Introduction to Macroeconomics Exam Bank
Course Introduction
Introduction to Macroeconomics explores the fundamental principles governing the performance and behavior of entire economies. The course covers topics such as national income accounting, inflation, unemployment, economic growth, fiscal and monetary policy, and the roles of government and central banks. Students will gain an understanding of how economic indicators are measured, how market forces interact on a large scale, and how policies can influence economic stability and growth. By the end of the course, students will be able to critically analyze current economic events and understand the interconnectedness of economies in a global context.
Recommended Textbook
Economics for Today 4th Asia Pacific Edition by Allan Layton
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Page 2
Chapter 1: Thinking like an economist
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Q1) Macroeconomics is concerned with the issue of how monetary policy can slow down inflation.
A)True
B)False
Answer: True
Q2) Inflation is a concern of:
A)macroeconomics.
B)microeconomics.
C)both macroeconomics and microeconomics.
D)neither macroeconomics or microeconomics.
Answer: A
Q3) Land resource includes farming land,forestry and fishery but does not include the atmosphere,the sun,the moon and other planets.
A)True
B)False
Answer: False
Q4) Economics studies decision making by a single individual.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Production possibilities and opportunity cost
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Q1) The opportunity cost of watching television is:
A)the cost of not watching all other programs that appear on other stations.
B)unable to be estimated because there is no money expenditure involved.
C)the next best alternative you do instead of watching the program.
D)zero if it benefits you.
Answer: C
Q2) An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:
A)low population growth rates mean fewer workers to produce food and other necessities.
B)their production possibilities curves shift in when resources are increased.
C)their production possibilities curves are positively sloped, unlike those in more developed economies.
D)they must cut back their already meagre consumption levels to increase capital production.
E)the opportunity cost of shifting resources from consumption goods to capital goods is relatively low.
Answer: D
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4
Chapter 3: Market demand and supply
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Q1) Assume that a computer is a normal good.An increase in consumer income,other things being equal,would:
A)cause an upward movement along the demand curve for computers.
B)cause a downward movement along the demand curve for computers.
C)shift the demand curve for computers to the left.
D)shift the demand curve for computers to the right.
Answer: D
Q2) Which of the following is true about the market equilibrium?
A)As the price increases, the quantity demanded and the quantity supplied increases.
B)As the price increases, the quantity demanded and the quantity supplied decreases.
C)As the price increases, the quantity demanded increases and the quantity supplied decreases.
D)As the price increases, the quantity demanded decreases and the quantity supplied increases.
E)As the price increases, neither the quantity demanded nor quantity supplied change.
Answer: D
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Chapter 4: Markets in action
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Q1) Ceteris paribus,an increase in the supply of a good causes which of the following?
A)Lowers the equilibrium price and reduces the quantity bought and sold.
B)Raises the equilibrium price and raises the quantity bought and sold.
C)Raises the equilibrium price and increases the quantity bought and sold.
D)Lowers the equilibrium price and increases the quantity bought and sold.
E)Equilibrium price and equilibrium quantity change are indeterminate.
Q2) A free rider is a person who:
A)is harmed by another's actions.
B)is subject to a negative externality.
C)receives benefits from someone else's action but does not pay for them.
D)pays less than the full value for a product.
E)won the lottery.
Q3) A vaccination shot provides a/an:
A)beneficial opportunity cost.
B)positive externality.
C)out-resourcing benefit.
D)managed-care opportunity benefit.
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Chapter 5: Elasticity of demand and supply
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Q1) If the price elasticity of demand for a product measures 0.45,then:
A)this good has many available substitutes.
B)this good must be a non-essential good.
C)this good is a high-priced good.
D)a decrease in price will increase total revenue.
E)this good is demand price inelastic.
Q2) A horizontal demand curve indicates perfectly elastic demand.
A)True
B)False
Q3) Suppose that the quantity of cars sold decreases by 5 per cent after the price of motorbikes decreases by 20 per cent.What is the coefficient of the cross elasticity of demand?
A)3.
B)1.5.
C)0.25.
D)2.
E)0.3.
Q4) Price elasticity remains constant along a straight-line demand curve
A)True
B)False
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Chapter 6: Production costs
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Q1) In Exhibit 6-1,total output increases from A to C because:
A)workers receive higher wages.
B)of technological progress in industries.
C)the law of diminishing marginal returns sets in.
D)of specialisation and therefore the increasing returns.
Q2) If the wage rate is constant:
A)the marginal cost rises as the marginal product of a variable input rises.
B)the marginal cost is constant as the marginal product of a variable input rises.
C)the marginal cost follows the shape of the marginal product curve.
D)the minimum of marginal cost curve corresponds to the maximum of the marginal product curve.
Q3) In Exhibit 6-5,by filling in the blanks it can be determined that the marginal cost of the first unit of output is:
A)$200.
B)$700.
C)$900.
D)$1000.
E)$3000.
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8
Chapter 7: Perfect competition
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Q1) If marginal revenue exceeds marginal cost in the short run,the perfectly competitive firm earns an economic profit in the short run.
