Macroeconomics Exam Bank
Course Introduction
Macroeconomics is the study of the economy as a whole, focusing on broad aggregate measures such as GDP, unemployment, inflation, and economic growth. This course introduces students to key concepts and models used to analyze the performance of national economies, the determinants of total output and income, and the role of government fiscal and monetary policy. Students will learn how economic indicators are measured, how economies recover from recessions, and how global interdependence and policy choices impact national and international economic stability.
Recommended Textbook
Macroeconomics 2nd Edition by Charles I. Jones
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20 Chapters
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Page 2
Chapter 1: Introduction to Macroeconomics
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Sample Questions
Q1) In the short run,we are concerned with the causes of economic fluctuations and how to fix them.
A)True
B)False
Answer: True
Q2) In the long run,we are concerned about the causes of economic growth.
A)True
B)False
Answer: True
Q3) In the long run,we are concerned about the causes economic fluctuations.
A)True
B)False
Answer: False
Q4) An economic model is an exact replica of the macroeconomy.
A)True
B)False
Answer: False
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Chapter 2: Measuring the Macroeconomy
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Sample Questions
Q1) According to the expenditure approach,if Y is GDP,C is consumption,I is investment,G is government purchases,and NX is net exports,which of the following is the national income identity?
A)Y = C + I + G - NX
B)Y = C + I + G + NX
C)Y + C = I + G + NX
D)Y = (C + I + G)/NX
E)Y = C + I + G
Answer: B
Q2) According to the expenditure approach,if Y is GDP,C is consumption,I is investment,G is government purchases,and NX is net exports,the national income identity can be written as:
A)Y = C + I + G.
B)Y = C + I + G - NX.
C)Y + C = I + G + NX.
D)Y = (C + I + G)/NX.
E)Y = C + I + G + NX.
Answer: E
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Chapter 3: An Overview of Long- Run Economic Growth
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Sample Questions
Q1) When a lower-income economy's GDP is able to "catch up" with a higher-income economy's GDP,this behavior is related to an important concept called economic growth.
A)True
B)False
Answer: False
Q2) Suppose that,in 1950,Japan has an initial per capita GDP of $15,000 per year and China has a per capita GDP of $2,500.But China is growing at 7 percent per year and Japan is growing at 2 percent per year.In 2005,__________ is the lower-income country,with a per capita GDP of approximately __________.
A)China;$73,642
B)China;$40,374
C)Japan;$40,374
D)China;$6,729
E)Japan;$73,642
Answer: C
Q3) A benefit of economic growth is increased resource depletion.
A)True
B)False
Answer: False
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Chapter 4: A Model of Production
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Sample Questions
Q1) One of the key characteristics of the Cobb-Douglas production function is
A)increasing returns to scale.
B)decreasing returns to scale.
C)constant returns to scale.
D)that it compacts all inputs into a single equation.
E)that it is an exact replication of a firm's production function.
Q2) The marginal product of labor is measured in:
A)dollars.
B)units of output.
C)units of output per dollar.
D)units of capital per dollar.
E)units of labor per dollar.
Q3) If MPK = r,the firm:
A)should hire more labor.
B)should hire more capital until MPK= r.
C)should hire more capital until MPK = 0.
D)should get rid of some capital until MPK = r.
E)has the optimal amount of capital.
Q4) What are the three sources of total factor productivity discussed in the text? Can you name other possible sources? Explain your answer.
Page 6
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Chapter 5: The Solow Growth Model
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Sample Questions
Q1) For any given saving rate,depreciation rate,and production function,changing the initial capital stock yields a different steady state.
A)True
B)False
Q2) Which of the following are an exogenous variable in the Solow model?
A)productivity
B)depreciation rate
C)saving rate
D)the initial capital stock
E)all of the above
Q3) Capital accumulation is a:
A)stock.
B)flow.
C)final good.
D)intermediate good.
