Macroeconomics
Chapter Exam Questions
Course Introduction
Macroeconomics is the branch of economics that studies the behavior, performance, and structure of an economy as a whole. This course explores key concepts such as national income, economic growth, unemployment, inflation, fiscal and monetary policies, and international trade. Students will learn how economic indicators are measured, the impact of government policy on economic stability, and the theoretical frameworks that explain fluctuations in the global and national economies. By the end of the course, students will be equipped to analyze real-world macroeconomic trends and understand the interconnections between various sectors of the economy.
Recommended Textbook
Macroeconomics 12th Edition by Roger A. Arnold
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Chapter 1: What Economics Is About
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Sample Questions
Q1) The __________ the opportunity cost of doing something,the __________ likely a person will do that something.
A)lower;less
B)lower;more
C)higher;more
D)higher;less
E)b and d
Answer: E
Q2) Economists use the ceteris paribus assumption primarily in order to
A)make their analyses easier for them to conduct.
B)designate what they believe is the correct relationship between two variables.
C)explain why people sometimes consume more of a good when its price rises.
D)explain why those things that come first do not necessarily cause those things that come later.
E)designate the difference between normative and positive economics.
Answer: B
Q3) To an economist,the terms factor and resource are synonyms.
A)True
B)False
Answer: True
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Chapter 2: Production Possibilities Frontier Framework
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Sample Questions
Q1) Suppose the economy goes from a point on its production possibilities frontier (PPF)to a point below that PPF.Assuming that the PPF has not shifted,this could be due to A)a gain of resources.
B)a loss of resources.
C)technological improvement in the production of both goods.
D)an increase in unemployment of some resources.
Answer: D
Q2) In the production possibilities framework,economic growth is depicted by the PPF
A)shifting leftward (toward the origin).
B)shifting rightward (away from the origin).
C)becoming a straight line rather than a bowed outward curve.
D)becoming bowed outward rather than a straight line.
Answer: B
Q3) Productive efficiency implies that
A)it is impossible to obtain gains in one area without losses in another.
B)it is possible to obtain gains in one area without losses in another.
C)there are too many resources available.
D)there are too few resources available.
Answer: A
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Chapter 3: Supply and Demand: Theory
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Sample Questions
Q1) Refer to Exhibit 3-10.$20 is the
A)equilibrium price.
B)market-clearing price.
C)price at which there is neither a surplus nor a shortage.
D)all of the above
Answer: D
Q2) There are two universities,A and B,in a city.Tuition rises at University A and,as a result,the demand for attending University B rises.It follows that educational services at the two universities are
A)complements.
B)normal goods.
C)inferior goods.
D)substitutes.
E)none of the above
Answer: D
Q3) Demand takes into account goods,but not services.
A)True
B)False
Answer: False
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Chapter 4: Prices: Free, controlled, and Relative
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Sample Questions
Q1) Suppose the government imposes a price ceiling above the equilibrium price of a given good.Which of the following is the most likely result?
A)Some other rationing device will emerge to allocate the good among buyers.
B)Some buyers and sellers will be willing to risk breaking the law in order to exchange the good at a price above the equilibrium price since there would be a shortage of the good at the price ceiling.
C)No change will occur in the market.
D)Brute force will be used to allocate the good among buyers.
E)a,b,and d
Q2) Refer to Exhibit 4-3.If price P<sub>3</sub> is a price ceiling,then
A)the price ceiling does not have an effect on the market for good X.
B)the price at which exchange takes place is P<sub>3</sub>.
C)the price at which exchange takes place is P<sub>2</sub>.
D)there is a shortage in the market for good X.
E)both a and c
Q3) The absolute price of a good is the price of that good in terms of another good.
A)True
B)False
Q4) List and describe the two major jobs performed by price.
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Chapter 5: Supply,demand,and Price: Applications
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Q1) Refer to Exhibit 5-6.Under law 1 a renter has 30 days to vacate an apartment after being served with an eviction notice.Under law 2,the renter has 90 days to vacate after being served with an eviction notice.This graph shows that the supply of apartments is____________ under law 1 than under law 2,and thus apartment rent is _______________ under law 1 than under law 2.
A)less;lower
B)less;higher
C)greater;lower
D)greater;higher
Q2) Refer to Exhibit 5-3 which shows the demand and supply of a college athlete.If the college is allowed to pay this student athlete its market equilibrium wage of $10,000,what is the consumers' surplus for the college that buys this one athlete's services at this wage?