A)True
B)False
Q2) A perfectly competitive industry's short-run market supply curve is derived from:
A)horizontal summation of the short-run supply curves of major firms in the industry.
B)horizontal summation of the long-run supply curves of all firms in the industry.
C)vertical summation of the short-run supply curves of all firms in the industry.
D)horizontal summation of the short-run supply curves of all firms in the industry.
Q3) Which of the following is not a characteristic of a perfectly competitive market?
A)There is a large number of small firms.
B)Firms sell a homogeneous product.
C)Firms can easily enter or exit the market.
D)Firms are price makers, not price takers.
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9
Chapter 8: Monopoly
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Sample Questions
Q1) Predatory pricing can occur in a monopoly market because:
A)the firm has no potential competitors to stop it doing so.
B)the firm wishes to discourage potential entrants.
C)the government has a tax incentive to let it happen.
D)the monopolist is trying to maximise short-term profits.
E)predatory pricing can never happen in a monopoly market.
Q2) The only dentist in a small isolated country town is an example of a/an:
A)oligopoly.
B)monopolistically competitive firm.
C)monopoly.
D)competitive firm.
Q3) If a monopoly holds a patent over a good,it is often because they paid the most money for it.
A)True
B)False
Q4) When is a monopolist able to charge a lower price than a competitive firm?
A)Never.
B)If the monopolist is a natural monopolist.
C)If the monopolist is able to price discriminate.
D)If the monopolist has enough profit.
Page 10
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Chapter 9: Monopolistic competition and oligopoly
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Q1) According to the kinked demand theory,when one firm raises its price,other firms will:
A)also raise their prices.
B)refuse to follow.
C)increase their advertising expenditures.
D)exit the industry.
Q2) When Pepsi is considering a price hike,it needs to consider how Coke may react.This situation is called:
A)mutual interdependence.
B)price leadership.
C)collusion.
D)monopolistic competition.
Q3) Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries.The primary reason for the complication is the:
A)small number of firms.
B)brand loyalty of consumers.
C)powerful effect of advertising.
D)variability of concentration ratios.
E)mutual interdependence of firms.
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Chapter 10: Policy issues: resource taxes and climate change
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Sample Questions
Q1) Long-term changes in the world's climate are believed to be caused by:
A)human activity.
B)natural changes in climate.
C)pre-industrial revolution.
D)governments' policies.
Q2) An example of a policy that is not designed to reduce the output of the activity creating the negative externality is a:
A)congestion charge.
B)policy that restricts the fishing activity.
C)competition policy.
D)policy that creates property rights.
Q3) The emissions trading scheme is preferred by economists because:
A)clean air is not like any other scarce resource and cannot be traded on the market.
B)it treats the clean air as a limited economic resource which is owned by consumers and firms have to pay to use it.
C)once the trading scheme is in place, the firms have no control over how to minimise their losses.
D)it is up to the firms to decide on how much emissions they can produce.
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Chapter 11: Measuring the size of the economy
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Sample Questions
Q1) GDP counts only:
A)all goods and services produced within the country.
B)transfer payments.
C)second-hand domestic products.
D)new domestic products.
Q2) GDP provides information about:
A)the total value of incomes of labour, land and capital.
B)distribution and quality of products produced.
C)the total value of goods and services produced on the black market.
D)the individual incomes.
Q3) All final goods and services that make up GDP can be expressed in the form:
A)GDP = C + I - G + (X + M).
B)GDP = C + I + G + (X + M).
C)GDP = C + I + G + (X - M).
D)GDP = C + I + (X - M).
E)GDP = C + I +
Q4) Flows are measured per period of time,while stocks are measured at a particular point in time.
A)True
B)False
Page 13
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Chapter 12: Business cycles and economic growth
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Sample Questions
Q1) According to Exhibit 12-2,the level of consumption per person when capital per person is 120 units will be:
A)32.
B)34.
C)36.
D)38.
E)40.
Q2) A goal of macroeconomic policy should be to _____ business-cycle fluctuations in an economy.
A)increase
B)reduce
C)ignore
D)encourage
Q3) The business cycle occurs from:
A)changes in industry demand.
B)changes in local supply and taxes.
C)changes in weather.
D)changes in the costs of production and in total spending.
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Chapter 13: Inflation and unemployment
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Q1) Consider borrowers and lenders who agree to loans with fixed nominal interest rates.If inflation is higher than what the borrowers and lenders expected,then who benefits from lower real interest rates?
A)Only the borrowers benefit.
B)Only the lenders benefit.
C)Both borrowers and lenders benefit.
D)Neither borrowers nor lenders benefit.
Q2) The source of demand-pull inflation is a:
A)lack of expectations.
B)shortage of demand.
C)excess of demand.
D)high cost of production.
Q3) Suppose a market basket of goods and services costs $400 in the base year and the consumer price index (CPI)is currently 125.This indicates the price of the market basket of goods is now:
A)$275.
B)$425.
C)$500.
D)$525.
