Intermediate Macroeconomics
Test Bank
Course Introduction
Intermediate Macroeconomics builds on fundamental economic concepts to explore the behavior of national economies in greater depth. The course examines the determinants of aggregate output, employment, inflation, and economic growth, with particular focus on the roles of government policy, the financial system, and expectations in shaping macroeconomic outcomes. Students analyze models such as the IS-LM, AD-AS, and Solow growth models, assess the impact of fiscal and monetary policies, and investigate real-world issues including business cycles, unemployment, and globalization. Real and theoretical frameworks are used to understand the interaction between domestic and international economic forces, preparing students to critically analyze current economic events and policies.
Recommended Textbook
Macroeconomics 10th Edition by William Boyes
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21 Chapters
2257 Verified Questions
2257 Flashcards
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Page 2
Chapter 1: The Wealth of Nations: Ownership and Economic Freedom
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87 Verified Questions
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Sample Questions
Q1) The opportunity cost of going to the movies is always the same for everyone.
A)True
B)False
Answer: False
Q2) A piece of land is divided between John and Mary. However, only John gets the title to his share of land. Which of the following is true?
A) Both Mary and John will not take care of their lands.
B) Mary will have a higher per capita output from her piece of land.
C) John will not be able to rent out a portion of his land.
D) Mary will have a greater incentive than John to invest in her piece of land.
E) John will be able to use his land as collateral for a loan from a bank.
Answer: E
Q3) In Figure 1.3, which point should society produce at to maximize efficiency?
A) Only point A
B) Only point B
C) Only point C
D) Only point E
E) Any point on its PPC
Answer: E
Page 3
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Chapter 2: Scarcity and Opportunity Costs
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Sample Questions
Q1) Julio makes wine and beer. Last year he made 20 bottles of wine and 20 cases of beer. If the price of grapes goes down (making wine cheaper to make), Julio will be able to make the same amount of wine and more beer.
A)True
B)False
Answer: True
Q2) According to economists, human activity is unresponsive to changes in costs.
A)True
B)False
Answer: False
Q3) If an individual can produce a good or service with a lower opportunity cost than another individual, then he or she is said to have the comparative advantage.
A)True
B)False
Answer: True
Q4) Economic growth can be illustrated by an outward shift of the PPC.
A)True
B)False Answer: True
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Chapter 3: The Market and Price System
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Sample Questions
Q1) Every Friday night Elizabeth either goes bowling or goes to the movies. Because the price of bowling went up, Elizabeth now sees more movies. Elizabeth's behavior would be best described as a change in which determinant of demand?
A) Price of complementary goods
B) Expectations
C) Income
D) Number of buyers
E) Price of substitute goods
Answer: E
Q2) Other things remaining the same, if a large part of the population decided against having soda for health reasons, there would be a(n):
A) increase in the quantity of soda supplied.
B) increase in the quantity supplied of complements like fries and burgers.
C) decrease in the price of soda.
D) rightward shift of the demand curve for soda.
E) decrease in the quantity demanded of substitutes like mineral water.
Answer: C
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Chapter 4: The Aggregate Economy
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Sample Questions
Q1) Identify the international organization that makes loans to developing countries.
A) The World Bank
B) The Federal Reserve
C) The World Trade Organization
D) The Industrial Development Board
E) The Bank of England
Q2) Households and firms pay taxes to the government to:
A) increase their consumption spending.
B) finance the country's import bill.
C) increase their savings.
D) improve their standard of living.
E) finance government expenditures.
Q3) The term net exports refers to:
A) the situation in which a country's exports exceed its imports.
B) the situation in which a country's imports exceed its exports.
C) the shortages that result when a country imposes a price ceiling.
D) the shortages that result when a country imposes a price floor.
E) the difference between the value of exports and the value of imports.
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6
Chapter 5: National Income Accounting
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Sample Questions
Q1) The price index for the current year is 180. This means that, on average, prices in the current year are:
A) 80 percent of prices in the base year.
B) $1.80 higher than prices in the base year.
C) 180 percent higher than prices in the base year.
D) $0.80 higher than prices in the base year.
