Intermediate Macroeconomics
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Course Introduction
Intermediate Macroeconomics builds upon foundational economic principles to explore the functioning and dynamics of entire economies. The course delves into topics such as national income determination, economic growth, unemployment, inflation, monetary and fiscal policy, and macroeconomic modeling. Students analyze both classical and contemporary theories to understand how economic variables interact at the aggregate level. Real-world policy issues and empirical data are incorporated to contextualize theoretical insights, equipping students with the analytical tools necessary to evaluate economic performance and policy outcomes in national and global contexts.
Recommended Textbook
Macroeconomics 8th Edition by Andrew Abel
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15 Chapters
1417 Verified Questions
1417 Flashcards
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Page 2
Chapter 1: Introduction to Macroeconomics
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67 Verified Questions
67 Flashcards
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Sample Questions
Q1) The classical approach to macroeconomics assumes that
A)wages,but not prices,adjust quickly to balance quantities supplied and demanded in markets.
B)wages and prices adjust quickly to balance quantities supplied and demanded in markets.
C)prices,but not wages,adjust quickly to balance quantities supplied and demanded in markets.
D)neither wages nor prices adjust quickly to balance quantities supplied and demanded in markets.
Answer: B
Q2) Equilibrium in the economy means
A)unemployment is zero.
B)quantities demanded and supplied are equal in all markets.
C)prices are not changing over time.
D)tax revenues equal government spending,so the government has no budget deficit.
Answer: B
Q3) What are the major factors affecting the long-term growth of the economy's output?
Answer: The major factors are population growth and average labor productivity.
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3
Chapter 2: The Measurement and Structure of the National Economy
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) If a local government collects taxes of $250,000,has $175,000 of government consumption expenditures,makes transfer payments of $75,000,and has no interest payments or investment,its budget would
A)show a surplus of $100,000.
B)show a surplus of $75,000.
C)be in balance with neither a surplus nor a deficit.
D)show a deficit of $75,000.
Answer: C
Q2) The government budget surplus equals
A)government purchases plus transfers.
B)government receipts minus government outlays.
C)government purchases minus net receipts.
D)government purchases minus transfers.
Answer: B
Q3) The three approaches to measuring economic activity are the A)cost,income,and expenditure approaches.
B)product,income,and expenditure approaches.
C)consumer,business,and government approaches.
D)private,public,and international approaches.
Answer: B
Page 4
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Chapter 3: Productivity, Output, and Employment
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Sample Questions
Q1) The government announces a tax increase on workers' wages to take effect in the future.What happens to current employment and the real wage rate?
A)Both employment and the real wage rate would increase.
B)Both employment and the real wage rate would decrease.
C)Employment would increase and the real wage would decrease.
D)Employment would decrease and the real wage would increase.
Answer: C
Q2) The tendency of workers to supply more labor in response to a larger reward for working is called the ________ of a higher real wage on the quantity of labor supplied.
A)homogeneous labor supply effect
B)negative correlation effect
C)income effect
D)substitution effect
Answer: D
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Chapter 4: Consumption, Saving, and Investment
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Sample Questions
Q1) If the substitution effect of the real interest rate on saving is larger than the income effect of the real interest rate on saving,then a rise in the real interest rate leads to a ________ in consumption and a ________ in saving,for someone who's a lender.
A)fall; fall
B)fall; rise
C)rise; rise
D)rise; fall
Q2) The desired level of the capital stock will increase if the A)user cost of capital increases.
B)expected future marginal product of capital increases.
C)effective tax rate increases.
D)price of capital increases.
Q3) What is the marginal propensity to consume,and why is it always less than one?
Q4) An increase in expected future output while holding today's output constant would
A)increase today's desired consumption and increase desired national saving.
B)increase today's desired consumption and decrease desired national saving.
C)decrease today's desired consumption and increase desired national saving.
D)decrease today's desired consumption and decrease desired national saving.
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Page 6
Chapter 5: Saving and Investment in the Open Economy
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107 Flashcards
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Sample Questions
Q1) Consider a small open economy in equilibrium with a zero current account balance.What happens to national saving,investment,and the current account balance in equilibrium if
(a)future income rises?
(b)business taxes rise?
(c)government expenditures decline temporarily?
(d)the future marginal product of capital rises?
