Macroeconomic Analysis Exam Bank
Course Introduction
Macroeconomic Analysis explores the behavior and performance of an economy as a whole, focusing on aggregate measures such as national income, output, unemployment, inflation, and economic growth. The course examines key macroeconomic models and theories, the roles of fiscal and monetary policies, and the impact of government intervention. Students will analyze macroeconomic indicators, learn how economies respond to shocks, and understand policy tools used to stabilize the economy. Emphasis is placed on contemporary macroeconomic issues, providing students with analytical frameworks to evaluate economic phenomena both in domestic and global contexts.
Recommended Textbook
Macroeconomics A Contemporary Introduction 9th Edition by William A. McEachern
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) 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
Q2) The expression "There's no such thing as a free lunch" means
A)that even if the lunch is free, we pay for it in extra calories
B)that resources used up in producing the lunch are not available to satisfy other wants
C)the same thing as "The best things in life are free"
D)you can eat only if you work first
E)neither sea water nor air is free
Answer: B
Q3) One problem with rent controls is that policy makers often ignore its secondary effects.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economics Systems
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Sample Questions
Q1) Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a decrease in unemployment?
E)a, b and c
Answer: D
Q2) On a production possibilities frontier, the opportunity cost of one more unit of a commodity per time period is measured by the
A)monetary price of the commodity
B)amount of the other commodity that must be sacrificed
C)amount of unemployed resources that must be used
D)amount of satisfaction it gives consumers
E)amount of tax paid to government for production, sale, and use of the commodity
Answer: B
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Government antitrust laws were designed to
A)encourage the production of public goods
B)prevent natural monopolies
C)prevent collusion among firms
D)regulate natural monopolies
E)correct the outcomes of positive and negative externalities in private markets
Answer: C
Q2) Import quotas on sugar result in lower sugar prices in the United States.
A)True
B)False
Answer: False
Q3) Some people have argued that government should provide only those goods that we would truly define as public goods. If so, which of the following should government produce?
A)National Defense
B)day-care centers for children of working mothers
C)mail delivery
D)unemployment benefits
E)subsidies for agricultural products
Answer: A
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Chapter 4: Demand Supply and Markets
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Sample Questions
Q1) The income effect of a decrease in the price of legal services (a normal good) is a(n)
A)decrease in the demand for legal services
B)decrease in the quantity demanded of legal services
C)increase in the demand for legal services
D)increase in the quantity demanded of legal services
E)new demand curve because everything else is no longer constant
Q2) Producers are willing and able to offer greater quantities for sale at higher prices because
A)they have the incentive to pay the increasing opportunity cost of resources to attract them from alternative uses
B)they will decrease their profits by expanding production at higher prices
C)the government orders them to do so
D)lower prices attract new firms, which have higher costs of production
E)they hire superior quality, higher-priced resources as production expands
Q3) Rent controls mean that tenants end up with the best possible housing choices over the long run.
A)True
B)False
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) A decrease in the price level will cause
A)an increase in the quantity of aggregate output supplied
B)a decrease in the quantity of aggregate output supplied
C)a leftward shift of the aggregate supply curve
D)a rightward shift of the aggregate supply curve
E)a leftward or rightward shift of the aggregate supply curve, depending on the reason for the price change
Q2) Given the aggregate demand curve, an increase in aggregate supply lowers the price level and decreases output.
A)True
B)False
Q3) Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.
A)True
B)False
Q4) If both aggregate demand and aggregate supply increase, then employment will increase.
A)True
B)False
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Chapter 6: Tracking the Us Economy
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Sample Questions
Q1) We can conclude that there has been inflation since the base year if the GDP price index in the current year is
A)positive
B)equal to zero
C)less than 100
D)greater than 100
E)negative
Q2) Which of the following would not be included in the calculation of GDP?
A)Jim purchases a new automobile.
B)Joe pays a plumber $100 to fix a broken pipe.
C)Sandy, who is on welfare, receives $100 in food stamps.
D)Kurt purchases an airline ticket for $500 just before a big reduction in fares.
E)Laurie pays $15 for a haircut.
Q3) Which of the following would not be included in GDP as government purchases?
A)The local township repairs the roads.
B)The state government funds a state university.
C)The federal government sends out Social Security checks.
D)The federal government pays a lawyer as a public defender.
E)The state government buys computer time.
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Page 8
Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Suppose you received a 4 percent increase in your nominal wage. Over the year, inflation runs about 7 percent. Which of the following is true?
A)Your real wage increased.
B)Both the nominal and real wages increased.
C)Both your nominal and real wages decreased.
D)Although your nominal wage fell, your real wage increased.
E)Although your nominal wage rose, your real wage decreased.
