Introduction to Macroeconomics Solved
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Introduction
Introduction to Macroeconomics offers students a foundational understanding of the broad economic forces that shape nations and influence global trends. The course explores key concepts such as gross domestic product (GDP), unemployment, inflation, fiscal and monetary policy, and international trade. Through real-world case studies and data analysis, students learn how governments, central banks, and markets interact to manage economic growth and stability. Emphasis is placed on the tools used to assess economic performance and the policy decisions that address economic challenges, equipping students with analytical skills to interpret current economic events.
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ECON MACRO 5th Edition by William A. McEachern
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19 Chapters
2883 Verified Questions
2883 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Which of the following would an economist classify as physical capital?
A)100 shares of Microsoft stock
B)A $50 bill
C)A credit card
D)A lawyer's laptop
E)A bauxite mine in Jamaica
Answer: D
Q2) Which of the following is the fundamental resource that is the basis of labor?
A)Capital
B)Natural resources
C)Time
D)Money
E)Entrepreneurial ability
Answer: C
Q3) Profit is the payment received by resource owners for the use of their capital.
A)True
B)False
Answer: False
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Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) On a bowed-out production possibilities frontier showing possible output levels of Good A and good B,the opportunity cost of producing the first 10 units of Good A will usually be:
A)the same as the opportunity cost of producing the next 10 units of Good A.
B)lower than the opportunity cost of producing the next 10 units of Good A.
C)greater than the opportunity cost of making the next 10 units of Good A.
D)10 units of Good A.
E)10 units of Good B.
Answer: B
Q2) Opportunity cost is objective; therefore,its value does not change as circumstances change.
A)True
B)False
Answer: False
Q3) Each point along a nation's production possibilities frontier represents efficient use of all resources.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Which of the following is not a government transfer program?
A)Unemployment compensation
B)Social Security
C)Food stamps
D)Medicare
E)Income taxes
Answer: E
Q2) Imposing a tax on an activity that generates an external benefit will cause participants in the activity to increase the amount of the activity undertaken.
A)True
B)False
Answer: False
Q3) Household production is more likely to occur when:
A)it requires many specialized resources.
B)technology makes it more costly than market production.
C)tax avoidance is undesirable.
D)more control over the final product is desirable.
E)it has a very high opportunity cost.
Answer: D
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Page 5
Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) Which of the following is most likely to shift the supply curve for a product to the right?
A)An increase in the price of a resource used in the good's production
B)The expectation of a higher price in the near future
C)An increase in the price of the product
D)A decrease in the price of an alternative good
E)An improvement in the technology for producing the good
Q2) A decrease in the price of peanuts will cause a leftward shift in the supply curve of peanut butter.
A)True B)False
Q3) Markets tend to increase the costs of time and information required for exchange. A)True B)False
Q4) The slope of the demand curve for a normal good must be positive. A)True
B)False
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) An investment bank is a financial institution that finances federal budget deficits at very low interest rates.
A)True
B)False
Q2) Identify an example of a stock variable.
A)The growth in investment in an economy
B)The change in the price level in an economy over the years
C)The number of unemployed people in an economy in a particular year
D)The increase in the money supply in an economy
E)The fall in consumer spending during two consecutive years
Q3) The market value of all final goods and services produced in a nation during a particular period is called the:
A)gross domestic product.
B)net national product.
C)national income.
D)gross national product.
E)gross world product.
Q4) The Reagan administration's policies were aimed at managing aggregate demand. A)True
B)False
Page 7
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Chapter 6: Tracking the Useconomy
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Q1) If the real gross domestic product (GDP)for the base year is $4 trillion,then the nominal gross domestic product (GDP)for that year is _____.
A) $.04 trillion
B)$0.4 trillion
C)$4 trillion
D)$40 trillion
E)$400 trillion
Q2) If nominal gross domestic product (GDP)for a particular year is $6 trillion and real gross domestic product (GDP)for that year is $5 trillion,then the GDP price index for that year is _____.
A)1.2
B)17
C)20
D)83
E)120
Q3) A fixed-weight price index uses a process that adjusts the weights continuously year by year.
A)True
B)False
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Page 8
Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) The type of unemployment most likely to be experienced by a touring professional golfer is:
A)frictional unemployment.
B)structural unemployment.
C)seasonal unemployment.
D)cyclical unemployment.
E)discouraged-worker unemployment.
Q2) Since World War II,the consumer price index has increased by an average of _____.
A)1.4 percent per year
B)2.1 percent per year
C)6.4 percent per year
D)5.6 percent per year
E)3.5 percent per year
Q3) Not counting _____ as unemployed understates unemployment.
A)children
B)retired persons
C)students
D)people who do not want to work
E)discouraged workers
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Page 9
Chapter 8: Productivity and Growth
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Sample Questions
Q1) Which of the following is the correct formula to calculate productivity?
