Introduction to Macroeconomics Final Exam Questions
Course Introduction
Introduction to Macroeconomics provides students with a foundational understanding of the overall functioning of an economy. The course explores key macroeconomic concepts such as national income, economic growth, unemployment, inflation, fiscal and monetary policy, and the roles of government and central banks. Students will examine how these factors interact in the global marketplace and influence everyday life, while also learning basic models and tools used to analyze economic performance. By the end of the course, students will be equipped to interpret economic indicators, understand policy debates, and apply economic reasoning to real-world issues.
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Macroeconomics 13th Edition by Roger A. Arnold
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Chapter 1: What Economics Is About
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Q1) When economists speak of scarcity,they are referring to the A) condition in which society is not employing all its resources in an efficient way. B) condition in which people's wants outstrip the limited resources available to satisfy those wants.
C) economic condition that exists in only very poor countries of the world.
D) condition in which society produces too many frivolous goods and not enough socially desirable goods.
Answer: B
Q2) The latest Taylor Swift album is available to be downloaded for $12.99.Is this price a rationing device?
A) No,the album will be sold to anyone having the required number of dollars.
B) Yes,because the album will only be purchased by people who are willing and able to pay $12.99.
C) No,for price to be a rationing device,it must be so high that only one unit of the item is sold.
D) Yes,since that is a reasonable price.
Answer: B
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Chapter 2: Production Possibilities Frontier Framework
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Q1) Refer to Exhibit 2-6.Which graph depicts the result of a decrease in the unemployment rate?
A) (1)
B) (2)
C) (3)
D) (4)
E) none of the above
Answer: E
Q2) A productive efficient society
A) produces at a point on its PPF.
B) can produce more of one good only by giving up some of another good.
C) cannot produce unlimited amounts of a good.
D) still has to make choices.
E) all of the above
Answer: E
Q3) Explain what productive efficiency means.Describe how productive efficiency is represented by a PPF.
Answer: An economy is producing efficiently if it is producing the maximum amount of output with a set amount of resources and technology.Efficiency is represented by all of the points that lie along the PPF.
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Chapter 3: Supply and Demand: Theory
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Q1) On a supply-and-demand diagram,consider a price for which the horizontal distance to the supply curve is shorter than the horizontal distance to the demand curve.There is a __________ at that price and the current price must be __________ the equilibrium price.
A) shortage; above B) shortage; below C) surplus; above D) surplus; below
Answer: B
Q2) An increase in the price of good B resulting from a decrease in the supply of B caused an increase in the demand for good C.This indicates that goods B and C are A) complements.
B) substitutes.
C) neither substitutes nor complements. D) normal goods.
Answer: B
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Chapter 4: Prices: Free,controlled,and Relative
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Q1) Refer to Situation 4-1.Before the oil embargo,the price ceiling on gasoline had no noticeable effect on the market.What is the most likely explanation for this?
A) The equilibrium price of gasoline was probably below the price ceiling.
B) The demand curve for gasoline in the 1970s was vertical.
C) The supply curve for gasoline in the 1970s was vertical.
D) The equilibrium price of gasoline was probably above the price ceiling.
Q2) Refer to Exhibit 4-3.Which of the following is true?
A) If price P<sub>3</sub> is set as a price ceiling it will have an effect on the market for good X.
B) If price P<sub>3</sub> is set as a price floor it will have an effect on the market for good X.
C) Price P<sub>3</sub> is the equilibrium price for good X.
D) Price P<sub>3</sub> is the highest price that can legally be charged in the market for good X.
Q3) Buyers always prefer lower prices to higher prices.
A)True
B)False
Q4) List and describe the two major jobs performed by price.
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Chapter 5: Supply,demand,and Price: Applications
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Q1) The objective of speculators is to buy at one price and sell at a lower price.
A)True
B)False
Q2) Refer to Exhibit 5-5.If the airline charges price P<sub>1</sub> for both aisle seats and middle seats,the result will be
A) a surplus of middle seats and the equilibrium quantity of aisle seats.
B) a surplus of aisle seats and the equilibrium quantity of middle seats.
C) a shortage of middle seats and the equilibrium quantity of aisle seats.
D) a shortage of aisle seats and the equilibrium quantity of middle seats.
Q3) The demand to attend a certain college is represented by a downward-sloping demand curve.The supply of spots at the college is represented by a vertical supply curve.At the tuition that students are charged,there is a shortage of spots at the college.If the demand to attend the college rises,but the tuition stays constant,it follows that the
A) GPA required to attend the college will probably rise.
B) GPA required to attend the college will probably fall.
C) SAT score required to attend the college will probably not change.
D) a and c
E) There is not enough information to answer this question.
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Chapter 6: Elasticity
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Q1) In automobile manufacturing,many parts of the production process that were once completed by people are now completed using robotics.Workers who lost their jobs as a result of the use of robotics became __________ unemployed.
