Macroeconomics for Social Sciences
Final Test Solutions
Course Introduction
Macroeconomics for Social Sciences covers the fundamental concepts and analytical frameworks used to understand the economy as a whole, including topics such as national income determination, unemployment, inflation, economic growth, and fiscal and monetary policy. Designed for students from diverse social science backgrounds, this course emphasizes the relevance of macroeconomic theories and policies to real-world social issues, such as inequality, development, and global economic trends. Through a blend of theoretical exploration and application to current economic challenges, students develop critical skills to analyze the broader economic forces that shape societies and influence the well-being of populations.
Recommended Textbook
ECON MACRO 5th Edition by William A. McEachern
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19 Chapters
2883 Verified Questions
2883 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) A good or service is considered scarce if:
A)any quantity of it can be consumed at a zero price.
B)the amount people desire exceeds the amount available at a zero price.
C)the amount people desire exceeds the amount available at any price.
D)the amount people desire is less than the amount available at any price.
E)the amount people desire is less than the amount available at a zero price.
Answer: B
Q2) An economic model is useful if it:
A)includes every detail of reality.
B)involves no unproven assumptions.
C)is expressed in equations.
D)makes accurate predictions.
E)is simple enough to be understood by a child.
Answer: D
Q3) The assumption of rational self-interest does not rule out the possibility of concern for other individuals.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economic Systems
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154 Flashcards
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Sample Questions
Q1) Janis mows the lawn in 1 hour and types a paper in 1 hour.Kristen mows the lawn in 2 hours and types a paper in 1 hour.Which of the following statements is true?
A)Kristen has an absolute advantage in typing and a comparative advantage in mowing.
B)Janis has an absolute advantage in both activities and a comparative advantage in typing.
C)Janis has an absolute advantage in both activities and a comparative advantage in mowing.
D)The opportunity cost of mowing the lawn is greater for Kristen than it is for Janis.
E)Neither Janis nor Kristen would gain from specialization.
Answer: D
Q2) The law of increasing opportunity cost explains why:
A)opportunity cost is constant along the production possibilities frontier.
B)the production possibilities frontier is downward sloping.
C)the production possibilities frontier is curved.
D)efficient points lie along the production possibilities frontier.
E)technology remains constant along a production possibilities frontier.
Answer: C
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Page 4
Chapter 3: Economic Decision Makers
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174 Flashcards
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Sample Questions
Q1) Under a regressive income tax system,individuals with higher incomes pay higher marginal tax rates.
A)True
B)False
Answer: False
Q2) A disadvantage of the corporate form of business organization is that corporate income is taxed twice.
A)True
B)False
Answer: True
Q3) Which of the following is an example of an in-kind transfer?
A)Welfare payments
B)Most Social Security benefits
C)Unemployment compensation payments
D)Food stamps
E)Charitable contributions
Answer: D
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Page 5
Chapter 4: Demand, supply, and Markets
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152 Flashcards
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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 quantity supplied of lawyers.
D)increase in the quantity demanded of legal services.
E)increase in the supply of lawyers.
Q2) Suppose a market is in equilibrium.If a price floor is set in this market below the equilibrium price it is likely that:
A)quantity demanded will increase.
B)a surplus will arise.
C)a shortage will arise.
D)the quantity sold will rise.
E)the market will remain in equilibrium.
Q3) The market supply curve of a particular product indicates the total quantities:
A)that are actually sold during a given time period.
B)that buyers are willing to purchase at alternative prices.
C)that sellers are willing and able to offer at alternative prices.
D)that sellers are willing to offer for sale at a fixed price.
E)of complements offered for sale.
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Page 6
Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) Which of the following statements regarding the gross domestic product is true?
A)It is useful in comparing the overall performance of different economies at the same time.
B)It measures aggregate income in an economy over a period of ten years.
C)It measures the value of all goods and services produced in the world during a given period.
D)It is a measure of an economy's price level during a particular year.
E)It records the cumulative value of all goods and services produced by domestically owned factors of production.
Q2) The market value of all final goods and services produced in a nation during a particular period is called the:
A)gross domestic product.
B)net national product.
C)national income.
D)gross national product.
E)gross world product.
Q3) The Reagan administration's policies were aimed at managing aggregate demand.
A)True
B)False
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Page 7
Chapter 6: Tracking the Useconomy
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Sample Questions
Q1) Which of the following is not a component of aggregate expenditure?
A)Consumption expenditures
B)Investment
C)Imports
D)Rent
E)Government purchases
Q2) We can conclude that there has been inflation since the base year if the GDP price index in the current year is _____.
A)10
B)equal to zero
C)20
D)greater than 100
E)negative
Q3) Which of the following is the best indicator of the performance of the national economy?
