Course Introduction
Macroeconomic Theory Exam Preparation Guide
Macroeconomic Theory explores the fundamental principles and models that explain the behavior of aggregate economic variables such as national output, inflation, unemployment, and interest rates. The course covers the analysis of economic growth, business cycles, monetary and fiscal policy, and the role of government in stabilizing the economy. Students engage with both classical and contemporary macroeconomic frameworks, critically examining real-world economic issues and policy responses to understand how large-scale economic factors influence overall economic health and societal well-being.
Recommended Textbook
Macroeconomics Policy and Practice 2nd Edition by Frederic S Mishkin
Available Study Resources on Quizplus
22 Chapters
1921 Verified Questions
1921 Flashcards
Source URL: https://quizplus.com/study-set/2587
Page 2
Chapter 1: The Policy and Practice of Macroeconomics
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/51514
Sample Questions
Q1) Economists apply the term "Great Inflation" to which decade?
A)1930s
B)1940s
C)1950s
D)1960s
E)1970s
Answer: E
Q2) Which of these is not among the principal determinants of economic growth?
A)institutions
B)education
C)research and development
D)balanced trade
E)saving and investment
Answer: D
Q3) There are no questions for this section.
Answer: As the input statement "There are no questions for this section." suggests that there are no inquiries to address within a particular section, there is no specific question to provide an answer for. If you have any questions or need information on a different topic, feel free to ask, and I'll be happy to help!
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Measuring Macroeconomic Data
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/51515
Sample Questions
Q1) Private disposable income equals GDP ________.
A)minus corporate profits and net factor income
B)plus transfer payments and net exports
C)plus depreciation,transfer payments,and interest payments on government debt
D)plus net factor income minus net government income
E)none of the above
Answer: D
Q2) An international comparison of eight major industrialized countries reveals the following about the components of GDP: ________.
A)the U.S.has one of the largest shares of GDP going to investment
B)the U.S.has one of the smallest government share of GDP
C)the U.S.runs one of the largest trade deficits
D)all of the above
E)none of the above
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Aggregate Production and Productivity
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/51516
Sample Questions
Q1) An economy's total labor income is $2 trillion,and total capital income is $1 trillion.In the Cobb-Douglas production function,the exponent on capital is ________.
A)two-thirds
B)one-half
C)one-third
D)0.3
E)none of the above
Answer: C
Q2) What does the Cobb-Douglas production function assume about the input shares in the economy?
A)the capital share is smaller than the labor share of income
B)both the capital and labor shares of income are positive
C)both the capital and labor shares of income remain relatively constant over time
D)all of the above
E)none of the above
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Saving and Investment in Closed and Open Economies
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/51517
Sample Questions
Q1) When a U.S.firm sells a good abroad for,say,100 euros (assume $1=1euro),U.S.net exports increase by $100.These $100 in exports can be accounted for as $100 increase in capital outflow because ________.
A)if the 100 euros are kept in the foreign bank,the U.S.firm is giving a loan to that bank
B)if the U.S.firm uses the 100 euros to buy a share of stock in a foreign firm,the firm is supplying U.S.capital to that foreign firm
C)if the U.S.firm uses the proceeds to build a new factory in that country,it is supplying U.S.capital to that country
D)all of the above
E)none of the above
Q2) Based on the Saving-Investment Diagram,if the world real interest rate is indicated by C,then ________.
A)the difference between values H and D measures the net capital outflow
B)the difference between values H and D measures the trade deficit
C)the domestic real interest rate is indicated by B
D)the difference between values H and F measures the trade deficit
E)none of the above
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Money and Inflation
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/51518
Sample Questions
Q1) The quantity theory of money ________.
A)implies that inflation equals the ratio of the growth rates of the money supply and of real income
B)provides central banks with a tool to prevent the rate of inflation from fluctuating C)implies that,in the long run,changes in the money supply will be matched by changes in real income
D)all of the above
E)none of the above
Q2) The velocity of money ________.
A)represents the average number of times a dollar is spent in a given year
B)indicates the relative importance of cash versus writing checks for purchases C)times the money supply should equal real GDP
D)all of the above E)none of the above
Q3) Credit cards are a popular means of payment.Why are credit card accounts not included in M1 or M2? Are credit cards of no relevance to these money measures?
Q4) How might inflation,even if fully anticipated,prevent the classical dichotomy from holding,even in the long run?
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: The Sources of Growth and the Solow Model
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/51519
Sample Questions
Q1) The growth accounting equation suggests that the growth rate of output is equal to the growth rate of ________.