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Page 15
Chapter 14: A simple model of the macro economy
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Q1) In Exhibit 14-2,if aggregate demand shifts from AD to AD ,real GDP will:
A)not change and the price level will not change.
B)fall from $7 to $4 and the price level will not change.
C)fall from $4 to $3 and the price level will not change.
D)fall from $4 to $3 and the price level will fall from 120 to 100.
E)fall from $4 to $3 and the price level will fall from 170 to 100.
Q2) In the aggregate demand-output model,if an economy operates below equilibrium GDP,there will be:
A)unplanned inventory depletion.
B)unplanned inventory accumulated.
C)a decrease in GDP.
D)a decrease in employment.
Q3) The net-exports effect is the direct relationship between net exports and the price level of an economy.
A)True
B)False
Q4) Stagflation occurs when an economy experiences the high unemployment and low prices simultaneously.
A)True
B)False
Page 16
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Chapter 15: The monetary and financial system
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Sample Questions
Q1) The primary functions of money are:
A)velocity, liquidity and transactions.
B)speculative demand, measure of value and precautionary demand.
C)a medium of exchange, a measure of value and a store of value.
D)a store of value, heterogeneity and a medium of exchange.
E)currency value, fiat value and accepted value.
Q2) The Australian Securities Exchange (ASX)market is a virtual market similar to the money market.
A)True
B)False
Q3) Assume the demand for money curve is stationary and the RBA increases the money supply.The result is that people:
A)increase the supply of bonds, thus driving up the interest rate.
B)increase the supply of bonds, thus driving down the interest rate.
C)increase the demand for bonds, thus driving up the interest rate.
D)increase the demand for bonds, thus driving down the interest rate.
Q4) Each bank has to make a choice whether to maintain an exchange settlement account with the RBA or not.
A)True
B)False
Page 17
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Chapter 16: Macroeconomic policy I: monetary policy
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Q1) If the central bank follows a rules-based approach to monetary policy and the velocity of money turns out to be larger than expected,then inflation:
A)will be lower than expected.
B)will be higher than expected.
C)will be unaffected.
D)could be higher or lower than expected.
Q2) If the velocity of money = 1,then the money supply will be:
A)equal to the price level.
B)equal to nominal GDP.
C)equal to real GDP.
D)equal to the difference between nominal and real GDP.
E)indeterminate.
Q3) According to monetarists:
A)if the money supply is expanding too much, higher rates of inflation will be likely.
B)if the money supply is expanding too slowly, the unemployment rate will decline.
C)if the money supply is expanding too slowly, prices will grow.
D)if the money supply is shrinking, higher rates of inflation will be likely.
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Chapter 17: Macroeconomic policy II: fiscal policy
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Q1) 'Tax cuts - by providing incentives to work,save and invest - will raise employment and lower the price level.' This argument is made by the:
A)Keynesian economists.
B)supply-side economists.
C)classical economists.
D)monetarists.
Q2) If the MPC is 0.8,the spending multiplier is 4.
A)True
B)False
Q3) 'Crowding out' refers to the government's increased demand for credit,which:
A)displaces some private-sector consumption by decreasing the price level.
B)displaces some private-sector borrowing by decreasing the interest rate.
C)displaces some private-sector borrowing by increasing the interest rate.
D)hires labour away from the private sector.
E)means longer lines at government agencies.
Q4) A $10 million increase in government spending has a different economic impact to a $10 million tax cut.
A)True
B)False
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Chapter 18: International trade and finance
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Q1) In Exhibit 18-3,Australia has a comparative advantage in producing:
A)potatoes.
B)wheat.
C)both potatoes and wheat.
D)neither potatoes nor wheat.
Q2) A flexible exchange rate system is one in which countries:
A)allow their currencies to adjust continuously according to the demand and supply.
B)do not allow their currencies to adjust continuously according to the demand and supply.
C)allow their currencies to adjust according to the foreign policy.
D)allow their currencies to adjust by fixing an exchange rate regular.
Q3) In Exhibit 18-4,when the exchange rate is 3 dollars per pound:
A)there is an excess supply of 110 pounds.
B)there is an excess demand of 110 pounds.
C)there is an excess supply of 110 dollars.
D)there is an excess demand of 110 dollars.
E)the market is in equilibrium.
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20
Chapter 19: Applying graphs to economics
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Q1) A change in a third variable not on either axis of a graph is illustrated with:
A)a horizontal or vertical line.
B)a movement along a curve.
C)a shift of a curve.
D)a point of intersection.
Q2) A graph can be used to illustrate the relationship between the price of compact discs and the quantity of compact discs demanded.If there is evidence that buyers' income also influences the demand for compact discs,then a movement along the curve can be caused by a change in the price of compact discs.
A)True
B)False
Q3) Which of the following pairs is the most likely to exhibit an inverse relationship?
A)The amount of time you spend studying and your final marks.
B)Waiter's tips and her service.
C)The annual income and demand for overseas travel.
D)People's annual income and their expenditure on second-hand clothes.
Q4) An inverse relationship is a negative causation between two variables.
A)True
B)False
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