Introduction to Macroeconomics Final
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Course Introduction
Introduction to Macroeconomics provides students with a foundational understanding of the principles and concepts that govern the economy as a whole. The course examines topics such as national income, inflation, unemployment, economic growth, fiscal and monetary policy, and international trade. Students learn to analyze how economies function at the aggregate level, explore the role of government and central banks in managing economic stability, and gain insights into contemporary macroeconomic issues. Through lectures, discussions, and real-world examples, the course equips students with analytical tools to critically evaluate economic events and policy decisions impacting society.
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Essentials of Economics 6th Edition by R. Glenn Hubbard
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Chapter 1: Economics: Foundations and Models
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Q1) Define macroeconomics.
Answer: Macroeconomics is the study of the economy as a whole,including topics such as inflation,unemployment,and economic growth.
Q2) Economists spend much of their time
A) describing how choices are made and analyzing the results of those choices.
B) arguing that optimal decisions are rarely made at the margin.
C) using normative analysis to develop economic models.
D) telling businesses what goods and services to produce and how to produce them.
Answer: A
Q3) Which of the following is a problem inherent in centrally planned economies?
A) Households and firms make poor decisions in choosing how resources are allocated.
B) There is too little production of low-cost, high-quality goods and services.
C) Production managers are more concerned with satisfying consumer wants than with satisfying government's orders.
D) Exports tend to exceed imports.
Answer: B
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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Q1) Refer to Figure 2-11.What is the opportunity cost of producing 1 pound of cashews in Pakistan?
A) 3/8 of a bolt of cotton
B) 5/8 of a bolt of cotton
C) 1 3/5 bolts of cotton
D) 240 bolts of cotton
Answer: C
Q2) Any output combination outside a production possibilities frontier is associated with unused or underutilized resources.
A)True
B)False
Answer: False
Q3) Refer to Figure 2-12.What is the opportunity cost of producing one gallon of honey in Tahiti?
A) 5/6 of a gallon of milk
B) 0.9 gallons of milk
C) 1.2 gallons of milk
D) 1 1/3 gallons of milk
Answer: A
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Chapter 3: Where Prices Come From: The Interaction of
Demand and Supply
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Q1) If the price of orchids falls,the substitution effect due to the price change will cause
A) an increase in the demand for orchids.
B) an increase in the demand for roses, a substitute for orchids.
C) an increase in the quantity of orchids demanded.
D) an increase in the quantity of orchids supplied.
Answer: C
Q2) The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.
A)True
B)False
Answer: True
Q3) Refer to Figure 3-2.An increase in the price of the product would be represented by a movement from
A) A to B.
B) B to A.
C) S to S .
D) S to S .
Answer: A
5
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Chapter 4: Market Efficiency and Market Failure
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Sample Questions
Q1) Refer to Table 4-4.The table above lists the highest prices three consumers,Curly,Moe,and Larry,are willing to pay for a bottle of champagne.If the price of one of the bottles is $27 dollars,total consumer surplus will be
A) $0.
B) $14.
C) $26.
D) $53.
Q2) Refer to Figure 4-9.What area represents consumer surplus after the imposition of the price floor?
A) A + B + E
B) A + B
C) A + B + E + F
D) A
Q3) What is producer surplus? What does producer surplus measure?
Q4) Government intervention in agricultural markets in the U.S.began in the A) 1920s. B) 1930s.
C) 1950s.
D) 1970s.
Q5) What is deadweight loss? When is deadweight loss equal to zero?
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Chapter 5: The Economics of Health Care
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Sample Questions
Q1) Adverse selection will occur in a market as a result of A) asymmetric information.
B) moral hazard.
C) the sale of "lemons."
D) rational ignorance.
Q2) As a percentage of all spending on health care,out-of-pocket spending has ________ in the United States.
A) remained fairly constant for the last 50 years
B) steadily declined for the past 50 years
C) rapidly increased for the last 50 years
D) erratically increased and decreased over the past 50 years
Q3) Refer to Figure 5-2.Marginal private benefit is represented by which curve?
A) D
B) D
C) Supply
D) All of the above represent marginal private benefit.
Q4) Identify and explain 4 of the difficulties in making cross-country comparisons in health care outcomes.
Q5) How do adverse selection and moral hazard affect the market for insurance?
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Q6) How can increases in a country's total income improve health?
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Chapter 6: Firms, The Stock Market, and Corporate Governance
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Q1) Of the types of business organizations in the United States,partnerships account for the ________ percentage of firms and ________ percentage of profits.
A) smallest; the smallest
B) smallest; neither the largest nor smallest
C) largest; the smallest
D) largest; neither the largest nor smallest
Q2) The higher the default risk on a bond,the higher the interest rate will be.
A)True
B)False
Q3) How are corporate profits taxed in the United States?
A) Earnings are taxed first by state sales taxes and then as corporate profits at the Federal level.
B) Earnings are taxed first as personal income then as corporate profits at the Federal level.
C) Earnings are taxed first as corporate profits then as personal income after dividends are paid.
D) Corporate profits are not taxed at all.