A)total factor productivity plus the contributions of both capital and labor
B)total factor productivity minus the rate of depreciation
C)capital and labor
D)the overall population
Q2) Productivity is ________.
A)determined by central bank policy
B)the combined effect of monetary and fiscal policy
C)the residual component of the production function
D)driven by changes in the rate of growth of output
Q3) In the past 50 years,per capita income in some countries such as ________ and ________ has hardly changed relative to per capita income in the United States.
A)Mexico;Argentina
B)Kenya;Nigeria
C)South Korea;India
D)France;United Kingdom
Q4) There are no questions for this section.
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Drivers of Growth: Technology, policy, and Institutions
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/51520
Sample Questions
Q1) The graph above might represent the ________.
A)response to an increase in the fraction of the population engaged in research and development
B)response to a rise in the productiveness of research and development
C)response to an increase in the total population
D)response to a rise in the saving rate
Q2) Education achievements ________.
A)are a sufficient condition for economic development to occur
B)are a guarantee of making a poor country wealthy
C)cannot raise human capital
D)are both rival and nonrival in character
Q3) Spending on education is likely to raise output per person by ________.
A)increasing the productiveness of R&D
B)by increasing the population
C)increasing the fraction of the population engaged in productive activities
D)increasing the saving rate
Q4) How does the centrality of institutions and property rights in economic growth help to explain the predominance of rich countries in temperate climates and of poor countries in the tropics?
Page 9
Q5) Use the distinction between rival and nonrival to explain the college premium.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Business Cycles: an Introduction
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/51521
Sample Questions
Q1) Arthur Burns and Wesley Mitchell first described business cycles as ________.
A)fluctuations in consumer preferences
B)fluctuations in the price of bicycles
C)fluctuations in aggregate economic activity
D)all of the above
E)none of the above
Q2) The Conference Board does a good job predicting recessions for reasons that include ________.
A)a focus on fewer than five leading variables
B)exclusive use of real-time data
C)revisions of the components of its monthly index
D)all of the above
E)none of the above
Q3) Interest rates spreads between long-term and short-term Treasury bills ________.
A)are countercyclical
B)are good predictors of recessions
C)are a lagging indicator
D)all of the above
E)none of the above
Q4) Why is the credit spread countercyclical and coincident?
10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: The Is Curve
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/51522
Sample Questions
Q1) In the IS curve,if Y increases for any given level of the real interest rate ________.
A)consumption increases
B)output decreases
C)saving decreases
D)all of the above
E)none of the above
Q2) If aggregate output is above its equilibrium level ________.
A)there is an excess supply of goods
B)actual output is below planned expenditure
C)firms will tend to replenish their low inventories driving output up toward equilibrium
D)all of the above
E)none of the above
Q3) Actual expenditure is to planned expenditure as ________ is to ________.
A)desire;accomplishment
B)aggregate demand;aggregate supply
C)output;income
D)observed;theoretical
E)fluctuation;equilibrium
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Monetary Policy and Aggregate Demand
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/51523
Sample Questions
Q1) A leftward shift of the money supply ________.
A)may come about from an increase in the quantity of money supplied by the Federal Reserve
B)may come about from an increase in the price level
C)leads to a decrease in interest rates ceteris paribus
D)all of the above
E)none of the above
Q2) According to liquidity preference theory,as real income increases,so does
A)the supply of real money balances
B)the demand for real money balances
C)the real interest rate
D)all of the above
E)none of the above
Q3) Suppose the economy is just recovering from a recession and all signs now point to robust growth.How might this transition from recovery to expansion be reflected in the monetary policy curve?
Q4) When the inflation rate falls,what happens,and why,to the MP,IS,and AD curves?
Q5) Why is the demand for real money balances related to the nominal interest rate,rather than the real interest rate?
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Aggregate Supply and the Phillips Curve
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/51524
Sample Questions
Q1) If the short-run aggregate supply curve is shifting down repeatedly,it is rather likely that ________.
A)output is declining repeatedly,relative to potential output
B)the long-run aggregate supply curve is shifting to the left
C)negative price shocks are recurring
D)all of the above
E)none of the above
Q2) Given the accelerationist Phillips curve = - 0.3 (U - 6)+ ,suppose that inflation in the preceding period was 3 percent,unemployment is 6 percent,and there is a price shock of 2 percent.The current inflation rate is ________.
A)3 percent
B)0.2 percent
C)5 percent
D)1 percent
E)none of the above
Q3) Why are changes in the output gap larger than changes in the unemployment gap? Why is the relationship expressed in Okun's law not affected by inflation or expected inflation?
