Introduction to Macroeconomics Final Exam
Course Introduction
Introduction to Macroeconomics offers a foundational understanding of how national and global economies operate as a whole. The course explores key topics such as gross domestic product (GDP), inflation, unemployment, fiscal and monetary policy, and international trade. By examining the aggregate behavior of households, firms, and governments, students will develop tools to analyze economic growth, cycles, and the impact of policy decisions. Real-world examples and current events are integrated throughout to illustrate how macroeconomic theories apply to everyday life and global issues.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn Hubbard
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15 Chapters
2116 Verified Questions
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Page 2
Chapter 1: Economics: Foundations and Models
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $45, and he charges $80 for this service. For a total price of $95, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. Should DeShawn continue to offer the engine detailing service?
A)Yes, he still makes a profit by selling the engine detailing service with the basic detailing package.
B)Yes, but only if he raises the price of the basic detailing package.
C)No, his marginal benefit is less than his marginal cost.
D)More information is needed for DeShawn to make this decision.
Answer: C
Q2) The distribution of income primarily determines which of the fundamental economic questions?
A)What goods and services are to be produced?
B)How are the goods and services to be produced?
C)Who will receive the goods and services produced?
D)How will the economy be planned?
Answer: C
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Page 3
Chapter 2: Choices and Trade Offs in the Market
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192 Verified Questions
192 Flashcards
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Sample Questions
Q1) Refer to Table 2.7. Which of the following statements is true?
A)Horace has a comparative advantage in both tasks.
B)Tammi has a comparative advantage in both tasks.
C)Horace has a comparative advantage in grooming dogs and Tammi in bathing cats.
D)Horace has a comparative advantage in bathing cats and Tammi in grooming dogs.
Answer: D
Q2) What is meant by the term 'free market'?
Answer: A free market is a market with few government restrictions on how a good or service can be produced or sold or on how factors of production can be employed.
Q3) On a diagram of a production possibility frontier, opportunity cost is represented by the production possibility frontier shifting outward.
A)True
B)False
Answer: False
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4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) What are the two effects that explain the Law of Demand? Briefly explain each effect.
Answer: The two effects that explain the Law of Demand are the income effect and the substitution effect. The income effect is the change in quantity demanded of a good that results from a change in purchasing power due to a change in the good's price, holding all other factors constant. The substitution effect is the change in quantity demanded of a good that results from the effect of a change in the good's price making the good more or less expensive relative to other goods that are substitutes, holding constant the effect of the price change on consumer purchasing power.
Q2) Refer to Figure 3.5. At a price of $10, the quantity sold is:
A)2 units.
B)4 units.
C)6 units.
D)8 units.
Answer: B
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Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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Sample Questions
Q1) What is the underground economy and how could it hurt an economy? How does it hurt developing economies?
Q2) The purchase of shares in a company is not included in the investment component of GDP.
A)True
B)False
Q3) A weakness of the measurement of GDP is that it includes the value of intermediate goods, therefore some double counting occurs.
A)True
B)False
Q4) Nominal GDP is GDP measured in current prices and can be smaller than real GDP.
A)True
B)False
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Chapter 5: Economic Growth, the Financial System and Business Cycles
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Which of the following statements about the Australian federal budget is true?
A)In 2010, the federal budget was in deficit by $54 billion.
B)In 1996, the federal budget was in deficit by $5 billion.
C)In 2007, the federal budget was in surplus by $17 billion.
D)All of these options are correct.
Q2) A federal budget surplus could be reduced by:
A)raising taxes.
B)lowering government spending.
C)increasing transfer payments.
D)lowering interest rates.
Q3) Outline the phases of the business cycle, and explain why business cycles have generally become less severe in Australia since the 1950s.
Q4) Potential GDP is always greater than real GDP in an economy. A)True B)False
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Chapter 6: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Economist Paul Romer argued that:
A)technological change was determined by forces outside of the market.
B)at the firm level, diminishing returns to labour occur.
C)at the economy level, knowledge capital is subject to increasing returns.
D)knowledge capital is excludable but rival.
Q2) Globalisation is defined as: the process of countries becoming ________ open to foreign investment and ________ open to foreign trade.
A)more; less
B)more; more C)less; more
D)less; less
Q3) An increase in ________ shifts ________ the production function, and makes it possible to produce a higher level of GDP with ________ capital per hour worked. A)technology; down; the same amount of B)technology; up; the same amount of C)consumption; up; a lesser amount
D)labour productivity; down; the same amount of
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Page 8
Chapter 7: Unemployment
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Sample Questions
Q1) Why are policy makers concerned about rising unemployment rates?
Q2) Trade unions cause unemployment because the union contract wage is set:
A)below the market wage, causing a shortage of labour.
B)below the market wage, causing a surplus of labour.
C)above the market wage, causing a surplus of labour.
D)above the market wage, causing a shortage of labour.
Q3) Why are jobs continually being created and destroyed in the economy?
Q4) The Australian economy destroys hundreds of thousands of jobs every year, even when the economy is experiencing strong growth.
A)True B)False
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Chapter 8: Inflation
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Sample Questions
Q1) Assume that the base period for CPI calculations is 1980. In Australia in 2016, around 30% of people accessed the Internet through a broadband connection that did not exist in the 1980s. This potential for bias in the CPI is referred to as ________ bias and results in ________.