E)none of the above
Q4) In the steady state,capital accumulation is positive.
A)True
B)False
Q5) What are the key assumptions of the Solow growth model?
Page 7
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Chapter 6: Growth and Ideas
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Sample Questions
Q1) In the Romer model,the creation of capital is the driving force behind sustained long-term economic growth.
A)True
B)False
Q2) In economics,a rival good is one that:
A)cannot be consumed by more than two persons at a time.
B)can be consumed by more than one person at a time.
C)can be consumed by more than one person at a time but is congested.
D)cannot be consumed by more than one person at a time.
E)none of the above
Q3) In growth accounting,if we subtract the capital intensity growth rate and the labor composition growth rate from the growth rate of output per person,we have:
A)the growth rate of total factor productivity.
B)the residual.
C)capital accumulation.
D)savings.
E)Both a and b are correct.
Q4) How does the Romer model of economic growth exploit the concept of nonrivalry?
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Chapter 7: The Labor Market,wages,and Unemployment
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Sample Questions
Q1) Over the past 50 years or so,
A)the employment-population ratio always has been rising.
B)the employment-population ratio generally has been falling.
C)the unemployment-population ratio generally has been rising
D)the employment-population ratio generally has been rising.
E)None of the above is correct.
Q2) During the Great Depression,unemployment reached about __________ at its peak.
A)8 percent
B)15 percent
C)25 percent
D)40 percent
E)5 percent
Q3) Beginning in __________,the wage premium began __________.
A)1980;slowing down
B)1980;accelerating
C)1963;trending down
D)1970;accelerating
E)1970;rising
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Page 9
Chapter 8: Inflation
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Sample Questions
Q1) Suppose you put $100 dollars in the bank on January 1,2007.If the annual nominal interest rate is 5 percent and the inflation rate is 5 percent,you will be able to buy __________ on January 1,2008.
A)$90 worth of goods
B)$110 worth of goods
C)$100 worth of goods
D)$105 worth of goods
E)$95 worth of goods
Q2) Compared to the nominal interest rate,the real interest rate is:
A)negative.
B)always smaller.
C)always greater than zero.
D)relatively stable.
E)relatively volatile.
Q3) If all goods' prices adjust simultaneously,there will be a short-term misallocation of resources.
A)True
B)False
Q4) Briefly explain the cause of the Great Inflation in the 1970s.
Q5) Explain how increases in government expenditures can lead to inflation.
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Chapter 9: An Introduction to the Short Run
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Sample Questions
Q1) Which of the following is not an example of a short term macroeconomic "shock"?
A)a change in the tax code
B)pork-barrel spending
C)increased military spending
D)planned investment expenditures
E)political unrest
Q2) According to the Phillips curve presented in the text,a negative macroeconomic shock:
A)increases the rate of inflation.
B)decreases the rate of inflation.
C)has no effect on the rate of inflation.
D)has a negative effect on the unemployment rate.
E)has a positive effect on the unemployment rate.
Q3) Taken together,the Phillips curve and Okun's law imply there is a __________ relationship between __________ and unemployment.
A)positive;inflation
B)negative;inflation
C)negative;interest rates
D)positive;interest rates
E)Not enough information is given.
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Chapter 10: The Great Recession: a First Look
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Sample Questions
Q1) Given the information in Table 10.2,this bank's liabilities are equal to:
A)$9,600.
B)$11,600.
C)-$2,000.
D)$700.
E)$3,400.
Q2) Between May 2004 and May 2006,the Fed __________ its interest rate
A)raised;from 1.25 percent to 5.25 percent
B)lowered;from 5.25 percent to 0 percent
C)kept;fixed at 3.25 percent
D)lowered;from 6.5 percent to 1 percent
E)The Fed does not control interest rates.
Q3) Net worth is equal to a bank's:
A)investments minus deposits.
B)cash plus reserves.
C)deposits plus loans.
D)loans minus capital.
E)total assets minus its total liabilities.