Q2) Jamal lost his job as a shipbuilder during 2004. His shipyard never reopened, and so his very specialized skills are no longer in demand. Jamal's unemployment is best classified as
A)cyclical
B)structural
C)seasonal
D)frictional
E)voluntary
Q3) Unanticipated inflation generally hurts borrowers and benefits lenders.
A)True
B)False
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) A small change in the rate of productivity growth will have
A)a small impact on output in both the short run and the long run
B)a large impact on output in both the short run and the long run
C)a small impact on output in the short run but a large impact in the long run
D)a large impact on output in the short run but a small impact in the long run
E)no effect on output at all
Q2) The resource whose productivity is most commonly measured is
A)labor
B)capital
C)land
D)energy
E)money
Q3) An increase in labor productivity necessarily means an increase in real GDP per capita if
A)real GDP increases
B)the employment growth rate is greater than the population growth rate
C)the employment growth rate is less than the population growth rate
D)the size of the labor force remains constant
E)real GDP increases more rapidly than nominal GDP
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Chapter 9: Aggregate Expenditure
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Sample Questions
Q1) Which of the following is not an example of a government purchase?
A)schools and teacher salaries
B)Chinese toys to be sold in discount department stores
C)aircraft carriers
D)interstate highway construction
E)All the answers are correct
Q2) If business managers become more optimistic about future sales and profits, then there will be
A)a rightward movement along the autonomous investment function
B)a leftward movement along the autonomous investment function
C)an upward shift of the autonomous investment function
D)a downward shift of the autonomous investment function
E)no movement along or shift of the autonomous investment function
Q3) An increase in the price level will
A)make the consumption function steeper
B)shift the consumption function downward
C)result in a movement upward along the consumption function
D)result in a movement downward along the consumption function
E)make the consumption function flatter
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Chapter 10: Aggregate Expenditure and Aggregate
Demand
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Sample Questions
Q1) If the price level increases, other things constant, consumption spending
A)increases because real income rises
B)decreases because real income rises
C)increases because the real value of wealth increases
D)decreases because the real value of wealth decreases
E)increases because nominal income increases
Q2) The aggregate expenditure line shows
A)real GDP on the horizontal axis and aggregate expenditure on the vertical axis
B)aggregate expenditure on the horizontal axis and real GDP on the vertical axis
C)consumption on the horizontal axis and aggregate expenditure on the vertical axis
D)aggregate expenditure on the horizontal axis and consumption on the vertical axis
E)investment on the horizontal axis and aggregate expenditure on the vertical axis
Q3) The larger the MPC, the greater the multiplier effect.
A)True
B)False
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Chapter 11: Aggregate Supply
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Sample Questions
Q1) If the economy is at point H in Exhibit 11-8, there is a(n)
A)expansionary gap of $300 billion (i.e., $0.3 trillion)
B)contractionary gap of $300 billion
C)contractionary gap of 10
D)expansionary gap of 20
E)expansionary gap of 10
Q2) The movement shown in Exhibit 11-9 could be caused by
A)government policies to increase demand
B)weather conditions causing worldwide crop failures
C)an attempt by key resource producers to monopolize supply
D)an increase in taxation or a decrease in government spending
E)an increase in labor productivity
Q3) The natural rate of unemployment includes frictional, cyclical, and structural unemployment.
A)True
B)False
Q4) As macroeconomic output expands, the cost of additional output increases.
A)True
B)False
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Chapter 12: Fiscal Policy
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Sample Questions
Q1) An increase in net taxes
A)raises aggregate expenditure by raising disposable income, thereby increasing consumption
B)raises aggregate expenditure by raising disposable income, thereby decreasing consumption
C)lowers aggregate expenditure by lowering disposable income, thereby increasing consumption
D)lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption
E)has no effect on aggregate expenditure
Q2) Unemployment insurance is an example of governmental discretionary fiscal policy. A)True
B)False
Q3) It has been estimated that the marginal propensity to consume out of tax rebate money is around 1/3.
A)True B)False
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Page 14
Chapter 13: Federal Budgets and Public Policy
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Sample Questions
Q1) A continuing resolution is
A)an annual determination on the part of Congress to improve the budget process
B)a decision to maintain a specific spending level for five years
C)a temporary extension of spending authority into the new fiscal year
D)the official name for the entire budget package when it is finally enacted
E)the result of a budget surplus
Q2) U.S. debt has never exceeded 100 percent of GDP because if it did so, the federal government would be bankrupt.
A)True
B)False
Q3) If a budget is cyclically balanced, the government should run a surplus when the economy experiences an expansionary gap.
A)True
B)False
Q4) If the functional finance approach to federal budgeting is used, the federal government's budget deficit should be zero.
