Macroeconomics for Business Final Exam
Course Introduction
Macroeconomics for Business provides students with a comprehensive understanding of how large-scale economic factors impact business environments and decision-making. The course explores key concepts such as gross domestic product (GDP), inflation, unemployment, fiscal and monetary policies, and international trade, examining their effects on business operations and strategies. Emphasis is placed on interpreting economic indicators, analyzing policy decisions, and understanding the global economic context, equipping students with the analytical tools needed to assess risks and opportunities in various business situations.
Recommended Textbook
ECON MACRO4 4th Edition by William A. McEachern
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Someone who committed the association-is-causation fallacy might conclude that
A)event B, which follows event A, was caused by the event A
B)event B, which follows event A, was not necessarily caused by event A
C)the simplest model is the best predictor
D)what is true for the individual is also true for the group
E)what is true for the individual is not necessarily true for the group
Answer: A
Q2) The difference between a positive economic statement and a normative statement is that
A)a positive statement must be true; a normative statement is often not true
B)a normative statement must be true; a positive statement is often not true
C)a positive statement can be verified; a normative statement cannot
D)a normative statements can be verified; a positive statement cannot
E)a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment
Answer: C
Q3) Resources are used only in the production of goods, not services.
A)True
B)False
Answer: False
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Chapter 2: Understanding Graphs-Appendix
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Sample Questions
Q1) In Exhibit 1-2, at y = 14, the
A)value of x is larger on curve A than on curve B
B)value of x is smaller on curve A than on curve B
C)value of x is the same on curve A as on curve B
D)slope of line A is negative
E)slope of line B is positive
Answer: A
Q2) One economic application of the slope of a line is
A)measuring unlimited wants
B)behavioral analysis
C)marginal analysis
D)allocative efficiency
E)rational self-interest
Answer: C
Q3) The slope of a vertical straight line is infinity.
A)True
B)False
Answer: True
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4
Chapter 3: Economic Tools and Economics Systems
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Sample Questions
Q1) When drawing a production possibilities frontier, all of the following are usually assumed except one. Which is the exception?
A)The quantity of resources is rapidly growing.
B)Technology is fixed.
C)Resources can be shifted between production of the two goods.
D)The production possibilities frontier is drawn for a particular time period.
E)Resources are fully and efficiently employed.
Answer: A
Q2) Refer to exhibit 2-10. Costa Rica has a comparative advantage in the production of T-shirts.
A)True
B)False
Answer: True
Q3) A command economic system does not need to be concerned with what to produce, how to produce things, or who will get the goods and services produced.
A)True
B)False
Answer: False
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Chapter 4: Economic Decision Makers
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Sample Questions
Q1) Which of the following taxes is most clearly based on the benefits-received principle of taxation?
A)corporate income tax
B)gasoline tax
C)personal income tax
D)payroll tax
E)value added tax
Q2) What part of federal government spending has grown the most slowly in recent decades?
A)national defense
B)welfare
C)interest on the national debt
D)social security and medicare
E)all other forms of federal government spending
Q3) Household production still exists because it often requires fewer specialized resources than market production does.
A)True
B)False
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Chapter 5: Demand, Supply, and Markets
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Sample Questions
Q1) If income rises and a good is inferior, then demand for that good will decrease.
A)True
B)False
Q2) The market for chewing gum is competitive with a current price of 50 cents per pack and a quantity of 100,000 packs per day. Which of the following events would lead to a new equilibrium price of 75 cents and a new equilibrium quantity of 125,000?
A)an increase in the price of other kinds of candy
B)an increase in the price of the ingredients used to make chewing gum
C)an agreement by workers in the chewing gum industry to work for lower wages
D)a decrease in the number of young people in the population
E)a decrease in income
Q3) Which of the following events is likely to reduce the demand for on-campus student housing?
A)a rise in rents for off-campus housing
B)more students enrolling at the university
C)it becomes less fashionable to live "on campus"
D)a rise in dorm fees
E)a rise in the incomes of students
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Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) If tax revenues increase more than government spending does, the price level will rise.
A)True
B)False
Q2) Certain economic activities signal forthcoming changes in the economy. These are known as the
A)coincidental economic indicators
B)GDP implicit price deflator
C)lagging economic indicators
D)composite of economic activities
E)leading economic indicators
Q3) Which decade is known as the "Golden Age of Keynesian Economics"?
A)the 1930s
B)the 1950s
C)the 1960s
D)the 1970s
E)the 1980s
Q4) In U.S. history, recessions have usually lasted longer than expansion periods.
A)True
B)False
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Chapter 7: Tracking the Us Economy
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Sample Questions
Q1) If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000, earns profits of $500, and sells its output for $14,000, the firm's value added is
A)$12,000
B)$8,000
C)$6,000
D)$2,000
E)$500
Q2) Which of the following is a leakage from the circular flow?
A)government purchases of goods and services
B)saving
C)transfer payments
D)exports
E)consumption expenditures
Q3) Which of the following would not be included in the measurement of GDP?