A)area 1
B)area 2
C)area 3
D)area 1 + 2
Q3) Explain in detail how the legalization of marijuana would be expected to impact the supply,demand,equilibrium price and quantity for marijuana.
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Page 7
Chapter 6: Macroeconomic Measurements, part I: Prices and Unemployment
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Sample Questions
Q1) Suppose that 1982 is the base year for the Consumer Price Index (CPI)and in 2014 the CPI was 190.What does this "190" mean?
A)What cost $100 in 1982 on average cost 190 times as much in 2014.
B)What cost $100 in 1982 on average cost $190 in 2014.
C)What cost $100 in 1982 on average cost 0.19 times as much in 2014 (that is,it cost $19 in 2014).
D)What cost $100 in 1982 on average cost $19 more in 2014.
Q2) The sum of the unemployment rate and the employment rate always equals 100 percent.
A)True
B)False
Q3) Suppose that 1983 is the base year for the Consumer Price Index (CPI)and in 2015 the CPI was 226.What does this "226" mean?
A)What cost $100 in 1983 on average cost 226 times as much in 2015.
B)What cost $100 in 1983 on average cost $226 more in 2015.
C)What cost $100 in 1983 on average cost 100/226 (or 0.44)times as much in 2015 (that is,it will cost $22 in 2015).
D)What cost $100 in 1983 on average cost $126 more in 2015.
Q4) Describe what the term "full employment" means to an economist.
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Chapter 7: Macroeconomic Measurements, part II: GDP and
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Sample Questions
Q1) Which of the following statements is true?
A)Indirect business taxes are a component of national income because when added to the other components of national income,the sum must equal GDP.
B)Indirect business taxes must be subtracted from national income to yield a figure equal to GDP.
C)Indirect business taxes are a part of national income because they are considered a payment to a factor of production.
D)Indirect business taxes are not part of national income because they are not considered a payment to a factor of production.
Q2) In the calculation of national income,dividends paid to stockholders are part of
A)compensation of employees.
B)proprietors' income.
C)rental income.
D)net interest.
E)corporate profits.
Q3) An example of income earned but not received is corporate dividends.
A)True
B)False
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Chapter 8: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Starting from short-run equilibrium,the following occurs: individuals expect higher (future)incomes and wage rates rise.What is the effect on the price level and Real GDP in the short run?
A)The price level rises and Real GDP rises.
B)The price level falls and Real GDP falls.
C)The price level rises,but the effect on Real GDP cannot be determined.
D)Real GDP rises,but the effect on the price level cannot be determined.
E)Real GDP falls,but the effect on the price level cannot be determined.
Q2) The short-run aggregate supply curve slopes upward as a result of the real balance effect,the interest rate effect,and the international trade effect.
A)True
B)False
Q3) A fall in the price level changes the purchasing power of money.This is relevant to the __________ effect.
A)international trade
B)real balance
C)aggregate demand
D)interest rate
E)aggregate supply
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Page 10
Chapter 9: Classical Macroeconomics and the
Self-Regulating
Economy
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Q1) If the economy is self-regulating,explain the correct sequence of events that occurs once the economy is in a recessionary gap to move the economy to long-run equilibrium.
Q2) The classical economists argued that saving is matched by an equal amount of investment because of
A)wage flexibility.
B)price flexibility.
C)money flexibility.
D)interest rate flexibility.
E)b and c
Q3) In the classical view of the credit market,a rise in saving produces a rise in investment via a
A)rising interest rate.
B)falling interest rate.
C)rising price level.
D)falling price level.
Q4) For saving to increase,consumption must decrease,ceteris paribus.
A)True
B)False
Q5) Explain the policy implications of the classical economists' beliefs.
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Chapter 10: Keynesian Macroeconomics and Economic
Instability: a Critique of the Self-Regulating Economy
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Sample Questions
Q1) Refer to Exhibit 10-1.At Q<sub>3</sub>,there is a tendency for Real GDP to A)rise.
B)fall.
C)remain unchanged.
D)There is not enough information to answer this question.
Q2) Refer to Exhibit 10-5 When TE is $200 billion,what state is the economy in?
A)TE < TP,individuals are buying less output than firms produce.
B)TE > TP,individuals are buying more output than firms produce.
C)TE = TP,the economy is in equilibrium.
D)TE < TP,individuals are buying more output than firms produce.
