Intermediate Macroeconomics
Test Questions
Course Introduction
Intermediate Macroeconomics explores the fundamental principles and models that shape the performance of national economies. Building on introductory concepts, this course examines aggregate demand and supply, economic growth, business cycles, unemployment, inflation, and the impact of monetary and fiscal policy. Students will analyze real-world economic fluctuations using theoretical frameworks such as the IS-LM and AD-AS models, and assess policy tools available to governments and central banks. Through problem-solving and empirical analysis, the course aims to deepen understanding of the mechanisms driving macroeconomic stability and growth, preparing students for advanced study or practical application in economics-related fields.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn Hubbard
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Page 2
Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) Examining the conditions that could lead to unemployment in an economy is an example of a microeconomics topic.
A)True
B)False
Answer: False
Q2) How are the fundamental economic questions answered in a market economy?
A)The government alone decides the answers.
B)Individuals, firms and the government interact in markets to decide the answers to these questions.
C)Households and firms interact in markets to decide the answers to these questions.
D)Large corporations alone decide the answers.
Answer: C
Q3) Which of the following is part of an economic model?
A)norms
B)hypotheses
C)opinions
D)preferences of economic agents
Answer: B
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3
Chapter 2: Choices and Trade Offs in the Market
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Sample Questions
Q1) The basis for trade is comparative advantage, not absolute advantage.
A)True
B)False
Answer: True
Q2) If a nation changes its laws to more actively enforce intellectual property rights, all of the following will most likely take place except:
A)more software companies will choose to export their products to that country.
B)more filmmakers will choose to do business in that country.
C)the black market for intellectual property will become more prosperous in that country.
D)foreign investment in that country will increase.
Answer: C
Q3) An inward shift of a nation's production possibility frontier represents:
A)economic decline.
B)rising prices of the two goods on the production possibility frontier model.
C)an impossible situation.
D)a situation in which a country produces more of one good and less of another.
Answer: A
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) What are the five variables that will shift the demand curve?
Answer: 1. Income
2. Price of related goods
3. Tastes
4. Population and demographics
5. Expected future prices
Q2) Assume that the price for swimming pool maintenance services has risen and sales of these services have fallen. One can conclude that:
A)the law of supply has been violated.
B)the demand for swimming pool maintenance services has increased.
C)the supply of swimming pool maintenance services has decreased.
D)swimming pool maintenance services are becoming more technologically advanced.
Answer: C
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Page 5
Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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Sample Questions
Q1) An increase in the price level of 5% between 2017 and 2018 would be implied by a change in the GDP deflator from ________ in 2017 to ________ in 2018.
A)105; 115
B)200; 205
C)400; 420
D)375; 390
Q2) The circular-flow model demonstrates that the value of total production is equal to the value of total income in an economy.
A)True
B)False
Q3) When measuring real GDP, what does the term 'chain volume measures' refer to?
Q4) If nominal GDP is less than real GDP, then the GDP deflator will be less than 100. A)True
B)False
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Chapter 5: Economic Growth, the Financial System and Business Cycles
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Sample Questions
Q1) When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?
A)Real GDP is falling.
B)Incomes are growing at a slower rate than the population.
C)Real GDP per capita is rising.
D)Living standards are falling.
Q2) A decrease in the real interest rate does which of the following?
A)increases the demand for loanable funds
B)decreases saving
C)increases consumption spending
D)decreases the demand for loanable funds
Q3) Equilibrium in the loanable funds market determines the:
A)nominal interest rate.
B)current interest rate.
C)real interest rate.
D)expected interest rate.
Q4) Financial markets and financial intermediaries comprise the financial system in Australia.
A)True
B)False
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Chapter 6: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Which of the following countries was identified as a newly industrialising country in the 1980s and1990s, but is not identified as high-income country?
A)United States
B)Australia
C)Hong Kong
D)Brazil
Q2) Technological change causes a movement along a per-worker production function.
A)True
B)False
Q3) Which of the following is a normative statement about economic growth?
A)Economic growth is associated with higher labour productivity growth.
B)Economic growth increases GDP per capita.
C)Economic growth hurts developing countries.
D)Foreign direct investment stimulates economic growth.
Q4) An example of foreign direct investment is when an Italian company:
A)purchases 1 000 shares of stock issued by an American company.
B)opens a new Italian factory.
C)purchases shares issued in Italy.
D)opens a new factory in Australia.
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Chapter 7: Unemployment
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Sample Questions
Q1) When the economy is at 'full employment', everyone who wants a job has a job.
A)True
B)False
Q2) What is one of the questions asked when the Australian Bureau of Statistics conducts surveys to estimate the rate of unemployment?
A)Is the person currently available to start work?
B)Has the person looked for work during the past year?
C)Does the person have any skills?
D)Has the person worked for 10 hours or more in the past week?
Q3) Minimum wage laws cause unemployment because the legal minimum wage is set:
A)below the market wage, causing labour demand to be greater than labour supply.
B)below the market wage, causing labour demand to be less than labour supply.
C)above the market wage, causing labour demand to be greater than labour supply.
D)above the market wage, causing labour demand to be less than labour supply.
Q4) When is the labour market at 'full employment'?
