Macroeconomics
Midterm Exam
Course Introduction
Macroeconomics is the study of the economy as a whole, analyzing large-scale economic factors and the overall functioning of national and global economies. This course explores topics such as gross domestic product (GDP), inflation, unemployment, fiscal and monetary policies, economic growth, and the role of government and central banks. Students will learn to interpret economic data, understand policy debates, and apply macroeconomic theories to real-world situations, gaining insights into how economic performance impacts societies and informs decision-making at the policy level.
Recommended Textbook
Exploring Economics 6th Edition by Robert L. Sexton
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28 Chapters
4557 Verified Questions
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Page 2
Chapter 1: The Role and Method of Economics
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Sample Questions
Q1) The importance of the ceteris paribus assumption is that it:
A) allows one to separate normative economic issues from positive economic ones.
B) allows one to generalize from the whole to the individual.
C) allows one to analyze the relationship between two variables apart from the influence of other variables.
D) allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
Answer: C
Q2) Which of the following best illustrates the fallacy of composition?
A) If I have more money, I will be better off; therefore if we all had more money, we all would be better off.
B) If I buy more gas each week, my gas consumption increases; therefore, if all gas consumers buy more gas each week, total gas consumption will increase.
C) If I spend more time studying, I will learn more; therefore, if all students spend more time studying, they will learn more.
D) If women's hemlines are higher this year, the Dow Jones Industrials average will fall.
Answer: A
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Chapter 2: Economics: Eight Powerful Ideas
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Sample Questions
Q1) The opportunity cost of an action includes:
A) the monetary expenses incurred as a result of the action.
B) the highest valued alternative use of the time spent on the action.
C) the benefits received as a result of the action.
D) only a. and b.
Answer: D
Q2) Which of the following is not a resource?
A) capital
B) entrepreneurship
C) legal institutions
D) labor
Answer: C
Q3) Would it make good sense for a community to seek to reduce its levels of pollution to zero? Why or why not?
Answer: In general it would not make sense for a community to seek to reduce pollution levels to zero because the costs involved would exceed the benefits received.
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Chapter 3: Scarcity, Trade-Offs, and Production Possibilities
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Sample Questions
Q1) Movement from one point on the production possibilities curve to another leads to more of both goods being produced.
A)True
B)False
Answer: False
Q2) In a simple circular flow model,
A) households are suppliers of resources.
B) households are demanders of final products.
C) firms are demanders of resources.
D) all of the above are true.
Answer: D
Q3) A straight line production possibilities curve implies increasing opportunity costs.
A)True
B)False
Answer: False
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Chapter 4: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) Which of the following would cause an increase in the demand curve for oranges?
A) a freeze in Florida (a major orange producing state)
B) a new machine that allows orange growers to harvest oranges faster
C) a decrease in the price of apples
D) an announcement by the FDA that oranges lowers cholesterol
Q2) The face value of a ticket to the Super Bowl was approximately $1,200 in 2011.The game is very popular and there are a number of fans who are not able to get tickets to this game.At the same time,many fans claim that prices are too high and that the NFL should lower the face value of the ticket prices.Would a decrease in ticket prices move the market towards equilibrium? Would it eliminate the shortage of tickets? Why or why not?
Q3) The law of demand refers to the:
A) negative relationship between the price of a good and the willingness of producers to sell it.
B) price increase that results from an increase in demand.
C) inverse relationship between the price of a good and the quantity demanded.
D) increase in the quantity of a good made available when its price increases.
Q4) Markets tend toward equilibrium and,as a result,will tend to eliminate shortages and surpluses.Why?
Q5) Differentiate between a change in quantity demanded and a change in demand.
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Chapter 5: Markets in Motion and Price Controls
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Sample Questions
Q1) An increase in both equilibrium price and quantity is a consequence of:
A) increase in supply.
B) increase in demand.
C) decrease in demand
D) decrease in supply
Q2) In general,an increase in price could be caused by either:
A) an increase in demand or a decrease in supply.