E)TE > TP,individuals are buying less output than firms produce.
Q3) Here is a consumption function: C = C<sub>0</sub> + MPC(Y<sub>d</sub>).If consumption is $2,000,MPC =0.75,and disposable income is $2,000,what does autonomous consumption equal?
A)$950
B)$3,500
C)$500
D)$4,500
E)none of the above
Q4) Describe Keynes' criticism of Say's law in a money economy.
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Chapter 11: Fiscal Policy and the Federal Budget
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Sample Questions
Q1) Suppose the economy's current AD and SRAS curves intersect to the right of Natural Real GDP.Keynesians might advise a policy of tax __________ to shift __________.
A)increases;SRAS to the left
B)increases;AD to the left
C)cuts;SRAS to the right
D)cuts;AD to the right
Q2) Suppose the economy is in a recessionary gap.If government expenditures are currently $1.4 trillion and tax revenues are currently $1 trillion,the (total)budget deficit is _____________.Assume that economists estimate that if the economy were operating at full employment,government expenditures would be $1.2 trillion and tax revenues would be $1.1 trillion.The structural deficit is _________________ and the cyclical deficit is _______________.
A)$2.4 trillion;$2.2 trillion;$200 billion
B)$400 billion;$300 billion;$100 billion
C)$400 billion;$100 billion;$300 billion
D)$300 billion;$100 billion;$400 billion
Q3) Explain how a value-added tax (VAT)works and how it differs from a sales tax.What impact does a VAT have on government revenue and the price of products paid by consumers?
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Page 13
Chapter 12: Money,banking,and the Financial System
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Sample Questions
Q1) A house is $100,000,a computer is $2,000,and a car is $20,000.In this context,money is principally functioning as a
A)unit of account.
B)store of value.
C)medium of exchange.
D)none of the above
Q2) In a barter economy,
A)money is a medium of exchange.
B)coins are used to facilitate trade.
C)money is a store of value.
D)goods and services are traded directly for each other.
E)the money supply consists entirely of coins and currency.
Q3) If a bank's deposits at the Federal Reserve equal $40 million and its total reserves equal $35 million,what does the bank's vault cash equal?
A)$5 million
B)$75 million
C)$37.5 million
D)$30 million
Q4) Describe the differences between M1 and M2.
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Chapter 13: The Federal Reserve System
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Sample Questions
Q1) The discount rate is the interest rate
A)banks pay on certificates of deposit.
B)the Fed pays on reserves held by banks.
C)the Fed charges when it lends reserves to banks.
D)banks charge their loan customers.
E)on short-term Treasury securities.
Q2) Which of the following is not a responsibility of the Fed?
A)supervising member banks
B)serving as the lender of last resort
C)determining the level of government spending
D)providing check-clearing services
E)supplying the economy with Federal Reserve Notes
Q3) Which of the following Fed actions will increase the money supply?
A)open market purchases of Treasury notes
B)an increase in the required reserve ratio
C)an increase in the discount rate
D)all of the above
E)none of the above
Q4) Summarize the history of how the Federal Reserve came to have twelve districts.
Q5) Explain the major differences between the Federal Reserve and the U.S.Treasury.
Page 15
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Chapter 14: Money and the Economy
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Sample Questions
Q1) In the equation of exchange,"Q" stands for A)the interest rate.
B)quality.
C)GDP.
D)Real GDP.
Q2) If M = $5,000,P = $20,and Q = 2,000,then V is
A)2.0.
B)4.0.
C)5.0
D)6.0
E)8.0
Q3) In the equation of exchange,the letter "V" stands for A)variance.
B)validity.
C)volume.
D)velocity.
Q4) Explain in detail how the California gold rush contributed to rising prices in the early 1850's.
Q5) Describe the expectations (or Fisher)effect.
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Chapter 15: Monetary Policy
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Sample Questions
Q1) Last year,Leah bought a bond for $1,000 that promises to pay $105 a year.This year,a person who buys a bond for $1,000 receives $95 a year.If Leah were to sell her (old)bond,its price would be approximately A)$818.
B)$846.
C)$905.
D)$1,105.
E)$1,273.
Q2) If the interest rate increases,the opportunity cost of holding money __________,and the quantity demanded of money __________.