Q2) The best weather in a decade has given Australia a bumper wheat crop.Australia is a small open economy.Based on this information alone,you would expect that
A)desired investment would decrease.
B)desired investment would increase.
C)the current account would increase.
D)the current account would decrease.
Q3) What determines the interest rate in a small open economy?
Q4) An economic benefit of capital outflows is that they
A)create future income payment inflows.
B)increase domestic investment.
C)reduce domestic saving.
D)reduce domestic unemployment.
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Chapter 6: Long-Run Economic Growth
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Sample Questions
Q1) The Solow model demonstrates that
A)in the absence of productivity growth,economic growth will turn negative in the long run.
B)in the absence of productivity growth,economic growth will reach a steady state of zero per-capita growth in the long run.
C)productivity growth must exceed the rate of growth in the population to avoid a steady state in the long run.
D)productivity growth will inevitably decline due to diminishing marginal productivity.
Q2) Describe the main ideas of endogenous growth theory.What does it have to say about the role of government in economic growth?
Q3) An increase in the growth rate of population in a steady-state economy would cause
A)a parallel shift upward in the investment line.
B)a pivot up and to the left in the investment line.
C)a pivot down and to the right in the investment line.
D)a parallel shift downward in the investment line.
Q4) What types of government policies can increase long-run living standards?
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8
Chapter 7: The Asset Market, Money, and Prices
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Sample Questions
Q1) For something to satisfy the medium-of-exchange function of money,it must be
A)backed by gold.
B)readily exchangeable for other goods.
C)issued by a central bank.
D)an inherently valuable commodity.
Q2) M2 does not include
A)Treasury bonds.
B)passbook savings accounts.
C)small-denomination time deposits.
D)M1.
Q3) An increase in expected inflation is likely to cause
A)a decline in the demand for real balances.
B)an increase in the demand for real balances.
C)no change in the demand for real balances.
D)no change in the demand for real balances only if the income elasticity of real money demand is zero.
Q4) Define asset market equilibrium and state the asset market equilibrium condition.
Q5) Give five examples of factors that could reduce the demand for money.
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Chapter 8: Business Cycles
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Sample Questions
Q1) Which of the following macroeconomic variables could not be used as a leading economic indicator?
A)Residential investment
B)Employment
C)The money supply
D)Stock prices
Q2) Peaks and troughs of the business cycle are known collectively as A)volatility.
B)turning points.
C)equilibrium points.
D)real business cycle events.
Q3) The longest economic expansion in the United States occurred during the A)1940s.
B)1960s.
C)1980s.
D)1990s.
Q4) Describe the major features of the business cycle.Be sure to discuss what variables are affected by the cycle,a description of the key features that are apparent in the data,how variables are related to one another,how regular the cycle is,and how predictable the cycle is.
Page 10
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Chapter 9: The IS-LM/AD-AS Model
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Sample Questions
Q1) A decrease in the money supply would cause the IS curve to ________ and the LM curve to ________.
A)shift down and to the left; be unchanged
B)shift down and to the left; shift up and to the left
C)be unchanged; shift up and to the left
D)be unchanged; shift down and to the right
Q2) Which of the following changes shifts the AD curve down and to the left?
A)A temporary increase in government purchases
B)A rise in the nominal money supply
C)A decrease in corporate taxes
D)A decrease in consumer confidence
Q3) A rise in the price of a bond causes the yield of the bond to A)rise.
B)fall.
C)remain unchanged.
D)rise if it's a short-term bond,fall if it's a long-term bond.
Q4) If the money supply is increased,which curve shifts in the IS-LM model? What direction does it shift? What is the intuition behind this shift?
Q5) Describe what happens to the FE line if government purchases increase.
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Chapter 10: Classical Business Cycle Analysis
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Sample Questions
Q1) Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle EXCEPT that
A)only productivity shocks can cause real fluctuations in the business cycle.
B)the government has imperfect knowledge of the economy.
C)political constraints on policy actions prevent the government from carrying out effective policies.
D)time lags between the onset of a recession and the implementation of effective countermeasures make anti-recessionary macroeconomic policies impractical.
Q2) According to classical economists,the increase in unemployment in recessions is caused by
A)slack aggregate demand.
B)the failure of wages to adjust to restore equilibrium in the labor market.
C)the power of labor unions,which prevent firms from cutting wages.
