Introduction to Macroeconomics
Textbook Exam Questions
Course Introduction
Introduction to Macroeconomics provides students with a foundational understanding of the broad economic factors that shape national and global economies. The course explores key concepts such as gross domestic product (GDP), inflation, unemployment, fiscal and monetary policy, and international trade. Students will examine how governments and central banks influence overall economic activity and stability, analyze the causes and consequences of economic fluctuations, and evaluate the impact of macroeconomic policies on growth and development. Emphasis is placed on real-world applications and data analysis to foster a practical grasp of macroeconomic principles.
Recommended Textbook
CoreMacroeconomics 3rd Edition by Eric Chiang
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Chapter 1: Exploring Economics
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Sample Questions
Q1) Supply and demand analysis is used:
A) only in microeconomics.
B) only in macroeconomics.
C) in both microeconomics and macroeconomics.
D) in neither microeconomics nor macroeconomics.
Answer: C
Q2) The basic idea of opportunity cost is that:
A) buyers miss opportunities to find better bargains.
B) using resources in an activity imposes costs on other people.
C) the decision to use resources in one activity means that they cannot be used elsewhere.
D) economic agents are always looking for better opportunities.
Answer: C
Q3) In the equation Y = b - aX,a is the intercept.
A)True
B)False
Answer: False
Q4) Is understanding recessions a microeconomic or a macroeconomic issue? Explain.
Answer: Macroeconomic;it is a national issue.
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Chapter 2: Production, Economic Growth, and Trade
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Sample Questions
Q1) If a country wants to maximize its GDP,it should always:
A) export goods in which it has an absolute advantage.
B) import goods in which it has an absolute advantage.
C) export goods in which it has a comparative advantage.
D) import goods in which it has a comparative advantage.
Answer: C
Q2) Suppose that if the United States produced only oil,it could produce 25 million barrels,and if it produced only microchips it could produce 20 million chips.Suppose that if Mexico produced only oil,it could produce 16 million barrels,and if it produced only microchips,it could produce 8 million chips.Which of the following statements is then correct?
A) Mexico has a comparative advantage in producing both goods.
B) The United States has an absolute advantage over Mexico in producing both goods.
C) Mexico has an absolute advantage over the United States in producing both goods.
D) The United States has a comparative advantage in producing both goods.
Answer: B
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Chapter 3: Supply and Demand
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Sample Questions
Q1) A change in demand causes a movement along the demand curve.
A)True
B)False
Answer: False
Q2) How is the equilibrium price determined? What occurs if the price is above the equilibrium price? What occurs if the price is below the equilibrium price?
Answer: The equilibrium price is found at the point where the demand curve and the supply curve meet.At the equilibrium price,quantity demanded and quantity supplied are equal.At a price greater than the equilibrium price there is a surplus,also called an excess quantity supplied,since an increase in price leads to a reduction in the quantity demanded but an increase in quantity supplied.At a price less than the equilibrium price,there is an excess quantity demanded,also called a shortage.
Q3) Which of the following would shift the supply curve for corn to the right?
A) an increase in land taxes
B) a decrease in land taxes
C) an increase in the market price of corn
D) a decrease in the market price of corn
Answer: B
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Chapter 4: Markets and Government
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Sample Questions
Q1) Markets tend to produce:
A) the right amount of a good exhibiting external costs.
B) the right amount of a good exhibiting external benefits.
C) too little of a good exhibiting external costs.
D) too little of a good exhibiting external benefits.
Q2) Consumer surplus is the difference between the:
A) minimum price the buyer is willing to pay and the market price.
B) maximum price the buyer is willing to pay and the market price.
C) minimum price the seller is willing to pay and the market price.
D) maximum price the seller is willing to pay and the market price.
Q3) Laws used to keep market prices from falling are called:
A) price ceilings.
B) rationing and subsidies.
C) allocations and redemptions.
D) price floors.
Q4) Will producer surplus rise or shrink when prices rise above equilibrium?
Q5) The lack of easy entry into a market tends to depress prices.
A)True
B)False
Q6) Will producer surplus rise or shrink when prices fall below equilibrium?
Page 6
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) Gross private domestic investment is a key factor behind economic growth in the United States.
A)True
B)False
Q2) The _____ is a weighted average of 85 indicators of aggregate economic performance,designed to pinpoint signs of a recession in a reasonable time frame.