E) 80 percent higher than prices in the base year.
Q2) Refer to Table 5.6. What is the constant-dollar real GDP growth from 1995 to 2003 using 2003 as the base year?
A) 50 percent
B) Zero percent
C) -75 percent
D) 100 percent
E) 14 percent
Q3) Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or fall at the same time or by the same amount.
A)True
B)False
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Chapter 6: An Introduction to the Foreign Exchapterange
Market and the Balance of Payments
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Sample Questions
Q1) Suppose you are a U.S. importer purchasing coffee from Guatemala at a dollar price of $10,000. If the bank charges $0.12 per quetzal, you would have to buy 120,000 quetzals to settle the account with the Guatemalan exporter.
A)True
B)False
Q2) The statistical discrepancy account is also referred to as:
A) omissions and errors.
B) econometric discrepancy.
C) statistical influence.
D) human flaws.
E) arbitrary human discrepancy.
Q3) An exchange rate can be described as:
A) the price of a foreign currency as determined by the World Bank.
B) the price of one country's currency in terms of another country's currency.
C) the dollar value of imports and exports undertaken in the world economy during a year.
D) the price of foreign currency as established by the relative amount of tourism.
E) the dollar value of U.S. international trade.
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Rapid increases in military spending by the federal government without accompanying increases in real output could be a cause of cost-push inflation.
A)True
B)False
Q2) Suppose statistical surveys indicate that new orders for manufactured goods and new building permits for single-family homes are declining and that business inventories are rising. This implies economic activity is slowing down and the economy is potentially entering a recessionary period.
A)True
B)False
Q3) The inflation rate is a:
A) percentage decrease in price level.
B) percentage increase in price level.
C) sustained increase in relative prices.
D) sustained decrease in relative prices.
E) sudden increase in the weighted average of all prices.
Q4) Inflation is defined as the sustained increase in relative prices.
A)True
B)False
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Chapter 8: Macroeconomic Equilibrium: Aggregate
Demand and Supply
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Sample Questions
Q1) What happens to aggregate supply when production costs adjust completely to price increases?
A) Both equilibrium output and prices increase
B) Only prices rise; equilibrium output remains fixed
C) Only equilibrium output rises; equilibrium prices remain fixed
D) Equilibrium output falls while prices rise
E) Both equilibrium output and prices remain fixed
Q2) The interest rate effect suggests that investment spending and planned aggregate expenditures fall when the general price level rises.
A)True
B)False
Q3) The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies, and increase in the quantity and quality of resources.
A) long-run aggregate supply; right
B) short-run aggregate supply; right
C) short-run aggregate demand; left
D) long-run aggregate demand curve; left
E) long-run aggregate supply; left
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Chapter 9: Aggregate Expenditures
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Sample Questions
Q1) When capacity utilization rate is high:
A) the price level is likely to go up.
B) consumption is likely to go down.
C) investment is likely to increase.
D) the rate of interest is likely to decrease.
E) aggregate supply of goods is likely to remain constant.
Q2) If a household experiences a $880 increase in consumption with a $1,100 increase in disposable income, what is the slope of that household's saving function?
A) 0.20
B) 2.0
C) 0.80
D) 0.08
E) 0.25
Q3) The 45-degree line used in a consumption function represents:
A) the saving function.
B) all points at which saving equals disposable income.
C) all points at which consumption equals saving.
D) all points at which all disposable income is consumed.
E) the aggregate income of the economy.
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Chapter 10: Income and Expenditures Equilibrium
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Sample Questions
Q1) A depreciation of the U.S. dollar will result in an increase in aggregate expenditures in the country.
A)True
B)False
Q2) A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply.
A)True
B)False
Q3) Ceteris paribus, a downward shift in the net exports function will cause:
A) equilibrium real GDP to decrease.
B) equilibrium real GDP to increase.
C) savings to decrease.
D) net exports to increase.
E) government budget deficit to decline.
Q4) When the purchasing power of money declines:
A) the demand for money increases and interest rates fall.
B) the supply of bonds increases and interest rates fall.
C) the demand for money increases and interest rates rise.