A) frictionally
B) structurally
C) naturally
D) cyclically
Q2) Which of the following statements is false?
A) Discouraged workers are a subset of a larger group termed marginally attached workers.
B) Discouraged workers are counted as unemployed in the official unemployment rate calculation.
C) A person is considered underemployed if he is working at a job for which his skills far exceed the skills required for his job.
D) People who are underemployed are not counted as unemployed.
Q3) The base year is always the year in which prices were the lowest.
A)True
B)False
Q4) Describe what the term "full employment" means to an economist.
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Chapter 7: Consumer Choice: Maximizing Utility and Behavioral Economics
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Q1) Draw an appropriate diagram to represent the business cycle and label each of the five phases.Provide a brief description of each phase.
Q2) Gross Domestic Product is computed by using A) base-year prices.
B) wholesale prices.
C) previous-year prices.
D) current-year prices.
Q3) Refer to Exhibit 7-1.What is the value of national income?
A) $4,351
B) $4,252
C) $4,403
D) $2,996
E) $4,542
Q4) The research of economists Stevenson and Wolfers tends to support the Easterlin paradox.
A)True
B)False
Q5) Explain why GDP figures do not necessarily measure happiness or well-being.
Q6) List and explain the two different approaches used to measure GDP.
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Chapter 8: Production and Costs
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Q1) Explain how aggregate demand and aggregate supply may affect your job prospects after you leave college.Support your answer with an appropriate example.
Q2) The level of Real GDP and the price level always have a direct relationship.
A)True
B)False
Q3) An increase in labor productivity shifts the
A) AD curve rightward.
B) AD curve leftward.
C) short-run aggregate supply (SRAS)curve leftward.
D) SRAS curve rightward.
E) none of the above
Q4) Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.
Q5) In a two-country world,a decrease in foreign input prices,ceteris paribus,
A) shifts the SRAS curve leftward,causing the price level to increase.
B) shifts the SRAS curve leftward,causing the price level to decrease.
C) shifts the SRAS curve rightward,causing the price level to increase.
D) shifts the SRAS curve rightward,causing the price level to decrease.
E) does not affect the SRAS curve or the price level.
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Chapter 9: Perfect Competition
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Q1) Explain the policy implications of the classical economists' beliefs.
Q2) The more institutional constraints that exist in a particular society,
A) the closer the institutional PPF will lie to the physical PPF.
B) the farther out from the origin the institutional PPF will lie.
C) the closer to the origin the institutional PPF will lie.
D) the closer to the origin the institutional PPF will lie and the farther out from the origin the physical PPF will lie.
Q3) According to classical economists,most,if not all,markets are competitive.
A)True
B)False
Q4) The unemployment rate is equal to the natural unemployment rate at
A) some point within the interior of the physical PPF but beyond the institutional PPF.
B) some point within the interior of the physical PPF,but we cannot locate it with more accuracy.
C) some point within the interior of the institutional PPF,but we cannot locate it with more accuracy.
D) every point on the institutional PPF.
E) every point on the physical PPF.
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Chapter 10: Monopoly
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Q1) Here is a consumption function: C = C<sub>0</sub> + MPC(Y<sub>d</sub>).If
C<sub>0</sub> = $4,000,then we know that
A) if Y<sub>d</sub> rises by $1,then Co rises by $1.
B) if Y<sub>d</sub> rises by $1,then C rises by $4,000.
C) as C<sub>0</sub> rises by $150,C rises by $150.
D) as C<sub>0</sub> rises by $150,Y<sub>d</sub> rises by $150.
Q2) Government purchases rise by $100 billion and the MPC equals 0.75.Assuming that idle resources exist at each expenditure round,and the multiplier is operative,the change in Real GDP equals
A) $40 billion.
B) $75 billion.
C) $400 billion.
D) $750 billion.
E) $250 billion.
Q3) The multiplier process following a drop in autonomous spending is
A) just as powerful as for a rise in autonomous spending.
B) more powerful than for a rise in autonomous spending.
C) less powerful than for a rise in autonomous spending.
D) nonexistent,because the multiplier applies only to a rise in autonomous spending.
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Chapter 11: Monopolistic Competition, oligopoly, and Game Theory
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Q1) Increased government spending and tax cuts characterize
A) contractionary fiscal policy.
B) expansionary fiscal policy.
C) expansionary monetary policy.
D) deflationary policy.
E) none of the above
Q2) According to Keynesian theory,a recessionary gap can be closed using expansionary fiscal policy.
A)True
B)False
Q3) The answer is: "After a policy measure is implemented,it takes time to affect the economy." What is the question?
A) What is the wait-and-see lag?
B) What is the data lag?
C) What is the effectiveness lag?
D) What is the transmission lag?
E) What is the legislative lag?
