippines to the United States
Q2) Unemployment is measured primarily in urban areas because in rural areas farm work is usually an outlet for labor.
A)True
B)False
Q3) Successful management of resource wealth is a poverty trap
A)True
B)False
Q4) In Zimbabwe, more than half the people are unemployed.
A)True
B)False
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