A) consumer price index
B) National Activity Index
C) producer price index
D) Dow Jones Industrial Index
Q3) The expenditure category that accounts for the largest share of GDP is:
A) gross private domestic investment.
B) government purchases of goods and services.
C) personal consumption expenditures.
D) net exports.
Q4) Changes in inventories are NOT included in the calculation of gross private domestic investment.
A)True B)False
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Chapter 6: Measuring Inflation and Unemployment
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Sample Questions
Q1) The chained consumer price index (CPI)for urban consumers does a better job in approximating a cost-of-living index than does the CPI.
A)True
B)False
Q2) The producer price index measures the average changes in the prices received by domestic producers for their output.
A)True
B)False
Q3) The GDP deflator shows that since the mid-1980s,the U.S.economy has had:
A) deflation.
B) hyperinflation.
C) an increasing inflation rate.
D) disinflation.
Q4) Structural unemployment can be reduced by retraining workers for new industries.
A)True B)False
Q5) A consumer price index of 115 means that prices rose by 15% since the base year.
A)True B)False
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Chapter 7: Economic Growth
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Sample Questions
Q1) The United States has unlimited labor supplies,and each worker uses a large array of capital equipment.
A)True
B)False
Q2) If technology is held constant,an increase in capital concurrent with a decrease in labor input causes output to:
A) rise,fall,or stay the same.
B) rise.
C) fall.
D) stay the same.
Q3) Open immigration policies in the United States,along with other increases in the labor force,have led to economic growth.
A)True
B)False
Q4) Spending money on research and development hurts a national economy because it increases the average cost of all products.
A)True
B)False
Q5) How can governments promote economic growth?
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Chapter 8: Aggregate Expenditures
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Sample Questions
Q1) The paradox of thrift is that if everyone tries to save more,in the aggregate they might just save less.
A)True
B)False
Q2) Consumption spending is:
A) spending by households,businesses,and government on all goods used up within one year.
B) spending by individuals and households on only nondurable goods,since they are used up quickly.
C) spending on goods and services by heads of households.
D) spending by individuals and households on both durable and nondurable goods.
Q3) If the multiplier is 2 and investment spending falls by $5 billion,then equilibrium income:
A) increases by $10 billion.
B) increases by $2.5 billion.
C) decreases by $5 billion.
D) decreases by $10 billion.
Q4) The average propensity to save is calculated by dividing savings by income.
A)True
B)False
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Chapter 9: Aggregate Demand and Supply
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Sample Questions
Q1) If the national incomes of foreign countries fall at the same time the dollar appreciates,then in the United States the aggregate demand curve:
A) shifts to the right.
B) shifts to the left.
C) remains unchanged.
D) does not shift,but there is movement up along it.
Q2) Rising input prices increase short-run aggregate supply.
A)True
B)False
Q3) Which of the following statements is CORRECT?
A) An improvement in technology shifts the long-run aggregate supply curve to the right.
B) A decrease in inflationary expectations shifts the short-run aggregate supply curve to the left.
C) As business expectations become more negative,the short-run aggregate supply curve shifts to the right.
D) Lower subsidies to business firms shift the short-run aggregate supply curve to the right.
Q4) Describe why the aggregate demand curve has a negative slope.
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Chapter 10: Fiscal Policy and Debt
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Sample Questions
Q1) For a fiscal policy to be sustainable,the present value of all projected future revenues must equal the present value of projected future spending.
A)True
B)False
Q2) The U.S.public debt is about 90% of its GDP.
A)True
B)False
Q3) When the economy is overheating and policymakers pursue contractionary fiscal policy,they express willingness to trade off _________ output for a ________ price level.
A) higher;higher
B) higher;lower
C) lower;higher
D) lower;lower
Q4) If the government borrows from the public,the quantity of publicly held bonds decreases.
A)True
B)False
Q5) Describe the crowding-out effect.
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Chapter 11: Saving, Investment, and the Financial System
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Sample Questions
Q1) The supply of loanable funds slopes ______ because an increase in the interest rate induces __________.
A) upward;more saving
B) downward;less saving
C) downward;less investment
D) upward;more investment
Q2) A deferment on a college loan means that _________ will pay it off.
A) the federal government
B) the student's parents or relatives
C) the student,beginning at a later time,
D) It will not have to be paid off at all.
Q3) Successful barter in a primitive economy necessitates:
A) a double coincidence of wants.
B) a low interest rate.
C) an increasing money supply.
