Introduction to Macroeconomics
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Course Introduction
Introduction to Macroeconomics provides students with a foundational understanding of the broader economic forces that shape national and global economies. The course explores key concepts such as gross domestic product (GDP), inflation, unemployment, fiscal policy, monetary policy, and economic growth. Emphasis is placed on the relationships between households, businesses, governments, and financial institutions, as well as the analysis of economic indicators and how policy decisions affect economic stability and long-term development. Students gain analytical tools to assess current economic issues and trends, preparing them for advanced studies in economics and related fields.
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Macroeconomics 5th Edition by R. Glenn Hubbard
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Chapter 1: Economics: Foundations and Models
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Q1) If a graph has a line that shows the quantity of flat-screen televisions sold in the last five years,it is known as
A)a pie chart.
B)a time-series graph.
C)a demand curve for outsourcing.
D)a supply curve of outsourcing.
Answer: B
Q2) Normative analysis is concerned with "what ought to be," while positive analysis is concerned with "what is."
A)True
B)False
Answer: True
Q3) The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
A)public economics.
B)microeconomics.
C)macroeconomics.
D)normative economics.
Answer: C
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Chapter 2: Trade-Offs,comparative Advantage,and the Market System
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Q1) Refer to Table 2-4.What is George's opportunity cost of cultivating a garden?
A)half a garden cultivated
B)two lawns mowed
C)two-thirds of a garden cultivated
D)one and a half lawns mowed
Answer: B
Q2) ________ exists because unlimited wants exceed the limited resources available to fulfill those wants.
A)Scarcity
B)Productive efficiency
C)The command economy
D)Economic growth
Answer: A
Q3) Refer to Figure 2-2.If Vidalia chooses to produce 40 dozen orchids,how many roses can it produce to maximize production?
A)30 dozen roses
B)50 dozen roses
C)100 dozen roses
D)150 dozen roses
Answer: C
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Q1) Refer to Figure 3-2.A technological advancement would be represented by a movement from
A)A to B.
B)B to A.
C)S<sub>1</sub> to S<sub>2</sub>.
D)S<sub>2 </sub>to S<sub>1</sub>.
Answer: C
Q2) If consumers believe the price of hybrid vehicles will decrease in the future,this will cause the demand for hybrid vehicles to decrease now.
A)True
B)False
Answer: True
Q3) If you are considering buying either an Apple iPhone or a Samsung Galaxy,and you choose the Samsung only because the price is lower,then you consider
A)the iPhone and the Galaxy to be complements.
B)the iPhone and the Galaxy to be substitutes.
C)the iPhone to be a normal good and the Galaxy to be an inferior good.
D)the iPhone to be an inferior good and Galaxy to be a normal good.
Answer: B
Page 5
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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Q1) Buyers will bear the entire burden of a unit tax if the demand curve for a product is A)horizontal.
B)vertical.
C)downward sloping.
D)upward sloping.
Q2) In the market for gasoline,an increase in the federal excise tax on gasoline would shift the supply curve up.
A)True
B)False
Q3) Price floors are illegal in the United States.
A)True
B)False
Q4) Which term refers to a legally established maximum price that firms may charge?
A)a price ceiling
B)a subsidy
C)a price floor
D)a tariff
Q5) What is meant by the term "economic efficiency"?
Q6) What area on a supply and demand graph represents producer surplus?
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Chapter 5: The Economics of Health Care
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Q1) The Congressional Budget Office estimates that ________ account(s)for less than 1 percent of health care costs in the United States.
A)the aging population
B)uninsured patients receiving treatment in hospital emergency rooms that could have been provided less expensively at doctor's offices
C)the payments to settle malpractice lawsuits and the premiums doctors pay for malpractice insurance
D)advances in medical technology
Q2) On average,people in the United States spend a smaller percentage of their income on health care than do people in most other countries.
A)True
B)False
Q3) Of the following high-income countries,which has the highest obesity rate?
A)Canada
B)Japan
C)the United Kingdom
D)the United States
Q4) What is health insurance?
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Chapter 6: Firms,the Stock Market,and Corporate Governance
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Q1) The existence of ________ increases the risk of buying stock in a corporation.
A)the principal-agent problem
B)corporate governance
C)unlimited personal liability
D)employee-owned corporations
Q2) Tanesha sells homemade candles over the Internet.Her annual revenue is $64,000 per year,the explicit costs of her business are $17,000,and the opportunity costs of her business are $22,000.What is her accounting profit?
A)$17,000
B)$22,000
C)$47,000
D)$64,000
Q3) A corporation's board of directors
A)hire the managers of the corporation.
B)control the day-to-day activities of the corporation.
C)are personally liable for the debts of the corporation.
D)are the sole owners of the corporation.
Q4) What is the difference between retained earnings and dividends?
Q5) How is economic profit found?
Q6) How does the principal-agent problem extend to managers and employees? Page 8
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Chapter 7: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many swords will Morocco consume?
A)50
B)95
C)105
D)200
Q2) Refer to Table 7-1.Use the table above to select the statement that accurately interprets the data in the table.