A)federal government purchases of automobiles
B)a purchase of California wine by a Canadian firm
C)employers' payments for employees' medical insurance
D)a state government's purchase of personal computers
E)transactions in the underground economy
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Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) If the aggregate supply curve shifts leftward,
A)the price level increases and output increases
B)the resulting increase in the price level is usually called cost-push inflation
C)the resulting increase in the price level is usually called demand-pull inflation
D)the price level increases only if there is also a rightward shift of the aggregate demand curve
E)the price level decreases and output increases
Q2) Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The number of people in the labor force is
A)30
B)60
C)85
D)90
E)70
Q3) Demand-pull inflation is typically caused by rapidly rising costs of production.
A)True
B)False
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) Human capital includes the machinery, equipment and other manufactured creations used to produce goods and services.
A)True
B)False
Q2) The resource whose productivity is most commonly measured is
A)labor
B)capital
C)land
D)energy
E)money
Q3) The shape of the per-worker production function in Exhibit 8-1 illustrates the law of diminishing marginal returns to labor.
A)True
B)False
Q4) Between 1982 and 2002, U.S. GDP per capita grew at an average rate of 2.2 percent per year.
A)True
B)False
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Chapter 10: Aaggregate Expenditure and Agregate Demand
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Sample Questions
Q1) Given the data in Exhibit 9-1, the level of saving decreases as disposable income increases.
A)True B)False
Q2) Out of disposable income, households
A)consume and save
B)consume and invest
C)save and invest
D)consume, save, and pay taxes
E)consume, save, pay taxes, and make transfer payments
Q3) If investment is autonomous, which of the following is least likely to have an effect on the level of investment?
A)a change in the rate of interest
B)a change in the level of income
C)a change in the level of optimism or pessimism about the economy as a whole
D)a change in the expected profitability of investment projects
E)a change in the rate of inflation
Q4) The current level of investment depends on the current level of income.
A)True B)False
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Chapter 11: Aggregate Expenditure and Aggregate Demand
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Sample Questions
Q1) 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
Q2) An increase in the U.S. price level, other things constant, would
A)increase U.S. exports and decrease U.S. imports
B)increase U.S. exports and leave U.S. imports unchanged
C)decrease U.S. exports and increase U.S. imports
D)decrease U.S. exports and leave U.S. imports unchanged
E)leave both U.S. exports and U.S. imports unchanged
Q3) Movement along the aggregate expenditure curve is caused by a change in the level of income.
A)True
B)False
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Chapter 12: Aggregate Supply
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Sample Questions
Q1) Which of the following is true regarding the closing of a contractionary gap?
A)The only way for the gap to close is for nominal wages to rise.
B)Such a gap could be closed if the nominal wage grew more slowly over time than the price level.
C)Once the economy falls into a contractionary gap, only a strong reduction in aggregate demand could close the gap.
D)Inflation eventually ends contractionary gaps.
E)Nominal wages and real wages should rise.
Q2) In Exhibit 11-2, if P<sub>1</sub> is the prevailing price level, then
A)there is an expansionary gap
B)the price level will decrease
C)the expected price level is the same as the actual price level
D)the unemployment rate is below the natural unemployment rate
E)potential output is less than the actual level of output
Q3) In the long run, the economy will produce at potential output if
A)workers mistakenly believe that nominal wages equal real wages
B)expectations are the same in the long and short run
C)wages and prices are sufficiently flexible
D)the price level is high
E)the price level is low
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) Which of the following had the greatest impact in pulling the U.S. economy out of the Great Depression?
A)the economy's natural tendency to contract toward potential output
B)the federal government's aggressive policy of tax cuts
C)the federal government's aggressive policy of monetary stimulus
D)a precipitous drop in aggregate demand
E)the increased spending brought on by World War II
Q2) When spending by the federal government exceeds net taxes,
A)the price level tends to fall
B)the money supply must fall
C)the aggregate demand curve shifts rightward
D)aggregate supply moves rightward
E)there is a federal budget surplus
Q3) In an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS<sub>50</sub> in Exhibit 12-3, the government could decrease government spending to shift the aggregate demand curve to AD' in order to eliminate the recessionary gap.
A)True
B)False
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Chapter 14: Federal Budgets and Public Policy
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Sample Questions
Q1) When a budget is not approved in time for continued agency operation,
A)a continuing resolution is frequently used
B)a budget resolution must be developed
C)the agency usually shuts down
D)the President can force Congress to act
E)the agency must borrow from the Federal Reserve
Q2) If a budget is cyclically balanced, the government should run a surplus when the economy experiences a contractionary gap.
A)True
B)False
Q3) If the automatic stabilizers are creating budget deficits, the economy must be experiencing falling output.
A)True
B)False
Q4) More than 40 percent of the publicly held U.S. federal debt is held by foreign individuals and corporations.