Q4) What is a firm's balance sheet?
Q5) With respect to business types,what does the term 'limited liability' mean?
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Chapter 7: Consumer Choice and Elasticity
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Q1) Economists do not think it is possible to compare the relative utility that two people get from consuming an additional unit of a particular good.
A)True
B)False
Q2) Consumers have to make tradeoffs in deciding what to consume because
A) not all goods give them the same amount of satisfaction.
B) the prices of goods vary.
C) they are limited by a budget constraint.
D) there are not enough of all goods produced.
Q3) When Nablom's Bakery raised the price of its breads by 10 percent,the quantity demanded fell by 15 percent.What was the effect on sales revenue?
A) Sales revenue increased.
B) Sales revenue remained unchanged.
C) Sales revenue decreased.
D) It cannot be determined without information on prices.
Q4) Necessities tend to have more inelastic demand than luxuries.
A)True
B)False
Q5) Explain the endowment effect.
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Chapter 8: Technology,Production,and Costs
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Sample Questions
Q1) The additional output a firm produces by hiring one more worker is called the marginal product of labor.
A)True
B)False
Q2) As output increases
A) average variable cost becomes smaller and smaller.
B) the difference between average total cost and average variable cost decreases.
C) marginal cost increases continuously.
D) the difference between average total cost and average variable cost becomes greater and greater.
Q3) Which of the following statements is true?
A) Opportunity cost = explicit cost - implicit cost.
B) Total cost = fixed cost + implicit cost.
C) Total cost = fixed cost + variable cost.
D) Variable cost = wages + salaries + benefits.
Q4) Damian owns a tattoo parlor and has hired three tattoo artists to work for him.The marginal product of labor is 8 for the first artist,12 for the second artist,and 7 for the third artist.What is Damian's average product of labor for these three tattoo artists?
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Chapter 9: Firms in Perfectly Competitive Markets
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Q1) Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium
A) there will be fewer firms in the industry and total industry output decreases.
B) there will be more firms in the industry and total industry output increases.
C) there will be fewer firms in the industry but total industry output increases.
D) there will be more firms in the industry and total industry output remains constant.
Q2) In a perfectly competitive market the term "price taker" applies to
A) sellers and buyers.
B) sellers but not buyers.
C) buyers but not sellers.
D) only the smallest sellers and buyers.
Q3) Refer to Figure 9-9.At price P ,the firm would
A) lose an amount equal to its fixed cost.
B) make a profit.
C) lose an amount less than fixed cost.
D) shut down.
Q4) What is meant by the term "long-run competitive equilibrium?
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Chapter 10: Monopoly and Antitrust Policy
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Q1) Refer to Figure 10-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?
A) This results in a misallocation of resources.
B) The marginal cost of producing the last unit sold exceeds the marginal benefit.
C) The firm will sustain persistent losses and will not continue in business in the long run.
D) The firm will break even.
Q2) For decades,the NCAA restricted the number of college football and basketball games that could be televised,and in 1982 the University of Georgia and the University of Oklahoma sued the NCAA under the federal antitrust laws.In 1984,the Supreme Court decided the case
A) for the NCAA, citing the fact that belonging to the NCAA was voluntary.
B) against the NCAA, citing that the NCAA did not control what television networks put on the air.
C) against the NCAA, citing anticompetitive practice.
D) against the NCAA, citing explicit collusion among the larger colleges.
Q3) What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?
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Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) A four-firm concentration ratio measures
A) the extent to which industry sales are concentrated among the four largest firms in the industry.
B) the price elasticity of demand among the four largest firms in an industry.
C) the number of firms in an industry.
D) the price elasticity of demand in an industry.
Q2) For a monopolistically competitive firm,marginal revenue
A) equals the price.
B) is greater than the price.
C) is less than the price.
D) and the price are unrelated.
Q3) Refer to Figure 11-1.The marginal revenue from the increase in price from P to P equals
A)the area A.
B)the area (B + D - A).
C)the area (A - D).
D)the area (C - B).
Q4) What is the most important difference between perfectly competitive markets and monopolistically competitive markets?
Q5) Explain why OPEC is caught in a prisoner's dilemma?
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Chapter 12: GDP: Measuring Total Production and Income
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Q1) The U.S.work week has declined from 60 hours in 1890 to fewer than 40 hours today.The impact of the decline in working hours
A) increases U.S. GDP and increases the well-being of a typical working person in the U.S.
B) increases U.S. GDP and decreases the well-being of a typical working person in the U.S.
C) decreases U.S. GDP and increases the well-being of a typical working person in the U.S.
D) decreases U.S. GDP and decreases the well-being of a typical working person in the U.S.
Q2) Between 2017 and 2018,if an economy's exports rise by $8 billion and its imports fall by $8 billion,by how much will GDP change between the two years,all else equal?
A) Net exports will increase GDP by $8 billion.
B) The increase in exports is offset by the decrease in imports, so there is no change in net exports and no effect on GDP.
C) Net exports will increase GDP by $16 billion.
D) Net exports will decrease GDP by $8 billion.