B) an increase in demand or an increase in supply.
C) a decrease in demand or an increase in supply.
D) an increase in demand or an increase in supply
Q3) A price ceiling is binding when it is set
A) above the equilibrium price, causing a shortage.
B) above the equilibrium price, causing a surplus.
C) below the equilibrium price, causing a shortage.
D) below the equilibrium price, causing a surplus.
Q4) If a nonbinding price floor is imposed on a market,then the
A) quantity sold in the market will decrease.
B) quantity sold in the market will stay the same.
C) price in the market will increase.
D) price in the market will decrease.
Page 7
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Chapter 6: Elasticities
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Sample Questions
Q1) The elasticity of supply coefficient for lobster is estimated to be equal to 0.6.It is expected,therefore,that a 10% decrease in price would lead to:
A) a 6% decrease in the quantity of lobsters supplied.
B) a 6% increase in the quantity of lobsters supplied.
C) a 10% decrease in the quantity of lobsters supplied.
D) a 10% increase in the quantity of lobsters supplied.
Q2) Price elasticity of demand is a measure of the relative responsiveness of the change in quantity demanded to a change in price.
A)True
B)False
Q3) Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold.What is the elasticity of demand facing Fantastic Cuts?
A) 0.05
B) 0.10
C) 0.33
D) 3.0
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Chapter 7: Market Efficiency and Welfare
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Sample Questions
Q1) A deadweight loss occurs as a result of a per-unit tax because:
A) the government spends tax dollars less efficiently than do private citizens.
B) there is a decline in output for units for which the marginal benefit exceeds the marginal cost.
C) taxes cause an overproduction of output relative to the socially efficient level or production.
D) a surplus is created.
Q2) Which of the following best explains the source of consumer surplus for Good A?
A)Many consumers pay prices that are greater than the equilibrium price of Good A.
B)Many consumers would be willing to pay more than the market price for some units of Good A.
C)Many consumers think the market price of Good A is greater than its cost.
D)Many consumers of Good A place a value on it that is less than the market price.
Q3) Ceteris paribus,a decrease in the price of a good will cause the:
A) quantity demanded of the good to decrease.
B) quantity supplied of the good to increase.
C) consumer surplus derived from the good to increase.
D) supply of the good to decrease.
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Page 9
Chapter 8: Market Failure
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Sample Questions
Q1) Assume that production of a good imposes external costs on others.The equilibrium price will be ____ and the equilibrium quantity ____ for efficient resource allocation.
A) too high; too high.
B) too high; too low.
C) too low; too high.
D) too low, too low.
Q2) Which of the following is true?
A) Economic reasoning implies that individuals will acquire all possible information about a choice before making it.
B) It is not rational for people to make decisions that could turn out to be mistaken.
C) Reducing information costs to consumers and suppliers could permit more intelligent market decisions and lead to greater satisfaction.
D) Occupational licensing laws generally act to protect misinformed consumers from getting shoddy services and enhances competition, leading to lower prices.
Q3) What are the external costs and external benefits associated with cellular phone usage in automobiles?
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10
Chapter 9: Public Finance and Public Choice
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Sample Questions
Q1) The benefits received principle means those with the least ability to pay should be the ones to receive the benefits.
A)True
B)False
Q2) Which of the following accounted for the highest percentage of federal government spending in 2010?
A) net interest on the national debt
B) income security
C) Medicare
D) Social Security
Q3) In a proportional tax system each individual would pay the same percentage of his or her income in taxes.
A)True
B)False
Q4) The idea of rational ignorance implies that people are fully informed about their market purchases but uninformed about political issues.
A)True
B)False
Q5) What are the advantages of a flat tax system?
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Chapter 10: Consumer Choice Theory
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Sample Questions
Q1) Assume that Michaela's marginal utility from pizza consumption is 10 utils and the price is $2.00 per slice.Further,assume that her marginal utility from scone consumption is 20 utils and the price is $3.00 per scone.Which of the following is true?
A) With her existing budget she should increase her consumption of pizza.
