Introduction to Macroeconomics Solved Exam Questions
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Introduction
Introduction to Macroeconomics explores the fundamental concepts and theories that shape entire economies at the national and global levels. The course examines key topics such as gross domestic product (GDP), inflation, unemployment, fiscal and monetary policy, and international trade. Students will learn to interpret economic indicators, understand the roles of governments and central banks in influencing economic activity, and analyze the effects of various macroeconomic policies on growth and stability. Through real-world applications, case studies, and data analysis, this course provides a strong foundation for understanding how economic environments impact societies and everyday life.
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ECON MACRO 5th Edition by William A. McEachern
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19 Chapters
2883 Verified Questions
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Chapter 1: The Art and Science of Economic Analysis
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Q1) The basic purpose of economic models is to:
A)construct simplifying assumptions about the real world.
B)explain reality in all its complexity.
C)collect empirical data to support the facts.
D)construct situations where controlled experiments can be carried out.
E)explain and predict economic events.
Answer: E
Q2) Economics is as much an art as it is a science.
A)True
B)False
Answer: True
Q3) The labor market is an example of a:
A)government market.
B)classified market.
C)communication market.
D)resource market.
E)product market.
Answer: D
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Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) In a command economy,_____.
A)a dictator makes every economic decision
B)owners can sell their resources to the highest bidder
C)no individual or group coordinates the economy
D)in theory,individual choices are reflected in collective decisions and decisions are made by central planners.
E)public ownership of resources is combined with free markets to direct economic activity
Answer: D
Q2) Opportunity cost is always measured in dollar terms,rather than in terms of real goods and services.
A)True
B)False Answer: False
Q3) It is possible for one person to have a comparative advantage in the production of all products.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Which of the following is a result of increased real wages in the United States?
A)A decrease in the quantity of services demanded by households
B)An increase in the opportunity cost of remaining employed in the home
C)A decrease in the opportunity cost of working outside the home
D)A decline in the number of households providing labor outside the home
E)Reduced use of labor-saving devices in households
Answer: B
Q2) Which of the following is true of progressive tax?
A)People who make more money pay less total taxes.
B)The marginal tax rate increases as income increases.
C)The percentage of income paid out decreases as income increases.
D)People who are poor receive the proceeds of the tax.
E)The percentage of income paid out increases as income decreases
Answer: B
Q3) The movement of households from rural to urban settings reduced the degree of specialization in household production.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) Which of these is likely to decrease the supply of leather jackets?
A)An increase in the price of leather jackets
B)An increase in the price of leather
C)A decrease in the price of zippers
D)An increase in the demand for leather jackets
E)A decrease in consumer income
Q2) When quantity demanded of a good exceeds the quantity supplied at the prevailing market price,_____.
A)the market is in equilibrium
B)the price of the good will decrease
C)the price of the good will tend to increase
D)the demand curve shifts rightward until the surplus is eliminated
E)the supply curve shifts leftward until the surplus is eliminated
Q3) For which of the following goods or services is the income effect of a price change likely to be the greatest?
A)Vitamin capsules
B)Gasoline
C)Laundry
D)Chocolates
E)College textbooks
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Chapter 5: Introduction to Macroeconomics
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Q1) A rise in the price level will:
A)cause an upward movement along the aggregate demand curve.
B)cause a downward movement along the aggregate demand curve.
C)cause a leftward shift of the aggregate demand curve.
D)cause a rightward shift of the aggregate demand curve.
E)have no impact on the aggregate demand curve.
Q2) Due to the implementation of the Troubled Asset Relief Program and the American Recovery and Reinvestment Act,the Federal budget deficit _____.
A)doubled
B)tripled
C)stayed the same
D)decreased significantly
E)quadrupled
Q3) Keynesian policies are ineffective at combating stagflation because stagflation is caused by:
A)budget surpluses.
B)decreases in aggregate supply.
C)trade deficits.
D)decreases in aggregate demand.
E)budget deficits.
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Chapter 6: Tracking the Useconomy
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Sample Questions
Q1) _____ is measured in terms of current-year prices.
A)Nominal gross domestic product (GDP)
B)GDP price index
C)Real gross domestic product (GDP)
D)Arbitrage
E)Depreciation
Q2) Which of the following actions will decrease the gross domestic product (GDP)?
A)Tom's alarm clock breaks,so he buys a new one.
B)Tom buys a new alarm clock because he tends to sleep through the first alarm.
C)Tom's alarm clock breaks.He now oversleeps and has to buy a cup of coffee on the way to work instead of making it at home.
D)Tom gets fired for being late often after his alarm clock breaks.
E)Tom sells his broken alarm clock and uses the money to buy some French fries.
Q3) Which of the following is an example of an injection into the circular flow of income and expenditure?