Q4) To finance a budget deficit the federal government borrows funds.
A)True
B)False
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Chapter 12: Government and Product Markets: Antitrust and Regulation
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Sample Questions
Q1) To a bank,reserves are classified as
A) an asset.
B) a liability.
C) equity
D) a liability or an asset
Q2) Bank A has $75,000 in total reserves,and zero excess reserves.The required reserve ratio is 12 percent.Bank A has checkable deposits of
A) $84,000.
B) $62,500.
C) $625,000.
D) $6,250,000.
E) $840,000
Q3) When a bank makes a loan to one of its customers,to the bank the loan is classified as
A) an asset.
B) a liability.
C) neither an asset nor a liability.
D) an asset in some cases and a liability in other cases,depending on the type of loan.
Q4) List and describe the three functions of money.
Page 14
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Chapter 13: Factor Markets: With Emphasis on the Labor Market
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Q1) The United States is divided into __________ Federal Reserve districts,each with a district bank.
A) three
B) eight
C) twelve
D) twenty
E) fifty
Q2) Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.At the end of this process of money creation,what is the total amount of new checkable deposits?
A) $1,000,000
B) $1,000
C) $10,000
D) $100,000
Q3) What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.
Q4) List and describe five of the eight major functions or responsibilities of the Fed.
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Chapter 14: Wages,union,and Labor
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Q1) The money supply falls from $1,200 billion to $1,152 billion.According to the simple quantity theory of money,the price level will decline by __________ percent.
A) 4.00
B) 3.33
C) 5.09
D) 4.17
Q2) Refer to Exhibit 14-1.What sequence of points shows the short- and long-run consequences of a fall in velocity under monetarist assumptions?
A) A-E-B
B) B-D-A
C) A-D-B
D) B-A
Q3) Describe the difference between the simple quantity theory of money and the equation of exchange.
Q4) Between 1890 and 1914,the gold stock of the world doubled,but world prices fell during this time.
A)True
B)False
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Chapter 15: The Distribution of Income and Poverty
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Q1) According to the Keynesian transmission mechanism,an increase in the money supply causes a(n)__________ in the interest rate and a(n)__________ in investment,which in turn causes a(n)__________ in total expenditures and aggregate demand.
A) increase; decrease; decrease
B) increase; increase; decrease
C) decrease; increase; increase
D) decrease; decrease; increase
Q2) Suppose that the bond market and the money market both start out in equilibrium,then the Federal Reserve decreases the money supply.The result will be a ______________ in the money market and a _________________ in the bond market,which will push bond prices _________________ and interest rates will ___________________ until a new equilibrium is reached.
A) surplus; shortage; up; fall
B) shortage; surplus; down; rise
C) surplus; shortage; down; rise
D) shortage; surplus; down; fall
Q3) Describe the monetary policy known as inflation targeting.What are the three major issues that surround this practice?
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Chapter 16: Interest,rent,and Profit
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Q1) A.W.Phillips collected data on the rate of change in money wages and plotted it against unemployment rates in the United Kingdom.The curve he fit to the data showed that
A) the rate of change of money wage rates and unemployment rates were inversely related.
B) the rate of change of money wage rates and unemployment rates were directly related.
C) the rate of change of money wage rates and unemployment rates were independent. D) as money wage rates increased,the unemployment rate was cut in more than half.
Q2) According to Milton Friedman,there are two Phillips curves,a short-run one and a long-run one.
A)True
B)False
Q3) The original Phillips curve depicted the relationship between
A) price inflation and unemployment.
B) price inflation and employment.
C) wage inflation and unemployment.
D) wage inflation and employment.
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Chapter 17: Market Failure: Externalities, public Goods, and
Asymmetric Information
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Q1) Two Harvard economists,Robert Barro and Rachel McCleary,have researched the role that ________________ plays in economic growth.
A) religion
B) meta-ideas
C) technology
D) human resource development
Q2) If a country's economic growth rate is 4 percent a year,approximately how many years will it take to double its Real GDP?
A) 22.2
B) 25.0
C) 15.6
D) 17.5
E) 8.8
Q3) In the production function,the variable K represents human capital.
A)True
B)False
Q4) Using the production function Real GDP = T (L,K),and the LRAS curve,describe the process by which a decline in taxes on the returns to capital impacts economic growth.
Page 19
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Chapter 18: Public Choice and Special-Interest-Group
Politics
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Q1) Suppose that a $50 billion increase in government spending increases Real GDP by $260 billion,and that a $50 billion tax reduction increases Real GDP by $290 billion.In this situation,the tax multiplier is _______________ the government spending multiplier. A) less than B) greater than C) equal to D) none of the above
Q2) Economist B says all of the following: The economy needs expansionary fiscal policy to remove it from a recessionary gap.Government should either raise its __________ or cut _________________.I believe the tax multiplier is larger than the government spending multiplier,so I suggest government ___________________. A) taxes; spending; cut taxes
B) spending; taxes; cut taxes
C) taxes; spending; raise spending
D) spending; taxes; raise spending E) none of the above
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Chapter 19: Building Theories to Explain Everyday Life: From
Observations to Questions to Theories to Predictions
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Q1) Public choice economists often explain low voter turnouts in terms of
A) dissatisfaction of many voters with the limited choice of candidates.