A)The budget deficit of the federal government
B)The stock of capital goods (machinery)in the nation
C)The nation's stock of money
D)The balance of trade with other nations
E)The value of the final goods and services produced in the nation
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) When an economy is operating at full employment,_____.
A)structural unemployment does not exist
B)cyclical unemployment does not exist
C)the unemployment rate is zero
D)seasonal unemployment does not exist
E)the number of discouraged workers is zero
Q2) If the CPI in the United States was 150 in 2003 and 160 in 2004,the inflation rate over the year is _____.
A)10 percent
B)20 percent
C)7 percent
D)30 percent
E)50 percent
Q3) If the price level increases by 2 percent each year,the inflation rate is increasing.
A)True
B)False
Q4) The nominal interest rate is determined in the market for loanable funds.
A)True
B)False
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) _____ had the highest level of per capita real output in 2012.
A)Canada
B)The United States
C)Italy
D)France
E)Germany
Q2) _____ is the resource whose productivity is most commonly measured.
A)Labor
B)Capital
C)Land
D)Energy
E)Money
Q3) Which of the following is included in physical capital?
A)Roads and bridges
B)A university graduate in physics
C)An astrophysicist
D)A high school diploma or college degree
E)A successful entrepreneur
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Page 10
Chapter 9: Aggregate Demand
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Sample Questions
Q1) The aggregate expenditure line shows total planned spending at each _____.
A)consumption level
B)investment level
C)income level,holding the price level constant
D)price level,holding the level of income constant
E)interest rate,holding the price level constant
Q2) Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.
A)True
B)False
Q3) If current aggregate expenditure equals current production,an economy is in equilibrium.
A)True
B)False
Q4) Exports minus imports equal net exports.
A)True
B)False
Q5) The current level of investment depends on the current level of income.
A)True
B)False
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Chapter 10: Aggregate Supply
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Sample Questions
Q1) In the long run,the price level in an economy is determined solely by:
A)the long-run aggregate supply curve.
B)the aggregate demand curve.
C)the amount of cyclical unemployment in the economy.
D)the short-run aggregate supply curve.
E)the potential output level.
Q2) Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2.This implies that the price level has:
A)increased by 20 percent.
B)increased by 25 percent.
C)remained unchanged.
D)fallen by 10 percent.
E)fallen by 20 percent.
Q3) A nominal wage is:
A)always equal to the legal minimum wage.
B)the same as the efficiency wage.
C)measured in terms of the amount of goods and services it can purchase.
D)measured in current dollars rather than in constant dollars.
E)measured in constant dollars rather than in current dollars.
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Chapter 11: Fiscal Policy
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149 Flashcards
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Sample Questions
Q1) Unemployment insurance is an example of a discretionary fiscal policy.
A)True
B)False
Q2) If the economy is already producing at its potential,_____.
A)the spending multiplier equals 1/(1 - MPC)in the long run
B)the spending multiplier is less than 1/(1 - MPC)in the long run
C)the spending multiplier is more than 1/(1 - MPC)in the long run
D)the spending multiplier equals zero in the long run
E)the aggregate demand curve is horizontal
Q3) _____ is contrary to a laissez-faire economic system.
A)Active government intervention in all economic decisions
B)Reliance on prices to adjust to changing market conditions
C)The theory put forward by classical economics
D)The theory introduced by neoclassical economics
E)The market acting as an invisible hand
Q4) Because of automatic stabilizers,disposable income varies proportionately less than real GDP during periods of economic fluctuations.
A)True
B)False
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Chapter 12: Federal Budgets and Public Policy
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Sample Questions
Q1) Because deadlines are frequently missed,budgets typically run from year to year based on _____.
A)continuing resolutions
B)budget resolutions
C)congressional suggestions
D)the suggestions of the President
E)the suggestions of the President's Council of Economic Advisers
Q2) Which of the following statements is true?
A)Federal budget deficits became progressively smaller during the 1990s and turned into a surplus by 1998.
B)Federal spending declined relative to GDP,while federal revenues rose relative to GDP during the 1980s.
C)Functional finance says that policy makers should be concerned less with the economy's potential output and more with balancing the budget annually.
D)A disadvantage of functional finance is that it increases the level of unemployment during recessions.
E)A disadvantage of annual financed budget is that it dampens swings in the business cycle without increasing the national debt.
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14
Chapter 13: Money and the Financial System
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150 Flashcards
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Sample Questions
Q1) Fractional reserve banking occurs when:
A)a bank has reserves that exceed its deposits.
B)a bank has reserves that are equal to its deposits.
C)a bank has reserves that are less than its deposits.
D)some depositors lose their deposits through poor bank management.
E)some lenders fail to repay their loans.
Q2) To minimize the effect of short-term political pressure on the Fed's Board of Governors,the governors are all appointed to their terms:
A)in different years,and their terms are long.
B)in different years,and their terms are short.
C)in the same year,and their terms are long.
D)in the same year,and their terms are short.