A)Consumption
B)Exports
C)Taxes
D)Saving
E)Government borrowing
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Chapter 7: Unemployment and Inflation
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Q1) People who are not currently employed but say they want a job are counted as unemployed only if they:
A)have previously held a job.
B)are actively seeking employment.
C)are discouraged workers.
D)are between 16 and 65 years of age.
E)are willing to accept any offer of employment.
Q2) Not counting _____ as unemployed understates unemployment.
A)children
B)retired persons
C)students
D)people who do not want to work
E)discouraged workers
Q3) The view that union wage demands may be a source of inflation would be best associated with cost-push inflation.
A)True
B)False
Q4) During periods of high inflation,people want to hold as much money as possible.
A)True
B)False
Page 9
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) Applied research is the search for knowledge without a clue about the end of the research.
A)True
B)False
Q2) The production possibilities frontier of an economy is based on the assumption that the:
A)amount of consumer goods produced in the economy is constant during a given year.
B)quality of labor available in the economy is variable during a given year.
C)patent laws applicable in the economy are constant during a given year.
D)level of technology available in the economy is variable during a given year.
E)economy can either produce capital goods or consumer goods during a given year.
Q3) The process of adding more capital per worker is called capital deepening.
A)True B)False
Q4) Labor productivity tends to fall as the capital to labor ratio rises.
A)True
B)False
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Chapter 9: Aggregate Demand
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Sample Questions
Q1) A firm's level of investment depends on the market interest rate:
A)only when the firm has to borrow funds to invest in new equipment.
B)only when the firm has to borrow funds to buy stocks and bonds.
C)only when the firm already has sufficient funds and could lend them.
D)because the interest rate represents the opportunity cost of investing in capital.
E)because investments are always made with borrowed funds.
Q2) Which of the following is true of the simple spending multiplier?
A)It equals the ratio of the marginal propensity to consume to the marginal propensity to save.
B)It equals the difference between the marginal propensity to save and the marginal propensity to consume.
C)It is the reciprocal of the marginal propensity to save.
D)It is the reciprocal of the marginal propensity to consume.
E)It is the sum of the marginal propensity to consume and the marginal propensity to save.
Q3) An increase in the interest rate will increase consumption spending.
A)True
B)False
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11
Chapter 10: Aggregate Supply
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Q1) In constructing the short-run aggregate supply curve,we define the short run as the period in which:
A)the price level is constant.
B)output is fixed.
C)profit is constant.
D)the costs of some resources are fixed.
E)the economic growth rate is less than 4 percent.
Q2) Given the aggregate demand curve,a beneficial supply shock will:
A)increase potential output and the price level.
B)decrease potential output and the price level.
C)increase potential output and decrease the price level.
D)decrease potential output and increase the price level.
E)cause no change in potential output or the price level.
Q3) A recessionary gap develops:
A)when actual output exceeds potential output.
B)when resource prices are "sticky" upward.
C)only when the economy is in recession.
D)only when GDP grows by more than 4 percent.
E)only when unemployment exceeds its natural rate.
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Page 12
Chapter 11: Fiscal Policy
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Sample Questions
Q1) Which of the following best describes the concept of laissez-faire?
A)Government should not intervene in the economy.
B)Government should actively intervene in the economy whenever it judges the action to be beneficial.
C)Government should intervene in the economy only to promote short-term economic stability.
D)Government should intervene in the economy only to maximize long-term growth rates.
E)Government should intervene in the economy only when the economy is not at full employment or there is substantial inflation.
Q2) The supply-side effect of higher tax rates would include a fall in the economy's potential GDP.
A)True
B)False
Q3) One of the difficulties in using discretionary fiscal policy effectively is that the legislative decision-making process is sometimes very long and drawn out.
A)True
B)False
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Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) 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 labor away from the private sector.
E)displaces some import purchases by the private sector.
Q2) Which of the following is not a form of crowding out?
A)Lower household spending due to higher interest rates
B)Lower business spending due to higher interest rates
C)Lower net exports due to higher interest rates
D)Lower private spending due to higher taxes
E)Greater output and employment in the short run
Q3) Which of the following is not included in the calculation of federal debt?
A)Debt held by banks
B)Debt held by firms
C)Debt held by the U.S.Treasury
D)Debt held by households
E)Debt held by foreign entities
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14
Chapter 13: Money and the Financial System
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Q1) Which of the following is not a power of the Federal Reserve System?
A)Setting the prime interest rate
B)Issuing Federal Reserve notes
C)Buying and selling U.S.government securities
D)Extending loans to member banks
E)Clearing checks
Q2) The wide acceptance of fiat money is determined by:
A)people's belief that it is worth something.
B)the amount of precious metal that the government holds to back the money.
C)the money's market value as a commodity.