A)True
B)False
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Chapter 15: Money and the Financial System
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Sample Questions
Q1) Which of the following statements best characterizes U.S. depository institutions over the last 50 years?
A)The industry has been very turbulent throughout this period.
B)The industry is highly regulated and hence is a very staid, predictable industry.
C)The industry has been highly unprofitable throughout this period.
D)The industry was once highly competitive, but now it is relatively quiet since deregulation began during the 1970s.
E)Once highly regulated, the industry has changed considerably during the past 20 years.
Q2) Which of the following countries has the most number of banks among the top 25 based on worldwide assets?
A)France
B)Japan
C)United Kingdom
D)Netherlands
E)United States
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Chapter 16: Banking and the Money Supply
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Sample Questions
Q1) The largest component of the Federal Reserve's liabilities is in the form of
A)government securities
B)Federal Reserve notes
C)U.S. Treasury deposits
D)bank deposits
E)coins
Q2) Suppose that a bank has $100 million in checkable deposits and the required reserve ratio is 0.1. Required reserves are
A)$1 million
B)$5 million
C)$10 million
D)$50 million
E)$100 million
Q3) M1 includes all but which of the following?
A)currency in the hands of the public
B)coins in the hands of the public
C)currency in the bank
D)checkable deposits
E)traveller's checks
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Chapter 17: Monetary Theory and Policy
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Sample Questions
Q1) There is considerable disagreement about whether the Fed should
A)engage in open market operations
B)have the power to set reserve requirements
C)reduce the money supply when the economy is growing
D)allow banks to invest in the stock market
E)attempt to control interest rates or should instead attempt to control the money supply
Q2) In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n)
A)inflation rate of 4 percent, if velocity were constant
B)inflation rate of -4 percent, if velocity were constant
C)$4 increase in the price level per year
D)$4 decrease in the price level per year
E)change in the velocity of money
Q3) According to the equation of exchange, M × V = P × C.
A)True
B)False
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Chapter 18: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) One implication of the Phillips curve analysis is that
A)unemployment rates below the natural rate are only possible in the long run
B)unemployment rates below the natural rate lead to falling rates of inflation in the long run
C)if inflationary expectations are accurate, the economy is on the short-run Phillips curve but not on the long-run Phillips curve
D)unemployment rates below the natural rate may be achieved only with rising inflation rates
E)the natural rate of unemployment is strictly a short-run phenomenon
Q2) Some economists believe that when workers and firms come to expect an expansionary monetary policy and the resulting inflation,
A)they act so as to prevent the inflation from occurring
B)their actions lead to a further increase in output
C)the expansionary monetary policy will have no effect on either output or employment
D)the monetary authority will be forced to cancel its planned expansionary policy
E)both output and employment will increase even more than was originally planned
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Chapter 19: International Trade
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Sample Questions
Q1) Which of the following is not true of declining industries?
A)Job loss is not a problem in a declining industry because the workers can easily find jobs in expanding industries.
B)Jobs may be lost by declining industries but new jobs are created in expanding industries.
C)Over 60 million new jobs have been created in the United States since 1960.
D)One way to solve the problems posed by declining industries is for the government to fund programs to retrain workers for jobs that are in greater demand.
E)One way to solve the problems posed by declining industries is for the government to offer wage subsidies or special tax breaks that decline over time.
Q2) Ad valorem tariffs on imports are based on a percentage of an import's value; specific tariffs are based on a lump sum per physical unit imported.
A)True B)False
Q3) The United States exports more raw materials than finished products.
A)True
B)False
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21
Chapter 20: International Finance
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Sample Questions
Q1) A German who exchanges euros for dollars in a U.S. airport is
A)contributing to U.S. exports
B)lending dollars to Germans
C)participating in the foreign exchange market
D)engaging in speculative activities
E)engaging in illegal activities
Q2) Under the Bretton Woods agreement,
A)nations could not adjust their exchange rates relative to the dollar for any reason
B)exchange rates were based on a market basket of European currencies plus the dollar
C)the United States stood ready to convert foreign holdings of dollars into gold at a fixed rate of $35 per ounce
D)the international monetary system operated exactly like the gold standard of pre-World War II years
E)gold played no role in the international monetary system
Q3) Flexible exchange rates are more volatile than floating ones.
A)True
B)False
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Chapter 21: Economic Development
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Sample Questions
Q1) Compared to industrial market countries, developing countries usually have
A)exports consisting mostly of agricultural products and raw materials
B)faster population growth
C)higher unemployment
D)higher rates of illiteracy
E)All of the answers are correct
Q2) Any international transfer made on concessional terms for the purposes of promoting economic development is
A)foreign aid
B)first aid
C)immigration
D)private investment
E)remittances
Q3) Privatization is the
A)process of turning private enterprises into public enterprises
B)the same as nationalization
C)process of turning public enterprises into private enterprises
D)process of turning state-owned enterprises into public enterprises
E)process of turning sole proprietor enterprises into corporate enterprises
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