D) a fixed supply of money.
Q4) Money is exclusively composed of currency and coins.
A)True
B)False
Q5) Which pays more over the long run,bonds or stocks? Explain.
Page 13
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Chapter 12: Money Creation and the Federal Reserve
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Sample Questions
Q1) What is the structure of the Federal Reserve System in the United States?
Q2) A solvency crisis means that a bank's liabilities exceed its assets.
A)True
B)False
Q3) Which one of the following actions is NOT a tool of monetary policy?
A) changing the discount rate
B) changing government spending and taxes
C) changing reserve requirements
D) open market operations
Q4) Assume that the reserve requirement is 20% and the Federal Open Market Committee buys a $100,000 bond.The money supply:
A) increases by a maximum of $100,000.
B) decreases by $100,000.
C) increases by a maximum of $20,000.
D) increases by a maximum of $500,000.
Q5) When you deposit $100 in your bank,your bank can lend part of that $100 to others.
A)True
B)False
Q6) How did the Federal Reserve System evolve in the United States?
Page 14
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Chapter 13: Monetary Policy
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Sample Questions
Q1) Milton Friedman and Anna Schwartz are most famous for:
A) monetary theory.
B) fiscal theory.
C) comparative advantage theory.
D) their tenures on the Federal Reserve Board.
Q2) Tight monetary policy is likely to decrease imports.
A)True
B)False
Q3) By using monetary policy,the Fed can partially offset the effects of a supply shock.
A)True
B)False
Q4) A monetary rule would make it difficult to:
A) have stable monetary growth.
B) prevent inflation.
C) respond to unforeseen events.
D) stabilize the price of gold.
Q5) Expansionary monetary policy tends to increase exports. A)True B)False
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Chapter 14: Macroeconomic Policy: Challenges in a Global Economy
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Sample Questions
Q1) According to the equation for the Phillips curve,if nominal wages rise by 8% and labor productivity rises by 5%,then we can expect:
A) prices to drop by 3%.
B) no change in prices.
C) prices to rise by 3%.
D) prices to drop by 5%.
Q2) Which of the following was NOT a factor leading to the financial crisis of 2008?
A) Low interest rates encouraged a housing boom.
B) Policymakers underestimated the level of risk inherent in the mortgage market.
C) The public lacked faith in the ability of the U.S.Treasury to pay on government bonds.
D) Investors borrowed heavily to purchase securitized mortgages.
Q3) (Figure: Understanding Phillips Curves)What is the expected inflation rate associated with Phillips curve PC<sub>a</sub>?
A) zero
B) 3%
C) 4%
D) 5%
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Chapter 15: International Trade
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Sample Questions
Q1) Suppose a Vietnamese shoe manufacturer were selling shoes to the European Union for $10 a pair,while selling those same shoes for $15 a pair in Vietnam.If the cost per pair of shoes is $12,the European Union:
A) could accuse Vietnam of using the infant industry argument.
B) could charge the Vietnamese shoe manufacturer with dumping.
C) could accuse Vietnam of using the national defense argument. D) definitely has a comparative advantage in producing shoes.
Q2) Distinguish between absolute and comparative advantage.Why would a country like the United States,which has an absolute advantage in producing many goods and services,be willing to trade?
Q3) The Trade Adjustment Assistance program provides help for domestic industries by offering production subsidies to those industries hurt by excessive imports.
A)True
B)False
Q4) Dumping occurs when goods are sold at higher prices abroad than in their home markets.
A)True
B)False
Q5) "With international trade,there are both gainers and losers." Explain.
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Chapter 16: Open Economy Macroeconomic
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Sample Questions
Q1) ABCD Corp.is a New York firm.Last year it earned $1.5 million from some business it conducted in Brazil.Its earnings are recorded in the balance of payments as:
A) income received.
B) an import.
C) a net transfer.
D) capital.
Q2) In which currency has gold long been priced on global markets?
A) the British pound
B) the German mark (now the euro)
C) the Japanese yen
D) the U.S.dollar
Q3) If the exchange rate changes from C$1.50 per U.S.dollar to C$1.67 per U.S.dollar:
A) the U.S.dollar has appreciated.
B) the U.S.dollar has depreciated.
C) Canadian tourists planning a trip to the United States will be pleased.
D) U.S.tourists planning a trip to Canada will be displeased.
Q4) Describe the difference between nominal and real exchange rates.Include relevant equation(s)in your response.
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