D)the rate of interest,which is the price paid to borrow money.
E)its ability to function as a unit of account.
Q3) Financial institutions are known as financial intermediaries because they serve as go-betweens,which link _____ and _____.
A)the government; the taxpayers through IRAs
B)savers; borrowers
C)employers; employees
D)firms; the government
E)firms; consumers
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Page 15
Chapter 14: Banking and the Money Supply
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Q1) If the Fed increases the required reserve ratio at a time when banks are holding excess reserves,then:
A)the Fed's aim is to increase the money supply.
B)banks are likely to lend out more money than they would if the Fed left the reserve ratio alone.
C)banks are likely to earn higher profits than they would.
D)the money supply will not increase as much as it would if the Fed left the reserve ratio alone.
E)the Fed's aim is to conduct open market operations without changing the money supply.
Q2) In the United States,paper money is redeemable for gold.
A)True
B)False
Q3) In commercial banking operations,there is a trade-off between liquidity and profitability.
A)True
B)False
Q4) M1 includes currency held in bank vaults.
A)True
B)False
Page 16
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Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) Which of the following changes will shift the money demand rightward?
A)An increase in the price level
B)A decrease in real GDP
C)A decrease in the nominal interest rate
D)An increase in the nominal interest rate
E)A decrease in the price level
Q2) Suppose an individual can earn 3 percent interest on an annual term deposit.His opportunity cost of holding $100,000 in cash instead of investing in the term deposit will be:
A)$3,300.
B)$330.
C)$1,000.
D)$6,000.
E)$3,000.
Q3) If the Fed targets the interest rate,then:
A)the money supply will grow at a more controlled rate.
B)monetary policy will reinforce fluctuations in economic activity.
C)the price level will be more stable in the long run.
D)money demand will be more stable.
E)velocity will be less stable.
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Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Which of the following is likely to dampen economic fluctuations in a country?
A)A regressive income tax
B)An increase in tax rates
C)A decrease in tax rates
D)An increase in money supply
E)Unemployment insurance
Q2) Opponents of inflation targets say that:
A)such targets encourage workers to expect a low and stable inflation rate and hold down demands for wage increases.
B)the Fed pays less attention to jobs and economic growth when it sets such targets.
C)such targets encourage firms to plan on a low and stable inflation rate and hold down price increases.
D)such targets encourage investors to plan on a low and stable inflation rate and hold down demands for interest rate increases.
E)the Fed pays more attention to jobs and economic growth when it sets such targets.
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18
Chapter 17: International Trade
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Sample Questions
Q1) Tariffs and quotas are the only two devices used to restrict foreign trade.
A)True
B)False
Q2) Unless there are barriers to prevent free international trade,a country becomes an importer:
A)when the world price exceeds the domestic price.
B)when the domestic price exceeds the world price.
C)when there is an excess supply in the domestic market.
D)when it wants to expand its scale of operation.
E)when the opportunity cost of producing a good is lower relative to other countries.
Q3) If resources are equally adaptable to the production of different goods,the production possibilities frontier of a country will be an upward-sloping,concave curve.
A)True
B)False
Q4) If production is subject to economies of scale,countries can gain from trade if each nation specializes in the production of a good.
A)True
B)False
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19
Chapter 18: International Finance
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Sample Questions
Q1) The demand curve for euros shows:
A)a direct relationship between the dollar price of euro and the quantity of euros demanded.
B)an inverse relation between the dollar price of euro and the quantity of euros demanded.
C)that the higher the dollar price of euro,the greater the quantity of euros demanded.
D)that the more expensive it is to buy euros,the larger the quantity of European goods demanded by Americans.
E)that the dollar price of euro is being fixed by the European Union.
Q2) A floating exchange rate:
A)is determined by the national governments involved.
B)remains extremely stable over long periods of time.
C)is determined by the actions of central banks.
D)is allowed to vary only within a narrow range.
E)adjusts in response to market forces.
Q3) In the United States,imports have exceeded exports every year since 1979.
A)True
B)False
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Chapter 19: Economic Development
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Sample Questions
Q1) Developing countries have higher birth rates because:
A)families with more children have higher levels of income.
B)children are viewed as economic and social security as parents age.
C)the opportunity cost of leisure for people in developing countries is less.
D)there are special government programs that encourage more children per family.
E)the infant mortality rate is low in developing countries.
Q2) The newly industrialized Asian economies have developed by adopting the latest technology and investing in _____.
A)human capital
B)the agricultural sector
C)defense equipment
D)public infrastructure like roads,communication,and transport
E)developing consumer-oriented products.
Q3) An aging population poses fiscal problems for any country.
A)True
B)False
Q4) The United States Agency for International Development focuses on short-range plans to meet the basic needs of the poor.
A)True
B)False
Page 21
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