Q3) Why do we subtract import spending from total expenditures?
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Chapter 13: Unemployment and Inflation
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Q1) In the modern U.S.economy,the typical unemployed person stays unemployed for A) a relatively long time, over a year.
B) a relatively short time, less than six months.
C) a long time during expansions and a short time during recessions.
D) an amount of time that is hard to quantify.
Q2) Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as A) employed.
B) unemployed.
C) not in the labor force.
D) not in the working-age population.
Q3) When the actual inflation rate turns out to be greater than the expected inflation rate,who gains-the borrower or the lender-and who loses? Explain why.
Q4) Which of the following price indices comes closest to measuring the cost of living of the typical household?
A) GDP deflator
B) producer price index
C) consumer price index
D) household price index
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Chapter 14: Economic Growth, The Financial System, and Business Cycles
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Sample Questions
Q1) During an expansion,how do inflation and unemployment typically change?
A) Inflation and unemployment both rise.
B) Inflation and unemployment both fall.
C) Inflation falls and unemployment rises.
D) Inflation rises and unemployment falls.
Q2) Potential GDP is defined as
A) the maximum of GDP that the economy can produce.
B) the amount of GDP produced if there is no frictional unemployment.
C) the level of GDP attained when all firms are producing at capacity.
D) the amount of GDP produced if there is no structural unemployment.
Q3) Use the rule of 70 to illustrate how small differences in growth rates can have a large impact on how rapidly the standard of living in a country increases.
Q4) Which of the following indicates that the U.S.economy has become more stable since 1950?
A) longer recessions
B) shorter expansions
C) less severe fluctuations in real GDP
D) All of the above indicate that the U.S. economy has become more stable since 1950.
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Chapter 15: Aggregate Demand and Aggregate Supply Analysis
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Q1) Refer to Figure 15-3.Suppose the economy is at point A.If government spending increases in the economy,where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
Q2) What does the phrase "Keynesian revolution" refer to?
Q3) On average,in the recessions since 1950,it has taken ________ for real GDP to return to its cyclical peak.
A) about 6 months
B) about 1 year
C) about 18 months
D) almost 2.5 years
Q4) If aggregate demand just decreased,which of the following may have caused the decrease?
A) a decrease in exports
B) a decrease in the interest rate
C) a decrease in the price level
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Chapter 16: Money,Banks,and the Federal Reserve System
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Q1) The largest proportion of M1 is made up of A) currency.
B) checking account deposits.
C) traveler's checks.
D) savings account deposits.
E) time deposits.
Q2) If a bank receives a $20 million discount loan from the Federal Reserve,then the bank's reserves will
A) not change.
B) increase by $20 million.
C) increase by less than $20 million.
D) increase by more than $20 million.
Q3) Paper currency is a
A) commodity money.
B) fiat money.
C) barter money.
D) bond.
Q4) Most U.S.currency held outside the U.S.banking system is held by foreigners.
A)True
B)False
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Chapter 17: Monetary Policy
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Q1) Inflation rates during the years 1979-1981 were the highest the United States has ever experienced during peacetime.
A)True
B)False
Q2) When the Fed buys a security from a financial firm and the financial firm agrees to buy back the security the next day,the transaction is known as
A) a repurchase agreement.
B) a reverse repurchase agreement.
C) an open market flip-flop.
D) a federal funds swap.
Q3) Refer to Figure 17-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,the Federal Reserve would most likely
A) increase interest rates.
B) decrease interest rates.
C) not change interest rates.
D) decrease the inflation rate.
Q4) What problems can high inflation rates cause for the economy?
Q5) List the Fed's four main monetary policy goals.
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Chapter 18: Fiscal Policy
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Q1) Government transfer payments include which of the following?
A) interest on the national debt
B) grants to state and local governments
C) Social Security and Medicare programs
D) national defense
Q2) During the twentieth century,the largest budget deficits as a percentage of GDP occurred
A) during the 1990s.
B) during the 1980s.
C) during the Vietnam war.
D) during World Wars I and II.
Q3) An increase in government spending lowers interest rates and increases the rate of investment in new capital.
A)True
B)False
Q4) Tax increases on business income decrease aggregate demand by decreasing
A) business investment spending.
B) consumption spending.
C) government spending.
D) wage rates.
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Chapter 19: Comparative Advantage, International Trade, and Exchange Rates
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Q1) Which of the following statements is false?
A) Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs.
B) Each year the United States exports about 50 percent of its wheat crop and 20 percent of its corn crop.
C) Most of the leading exporting countries are large, high-income countries.
D) Not all sectors of the U.S. economy are affected equally by international trade.
Q2) In the real world,we don't observe countries completely specializing in the production of goods for which they have a comparative advantage.One reasons for this is
A) comparative advantage works better in theory than in practice.
B) because some countries also have an absolute advantage in the production of those goods.
C) tastes for many traded goods are similar in many countries because of globalization. D) production of most goods involves increasing opportunity costs.
Q3) Protectionism is usually justified on the basis of one of four arguments.What are those four arguments?
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