B) With her existing budget she should increase her consumption of scones.
C) She is currently maximizing her utility and should not change the amount of consumption for either good with her current budget.
D) If her budget increases, she should increase her consumption of pizza but not scones.
E) If her budget increases, she should increase her consumption of scones but not pizza.
Q2) The term used to describe a more realistic conception of human problem-solving that assumes less than perfect analysis is:
A) framing.
B) compartmentalizing.
C) countercyclical policy.
D) bounded rationality.
Q3) How does the law of demand reflect the law of diminishing marginal utility?
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Page 12
Chapter 11: The Firm: Production and Costs
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Sample Questions
Q1) Explain the cost advantage of a firm operating at constant returns to scale.
Q2) The short run is that period in which firms:
A) are free to vary all inputs.
B) are able to vary some, but not all, inputs.
C) can vary inputs, but only by varying all inputs in equal proportion.
D) cannot increase production at all.
Q3) Economists normally assume that the goal of a firm is to:
A) sell as many units of output as possible.
B) maximize profits.
C) sell products at the highest prices possible.
D) maximize sales revenue.
Q4) In the short run,all costs are variable.
A)True
B)False
Q5) Diseconomies of scale are associated with:
A) a downward sloping long-run average total cost curve.
B) an upward sloping long-run average total cost curve.
C) a horizontal long-run average total cost curve.
D) a vertical long-run average total cost curve.
Q6) How short is the short-run production period?
Page 13
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) A firm that is earning zero economic profits has a strong incentive to exit the industry.
A)True
B)False
Q2) In a perfectly competitive market,producers efficiently use their scarce resources to produce what consumers want and as a result they achieve:
A) productive efficiency.
B) allocative efficiency.
C) economic efficiency.
D) constant returns of scale.
Q3) If the market demand curve in a perfectly competitive industry shifts right,the demand curve for each existing firm will:
A) shift up.
B) shift down.
C) shift right.
D) shift left.
Q4) In the short run,if a perfectly competitive firm produced at the quantity of productive efficiency,would it generate the highest profit level possible? Why or why not?
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Chapter 13: Monopoly and Antitrust
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Sample Questions
Q1) In the short run,a monopolist:
A) always earns an economic profit.
B) never earns an economic profit.
C) never earns an accounting profit.
D) None of the above are correct.
Q2) A natural monopoly exists when one large firm can produce a product at a lower per unit cost than can smaller firms.
A)True
B)False
Q3) In both perfect competition and monopoly,a firm:
A) maximizes profit by equating marginal revenue to marginal cost.
B) will shut down in the short run if price is less than average variable cost.
C) will always earn a zero economic profit.
D) will be characterized by both (a) and (b).
Q4) If a regulatory commission wishes to allow a firm to earn a normal rate of return,it should set price equal to:
A) marginal revenue.
B) marginal cost.
C) average total cost.
D) average variable cost.
Page 15
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Chapter 14: Monopolistic Competition and Product
Differentiation
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Sample Questions
Q1) Which of the following will not generally be true of a monopolistic competitor operating in the long run?
A) It will be earning normal profits.
B) Its marginal revenue = marginal cost.
C) Its average total cost will be minimized.
D) Its price will be greater than its marginal cost.
Q2) For a monopolistically competitive firm in long run equilibrium:
A) marginal revenue equals marginal cost and price equals average cost.
B) the economic profits it is earning will soon be competed away by entry.
C) accounting profits are zero and price equals marginal cost.
D) marginal revenue equals marginal cost and average total cost is minimized.
Q3) Monopolistic competition is characterized by:
A) homogeneous products.
B) barriers to entry
C) firms earning economic profits in the long run.
D) differentiated products.
Q4) Define monopolistic competition.
Q5) How might a clothing store differentiate itself from its competitors? List at least three ways.
Q6) Why does inefficiency exist in monopolistic competition? Page 16
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Page 17
Chapter 15: Oligopoly and Strategic Behavior
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Sample Questions
Q1) In the prisoner's dilemma:
A) the outcome obtained when both confess is worse for each than the outcome they would have obtained had they both remained silent.