A)True
B)False
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Chapter 14: Money and the Financial System
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Sample Questions
Q1) One problem with fiat money, as compared to commodity money, is that
A)more resources are used to create fiat money
B)there is frequently too little fiat money available
C)there is a greater potential for inflation with fiat money
D)fiat money must be turned in to the government to receive the commodity on which it is based
E)fiat money is less divisible than commodity money
Q2) The twelve district banks of the Federal Reserve System were created to decentralize power and respond to the public's fears of the monopoly power of a single central bank such as the Bank of England or the Bank of Japan.
A)True
B)False
Q3) The first bankers were probably
A)carpenters
B)stock brokers
C)goldsmiths
D)sea captains
E)grain merchants
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Chapter 15: Banking and the Money Supply
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Sample Questions
Q1) When the Fed buys U.S. government securities from a bank, that bank's excess reserves and required reserves increase but total reserves decrease.
A)True
B)False
Q2) Tony deposits $2,000 in cash at the Last National Bank and the bank credits Tony's checking account in the amount of $2,000. Which of the following is true immediately after this transaction?
A)The money supply, M1, increases by $2,000.
B)Only the composition of M1 changes, not its amount.
C)A $2,000 loan from the Last National Bank is an asset to Tony.
D)Both the assets and the liabilities of the Last National Bank fall by $2,000.
E)The immediate effect of this transaction is that M1 increases by $2,000 times the money multiplier.
Q3) The chance of encountering fake U.S. currency abroad is only about
A)1 in 10
B)1 in 100
C)1 in 1,000
D)1 in 10,000
E)1 in 1,000,000
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Page 17
Chapter 25: The Algebra of Income and Expenditure
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Sample Questions
Q1) The nation of Omega has an MPC of 0.70 and a multiplier of 2.22. Therefore, Omega's MPM is
A)0.9
B)0.7
C)0.5
D)0.15
E)This question cannot be answered without knowing the MPS
Q2) If the net export function is 500 - 0.15Y, then an increase in income of $1,000 will decrease net exports by $150.
A)True
B)False
Q3) In the consumption function: C = a + b(Y - NT), the term b represents the A)intercept of the consumption function
B)level of taxation
C)level of net taxation
D)level of income
E)marginal propensity to consume
Q4) Investment is the only autonomous spending component in aggregate expenditure. A)True
B)False
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Chapter 16: Monetary Theory and Policy
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Sample Questions
Q1) 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 increases in real GDP and the price level will be large
D)the increases in 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
Q2) Hyperinflation
A)was primarily a 19th century phenomenon
B)is always accompanied by extremely rapid growth in the money supply
C)is always accompanied by rapid shrinkage of the money supply
D)occurs when an economy grows too rapidly
E)is really nothing to worry about since it affects only nominal GDP (and not real GDP)
Q3) If the price level rises, the money demand curve will shift to the right.
A)True
B)False
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Chapter 17: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) The formulation of active policy is
A)made easier if the natural unemployment rate can be easily calculated
B)made easier if the natural unemployment rate cannot be easily calculated
C)made more difficult if the natural unemployment rate can be easily calculated
D)made more difficult if the natural unemployment rate cannot be easily calculated
E)done without considering the natural unemployment rate because such a policy focuses on rules to follow in any unemployment situation
Q2) For an economy to eliminate inflation once people have begun to anticipate inflation,
A)all of the following could occur
B)credibility of policy is crucial to the cost of lowering inflation
C)actual inflation must be less than anticipated inflation
D)cold-turkey solutions will reduce inflation relatively rapidly
E)a recession will have to be endured until expectations have been reduced
Q3) If self-correction causes prices to fall less than nominal wages, both output and real wages will decrease.
A)True
B)False
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Chapter 26: The Algebra of Demand-Side Equilibrium
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Sample Questions
Q1) An increase in autonomous government purchases will have exactly the same effect as an equal increase in
A)autonomous net taxes
B)proportional income taxes
C)autonomous investment
D)autonomous saving
E)transfer payments
Q2) If the MPC = 0.8 and both government purchases and autonomous net taxes fall by $100 billion, by how much does the equilibrium level of real GDP demanded change (assuming neither income taxes nor net exports exist)?
A)-$100 billion
B)+$100 billion
C)-$500 billion
D)+$500 billion
E)+$200 billion
Q3) The balanced budget multiplier is always negative.
A)True
B)False
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21
Chapter 18: International Trade
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Sample Questions
Q1) Exports amount to about 11 percent of U.S. GDP.
A)True
B)False
Q2) For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true concerning production possibilities curves in both countries?
A)The slopes of the countries' production possibilities frontiers cannot be determined unless the number of workers in each country is known.
B)The countries' production possibilities frontiers have the usual bowed-out shape.