A)does not change;does not change B)increases;also increases C)decreases;increases D)increases;decreases E)decreases;also decreases
Q3) The money supply curve is usually horizontal. A)True B)False
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Chapter 16: Expectations Theory and the Economy
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Q1) Suppose that the Fed expects to increase the money supply by $49 billion,but economic agents expect that the increase will be closer to $75 billion.Using rational expectations theory,the result will be ______________ Real GDP and a ________________ price level.
A)lower;higher
B)lower;lower
C)higher;higher
D)higher;lower
Q2) Refer to Exhibit 16-9.Assume that the starting point is point 1.Suppose that the government implements expansionary fiscal policy that raises aggregate demand.Which of the following best goes with the diagram shown?
A)New classical theory with policy incorrectly anticipated,bias downward
B)New classical theory with policy incorrectly anticipated,bias upward
C)Real business cycle theory
D)New classical theory with policy unanticipated
E)Policy ineffectiveness proposition (PIP)
Q3) If stagflation is present the short-run Phillips curve is vertical.
A)True
B)False
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Page 18
Chapter 17: Economic Growth: Resources, technology, ideas, and Institutions
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Sample Questions
Q1) New growth theory puts emphasis on A)ideas.
B)experimenting with new ways of doing things.
C)rearranging resources in ways that are more valuable.
D)b and c
E)a,b,and c
Q2) Refer to Exhibit 17-5.Based on the equation given in this exhibit,if your motivation to learn rises from 7 to 9,by how much will the amount of learning acquired rise as a result?
A)2
B)0.8
C)1.6
D)8
Q3) The Real GDP of country X doubled in 10 years.It follows that
A)the per-capita Real GDP doubled during this time,too.
B)the per-capita Real GDP remained stable during this time.
C)the per-capita Real GDP fell during this time.
D)disposable income also doubled during this time.
E)none of the above
Q4) List and describe four factors that can contribute to economic growth.
Page 19
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Chapter 18: The Financial Crisis of 2007-2009
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Sample Questions
Q1) In the early 2000s,Fannie Mae and Freddie Mac came under political pressure to buy nontraditional loans.
A)True
B)False
Q2) Suppose that a bank has $30 million in asset X,$10 million in asset Y,and $20 million in asset Z.Each asset has a different risk weight.The risk weight for asset X is 30%,the risk weight for asset Y is 60%,and the risk weight for asset Z is 10%.The amount of risk-weighted assets for this bank is ____________ million.Assuming that the bank has to hold capital equal to 8% of its risk-weighted assets,the bank must hold _____________ million in capital.
A)$17;$13,6
B)$60;$4.8
C)$17;$1.36
D)$66;$5.28
Q3) If the value of a bank's assets is rising,a high leverage ratio increases the percentage rise in its capital.
A)True
B)False
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Chapter 19: Debates in Macroeconomics Over the Role and Effects
of Government
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Q1) Public choice deals exclusively with business decisions.
A)True
B)False
Q2) Would we expect the "average" person to take more time to learn about the car he or she is considering purchasing or about the issues in the upcoming U.S.Senate race in his or her state?
A)The Senate race,because it is critical that we elect the right people to government.
B)The car,but there is no rational reason for this.
C)The Senate race,because the person who is elected senator today may become president tomorrow.
D)The car,because a mistake here can potentially cause him or her more harm on a day-to-day basis;in addition,a person is unlikely to be able to determine the outcome of a Senate race.
Q3) In the early 19th century,the main lobbyists behind passage of the Factory Acts were the women and children who were being exploited.
A)True
B)False
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Chapter 20: Public Choice and Special-Interest-Group
Politics
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Q1) For economic imperialists,economics is more of a method of analysis than a specific field of study.
A)True
B)False
Q2) Which of the following can a homebuyer pay for indirectly when purchasing a home?
A)good weather
B)a good school district
C)a nice view
D)all of the above
Q3) House A has an ocean view and House B does not.In all other respects,the two houses are the same.The market price of house A is $2,800,000;the market price of house B is $2,600,000.The ocean view is therefore valued at
A)$200,000.
B)$1,950,000.
C)-$700,000.
D)$2,700,000.
Q4) Explain what it means to say that a theory is falsifiable or refutable? Give a specific example to help support your answer.
Page 22
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Chapter 21: Building Theories to Explain Everyday Life: From
Observations to Questions to Theories to Predictions
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Q1) The difference between the amount a seller receives for a good and the lowest amount for which he would sell the good is called
A)producers' surplus.
B)windfall gain.
C)consumers' surplus.
D)excess profit.