B) whatever the other does, each is better off confessing than remaining silent.
C) we see a conflict between group and individual rationality.
D) all of the above
Q2) Which of the following best reflects a network externality?
A) Price of a good affecting a purchase decision.
B) Number of other people purchasing the good influencing the quantity demanded.
C) Proven quality of a product influencing the quantity demanded.
D) Price of a related good affecting a purchase decision.
Q3) What impact would easy entry have on the profitability of oligopolies?
Q4) How do economies of scale result in barriers to entry into oligopoly models?
Q5) When oligopolists join together in a cartel,they:
A) choose to ignore their mutual interdependence.
B) indicate awareness that their behavior is interdependent.
C) violate the law of supply and demand.
D) attempt to behave like perfect competitors.
Q6) Why is it difficult for an oligopolist to determine its profit-maximizing price and output?
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Chapter 16: The Markets for Labor, Capital, and Land
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Sample Questions
Q1) Unions,by nature,must ____ their membership in order to ____ wages.
A) open; lower
B) open; raise
C) restrict; lower
D) restrict; raise
Q2) In the last 60 years,the percentage of workers in union jobs has increased substantially.
A)True
B)False
Q3) Which of the following best illustrates the concept of "derived demand"?
A) An increase in the wages of autoworkers leads to an increase in the demand for robots in automobile factories.
B) An auto firm decides to supply more minivans when there is a decrease in the demand for station wagons.
C) An increase in the price of gasoline leads to an increase in the demand for small cars.
D) An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.
Q4) Discuss the factors behind the recent decline in labor union membership.
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Page 19
Chapter 17: Income, Poverty, and Health Care
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Sample Questions
Q1) Which of the following is not a reason for the existence of imperfect competition in health care markets?
A) eas entry into industry
B) restrictions on advertising
C) economies of scale
D) collusion
Q2) On average,an individual with a college degree earns about ____ more each week than an individual who has not completed high school.
A) $8,000
B) $18,000
C) $33,000
D) $58,000
Q3) Health care reform will lead to a(n)____ in the number of new,young health care recipients which will cause the ____ of moral hazard problems associated with health insurance.
A) increase; elimination
B) increase; worsening
C) decrease; elimination
D) decrease; worsening
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Page 20
Chapter 18: Introduction to Macroeconomics:
Unemployment, Inflation, and Economic Fluctuations
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Sample Questions
Q1) Economists believe that the Consumer Price Index tends to overstate the actual rate of inflation.
A)True
B)False
Q2) If the economy is operating at the natural rate of unemployment,which of the following is essentially eliminated?
A) frictional unemployment
B) structural unemployment
C) cyclical unemployment
D) all of the above
Q3) Roughly 60 percent of women participate in the labor force today.
A)True
B)False
Q4) Which of the following observations concerning leading economic indicators is true?
A) They provide warnings of likely downturns.
B) They provide accurate information on the depth of a downturn.
C) They provide accurate information on the duration of a downturn.
D) Both b. and c. are true.
Q5) Discuss the costs associated with high inflation.
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Chapter 19: Measuring Economic Performance
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Sample Questions
Q1) Which of the following is an example of an intermediate good?
A) a pair of jeans sold by a clothing retailer
B) cloth sold to a suit manufacturer
C) a share of Wal-Mart stock
D) a used Ford Mustang sold from one neighbor to another
Q2) National income includes wages and salaries,interest and rent,but not corporate profits.
A)True
B)False
Q3) Which of the following is not included in the investment category under the expenditure approach to GDP accounting?
A) newly constructed residential housing
B) factory buildings
C) stocks and bonds
D) additions to inventory
Q4) Nominal GDP has risen faster than real GDP in the last decade because:
A) the price level has increased.
B) the price level has decreased.
C) the growth rate of productivity has accelerated.
D) the volume of foreign trade has expanded sharply.
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Chapter 20: Economic Growth in the Global Economy
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Sample Questions
Q1) Which of the following is false?