C)On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is everywhere equal to 1/100.
D)On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is steeper than Denmark's.
E)On a graph with cheese on the vertical axis, the slope of Germany's production possibilities frontier is everywhere equal to negative 1/100.
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Chapter 19: International Finance
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Sample Questions
Q1) When the international financial system operated under the gold standard,
A)the currencies of most countries were convertible into gold
B)all international transactions were financed with gold
C)the price of gold was determined by the supply and demand for foreign exchange
D)the quantity of money demanded was always the same
E)there was very little inflation
Q2) U.S. investment earnings from foreign assets minus foreigners' earnings from their U.S. assets is
A)the merchandise trade balance
B)net unilateral transfers abroad
C)the balance on good and services
D)net investment from abroad
E)the financial account
Q3) Which of the following is not a criticism of flexible exchange rates?
A)All of the following.
B)They are volatile, which increases risks for importers and exporters.
C)They could affect employment and increase demand for trade restrictions.
D)They do not allow for discretionary monetary policy.
E)They allow central banks to follow expansionary monetary policies.
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Page 23
Chapter 20: Economic Development
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Sample Questions
Q1) The first step in gradualism is
A)the privatization of larger industrial sectors
B)the phasing out of money-losing enterprises
C)large industrial enterprises quickly finding market-clearing prices
D)the thriving of small-scale capitalism
E)state-owned enterprises running more like businesses to maximize profit
Q2) One possible reason that the country of Whatsis is trapped in poverty is
A)a lack of mineral wealth
B)an honest and functional government
C)laws and regulations to help detect fiscal fraud
D)a free press
E)a civil war
Q3) The group of countries more likely to have a high number of telephone lines per 1,000 people is
A)high-income countries
B)zero-income countries
C)infinite-income countries
D)low-income countries
E)middle-income countries
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Page 24
Chapter 21: National Income Accounts
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Sample Questions
Q1) Disposable Income is Personal Income minus personal taxes.
A)True
B)False
Q2) In Exhibit 6-5, Disposable Income equals
A)$365 billion
B)$375 billion
C)$385 billion
D)$390 billion
E)$420 billion
Q3) In Exhibit 6-5, Net Domestic Product equals
A)$365 billion
B)$375 billion
C)$385 billion
D)$390 billion
E)$420 billion
Q4) National income captures all income earned by American-owned resources, whether located in the United States or abroad.
A)True B)False
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Chapter 22:Understanding Graphs
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Sample Questions
Q1) A line is tangent to a curve if it
A)crosses the curve at one point
B)touches the curve at one point, without crossing it
C)crosses the curve at a minimum of two points
D)never touches the curve
E)forms a right triangle with the curve
Q2) The slope of a vertical straight line is infinity.
A)True
B)False
Q3) The statement that there is a direct relation between x and y means that
A)x and y move in the same direction
B)x causes y
C)y causes x
D)either y causes x or x causes y
E)the causal connection between x and y is immediate
Q4) If the dependent variable Y is directly related to the independent variable X, this means that changes in X cause changes in Y.
A)True
B)False
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Chapter 23:Variable Net Exports
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Sample Questions
Q1) Which of the following would shift the U.S. net export function downward?
A)an increase in the value of the U.S. dollar relative to other currencies
B)a decrease in the value of the U.S. dollar relative to other currencies
C)a decrease in U.S. incomes relative to other countries
D)a decrease in U.S. price levels relative to foreign price levels
E)an increase in foreign incomes relative to U.S. incomes
Q2) U.S. net exports will increase if
A)U.S. income increases
B)the value of the U.S. dollar decreases relative to foreign currency
C)the value of the U.S. dollar increases relative to foreign currency
D)U.S. exports decrease
E)U.S. imports increase
Q3) If imports are plotted on the vertical axis and disposable income on the horizontal axis, the import line
A)slopes downward, but we can tell nothing about its steepness
B)slopes downward with a slope less than -1
C)is a horizontal line
D)slopes upward with a slope less than 1
E)slopes upward, but we can say nothing about its steepness
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Page 27
Chapter 24: Variable Net Exports Revisited
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Sample Questions
Q1) A more realistic approach has net exports varying __________ with income.
A)positively
B)independently
C)directly
D)inversely
E)None of the answers is correct
Q2) An economy that engages in international trade will have a steeper aggregate expenditure line than one that is the same in all other respects, except for the absence of international trade.
A)True
B)False
Q3) If net exports increase by $400 billion at every level of income, the aggregate expenditure line will
A)shift upward by $400 billion
B)shift downward by $400 billion
C)shift upward by more than $400 billion because of the multiplier effect
D)shift upward by less than $400 billion
E)shift downward by more than $400 billion because of the multiplier effect
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