E)in the same year,and their terms are shorter than that of the chairman of the Federal Reserve Board.
Q3) The actions of the Fed:
A)must be approved by the president and Congress.
B)must be approved by the president alone.
C)must be approved by Congress alone.
D)are not subject to approval by any branch of government.
E)are subject to the approval of the electorate.
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) Which of the following is an advantage of using a credit card?
A)Credit cards help account holders tap directly into their checking account.
B)Credit cards help account holders get a loan from the card issuer.
C)Credit cards require a PIN number,and are therefore safe.
D)Credit card holders can earn a fixed interest on their accounts.
E)Credit cards help eliminate the use of money.
Q2) To maximize its profit,a bank will:
A)minimize the number transactions it engages in.
B)maximize required reserves.
C)minimize excess reserves.
D)maximize excess reserves.
E)minimize required reserves.
Q3) Open market operations involve:
A)opening the discount window.
B)buying stocks in the stock market.
C)buying and selling government securities in the open market.
D)opening new markets for commodities.
E)selling failed banks to other banks.
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16
Chapter 15: Monetary Theory and Policy
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Sample Questions
Q1) The demand curve for investment depicts:
A)an inverse relationship between interest rate and aggregate demand.
B)an inverse relationship between interest rate and investment.
C)an inverse relationship between price level and real GDP.
D)a direct relationship between interest rate and quantity of money.
E)a direct relationship between aggregate demand and real GDP
Q2) For interest rates to remain stable during economic expansions,the money supply should:
A)decrease at a faster rate than the demand for money.
B)grow at the same rate as money demand.
C)grow at a faster rate than money demand.
D)grow at a slower rate than money demand.
E)decrease at a slower rate than the demand for money.
Q3) The ultimate effect of a reduction in the money supply is:
A)a leftward shift of the aggregate demand curve.
B)a rightward shift of the short-run aggregate supply curve.
C)a movement upward along the aggregate demand curve.
D)a movement downward along the aggregate demand curve.
E)a movement upward along the short-run aggregate supply curve.
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Page 17
Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Suppose we observe several years of falling inflation rates for an economy.Which of the following would best explain this phenomenon?
A)Unemployment is probably at the natural rate.
B)The unemployment rate must be rising.
C)The unemployment rate must be below the natural rate.
D)The unemployment rate is probably above the natural rate.
E)Aggregate output must be increasing.
Q2) For those who favor an active approach,public policy changes are necessary to cure a recessionary gap because:
A)the short-run aggregate supply curve will otherwise shift quickly to the right.
B)prices and wages are flexible downward but not upward.
C)the required decrease in output can be achieved only by shifting the aggregate demand curve.
D)real wages must fall in order to increase aggregate supply in the economy.
E)falling money wages will cause the AD curve to shift leftward unless policy counters this movement.
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Chapter 17: International Trade
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Sample Questions
Q1) The largest regional trading bloc is the _____.
A)North American Free Trade Agreement
B)European Community
C)Latin American Free Trade Agreement
D)Asian Free Trade Agreement
E)East Asian Cooperation Council
Q2) Some industries have argued that since their output is vital for national defense,_____.
A)they should be entitled to additional trade protection
B)they should make special deals among themselves and discriminate against outsiders
C)they are more vulnerable to fiscal deficits
D)they should be given more time to grow to become competitive
E)they protect domestic jobs and wage levels
Q3) The source of gains from trade is _____.
A)tariff revenue
B)self-sufficiency
C)terms of trade
D)absolute advantage
E)comparative advantage
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Chapter 18: International Finance
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Sample Questions
Q1) Exchange rates:
A)are always fixed between the currencies of two countries.
B)fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied.
C)fluctuate to equate imports and exports.
D)fluctuate to equate interest rates in various countries.
E)fluctuate according to agreements between the governments of various countries.
Q2) Speculators profit by taking risks,while the actions of arbitrageurs involve no risk.
A)True
B)False
Q3) A floating exchange rate:
A)is determined by the national governments involved.
B)remains extremely stable over long periods of time.
C)is determined by the actions of central banks.
D)is allowed to vary only within a narrow range.
E)adjusts in response to market forces.
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Chapter 19: Economic Development
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Sample Questions
Q1) Which of the following is true?
A)In low-income countries,less than 5 percent of those 15 and older were illiterate in 2007.
B)In middle-income countries,17 percent of those 15 and older were illiterate in 2007.
C)In high-income countries,38 percent of those 15 and older were illiterate in 2007.
D)Education bears little relationship to economic development in high-income countries.
E)Education is more important to the economic development of low-income countries than it is to high-income countries.
Q2) Private international borrowing and lending is freely allowed by governments of developing countries.
A)True
B)False
Q3) For the newly industrialized countries of East Asia,export promotion has been more successful than import substitution.
A)True
B)False
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