Q2) Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is P<sub>W</sub>.If there is a policy change such that imports are prohibited,the price becomes P<sub>N</sub>.U.S.producers are better off if imports are __________;specifically,their producers' surplus changes by area
A)permitted;P<sub>W</sub>DE
B)permitted;P<sub>N</sub> BDP<sub>W</sub>
C)prohibited;BDC
D)prohibited;P<sub>N</sub>BDP<sub>W</sub>
Q3) The law of comparative advantage can be used to explain why many couples divide up their household duties along gender lines.
A)True
B)False
Page 23
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Chapter 22: International Trade
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Q1) When exports of American goods increase,this __________ the demand for U.S.dollars and at the same time __________ foreign currencies. A)increases;increases the supply of B)decreases;increases the supply of C)increases;decreases the supply of D)increases;increases the demand for E)none of the above
Q2) If,under a fixed exchange rate system,the dollar price of a Mexican peso is above its equilibrium level,then the A)dollar is overvalued. B)peso is overvalued. C)dollar has appreciated. D)peso has depreciated.
Q3) In the long run,the purchasing power parity theory predicts exchange rates accurately,particularly when there is a large difference in inflation rates across countries. A)True B)False
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24
Chapter 23: International Finance
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Q1) According to the textbook,in which of the following countries was tipping found to occur very infrequently?
A)Mexico
B)United States
C)Egypt
D)Vietnam
Q2) With globalization,the world is moving from hundreds of national economies toward one large world economy.
A)True
B)False
Q3) An appreciation of the dollar in the foreign exchange market raises United States Real GDP when the _____________ shift of the SRAS curve exceeds the __________ shift of the AD curve.
A)rightward;rightward
B)rightward;leftward
C)leftward;rightward
D)leftward;leftward
Q4) In recent years,tariff rates have declined in the United States,China,and India.
A)True
B)False
Page 25
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Chapter 24: Globalization and International Impacts on the Economy
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Q1) Which of the following statements is false?
A)In the case of a negative externality,the market equilibrium is inefficient.
B)In the case of a negative externality,when a tax is set equal to the marginal external costs (MEC)efficiency can be achieved.
C)In the case of a negative externality,when a tax is set that is greater than the marginal external costs (MEC)inefficiency will result.
D)In the case of a positive externality,when a tax is set equal to the marginal external benefits (MEB)efficiency can be achieved.
Q2) Government can overcome the free rider problem by collecting taxes and using the funds to provide individuals with nonexcludable public goods that they want to buy but the market cannot provide.
A)True
B)False
Q3) If the government grants tax credits to first-time homebuyers,the supply of houses would increase and the price of housing would fall.
A)True
B)False
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Page 26
Chapter 25: The Economic Case for and Against
Government: Five Topics Considered
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Q1) The acronym NASDAQ (one of the stock exchanges)stands for
A)National Academy of Stock Dealers Automated Quotations
B)New American Securities Dealers Automated Quotations
C)National Association of Securities Dealers Automated Quotations
D)North American Stock Dealers Automated Quotations
Q2) Which of the following can issue bonds?
A)the government
B)corporations
C)government agencies
D)all of the above
Q3) If the coupon payment on a bond is $350 and the coupon rate is 7%,then what is the face value of the bond?
A)$5,000
B)$374.50
C)$24.50
D)$528.57
E)There is not enough information provided to answer this question.
Q4) The issuer of a bond is a lender.
A)True
B)False
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Chapter 26: Stocks, bonds, futures, and Options
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Q1) Suppose farmers agree to reduce their supply of foodstuffs.The most likely reason they would want to do this is they believe that less supply
A)means higher prices and higher total revenue.
B)means consumers will buy more of what they have to sell.
C)translates into higher-quality foodstuffs and that the higher the quality of the foodstuffs they sell,the higher the prices for what they sell.
D)will get Congress to favor them with agriculture subsidies.
E)will get Congress to decrease their taxes.
Q2) Refer to Exhibit 39-4.The government feels that the present level of farmers' total revenues is insufficient to support a reasonable standard of living and wants to raise it to exactly $3,000.This can be achieved by
A)restricting supply so that price increases to $4.
B)a price support of $5.
C)restricting supply so that price increases to $5.
D)any of the above
E)none of the above
Q3) Explain how the purchase of futures contracts can help to insure a farmer against adverse swings in the prices of the crops that he grows.
To view all questions and flashcards with answers, click on the resource link above.
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