Q4) Briefly discuss the macroeconomic outcomes of the financial crisis.
Q5) How does "securitization" reduce overall risk?
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Chapter 11: The Is Curve
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Sample Questions
Q1) If there is an aggregate demand shock, A)the IS curve shifts to the right.
B)the IS curve shifts to the left.
C)there is rightward movement along the IS curve.
D)there is leftward movement along the IS curve.
E)Not enough information is given.
Q2) Consider Figure 11.6 of the Life Cycle hypothesis.Area(s)__________ are periods of __________,and area(s)__________ are periods of __________.
A)A;borrowing;C;dissaving B)A;borrowing;B;saving C)B;dissaving;A and C;saving D)A and C;dissaving;B;saving E)a and b are correct.
Q3) If there is an aggregate demand shock,the IS curve shifts right.
A)True B)False
Q4) Derive Hicks' IS relationship beginning with the national income identity.
Q5) An increase in income taxes is a negative aggregate demand shock.
A)True B)False
Page 13
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Chapter 12: Monetary Policy and the Phillips Curve
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Sample Questions
Q1) Which of the following contributed to high levels of inflation in the 1970s?
i.Soviet invasion of Afghanistan
ii.loose monetary policy
iii.a productivity slowdown
A)i only
B)ii only
C)iii only
D)i and iii
E)ii and iii
Q2) The main tool used by the Federal Reserve is the federal funds rate.
A)True
B)False
Q3) Which of the following statements is not true?
A)Small menu prices lead to price stickiness.
B)In the classical dichotomy,some prices are sticky.
C)In the classical dichotomy,an increase in money supply growth leads to a corresponding increase in inflation.
D)Short-run contracts lead to price persistence.
E)Imperfect information may lead to price inflexibility.
Q4) Discuss the differences between the ex ante and ex post real interest rate.
Page 14
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Chapter 13: Stabilization Policy and the Asad Framework
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Sample Questions
Q1) Consider Figure 13.2.Each of the aggregate demand curves pictured represents a different economy.In which economy is the central bank most concerned with inflation?
A)Economy 4
B)Economy 1
C)Economy 3
D)Economy 2
E)Not enough information is given.
Q2) Since the 1990s,the country with the lowest rate of inflation has been the United States.
A)True
B)False
Q3) Canada has an explicit inflation target.
A)True
B)False
Q4) On the aggregate demand curve,if the rate of inflation rises,short-term output will rise as the curve shifts right.
A)True
B)False
Q5) What is the Taylor rule? How effective a tool is it?
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Chapter 14: The Great Recession and the Short-Run Model
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Sample Questions
Q1) Throughout the first three-fourths or so of 2009,
A)real interest rate on ten-year bonds was higher than the nominal interest rate.
B)the ten-year bonds nominal interest rate was higher than the real interest rate.
C)real interest rate was zero.
D)real interest rate was negative.
E)a and d
Q2) When a risk premium is added to the short-run model it shifts the MP curve up.
A)True
B)False
Q3) When a risk premium is added to the short-run model it:
A)shifts the MP curve up.
B)shifts the IS down.
C)shifts the AD curve down.
D)is represented by a movement along the MP curve.
E)c and a
Q4) The risk premium raises the borrowing rate above the nominal federal funds rate.
A)True
B)False
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16
Chapter 15: Consumption
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Sample Questions
Q1) Using the neoclassical model of consumption,an implication of the permanent income hypothesis is ___________ because of __________.
A)consumption smoothing;diminishing marginal utility
B)permanent income follows a random walk;aggregate demand shocks
C)wealth is constant;real interest rates are,more or less,constant
D)a low discount factor;the borrowing constraint
E)no borrowing;income in the future is higher
Q2) If the government lowers taxes to stimulate the economy,but then raises taxes in the future,according to the neoclassical consumption model,___________ because of
A)consumption will rise today,but fall in the future;the lack of consumption smoothing
B)savings in each period rises;precautionary saving
C)transitory income rises;falling discount factors
D)tax revenues will rise;the Laffer curve
E)present value of wealth remains unchanged and consumption today does not change;Ricardian equivalence
Q3) Are all households homogeneous and rational,at least as defined by economists?