D) the supply of bonds decreases and interest rates rise.
E) the demand for money decreases and interest rates rise.
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) Under a progressive tax system:
A) the average tax rate increases with increases in real GDP.
B) the average tax rate remains constant with changes in real GDP.
C) the average tax rate falls with increases in real GDP.
D) government tax receipts increase when the economy is in a recession.
E) government tax receipts decrease when the economy is expanding.
Q2) Which of the following taxes are more easier to collect in industrial countries than in developing countries?
A) Sales tax
B) Capital gains tax
C) Personal income tax
D) Business tax
E) Export tax
Q3) The higher the level of inflation, the stronger the impact of reductions in the personal income tax on real GDP .
A)True
B)False
Q4) Most industrial countries have adopted the regressive tax system.
A)True
B)False
Page 13
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Chapter 12: Money and Banking
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Sample Questions
Q1) Assume that the reserve requirement is 10 percent. If a bank has total deposits of $80 million, then the required reserves must equal:
A) $80 million.
B) $12 million.
C) $50 million.
D) $8 million.
E) $10 million.
Q2) The maximum money that can be created by the entire banking system is equal to a multiple of its excess reserves.
A)True
B)False
Q3) In the 1980s, the number of bank failures increased dramatically in the United States, most of which were uninsured.
A)True
B)False
Q4) Stocks and bonds are considered to be highly illiquid assets while real estate is considered to be a liquid asset.
A)True
B)False
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Chapter 13: Monetary Policy
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Sample Questions
Q1) Refer to Table 13.1. Given a reserve requirement of 8 percent, what is the amount of excess reserves?
A) $2,800
B) $224
C) $936
D) $1,640
E) -$256
Q2) The President of which of the following district banks of the Fed is perpetually present on the Federal Open Market Committee?
A) The New York Fed
B) The Seattle Fed
C) The Boston Fed
D) The Chicago Fed
E) The Atlanta Fed
Q3) Other things equal, an increase in the general price level causes the money demand function to shift to the left.
A)True
B)False
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Page 15
Chapter 14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility,
and Sources of Business Cycles
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Sample Questions
Q1) Refer to Figure 14.3. Consider that the economy initially operates at point A. Therefore, according to the theory of rational expectations, an unanticipated increase in consumer confidence will cause the economy to move along the path:
A) ADC.
B) AC.
C) ABDC.
D) AD.
E) ABC.
Q2) If the short-run Phillips curve shifts to the right, we can conclude that:
A) the trade-off between inflation and unemployment has improved over time.
B) the trade-off between inflation and unemployment has worsened over time.
C) the inflation rate associated with any given level of unemployment has declined.
D) the unemployment rate associated with any given inflation rate has declined.
E) the trade-off between inflation and unemployment has remained unchanged.
Q3) The long-run Phillips curve corresponds to the vertical region of the long-run aggregate supply curve.
A)True
B)False
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Chapter 15: Macroeconomic Viewpoints: New Keynesian,
Monetarist, and New Classical
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Sample Questions
Q1) In the early 1960s, monetary theory rather than Keynesian theory dominated economics.
A)True
B)False
Q2) Refer to the Figure 15.2. Assume the economy is currently at point C. According to the new classical school, an expected increase in government spending:
A) would move the economy to point A.
B) would move the economy to point B.
C) would move the economy to point D.
D) would move the economy above point A.
E) would move the economy below point C.
Q3) Milton Friedman in his book on consumption function, discussed the importance of _____, rather than _____, to understand consumer spending.
A) savings; expenditure
B) permanent income; current income
C) money supply; real output
D) wages; savings
E) real output; prices
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Chapter 16: Economic Growth
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Sample Questions
Q1) Long-term economic growth requires a permanent:
A) decline in the average price level.
B) leftward shift of the vertical Phillips curve.
C) rise in the natural rate of unemployment.
D) leftward shift of the aggregate demand curve.
E) rightward shift of the vertical aggregate supply curve.
Q2) Other things equal, a country's long-run aggregate supply will shift to the left when _____.