D)a mismatch of workers and jobs.
Q3) Define real shocks,define nominal shocks,and give an example of each.
Q4) According to the real business cycle theory,what is the principal cause of business cycle fluctuations?
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Chapter 11: Keynesianism: The Macroeconomics of Wage and Price Rigidity
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Sample Questions
Q1) The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called
A)transactions cost theory.
B)cost-benefit theory.
C)menu cost theory.
D)gift exchange theory.
Q2) Easy monetary policy and tight fiscal policy lead to
A)high real interest rates.
B)low real interest rates.
C)roughly unchanged real interest rates.
D)roughly unchanged real interest rates only when Ricardian equivalence holds; otherwise,low real interest rates.
Q3) In the Keynesian model,which curve is vertical?
A)LRAS
B)SRAS
C)AD
D)NS
Q4) Why might firms pay an efficiency wage rather than a market-clearing wage?
Page 13
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Chapter 12: Unemployment and Inflation
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Sample Questions
Q1) The Lucas critique is an objection to the assumption that
A)inflation is always and everywhere a monetary phenomenon.
B)there is a negative relationship between inflation and unemployment.
C)historical relationships between macroeconomic variables will continue to hold after new policies are in place.
D)people form expectations rationally.
Q2) An increase in the expected rate of inflation would
A)shift the Phillips curve upward.
B)shift the Phillips curve downward.
C)shift the long-run Phillips curve to the right.
D)shift the long-run Phillips curve to the left.
Q3) The Friedman-Phelps analysis shows that a negative relationship between inflation and unemployment holds
A)even when expected inflation changes.
B)even when the natural rate of unemployment changes.
C)even if both the expected inflation rate and the natural rate of unemployment change.
D)as long as the expected inflation rate and the natural rate of unemployment are approximately constant.
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Chapter 13: Exchange Rates,Business Cycles,and
Macroeconomic Policy in the Open Economy
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96 Flashcards
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Sample Questions
Q1) According to the classical model,an increase in the American nominal money supply would cause the nominal exchange rate to ________ and the real exchange rate to ________.
A)depreciate; appreciate
B)appreciate; depreciate
C)depreciate; remain unchanged
D)appreciate; remain unchanged
Q2) When the nominal exchange rate falls,
A)the domestic currency buys more units of foreign currency and the domestic currency has depreciated.
B)the domestic currency buys fewer units of foreign currency and the domestic currency has depreciated.
C)the domestic currency buys more units of foreign currency and the domestic currency has appreciated.
D)the domestic currency buys fewer units of foreign currency and the domestic currency has appreciated.
Q3) In a Keynesian model,what are the short-run effects on output,the real interest rate,and the real exchange rate,for both the domestic economy and a foreign economy,of a decline in investment?
Page 15
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Chapter 14: Monetary Policy and the Federal Reserve System
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Sample Questions
Q1) Suppose the following statistics are available for the economy:
CU = $60 billion
RES = $100 billion
DEP = $1000 billion
(a)Calculate the size of the monetary base,the money supply,the reserve-deposit ratio,the currency-deposit ratio,and the money multiplier.
(b)Suppose the currency-deposit ratio rises to .10,while the reserve-deposit ratio and monetary base remain unchanged.Calculate the money multiplier,the money supply,and the new values of CU,RES,and DEP.
Q2) When U.S.banks borrow from one another,they must pay the
A)discount rate.
B)prime rate.
C)Fed funds rate.
D)Interbank Offer Rate.
Q3) Was the money multiplier stable during the Great Recession? Why would an unstable money multiplier pose a problem for monetary policy?
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16
Chapter 15: Government Spending and Its Financing
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Sample Questions
Q1) Real money demand in the economy is given by L = 0.3Y - 600i, where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 2000 and the real interest rate is 5%.
(a)At what rate of inflation is seignorage maximized?
(b)What is the maximum amount of seignorage revenue?
Q2) Since 1960,the only period of several years when the full-employment government budget deficit was negative (that is,there was a full-employment surplus)was
A)from 2000 to 2005.
B)the late 1990s and early 2000s.
C)the mid-1980s.
D)the early 1970s.
Q3) The type of tax receipts that has shown the slowest growth since World War II has been
A)personal taxes.
B)contributions for social insurance.
C)taxes on production and imports.
D)corporate taxes.
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Page 17