A)Output + quantity of input
B)Output quantity of input
C)Quantity of input ÷ output
D)Output ÷ quantity of input
E)Output × quantity of input
Q2) Applied research is the search for knowledge without a clue about the end of the research.
A)True
B)False
Q3) The productivity of land is the most important factor that determines the standard of living of a country.
A)True
B)False
Q4) Capital deepening refers to:
A)an increase in the amount of capital per worker.
B)an increase in the amount of workers per unit of capital.
C)a decrease in the amount of capital per unit of output.
D)an increase in the amount of output per unit of capital.
E)an increase in the productivity of capital.
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) A decrease in the price level in an economy implies that _____.
A)the spending multiplier will be equal to the marginal propensity to consume
B)there will be an increase in investment
C)there will be a decrease in investment
D)the value of the spending multiplier will be equal to one
E)the value of the spending multiplier will be equal to zero
Q2) Along the consumption function,an increase in disposable income will:
A)cause autonomous consumption to rise.
B)shift the consumption function upward.
C)cause a corresponding downward shift of the saving function.
D)cause a movement along the given consumption function.
E)shift the consumption function downward.
Q3) Movement along the aggregate expenditure line is caused by a change in the level of income.
A)True
B)False
Q4) The slope of the consumption function is equal to the marginal propensity to save (MPS).
A)True
B)False
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Chapter 10: Aggregate Supply
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Sample Questions
Q1) The actual price level is assumed to be constant along a given short-run aggregate supply curve.
A)True
B)False
Q2) The more the short-run output exceeds an economy's potential,_____.
A)the smaller the expansionary gap
B)the greater the upward pressure on the price level
C)the larger the recessionary gap
D)the greater the downward pressure on the price level
E)the lesser the demand for resources
Q3) A recessionary gap is usually closed in the long run by a(n):
A)rightward shift of the short-run aggregate supply curve.
B)leftward shift of the short-run aggregate supply curve.
C)rightward movement along a fixed short-run aggregate supply curve.
D)decrease in aggregate demand.
E)leftward movement along a fixed short-run aggregate supply curve.
Q4) Actual output can exceed the economy's potential both in the short run and the long run.
A)True
B)False
Page 12
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) Supply-side economics emphasized government policies to:
A)restrict aggregate spending and boost aggregate supply.
B)increase minimum wage to improve labor productivity.
C)stimulate real GDP by improving incentives to work.
D)lower interest rates to boost saving.lower interest rates to boost saving.
E)increase government tax revenues in order to increase government purchases.
Q2) An automatic stabilizer:
A)increases inflationary pressure during expansions.
B)Increases the drop in disposable income during recessions and increases the jump in disposable income during expansions.
C)reduces the drop in disposable income during recessions and reduces the jump in disposable income during expansions.
D)increases tax revenue relative to government spending throughout the business cycle.
E)decreases tax revenue relative to government spending throughout the business cycle.
Q3) The unemployment problem becomes more severe if prices are sticky downward.
A)True
B)False
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Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) The national debt:
A)is a flow variable measuring the net accumulation of past deficits.
B)is a stock variable measuring the net accumulation of past deficits.
C)measures the amount by which government revenues exceed outlays in a particular year.
D)includes the projected liabilities of Social Security,Medicare,and other federal retirement programs.
E)includes outstanding liabilities of federal,state,and local governments minus government financial assets.
Q2) When a budget is not approved in time,_____.
A)agencies operate on the basis of continuing resolutions
B)agencies operate on the basis of a budget resolution developed by budget committees
C)agencies tend to shuts down
D)the President can force Congress to act
E)agencies borrow from the Federal Reserve
Q3) With few exceptions,the U.S.federal government has historically run a balanced budget.
A)True
B)False
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Chapter 13: Money and the Financial System
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Sample Questions
Q1) Before the 1970s,bankers were happy with interest-rate ceilings because those ceilings:
A)reduced interest-rate competition for deposits among banks.
B)guaranteed them high profits.
C)guaranteed them a minimum profit.
D)enabled them to expand into other lines of commerce.
E)allowed them to hold corporate stock.
Q2) The reserve requirement refers to:
A)the fraction of deposits that banks are required by the Fed to hold as reserves.
B)the amount of gold required to back up all Federal Reserve notes.
C)the requirement that banks reserve part of their lending capacity for small businesses.
D)the requirement that Reserve bank presidents be part of the FOMC.
E)the Treasury deposits held by the Fed.
Q3) Interest rate ceilings resulted in great profitability for banks in the 1970s.
A)True
B)False
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) The Reserve Bank of Glassen is the apex banking institution in the country of Glassen.Money supply in Glassen will increase when:
A)the Reserve Bank of Glassen buys bonds from commercial banks.