A)Rob has a comparative advantage in catching fish.
B)Bill has an absolute advantage in catching fish.
C)Bill has a comparative advantage in catching fish.
D)Rob has a comparative advantage in picking berries and catching fish.
Q3) The Smoot-Hawley Tariff
A)lowered U.S.tariffs by 50 percent following World War II.
B)was passed by the U.S.Congress following the Civil War as a means of increasing government revenue.
C)was passed by the U.S.Congress upon a recommendation made by the General Agreement on Tariffs and Trade (GATT)in 1948.
D)raised average tariff rates by over 50 percent in the United States in 1930.
Page 10
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Chapter 8: GDP: Measuring Total Production and Income
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Q1) If the GDP deflator is less than 100,then for that year nominal GDP ________ real GDP.
A)equals
B)is greater than
C)is less than
D)may be greater than or less than
Q2) National income equals gross national product minus A)imports.
B)depreciation.
C)inventories.
D)changes in inventories.
Q3) In 2013,Ford Motor Company's sales were rising.These events were caused by A)an economic recession.
B)an economic expansion.
C)an increase in advertising.
D)improving quality of service.
Q4) Refer to Table 8-31.The table above represents hypothetical data from the National Income Accounts for 2013.Use the data to calculate personal income and disposable income.
Q5) Why do we subtract import spending from total expenditures?
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Chapter 9: Unemployment and Inflation
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Sample Questions
Q1) What is the natural rate of unemployment,and what types of unemployment constitute the natural rate of unemployment?
Q2) Refer to Figure 9-1.Based on the graph of the labor market above,if a minimum wage is set at $5 per hour,which of the following will occur?
A)The unemployment rate will rise.
B)The unemployment rate will fall.
C)The level of unemployment will rise,but the percentage of the labor force unemployed will not change.
D)None of the above will occur.
Q3) You borrow $10,000 from a bank for one year at a nominal interest rate of 5%.If inflation over the year is 2%,what is the real interest rate you are paying?
A)2%
B)2.5%
C)3%
D)5%
Q4) Efficiency wage is another name for the minimum wage.
A)True
B)False
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Chapter 10: Economic Growth, the Financial System, and Business Cycles
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Sample Questions
Q1) There is a government budget surplus if
A)T - TR > G.
B)G > T.
C)G > TR.
D)TR < T.
Q2) In a closed economy,private saving is equal to which of the following? (Y = GDP,C = Consumption,G = Government purchases,T = Taxes,and TR = Transfers)
A)Y - C - T
B)Y - G - T
C)Y - G - T + TR
D)Y + TR - C - T
Q3) Empirical evidence shows that the impact of government budget deficits and surpluses on the equilibrium interest rate is quite large.
A)True
B)False
Q4) Market economies tend to grow more quickly than centrally-planned economies. A)True
B)False
Q5) Explain why the demand curve for loanable funds has a negative slope.
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Chapter 11: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) How do economic growth rates affect a nation's standard of living?
Q2) What is "brain drain"?
A)the tendency for highly educated workers in high-income countries to move to low-income countries to volunteer their services
B)increased recruiting efforts that attempt to raise the average level of education in developed nations
C)foreign direct investment that flows from a developed country to a developing country
D)the loss of highly educated people from a low-income country as they move to higher-income opportunities in foreign countries
Q3) Foreign direct investment occurs when a Chinese corporation
A)purchases stock issued in China.
B)opens a new Chinese factory.
C)purchases 1,000 shares of stock issued by an American company.
D)opens a new factory in France.
Q4) How do government policies that enforce property rights affect economic growth?
Q5) Most economic growth in the world occurred between 1,000,000 B.C.and 1300 A.D.
A)True
B)False
Page 14
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Chapter 12: Aggregate Expenditure and Output in the Short Run
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Q1) You review a salesman's income over a 5-year period.You note it fluctuates tremendously from year to year,yet his consumption of goods and services remains consistently at the same level,year after year.Does this mean that income is not a determinant of consumption,or could something else explain his behavior?
Q2) The difference between GDP and disposable income is
A)national income.
B)actual investment spending.
C)net taxes.
D)unplanned investment spending.
Q3) Which of the following will decrease aggregate expenditure in the United States?
A)a decrease in the value of the dollar
B)a decrease in the price level
C)a decrease in interest rates
D)a decrease in government purchases
Q4) The consumption function describes the relationship between
A)consumption spending and national income.
B)consumption spending and aggregate income.
C)consumption spending and disposable income.
D)consumption spending and personal income.
Q5) What are the four categories of aggregate expenditure?
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Chapter 13: Aggregate Demand and Aggregate Supply Analysis
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Q1) A decrease in investment causes the price level to ________ in the short run and ________ in the long run.
A)increase; increase further
B)increase; decrease
C)decrease; decrease further
D)decrease; increase
Q2) If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries,
A)the long-run aggregate supply curve will shift to the right.
B)the long-run aggregate supply curve will shift to the left.