A) Generally speaking, higher levels of saving will lead to higher levels of investment and capital formation and, therefore, to greater economic growth.
B) Economic growth rates tend to be higher in countries where the government enforces property rights.
C) Investment alone does not guarantee economic growth, which hinges importantly on the quality and the type of investment as well.
D) None of the above are false; all are true.
Q2) There are several factors that nearly everyone agrees have contributed to economic growth in some or all countries.They do not include which of the following?
A) Growth in the quantity and quality of labor resources used
B) Increase in the use of inputs provided by the land
C) Growth in physical capital inputs
D) All of the above are included.
Q3) According to Malthus,how do economic growth and population relate to each other?
Q4) As economic growth rises,literacy rates tend to fall.
A)True
B)False
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Page 23
Chapter 21: Financial Markets, Saving, and Investment
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Q1) Which of the following was not a reason for the financial collapse in 2008?
A) inaccurate ratings by S&P and Moody's
B) government promoting aggressive mortgage lending
C) pooling of mortgage backed securities
D) the absence of financial leveraging in the banking industry
Q2) Which of the following is a method by which a firm can obtain financial resources to invest in capital?
A) use of retained earnings
B) borrowing from financial intermediaries
C) selling stocks or bonds
D) all of the above
Q3) In the loanable funds market which of the following is true?
A) Borrowers represent supply and government represents demand.
B) Borrowers represent supply and banks represent demand.
C) Banks represent supply and savers represent demand.
D) Savers represent supply and borrowers represent demand.
Q4) In a closed economy,the formula for private saving is: S<sub>private</sub> = Y - CT + TR
A)True
B)False
Page 24
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Chapter 22: Aggregate Demand and Aggregate Supply
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Q1) Greater and more extensive government regulations of safety standards and environmental controls will have what effect on short-run and long-run aggregate supply?
Q2) ____ are unexpected temporary events that can either increase or decrease the short-run aggregate supply.
A) Profit effects
B) Volatilities
C) Supply shocks
D) Misperception effects
Q3) If there was no misperception effect,but there was a profit effect in the short run,then SRAS is ____ and LRAS is ____.
A) upward sloping: vertical
B) upward sloping; upward sloping
C) vertical; vertical
D) vertical; upward sloping
Q4) The aggregate demand curve portrays the relationship between price level and real GDP.What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.
Q5) Explain how changes in the stock of capital affect aggregate supply.
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Chapter 23: The Aggregate Expenditure Model
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Q1) The concept of cost-push inflation cannot be explained by the aggregate expenditure model.
A)True
B)False
Q2) If the ____ is/are fixed,a change in nominal income is equivalent to a change in real income.
A) price level
B) interest rates
C) tastes and preferences
D) future expectations
Q3) Which of the following observations concerning the Keynesian model is not true?
A) It is helpful in explaining the events that unfolded in the 1930s.
B) It is less useful in explaining today's economy.
C) It explains the stagflation of the 1970s.
D) It does not incorporate possible shifts in the aggregate supply curve.
Q4) Explain the effects of the following actions on equilibrium income.
1.Government purchases rise by $20 billion.
2.Taxes fall by $20 billion.
Q5) Identify factors that would cause consumption spending to increase.What effect would that have on aggregate demand?
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Chapter 25: Monetary Institutions
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Q1) Even though the use of checks lower transaction costs when compared to the use of paper currency,it is unlikely that the use of paper or metallic currency will disappear entirely.Why?
Q2) If a bank has $1 million in demand deposits,$350,000 in reserves,and faces a 30 percent reserve requirement,the amount of money that a bank could initially create by loaning out their excess reserves is:
A) $50,000.
B) $300,000.
C) $350,000.
D) $700,000.
Q3) A bank's actual reserves can be calculated by:
A) multiplying its demand deposits by the required reserve ratio.
B) multiplying its excess reserves by the required reserve ratio.
C) subtracting its required reserves from its excess reserves.
D) adding its required reserves and its excess reserves.