A)When there is only cyclical unemployment in the economy.
B)When there is only structural unemployment in the economy.
C)When the unemployment rate is 0%.
D)When there is no cyclical unemployment in the economy.
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Chapter 8: Inflation
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Sample Questions
Q1) What is the difference between the nominal interest rate and the real interest rate?
Q2) Describe how inflation can be costly even if it is anticipated.
Q3) Of the market basket that makes up the CPI, which of the following is the smallest portion?
A)education
B)clothing and footwear
C)transportation
D)housing
Q4) There are no costs to inflation if it is fully anticipated.
A)True
B)False
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Chapter 9: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) Discuss the leading drivers of the Great Depression in Australia and use the 45° line diagram to show how those drivers caused a decline in real GDP.
Q2) If firms are less optimistic that future profits will rise and remain strong for the next few years, then:
A)investment spending will fall.
B)investment spending will rise.
C)investment spending will remain unaffected.
D)investment spending will rise at first, then fall.
Q3) If planned aggregate expenditure is less than total production, then:
A)actual inventories will equal planned inventories.
B)firms will experience an unplanned increase in inventories.
C)GDP will increase.
D)the economy is in equilibrium.
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Page 11
Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) The aggregate demand curve shows the relationship between the price level and the quantity of real GDP demanded by households and firms, excluding government spending.
A)True
B)False
Q2) The impact of a natural disaster on consumers in the economy can make them very pessimistic about their future incomes. How would an increase in pessimism affect the aggregate demand curve?
A)This will move the economy up along a stationary aggregate demand curve.
B)This will move the economy down along a stationary aggregate demand curve.
C)This will shift the aggregate demand curve to the left.
D)This will shift the aggregate demand curve to the right.
Q3) Starting from long-run equilibrium, use the basic (static)aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.
12
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Chapter 11: Money, Banks and the Reserve Bank of Australia
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Sample Questions
Q1) The ________ the reserve ratio, the ________ the simple deposit multiplier.
A)smaller; smaller
B)smaller; larger
C)larger; larger
D)smaller; greater likelihood there is no change in
Q2) 'Barter' takes place in an economy when:
A)goods and services are exchanged for money.
B)money is exchanged for goods and services.
C)goods and services are exchanged for other goods and services.
D)goods and services are exchanged for liabilities.
Q3) If the reserve ratio is 0.05, then the simple deposit multiplier is: A)10.
B)5.
C)2.
D)20.
Q4) The Reserve Bank of Australia intervenes in the financial markets mostly to stop interest rates from changing.
A)True
B)False
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Chapter 12: Monetary Policy
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Sample Questions
Q1) Explain how the Reserve Bank of Australia maintains its targeted cash rate on a daily basis.
Q2) Refer to Figure 12.2. In this figure, a movement from point A to point B would be caused by:
A)a decrease in real GDP.
B)an increase in the price level.
C)a decrease in the price level.
D)an increase in the interest rate.
Q3) Maintaining a strong exchange rate for the dollar in international currency markets is one of the monetary policy goals of the Reserve Bank of Australia.
A)True
B)False
Q4) The main goal of monetary policy in Australia is a low inflation rate.
A)True
B)False
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) If the equilibrium real GDP were higher than potential GDP, then a contractionary fiscal policy would cause the inflation rate to be ________ and real GDP to be
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower
Q2) Which of the following is an example of discretionary fiscal policy?
A)An increase in the number unemployment benefit payments during a recession due to rising unemployment.
B)An increase in income tax receipts during an expansion because incomes are rising.
C)Tax increases to combat rising inflation.
D)A decrease in income tax receipts during a recession because incomes are falling.
Q3) A vertical long-run Phillips curve implies that in the long-run there is no trade-off between unemployment and inflation.
A)True
B)False
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Chapter 14: Macroeconomics in an Open Economy
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Sample Questions
Q1) What is the 'real exchange rate' and how is it calculated?
Q2) If the capital account is in surplus and the current account is zero, then the:
A)financial account must be in deficit.
B)balance of trade must be in deficit.
C)balance of payments must be in surplus.
D)balance of services must be in deficit.
Q3) An example of 'foreign direct investment' is:
A)Holden building a factory in India.
B)a British investor buying shares in an Australian firm.
C)an Australian investor buying a Canadian bond.
D)a British bank buying an Australian government bond.
Q4) A federal budget deficit can lead to a(n):
A)appreciation of the dollar and an increase in net exports.
B)depreciation of the dollar and a decline in net exports.
C)appreciation of the dollar and a decline in net exports.
D)depreciation of the dollar and an increase in net exports.
Page 16
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Chapter 15: The International Financial System
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Sample Questions
Q1) Prior to the 1980s, most firms raised funds through the ________ stock and bond market. After the 1980s, firms have a greater access to ________ markets.
A)domestic; domestic B)domestic; foreign C)foreign; domestic D)foreign; foreign
Q2) What are 'capital controls'? Why might a financial crisis lead to a reconsideration of using capital controls and what problems might result from the reinstatement of capital controls?
Q3) The Australian dollar was floated in: A)1974.
B)1983.
C)1989. D)2001.
Q4) The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.
A)True
B)False
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