C)we will move up along the long-run aggregate supply curve.
D)we will move down along the long-run aggregate supply curve.
Q3) Refer to Figure 13-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from
A)AD<sub>1</sub> to AD<sub>2</sub>.
B)AD<sub>2</sub> to AD<sub>1</sub>.
C)point A to point B.
D)point B to point A.
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Chapter 14: Money, banks, and the Federal Reserve System
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Sample Questions
Q1) If a bank receives a $1 million discount loan from the Federal Reserve,then the bank's reserves will
A)not change.
B)increase by $1 million.
C)increase by less than $1 million.
D)increase by more than $1 million.
Q2) If the bank of Waterloo receives a $10,000 deposit,and the reserve requirement is 10 percent,how much can the bank loan out? (Assume that before the deposit this bank is just meeting its legal reserve requirement.)
A)$1,000
B)$9,000
C)$10,000
D)$11,000
Q3) If banks receive a greater amount of reserves and do not hold all of these reserves as excess reserves,the money supply expands.
A)True
B)False
Q4) Although gold is highly valued by most people,it is difficult to use as a medium of exchange.Explain.
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Chapter 15: Monetary Policy
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Q1) Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.
A)will be greater than B)will be less than C)will be the same as D)may be greater than or less than
Q2) The money market model is concerned with ________ and the loanable funds market model is concerned with ________.
A)short-term real interest rates; long-term nominal interest rates
B)short-term nominal interest rates; long-term nominal interest rates
C)short-term real interest rates; long-term real interest rates
D)short-term nominal interest rates; long-term real interest rates
Q3) If the Fed buys Treasury bills,this will shift the
A)money supply curve to the right.
B)money supply curve to the left.
C)money demand curve to the right.
D)money demand curve to the left.
Q4) List the Fed's four main monetary goals.
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Chapter 16: Fiscal Policy
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Sample Questions
Q1) The tax increases necessary to fund future Social Security and Medicare benefit payments would be
A)small,and have little effect on economic growth.
B)small,but could discourage work effort,entrepreneurship and investment,thereby slowing economic growth.
C)large,but would have little effect on economic growth.
D)large,and could discourage work effort,entrepreneurship and investment,thereby slowing economic growth.
Q2) Crowding out will be greater
A)the less sensitive consumption spending is to changes in the interest rate.
B)the further equilibrium GDP is below potential GDP.
C)the more sensitive investment spending is to changes in the interest rate.
D)if the economy is in recession,rather than at full employment.
Q3) The federal government debt as a percentage of GDP fell during the period
A)2002 - 2007.
B)1980-1992.
C)during World War I and World War II.
D)1997-2001.
E)the Great Depression.
Q4) What is fiscal policy,and who is responsible for fiscal policy?
Page 19
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Chapter 17: Inflation, unemployment, and Federal Reserve Policy
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Q1) Expansionary monetary policy will result in
A)lower interest rates.
B)decreased rates of inflation.
C)a decrease in aggregate demand.
D)All of the above are correct.
Q2) Refer to Figure 17-6.If firms and workers have adaptive expectations,an expansionary monetary policy will cause the short-run equilibrium to move from
A)point B to point C.
B)point A to point C.
C)point A to point B.
D)point B to point A.
E)point C to point B.
Q3) The expansionary monetary and fiscal policies of the 1960s resulted in ________ inflation rates and ________ rates of unemployment.
A)high; high
B)low; low
C)low; high
D)high; low
Q4) Why is the credibility of the Fed's policy announcements particularly important?
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Chapter 18: Macroeconomics in an Open Economy
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Q1) If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro then
A)the dollar has depreciated.
B)the dollar has appreciated.
C)the euro has appreciated.
D)the euro has stayed constant in value.
Q2) Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be
A)an increase in U.S.real income.
B)speculators expect the dollar to depreciate in value in the near future.
C)an economic expansion in the United States.
D)a decrease in Japanese interest rates.
Q3) If net exports are positive for China,it must be true that China is experiencing net outflows of capital.
A)True
B)False
Q4) Explain and show graphically how an increase in incomes in the United States will affect equilibrium in the foreign exchange market?
Q5) Explain the relationship between net exports and net foreign investment.
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Chapter 19: The International Financial System
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Q1) If the implied exchange rate between Big Mac prices in the United States and the Philippines is 68 pesos per dollar,but the actual exchange rate between the United States and the Philippines is 43 pesos per dollar,which of the following would you expect to see?
A)a depreciation of the dollar
B)a decrease in the demand for Philippine pesos
C)a decrease in the demand for dollars
D)an appreciation of the Philippine pesos
Q2) Under a floating exchange rate,the exchange rate
A)will change whenever the price of gold changes.
B)is controlled by central bank intervention.
C)is determined by the interaction of supply of the currency and demand for the currency.
D)is pegged against the euro.
Q3) What factors are most important for determining exchange rate fluctuations in the long run?
A)relative price levels across countries
B)relative rates of productivity growth across countries
C)preferences for domestic and foreign goods across countries
D)All of the above are correct.
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