Introduction to Macroeconomics Study Guide Questions
Course Introduction
Introduction to Macroeconomics provides a comprehensive overview of the fundamental concepts and principles that govern the behavior of economies on a national and global scale. Students will explore topics such as gross domestic product (GDP), inflation, unemployment, fiscal and monetary policy, and international trade. Through analysis of real-world economic issues and policy debates, this course equips students with the tools to understand economic indicators, evaluate government interventions, and appreciate the forces that influence economic growth and stability. Emphasis is placed on applying theoretical models to contemporary problems and interpreting economic data relevant to everyday life.
Recommended Textbook Principles of Macroeconomics A Streamlined Approach 3rd Edition by Robert H. Frank
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13 Chapters
2266 Verified Questions
2266 Flashcards
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Chapter 1: Thinking Like an Economist
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) The economic surplus of an action is:
A) the benefit gained by taking an action.
B) the difference the explicit and implicit costs of taking an action.
C) the difference between the benefit and the cost of taking an action.
D) the money a person has left over after taking an action.
Answer: C
Q2) The Cost-Benefit Principle predicts that people will be less likely to smoke if the government:
A) increases taxes on smoking-cessation devices such as nicotine patches.
B) increases taxes on cigarettes, effectively raising the price.
C) subsidizes hospitals treating lung disease.
D) invests more money in cancer research.
Answer: B
Q3) By convention, there are two major divisions of economics, called:
A) marginal benefit and marginal cost.
B) reservation price and opportunity cost.
C) microeconomics and macroeconomics.
D) rational economics and irrational economics.
Answer: C
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Page 3
Chapter 2: Supply and Demand
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:
A) the income effect of a price change.
B) a decrease in reservation price.
C) the substitution effect of a price change.
D) a decrease in demand.
Answer: C
Q2) Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?
A) There is an excess demand for tickets at the Ticketmaster price.
B) The Ticketmaster price was above the equilibrium price.
C) There is an excess supply of tickets at the Ticketmaster price.
D) The Ticketmaster price is the equilibrium price.
Answer: A
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4
Chapter 3: International Trade and Trade Policy
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) There is 5% average tax on imported goods in the United States. This tax is known as a(n) ________.
A) income tax
B) sales tax
C) tariff
D) quota
Answer: C
Q2) Australia is a net exporter of wool, free trade will benefit the ________.
A) domestic producers
B) rich citizens of the Australia
C) poor citizens of the Australia
D) domestic consumers
Answer: A
Q3) Why is there often resistance to free trade?
A) Free trade does not benefit the economy as a whole.
B) Specific groups may be hurt by free trade.
C) Free trade does not benefit the global economy.
D) Free trade usually hurts consumers.
Answer: B
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Page 5
Chapter 4: Macroeconomics: the Birds-Eye View of the Economy
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) Aggregation allows economists to ______ at the cost of ________.
A) see the big picture; obscuring the details
B) make positive statements; ignoring normative analysis
C) make normative statements; ignoring positive analysis
D) see the details; obscuring the big picture
Q2) If living standards in a country, as measured by output per person, increase, then total output must have:
A) increased more rapidly than population increased.
B) increased at the same rate that population increased.
C) increased more slowly than population increased.
D) decreased more rapidly than population decreased.
Q3) Which of the following statements is positive?
A) When the Federal Reserve increases the money supply, interest rates decrease.
B) Large budget deficits should be avoided.
C) Higher taxes are needed to support education.
D) A tax cut that benefits low-income households is acceptable.
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Chapter 5: Measuring Economic Activity: GDP, Unemployment,
and Inflation
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272 Flashcards
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Sample Questions
Q1) Which of the following is an example of an intermediate good?
A) A new car sold to a family
B) A metal-stamping machine used to produce cars sold to an automaker
C) A new CD player sold to an automaker for installation in a car
D) A new CD player sold to a teenager
Q2) The situation when the price of most goods and services are falling over time is called:
A) inflation.
B) disinflation.
C) a boom.
D) deflation.
Q3) The CPI in 1974 equaled 0.49. The CPI in 1975 equaled 0.54. The rate of inflation between 1974 and 1975 was ______ percent.
A) 5.0
B) 5.4
C) 9.3
D) 10.2
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Page 7
Chapter 6: Economic Growth, Productivity, and Living Standards
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) If the share of population employed in two countries is the same, average living standards will be higher in the country with:
A) the smaller population.
B) the larger population.
C) higher average labor productivity.
D) lower average labor productivity.
Q2) If you left $2,500 on deposit with a bank promising to pay you a 5 percent compound annual rate of interest, then after 50 years your deposit would be worth approximately:
A) $2,625
B) $250,750
C) $11,467
D) $28,668
Q3) Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ average labor productivity.
A) increase; decreasing
B) increase; increasing
C) increase; not changing
D) decrease; increasing
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Chapter 7: The Labor Market: Workers, Wages, and Unemployment
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143 Flashcards
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Sample Questions
Q1) Compared to Western Europe, over the last three decades unemployment in United States has been ____ and the rate of job creation has been ______.
A) lower; slower
B) higher; faster
C) higher; slower
D) lower; faster
Q2) Whether a particular technological innovation is good for a particular worker depends on the effect of that innovation on the worker's:
A) reservation price.