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Page 17
Chapter 16: Investment
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Sample Questions
Q1) Consider Figure 16.1.If there is a decrease in the corporate tax rate,then curve __________ would shift to curve __________.
A)d;c
B)b;a
C)c;d
D)a;b
E)not enough information
Q2) Over the ten-year period from 1997-2005,real interest rates fell gradually.Given this information,theory suggests that stock prices would rise over that period.
A)True
B)False
Q3) According to data in the text,the country with the lowest corporate tax rate is Japan.
A)True B)False
Q4) The payment the owner of a stock receives from a firm is called the return on assets,or ROA.
A)True
B)False
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Chapter 17: The Government and the Macroeconomy
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Sample Questions
Q1) Which of the following countries has the largest government spending-to-GDP ratio?
A)France
B)the United States
C)Sweden
D)the United Kingdom
E)Germany
Q2) If the economy grows faster than the debt,the government can continue to accumulate debt.
A)True
B)False
Q3) The ratio of all levels of government spending-to-GDP in the United States is under 40 percent.
A)True
B)False
Q4) The debt-to-GDP ratio in the United States was over 100 percent during World War II.
A)True
B)False
Q5) Explain how budget deficits lead to crowding out.Is there evidence of this?
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Chapter 18: International Trade
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Sample Questions
Q1) According to the President's Council of Economic Advisors,"The gains from trade that takes place __________ are no different than the gains from trade __________.When a good or service is produced at lower cost in another country,it makes sense to import it rather than to produce it domestically."
A)over the Internet or telephone lines;in physical goods transported by ship or plane
B)over the Internet or telephone lines;due to the movement of real assets
C)due to the movement of real assets;over the Internet or telephone lines
D)due to the movement of financial assets;in physical goods transported by ship or plane
E)due to the movement of financial assets;over the Internet or telephone lines
Q2) There is a "magic level" where foreign debt becomes too large and triggers a crisis.
A)True
B)False
Q3) According to the model of free trade,if the United States were to open its borders to Mexican migrants,the wages of Americans and Mexicans would equalize.
A)True
B)False
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Page 20
Chapter 19: Exchange Rates and International Finance
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Sample Questions
Q1) In the short run,the real exchange rate moves with:
A)the law of one price.
B)unanticipated changes in the nominal exchange rate.
C)the quantity theory of money.
D)monetary policy.
E)the relative prices in the two economies.
Q2) One impact of the Southeast Asian crisis was a decline in U.S.inflation and a widening trade deficit in the United States.How does the AS/AD model explain this phenomenon?
Q3) Exchange rate stability is desirable because a sudden sharp __________ of the exchange rate could __________.
A)depreciation;increase import prices
B)depreciation;exacerbate debt held in foreign currencies
C)appreciation;decrease export prices
D)All of the above are correct.
E)a and b
Q4) In the years prior to the Argentinean financial crisis,the Argentineans adopted a flexible exchange rate policy.
A)True
B)False
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Chapter 20: Parting Thoughts
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Sample Questions
Q1) In the long run,the unemployment rate:
A)is zero.
B)is determined primarily by institutional features of the labor market.
C)is determined primarily by structural features of the labor market.
D)is determined primarily by the business cycle.
E)is indeterminate.
Q2) The policies used by a successful economy can be adopted by aspiring economies.
A)True
B)False
Q3) As a country devotes more of its resources to education,we can expect output to stay constant for all time.
A)True
B)False
Q4) Which of the following has not contributed to higher standards of living in the long run?
A)productivity
B)investment in physical capital
C)investment in human capital
D)the stock of technology
E)lower interest rates
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