B) lack of civic responsibility of the electorate.
C) net costs of voting that many voters perceive.
D) rational ignorance of many voters of the actual date of the elections.
Q2) In the median voter model,we assume that
A) voters will vote for the friendlier of two candidates.
B) voters will vote for the candidate who comes closer to matching their views.
C) the candidate who occupies the far right has a better chance of winning the election than the candidate who occupies the far left.
D) there are three candidates running for the same office.
E) b and c
Q3) People may vote in a presidential election if
A) they feel it is their civic duty to vote.
B) they believe their vote will matter.
C) the costs of doing so are greater than the benefits received from voting.
D) a or b
E) a,b,or c
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Chapter 20: International Trade
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Q1) Refer to Situation 33-1.If the prospective criminal sets the following values: Ps = 65 percent
Loot = $20,000
Pp = 20 percent
I = $30,000
F = $15,000
AC = $5,000
The prospective criminal's expected benefit from committing the burglary is ______________ and his expected cost of committing the burglary is _______________.Economic theory tells us that under these circumstances,the prospective criminal ______________ commit the burglary.
A) $13,000; $14,000; will
B) $13,000; $14,000; will not
C) $6,667; $50,000; will not
D) $57,500; $50,000; will
Q2) To an economist,it is preferable to A) assume that all criminals are rational. B) assume that all criminals are irrational.
C) build a theory based on a rational criminal and then check the evidence.
D) a or b
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Chapter 21: International Finance
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Q1) Dumping occurs when a firm sells goods abroad at a price below their cost and below the price charged in their domestic market.
A)True
B)False
Q2) Refer to Exhibit 34-9.In the no specialization-no trade case,suppose country X produces and consumes 100 units of good A and 20 units of good B.Country Y produces and consumes 20 units of good A and 60 units of good B.If the two countries specialize and trade,and the actual amounts traded are 125 units of good A for 25 units of good B,how many more units of good B will country X consume by specializing and trading?
A) 75
B) 25
C) 5
D) 105
E) 50
Q3) Refer to Exhibit 34-10.Danielle's opportunity cost of mowing the lawn is
A) 0.50 clean houses.
B) 2.40 clean houses.
C) 2.00 clean houses.
D) 0.60 clean houses.
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Chapter 22: The Economic Case for and Against
Government: Five Topics Considered
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Q1) When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency,the domestic currency
A) has appreciated.
B) has depreciated.
C) is overvalued.
D) is undervalued.
E) is revalued.
Q2) Suppose there is a decrease in U.S.income and Mexican income does not change.We would expect to see
A) both the dollar and the peso depreciate.
B) both the dollar and the peso appreciate.
C) the dollar depreciate and the peso appreciate.
D) the dollar appreciate and the peso depreciate.
Q3) The concept of an optimal currency area arose from the debate over whether fixed or flexible exchange rates are better.
A)True
B)False
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Chapter 23: Stocks,bonds,futures,and Options
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Q1) The answer is,"Because of the free rider problem." The question is:
A) Why can't the government produce nonexcludable public goods?
B) Why can't the market produce nonexcludable public goods?
C) Why do negative externalities exist?
D) Why do positive externalities exist?
E) b and d
Q2) Describe the intended effects of the first-time home buyer tax credits granted by Congress and many state governments in 2009 and 2010.In addition,describe in detail the unintended effect of this type of legislation.
Q3) A consequence of a negative externality is that social costs __________ private costs,and the efficient level of output __________.
A) equal; does not require any type of government intervention
B) are less than; requires the government to create a subsidy
C) are greater than; requires the government to impose a tax
D) are greater than; requires the government to create a subsidy
E) are less than; requires the government to impose a tax
Q4) In making the case against government,discuss the two main points about special interest groups.
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Q1) You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says,"128:16" this indicates that
A) the price that the buyer is willing to pay for this bond is $128.16.
B) the price that the buyer is willing to pay for this bond is $1,280.16.
C) the price that the seller is willing to sell this bond for is $1,285.
D) the price that the seller is willing to sell this bond for is $128.16.
Q2) Jessica paid $7,000 for a bond with a face value of $6,000.She will be paid $400 annually as long as she holds on to the bond,until the bond's maturity date.The yield on the bond is
A) 6.67 percent.
B) 5.71 percent.
C) 15.0 percent.
D) 80.0 percent.
Q3) Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.
A)True B)False
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