B) marginal product.
C) labor mobility.
D) union contract.
Q3) The real purchasing power of the average worker's yearly earnings in the United States in 2014 was ____ as in 1929.
A) five times as large
B) more than twice as large
C) about the same
D) about half as much
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Chapter 8: Saving and Capital Formation
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174 Flashcards
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Sample Questions
Q1) Steve uses $300 from his paycheck to pay off his credit card balance. Based on this information:
A) Steve's saving has increased by $300.
B) Steve's saving has decreased by $300.
C) Steve's wealth is unchanged.
D) Steve has a capital loss of $300.
Q2) Joe's Taco Hut can purchase a delivery truck for $20,000 and Joe estimates it will generate a net income (after taxes, maintenance and operating costs) of $2,000 per year. He has no other opportunities. He should:
A) purchase the truck only if the real interest rate is less than 2%.
B) not purchase the truck if the real interest rate is greater than 2%.
C) purchase the truck if the real interest rate is greater than 10%.
D) purchase the truck if the real interest rate is less than 10%.
Q3) When the government runs a budget surplus, it uses the funds to:
A) issue bonds.
B) pay down outstanding debt.
C) decrease transfer payments.
D) decrease public saving.
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Chapter 9: Money, The Federal Reserve, and Global
Financial
Markets
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) In an open-market purchase the Federal Reserve ______ government bonds from the public and the supply of bank reserves ______.
A) buys; increases
B) buys; decreases
C) sells; decreases
D) sells; increases
Q2) The amount of money in the United States is determined by:
A) the Federal Reserve.
B) the combined behavior of commercial banks and the public, as well as actions of the Federal Reserve.
C) the public
D) the combined behavior of commercial banks and the public.
Q3) If the United States has a $300 billion net capital inflow, then there must be a:
A) trade surplus of $300 billion.
B) trade deficit of $300 billion.
C) trade surplus of $600 billion.
D) net capital outflow of $300 billion.
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Page 11
Chapter 10: Short-Term Economic Fluctuations and Fiscal Policy
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190 Verified Questions
190 Flashcards
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Sample Questions
Q1) Assuming that the government cannot act immediately and the multiplier takes effect, ultimately creating an expansionary gap of $10 billion dollars. To close this gap, government purchases must be:
A) increased by $10 billion.
B) decreased by $10 billion.
C) increased by more than $10 billion.
D) decreased by less than $10 billion.
Q2) Industrial production, total sales, nonfarm employment, and after-tax household income are examples of ______ indicators of economic activity.
A) coincident
B) preceding C) lagged
D) real
Q3) Autonomous expenditure is the portion of aggregate expenditure that:
A) equals aggregate output.
B) equals planned spending.
C) equals induced expenditure.
D) is independent of income.
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Chapter 11: Stabilizing the Economy: The Role of the Fed
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Sample Questions
Q1) In an economy where aggregate spending is given by Y = 5,500 + 0.6Y - 20,000r, the interest rate is currently 2 percent (0.02). If potential output equals 8,000, the central bank must ______ the interest rate to close the ______ gap.
A) lower; expansionary
B) lower; recessionary
C) raise; recessionary
D) raise; expansionary
Q2) The money demand curve will shift to the left if:
A) the nominal interest rate increases.
B) the nominal interest rate decreases.
C) the price level increases.
D) the price level decreases.
Q3) If the Fed's policy reaction function equals r = .02 + \(\pi\), where r is the real interest rate, \(\pi\) is the inflation rate. If the real rate of interest is set at 5%, then the rate of inflation must be:
A) 2%.
B) 3%.
C) 1%.
D) 4%
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Page 13
Chapter 12: Inflation and Aggregate Supply
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Starting from potential output, if firms become less optimistic about the future and decide to decrease their investment in new capital, then this will generate a(n) _____ gap and inflation will _____.
A) recessionary; increase
B) recessionary; decrease
C) expansionary; decrease
D) expansionary; increase
Q2) Graphically inflation shocks shift the _____ and shocks to potential shift the ______.
A) aggregate demand curve; long-run aggregate supply line
B) aggregate demand curve; short-run aggregate supply line
C) short-run aggregate supply line; long-run aggregate supply line
D) long-run aggregate supply line; short-run aggregate supply line
Q3) Starting from long-run equilibrium, an increase in autonomous investment results in ____ output in the short run and _____ output in the long run.
A) higher; higher
B) higher; potential C) lower; potential D) lower; higher
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Page 14
Chapter 13: Exchange Rates and the Open Economy
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) If a country's international reserves are increasing, then its exchange rate is ______ and there is a balance-of-payments _______.
A) undervalued; surplus
B) undervalued; deficit
C) overvalued; deficit
D) overvalued; surplus
Q2) Based on the theory of purchasing power parity, in the long run, currencies of countries with significant inflation will tend to:
A) be flexible.
B) have nominal exchange rates.
C) depreciate.
D) appreciate.
Q3) A currency devaluation is a(n):
A) increase in the value of a currency relative to other currencies.
B) decrease in the value of a currency relative to other currencies.
C) reduction in the official value of a currency in a fixed-exchange-rate system.
D) increase in the official value of a currency in a fixed-exchange-rate system.
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