Q4) Which of the following would most likely reduce the number of bank failures?
A) an increase in the number of small banks
B) tighter restrictions on interstate banking
C) creating a system of deposit insurance
D) encouraging banks to make more risky loans
Page 27
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Chapter 26: The Federal Reserve System and Monetary Policy
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Q1) If the Fed raises the discount rate,it:
A) forces commercial banks to call in existing loans.
B) changes excess reserves into required reserves.
C) changes required reserves into excess reserves.
D) none of the above
Q2) Which of the following is a definition of velocity?
A) Velocity = value of final goods and services produced/money supply
B) Velocity = real GDP/M
C) Velocity = nominal GDP/real GDP
D) Velocity = (P ´ Q)/(M ´ V)
Q3) During the sixteenth century,Spanish conquistadors like Hernan Cortes overwhelmed the Aztecs and other indigenous peoples in America by pillaging their cities,and taking their gold and silver.The gold and silver was sent back to Spain,causing its money supply to increase tenfold.Assuming V remained stable and Q increased slightly,what do you think happened to prices in Spain during this period?
Q4) If the Fed buys a U.S.government bond from a member of the public,
A) the banking system has more reserves and the money supply tends to grow.
B) the banking system has less reserves and the money supply tends to grow.
C) the banking system has more reserves and the money supply tends to fall.
D) the banking system has less reserves and the money supply tends to fall.
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Chapter 27: Issues in Macroeconomic Theory and Policy
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Q1) For the short-run Phillips curve to remain relatively stable,then changes in real GDP must occur primarily as a result of shifts in:
A) changes in aggregate demand.
B) changes in real wages caused by changes in the supply of labor.
C) changes in inflationary expectations.
D) changes in aggregate supply.
Q2) According to the natural rate hypothesis:
A) a short-term as well as long-term trade-off exists between unemployment and inflation.
B) economic fluctuations are the result of external negative and positive productivity shocks to the economy
C) workers and consumers incorporate the likely consequences of government policy changes into their expectations by quickly adjusting wages and prices.
D) the economy will self-correct to the natural rate of unemployment.
Q3) Rational expectations theory suggests that government or central bank policies designed to change aggregate demand will be effective.
A)True
B)False
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Chapter 28: International Trade
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182 Verified Questions
182 Flashcards
Source URL: https://quizplus.com/quiz/53317
Sample Questions
Q1) Imposing a quota on metal softball bats shipped into the United States would likely:
A) increase the price of the bats but decrease the total quantity of bats purchased in the United States.
B) increase the price of the bats and the total quantity of bats purchased in the United States.
C) leave the price of the bats unchanged but decrease the quantity purchased in the United States.
D) leave both the price of bats and the quantity purchased in the United States unchanged.
Q2) When a country allows trade and becomes an importer of goods everyone benefits. A)True
B)False
Q3) A nation can gain from international trade when the relative domestic prices of the nation differs from that in other countries,and it imports goods for which it is a high opportunity cost producer.
A)True
B)False
Q4) What is producer surplus? How is it different from consumer surplus?
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30
Chapter 29: International Finance
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138 Verified Questions
138 Flashcards
Source URL: https://quizplus.com/quiz/53318
Sample Questions
Q1) The agreement that established a system of fixed exchange rates immediately following World War II is known as the:
A) IMF agreement.
B) World Bank agreement.
C) Bretton Woods agreement.
D) none of the above.
Q2) If incomes decrease in the United States,Americans will buy more goods,including foreign goods.This increase in demand for foreign goods will cause an increase in the demand for euros.
A)True
B)False
Q3) If a British student pays her way to attend Harvard University,her actions will:
A) create a supply of dollars and a demand for pounds in the foreign currency market.
B) create a supply of pounds and a demand for dollars in the foreign currency market.
C) cause the British pound to appreciate.
D) cause the U.S. dollar to depreciate.
Q4) What factors will shift the supply and demand for currency?
Q5) What are the main arguments presented against flexible exchange rates?
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