B)the Reserve Bank of Glassen raises the required reserve ratio for commercial banks.
C)the Reserve Bank of Glassen sells government bonds to commercial banks.
D)the Reserve Bank of Glassen raises the discount rate for commercial banks.
E)the Reserve Bank of Glassen prints new checks.
Q2) If the Fed buys a $1,000 U.S.government bond from a bank,it pays for it by giving the bank $1,000 in reserves-reserves that it simply creates out of thin air.
A)True
B)False
Q3) When a check is cleared against Bank A after being deposited at Bank B,_____.
A)both Bank A's and Bank B's liabilities increase
B)both Bank A's and Bank B's liabilities decrease
C)Bank A's liabilities increase and Bank B's liabilities decrease
D)Bank A's liabilities decrease and Bank B's liabilities increase
E)there is an increase in the liabilities of the Federal Reserve
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Page 16
Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) When calculating how much changes in the money supply will change nominal GDP,we use the money multiplier instead of the spending multiplier.
A)True
B)False
Q2) When the short-run aggregate supply curve is steep,then for a given increase in aggregate demand:
A)the increase in real GDP will be relatively small and the increase in the price level will be relatively large.
B)the increase in real GDP will be relatively large and the increase in the price level will be relatively small.
C)the increase in both real GDP and the price level will be large.
D)the increase in both real GDP and the price level will be small.
E)the decrease in real GDP will be larger than the decrease in the price level.
Q3) A decrease in the market interest rate,other things constant,will result in:
A)a rightward shift of the money demand curve.
B)a leftward shift of the money demand curve.
C)an increase in the slope of the money demand curve.
D)a movement up along the money demand curve.
E)a movement down along the money demand curve.
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Page 17
Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) The short-run Phillips curve shows that as the unemployment rate goes down,_____.
A)unemployment benefit payments go up
B)prices go down
C)the Phillips curve shifts outward
D)the inflation rate goes up
E)there is no change in the rate of inflation
Q2) Which of the following is true about rational expectations?
A)People form expectations on the basis of information about past as well as future actions of policy makers.
B)Wage agreements do not reflect inflationary expectations if workers expect continued inflation.
C)Rational people cannot easily anticipate the effects of discretionary policy on the price level and output.
D)The role of expectations is applicable in the context of monetary policy only.
E)The effectiveness of a particular government policy is independent of people's expectations.
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Chapter 17: International Trade
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Sample Questions
Q1) Economists argue that U.S.government can earn federal revenue:
A)from quotas by auctioning off quotas to foreign producers.
B)by increasing the profitability of getting quota rights.
C)by encouraging foreign governments to retaliate with quotas and tariffs of their own.
D)from quotas,as quotas redistribute wealth from domestic consumers to domestic producers.
E)by distributing quota rights to domestic exporters.
Q2) Quotas are favoured over free international trade by:
A)consumers in the importing country and consumers in the exporting country.
B)domestic producers in the importing country and foreign producers with quota rights.
C)domestic producers and domestic consumers in the exporting country.
D)foreign producers without quota rights and consumers in the importing country.
E)foreign consumers and domestic producers in the exporting country.
Q3) Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.
A)True
B)False
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Page 19
Chapter 18: International Finance
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Sample Questions
Q1) The gold standard:
A)has been in operation since the establishment of the Federal Reserve Board.
B)has been in operation since shortly after World War I.
C)has been in operation since the Bretton Woods agreement was signed.
D)was in operation for about 35 years before World War I.
E)was in operation from the date of the Bretton Woods agreement until the devaluation of the U.S.dollar in 1971.
Q2) Managed float means:
A)a fixed exchange rate system with regularly scheduled periodic devaluations.
B)a freely floating exchange rate system.
C)a combination of freely floating exchange rates with occasional intervention by central banks.
D)a fixed exchange rate system managed by the European Community.
E)a flexible exchange rate system managed entirely by the IMF.
Q3) Under the gold standard,gold discoveries in Alaska and South America led to severe deflation in the U.S.economy.
A)True
B)False
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Page 20
Chapter 19: Economic Development
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Sample Questions
Q1) Which of the following is true of import substitution?
A)The government encourages domestic producers to make products which can compete in the international market.
B)The government takes steps to liberate imports and lift restrictions.
C)The government takes steps to promote exports and subsidizes export-oriented production.
D)The government insulates domestic producers by imposing strict tariffs and quotas.
E)The government focuses on service-oriented imports rather than primary imports.
Q2) In general,it can be asserted that foreign aid promotes economic development.
A)True
B)False
Q3) Foreign aid includes loans that:
A)have high interest rates and short repayment periods.
B)have high interest rates and long repayment periods.
C)have low interest rates and short repayment periods.
D)have low interest rates and long repayment periods.
E)require no interest payments at all.
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