A)outlet; the CPI underestimating the true change in the cost of living B)new product; the CPI overestimating the true change in the cost of living C)outlet; the CPI overestimating the true change in the cost of living D)net product; the CPI underestimating the true change in the cost of living
Q2) There is a negative relationship between real interest rates and inflation rates. A)True B)False
Q3) Describe how a lender can lose from inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that adjusts over the contract period)eliminate these losses?
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Chapter 9: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) An increase in the price level results in a(n)________ in household consumption spending and A(n)________ in investment spending.
A)increase; decrease
B)increase; increase
C)decrease; decrease
D)decrease; increase
Q2) A stock market crash which causes share prices to fall should cause:
A)a decrease in consumption spending.
B)an increase in consumption spending.
C)an increase in wealth.
D)no change in consumption spending.
Q3) When there is an unplanned decrease in inventories________.
A)actual inventory investment equals planned inventory investment.
B)actual inventory investment is less than planned inventory investment.
C)actual inventory investment is greater than planned inventory investment.
D)a firm experiences much higher sales than expected.
Q4) If the marginal propensity to save is 0.35, the multiplier is 2.86.
A)True
B)False
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Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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134 Flashcards
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Sample Questions
Q1) Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, the:
A)long-run aggregate supply curve will shift to the right.
B)long-run aggregate supply curve will shift to the left.
C)economy will move up along the long-run aggregate supply curve.
D)economy will move down along the long-run aggregate supply curve.
Q2) After an unexpected increase in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.
A)increases; increases
B)increases; decreases
C)decreases; increases
D)decreases; decreases
Q3) The long-run aggregate supply curve shows the relationship between the ________ and ________.
A)inflation rate; quantity of real GDP demanded
B)real interest rate; quantity of real GDP supplied
C)nominal interest rate; quantity of real GDP supplied
D)price level; quantity of real GDP supplied
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Chapter 11: Money, Banks and the Reserve Bank of Australia
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Sample Questions
Q1) 'Hyperinflation' is caused by:
A)a constant increase in the money supply.
B)a rapid increase in the money supply.
C)GDP growing more rapidly than the money supply.
D)the money supply growing more slowly than GDP.
Q2) Suppose that you decide that you no longer want to hold currency. You transfer all of your currency holdings to your cheque account. Carefully explain how this affects M1.
Q3) By selling dollars in foreign currency markets, the Reserve Bank of Australia would increase the value of the Australian dollar relative to other currencies.
A)True
B)False
Q4) A person's 'wealth' is the same as her or his income.
A)True
B)False
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Chapter 12: Monetary Policy
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Sample Questions
Q1) Which of the following does the Reserve Bank of Australia use as its main measure of monetary movements in Australia?
A)credit
B)the cash rate
C)the money supply
D)the demand for money
Q2) Refer to Figure 12.4. In this figure, if the economy in Year 1 is at point A and expected in Year 2 to be at point B, then the appropriate monetary policy by the Reserve Bank of Australia would be to:
A)lower interest rates.
B)raise interest rates.
C)lower income taxes.
D)raise income taxes.
Q3) The Reserve Bank of Australia engages in open market operations only when it wants to change interest rates.
A)True
B)False
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Chapter 13: Fiscal Policy
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163 Flashcards
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Sample Questions
Q1) Raising taxes will:
A)raise disposable income and raise spending.
B)raise disposable income and lower spending.
C)lower disposable income and raise spending.
D)lower disposable income and lower spending.
Q2) Increasing government debt relative to GDP does not cause which of the following?
A)crowding out
B)an opportunity cost for the funds used to service the debt
C)the possibility of higher taxes in the future
D)lower interest repayments relative to the size of GDP
Q3) In Figure 13.4, if fiscal policy is successful at moving the economy from point B to equilibrium at potential GDP, which of the following will occur?
A)the price level will rise
B)deflation will occur
C)unemployment will fall
D)unemployment will rise
Q4) Induced taxes and transfer payments reduce the multiplier effects.
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 savings and investment equation? If S > I, then what is true of net foreign investment? Explain, using the savings and investment equation.
Q2) Suppose that health experts discover that French red wine lowers cholesterol. How will this affect the demand and supply of dollars in exchange for euros? Illustrate with a graph and explain. Will the dollar appreciate or depreciate?
Q3) Since the 1980s in Australia, the balance on goods and services has:
A)usually been positive.
B)usually been negative.
C)led to a current account surplus.
D)led to capital flows out of the financial account.
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16
Chapter 15: The International Financial System
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Sample Questions
Q1) In order to maintain an undervalued yuan to encourage a trade surplus, the Chinese government must buy United States dollars and increase the supply of yuan.
A)True
B)False
Q2) If a country's exchange rate is pegged above the equilibrium exchange rate, the country must:
A)sell domestic currency at the pegged rate.
B)buy domestic currency at the pegged rate.
C)purchase surplus domestic currency at the equilibrium exchange rate.
D)decrease the pegged exchange rate.
Q3) If interest rates in Australia rise, ceteris paribus, the value of the Australian dollar will:
A)rise as foreign investors increase their holdings of Australian investments.
B)rise as foreign investors decrease their holdings of Australian investments.
C)fall as foreign investors increase their holdings of Australian investments.
D)fall as foreign investors decrease their holdings of Australian investments.
Q4) Australian currency continues to be backed by the gold standard to this day.
A)True
B)False
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