A) the aggregate expenditure on education rises
B) the productivity of labor rises
C) the quantity of natural resources rises
D) the mortality rate rises
E) the amount of investment rises
Q3) When trying to determine the standard of living in a given country, it is not important to observe its income distribution, because what we are interested in is the income per person in the economy.
A)True
B)False
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Chapter 17: Development Economics
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Sample Questions
Q1) The reason why public subsidization of industries in less-developed countries causes slow economic growth is that:
A) when companies face no competition, there is no incentive for them to improve their production.
B) too much of the taxpayer's money is spent in these programs.
C) consumers tend to develop an aversion for the purchase of subsidized goods and services.
D) subsidies tend to create too much competition for products.
E) subsidization creates shortage in the product market.
Q2) To have significant foreign direct investment, a developing country ought to have a stable system of property rights.
A)True
B)False
Q3) Poverty is usually defined by economists in relative terms.
A)True
B)False
Q4) Higher per capita GNP always means higher quality of life.
A)True
B)False
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Chapter 18: Globalization
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Sample
Questions
Q1) Refer to Figure 18.1. Assume that there is a market perception that the value of Thai assets will decrease in the near future. This affects the current equilibrium exchange rate. What can the Thai central bank do to restore the previous value of the baht?
A) Increase the demand for U.S. dollars
B) Sell Thai bahts in the foreign exchange market
C) Sell dollars in the foreign exchange market
D) Appeal to the WTO for help
E) Buy back outstanding Thai bonds in open market operations
Q2) Evidence exists that countries with the most open economies tend to have more stringent environmental regulations.
A)True
B)False
Q3) International trade constantly increased throughout the twentieth century. A)True
B)False
Q4) India is one of the countries that did not participate in the process of globalization. A)True
B)False
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Chapter 19: World Trade Equilibrium
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Sample Questions
Q1) International trade permits greater consumption than would be possible from the domestic production alone.
A)True
B)False
Q2) The human skills theory is similar to the factor abundance theory of explaining the source of comparative advantage, except that the former concentrates only on different aspects of labor.
A)True
B)False
Q3) The product life cycle theory predicts that comparative advantage shifts away from the country of origin if:
A) the product is introduced in many countries simultaneously.
B) the product is highly demanded in international markets.
C) the demand for the product drastically declines in the domestic market of the country where it was invented.
D) other countries have lower manufacturing costs using the now-standardized technology.
E) other countries develop highly skilled labor forces to improve product quality.
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Chapter 20: International Trade Restrictions
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Sample Questions
Q1) The abbreviation GATT stands for:
A) General Analysis of Taxes and Transfers.
B) General Agreement on Tariffs and Trade.
C) Government Agency for Trade and Transportation.
D) Government Agency for Treaties and Taxes.
E) General Agreement on Terms of Trade.
Q2) Which of the following statements about international trade restrictions is true?
A) They ensure that only efficient producers survive.
B) They ensure that countries specialize only in those products that they can produce most efficiently.
C) In the majority of cases, they harm domestic consumers.
D) They typically benefit foreign producers at the expense of domestic consumers.
E) They ensure that higher-quality goods are provided at lower prices.
Q3) Government standards for products sold in the domestic market can have the effect of protecting domestic producers from foreign competition.
A)True
B)False
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22
Chapter 21: Exchapterange Rates and Financial Links
Between Countries
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Sample Questions
Q1) Suppose you are a U.S. exporter expecting to receive a payment of NZD ,000 (New Zealand dollars) in 12 months. The annual interest rate on NZD deposits is 5 percent, and the annual interest rate on dollar deposits is 9 percent. If the present exchange rate is $0.50 per NZD and interest rate parity holds, how many dollars do you expect to receive at the maturity date of the export contract?
A) $2,000
B) $1,923
C) $1,000
D) $580
E) $520
Q2) Suppose that the price of an ounce of gold is 120 pesos in Mexico and 2,400 yen in Japan. Then the Japanese yen is worth two hundred times the value of a Mexican peso. A)True
B)False
Q3) Fixed exchange rates serve as a constraint on inflationary government policies. A)True B)False
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