Q4) Why is there no long-run trade-off between unemployment and inflation?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Aggregate Demand and Supply Model
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/51525
Sample Questions
Q1) In the 1960s and 1970s,research funding by the U.S.government and some universities led to revolutionary advances in network computing.These advances in communication and network technology remained largely isolated to governmental and academic use.By the mid-to-late 1990s,the Internet began to be widely adopted with massive increases in productivity (which journalists dubbed the "new economy").Which of the following is an appropriate description of the mechanism behind this supply shock?
A)Since this "new economy" was a new paradigm,the transition from a pre-internet to an internet economy was initially costly.Thus,the AS curve likely shifted to the left and unemployment likely increased in the short-run.
B)The ensuing increase in productive capacity led to the rightward shift of the LRAS which is a likely explanation for the protracted decline in the unemployment rate of the 1990s.
C)A negative output gap would have resulted in the short-run,but it was eventually closed by a rightward shift of the LRAS which is a likely explanation for the protracted decline in the inflation rate of the 1990s.
D)all of the above
E)none of the above
Q2) How does the aggregate supply curve differ from a supply curve for,say,bananas?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Macroeconomic Policy and Aggregate
Demand and Supply Analysis
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/51526
Sample Questions
Q1) According to the Taylor rule,which of the following will lead to a higher nominal federal funds rate?
A)a decrease in inflation
B)a negative output gap
C)a positive inflation gap
D)all of the above
E)none of the above
Q2) If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.
A)it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate
B)an increase in aggregate demand would ensue generating a positive output gap
C)an eventual decrease in short-run AS would drive the long-run equilibrium level of inflation up
D)all of the above
E)none of the above
Q3) How might openness to the global economy influence the debate between policy activists and nonactivists?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: The Financial System and Economic Growth
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/51527
Sample Questions
Q1) In 2012,U.S.banks held ________.
A)$19.4 million in assets
B)$19.4 million in liabilities
C)$19.4 billion in assets
D)$19.4 trillion in assets
Q2) From the perspective of households and businesses deciding where to deposit their money,the key advantage of the private loans issued by commercial banks is
A)transparency
B)marketability
C)incentive for the bank to collect information
D)relatively high interest rates
Q3) The purpose of a financial sector is ________.
A)to minimize the payments firms make to state and local governments
B)to maximize the payments firms make to state and local governments
C)to channel funds away from households and firms with surplus funds
D)to channel monies into socially acceptable causes
Q4) How do commercial banks solve asymmetric information problems?
Q5) How might financial deepening contribute to poverty reduction?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Financial Crises and the Economy
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/51528
Sample Questions
Q1) Which of the following best illustrates the adverse selection problem?
A)a professional football team that consistently drafts poor players
B)an economic agent who engages in risky behavior once a loan is received
C)an individual who hides a pre-existing condition from a health insurer
D)an individual who experiences a lost of income by not working while attending college
Q2) Regulatory policy used to affect credit markets is known as ________.
A)fiscal restraint
B)monetary policy
C)Bierstadt relaxation
D)macroprudential regulation
Q3) Describe the role of uncertainty at the beginning of and in the unfolding of a financial crisis.
Q4) The Great Crash on the New York Stock Exchange occurred in ________.
A)October 1929
B)July 1776
C)September 2001
D)March 1933
Q5) How might the globalization of financial markets affect the role of financial frictions in business fluctuations?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Fiscal Policy and the Government Budget
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/51529
Sample Questions
Q1) ________ refers to a government's failure to repay its debt.
A)Intolerance
B)Distortion
C)Seignorage
D)Repudiation
Q2) According to Ricardian Equivalence theory,a tax cut ________.
A)will tend to have little economic effect
B)will tend to reduce the magnitude of the trade-off between inflation and the rate of unemployment
C)can be an effective policy tool in the midst of an economic downturn
D)must be used in conjunction with money supply changes over the course of the business cycle
Q3) According to Ricardian equivalence,a long-run impact on the economy occurs when the government ________.
A)lowers taxes
B)issues more government bonds
C)increases spending on capital goods
D)raises taxes
Q4) What does Ricardian equivalence imply about the relative size of the expenditure and tax multipliers?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Exchange Rates and International Economic Policy
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/51530
Sample Questions
Q1) ________ was the main cause of weakening of the U.S.dollar between August 2007 and July 2008.
A)Easing of monetary policy in the U.S.
B)An increase in the expected value of the dollar
C)Rising energy prices
D)A surge in exports from China to the U.S.
Q2) Suppose the U.S.dollar depreciates,and there is no change in monetary policy.Which of the following is a correct description of the short-run consequences?
A)output,inflation,and the real interest rate have all increased
B)output,inflation,and the real interest rate have returned to their original values
C)output and inflation are higher,while the real interest rate has fallen
D)output and inflation have returned to their original values,while the real interest rate is increased
Q3) In the short run,who tends to benefit from a decrease in the exchange rate?
A)domestic producers
B)owners of domestic-currency assets
C)domestic consumers
D)foreign producers
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Consumption and Saving
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/51531
Sample Questions
Q1) In the permanent income hypothesis,income is divided into ________.
A)current and future income
B)future and transitory income
C)transitory and permanent income
D)permanent and current income
Q2) Given the table above,suppose consumption in period two is $40,000.Then,the interest rate rises to five percent,and period-two consumption does not change.We may infer that ________.
A)the income effect is stronger than the substitution effect
B)the substitution effect is stronger than the income effect
C)the substitution and income effects cancel out
D)this consumer has a binding borrowing constraint
Q3) Referring to the table above,if consumption in period one is $20,000,then consumption in period two cannot be greater than ________.
A)$52,800
B)$50,400
C)$49,600
D)$50,000
Q4) How consistent is the Keynesian consumption function with the random walk hypothesis?
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Investment
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/51532
Sample Questions
Q1) One explanation for the sharp decline in inventory investment during the 2007-2009 financial crisis was ________.
A)financing constraints
B)the rise in the level of income
C)the volatility of interest rates
D)the increase in total spending and therefore costs
Q2) If the marginal product of capital is greater than the rental cost of capital in terms of goods and services,then ________.
A)the firm should continue to produce using that same amount of capital
B)the firm should add additional capital
C)the firm should reduce the amount of capital is using D)diminishing returns have been avoided
Q3) Gross investment is equal to ________.
A)net investment plus depreciation
B)net investment divided by depreciation
C)net investment minus depreciation
D)net investment times depreciation
Q4) Why is residential investment procyclical?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: The Labor Market, employment, and Unemployment
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/51533
Sample Questions
Q1) When productivity growth has been rapid and then slows,the natural rate of unemployment is likely to ________.
A)decrease
B)be unaffected
C)increase
D)vary unpredictably
Q2) Net entrants to the labor force is likely to be highest when the economy ________.
A)is entering a recession
B)nears the peak of an expansion
C)has passed the peak of an expansion
D)begins to recover from a recession
Q3) An increase in labor supply will cause,other things the same ________.
A)real wages and employment to rise
B)real wages to fall and employment to rise
C)real wages to rise and employment to fall
D)real wages and employment to fall
Q4) How might the increase in the natural rate of unemployment in Europe be related to the increase in income inequality in the United States?
Page 22
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: The Role of Expectations in Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/51534
Sample Questions
Q1) Swiss experience in the 1980s evidences the ________.
A)effectiveness of targeting monetary aggregates
B)need for discretion in the face of structural changes in the economy
C)value of fiscal policy over monetary policy
D)ascendancy of flexible exchange rate regimes over fixed exchange rate systems
Q2) The "anchor" that sustains the credibility of monetary policy is ________.
A)easily weighed during the slightest of macroeconomic storms
B)composed of some indestructible substance
C)necessary to avoid central bank independence
D)available for scrutiny to all who care to observe
Q3) When monetary policies result in a worsening of economic performance,the least likely explanation is ________.
A)a political business cycle
B)changes in one or more key structural parameters of the economy
C)a policy-induced change in the expectations and behaviors of households and businesses
D)faulty interpretation of incomplete and ambiguous economic data
Q4) Suppose you need an estimate of future inflation (to decide,for example,whether a particular security is a good investment).How might you formulate a rational expectation?
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Modern Business Cycle Theory
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/51535
Sample Questions
Q1) According to real business cycle theory,a likely cause of an increase in employment is ________.
A)an increase in the real wage
B)an increase in aggregate demand
C)a decrease in the real wage
D)a decrease in the real interest rate
Q2) No distinction is made between the effects of anticipated and unanticipated policy in ________.
A)traditional Keynesian theory
B)new Keynesian theory
C)real business cycle theory
D)traditional Keynesian and real business cycle theory
Q3) The new Keynesian model has ________ in common with the real business cycle model.
A)wage and price stickiness
B)a theory of aggregate demand
C)procyclical inflation
D)a microeconomic foundation
Q4) How do the new Keynesian and real business cycle models differ on the ability of inflationary expectations to affect output?
To view all questions and flashcards with answers, click on the resource link above. Page 24