Macroeconomics Practice Questions
Course Introduction
Macroeconomics explores the behavior and performance of an entire economy, focusing on aggregate indicators such as GDP, unemployment rates, inflation, and economic growth. The course examines how governments use fiscal and monetary policy tools to stabilize the economy and foster long-term growth. Topics include the measurement of national income, causes and consequences of inflation and unemployment, the role of central banks, international trade and finance, and the impact of government interventions. Through case studies and economic models, students develop analytical skills to understand current economic events and policy debates affecting national and global economies.
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Economics Principles and Applications 6th Edition by
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Page 2
Robert E. Hall
Chapter 1: What Is Economics
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Sample Questions
Q1) Macroeconomics is the study of
A) how wages are determined in a specific labor market
B) how to use the fewest natural resources to produce public goods
C) what is happening in the economy as a whole
D) how consumers and producers interact in individual markets
E) the price and the quantity exchanged in a market
Answer: C
Q2) The ultimate purpose of building an economic model is to
A) challenge college students
B) constrain economic agents
C) predict behavior
D) change behavior
E) prevent behavior
Answer: C
Q3) The opportunity cost of a particular activity is the sum of the benefits that could have been received from all foregone activities.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Scarcity,choice,and Economic Systems
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Sample Questions
Q1) One way to increase economic efficiency in saving lives is to
A) shift resources toward methods with low cost per life saved
B) shift resources toward methods with high cost per life saved
C) allocate more resources to saving lives
D) allocate fewer resources to saving lives
E) move along the production possibilities frontier and increase the number of lives saved
Answer: A
Q2) Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?
A) Molly should specialize in both tasks.
B) Renee should specialize in both tasks.
C) Each woman should specialize in the task in which she has the absolute advantage.
D) Absolute advantage is not an appropriate guide for determining specialization.
E) Neither woman should specialize.
Answer: D
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4
Chapter 2: Scarcity, choice, and Economic Systems: Part A
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Sample Questions
Q1) The demand curve for apples slopes downward
A) because supply and demand are equal in equilibrium
B) since producers supply more when consumers demand more C) because people are assumed to be basically greedy
D) because the law of demand holds in the market for apples
E) because apples are preferred to all other goods
Answer: D
Q2) In Figure 3-8,using the supply and demand curves denoted S<sub>1</sub> and D<sub>2</sub>,respectively,the equilibrium price and quantity are
A) $100 and 50,000
B) $100 and 100,000
C) $150 and 50,000
D) $150 and 75,000
E) $150 and 100,000
Answer: D
Q3) Both the supply and demand curves can shift due to changes in income.
A)True
B)False
Answer: False
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Chapter 4: Working With Supply and Demand
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Questions
Q1) The incidence of an excise tax
A) refers to who really pays it
B) always falls on suppliers
C) is equally divided between demanders and suppliers
D) is determined by the number of demanders
E) is decided by the government when the tax is imposed
Q2) A price floor on corn would have the effect of
A) creating a surplus regardless of the level at which the price floor is set
B) creating a surplus supply when the floor is above the equilibrium price
C) creating a shortage when the price floor is set below the equilibrium price
D) creating a shortage regardless of where the price floor is set
E) ensuring a more equitable distribution of the good among consumers
Q3) If an excise tax is imposed on steak,
A) the government's tax revenue will decrease
B) the government's tax revenue will increase
C) the amount of steak produced and sold will increase
D) the market price of steak will decrease
E) the market price will rise but the market quantity will be unaffected
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Chapter 5: Elasticity
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Sample Questions
Q1) Figure 5-1 shows the prices of two services offered by Earl's Barber Shop and the resulting quantities demanded by customers.In this example,the price elasticity of demand for haircuts (using the midpoint formula)is
A) 1
B) 1.8
C) 3.5
D) 2.25
E) 0.5
Q2) The price elasticity of supply
A) is a number between 0 and 1.
B) measures the percent change in quantity supply as a result of a 1-percent change in price
C) measures the percent change in quantity supplied as a result of a 1-percent change in cost.
D) measures the shift in supply as the result of a price change
E) measures the movement of a supply curve along a fixed demand curve
Q3) An inferior good is defined by an income elasticity less than 1.
A)True
B)False
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Page 7
Chapter 6: Consumer Choice
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Sample Questions
Q1) If a consumer allocates her income between two goods,x and y,then she will be in equilibrium when
A) MU<sub>x</sub>/P<sub>x</sub> = MU<sub>y</sub>/P<sub>y</sub> and she is below her budget constraint
B) MU<sub>x</sub> = MU<sub>y</sub> and she has spent all of her income
C) MU<sub>x</sub>/MU<sub>y</sub> > P<sub>x</sub>/P<sub>y</sub> and all of her income is spent
D) MU<sub>x</sub>/P<sub>x</sub> = MU<sub>y</sub>/P<sub>y</sub> and all of her income is spent
E) MU<sub>x</sub> = MU<sub>y</sub> and she is below her budget constraint
Q2) Economists usually assume that all consumers have the same tastes and preferences.
A)True
B)False
Q3) People sometimes try to limit the options they have available.This
A) is consistent with rational economic behavior.
B) can be explained by behavioral economic analysis
C) explains why demand curves are sometimes vertical
D) violates the assumption of transitive preferences
E) occurs when income and substitution effects cancel out.
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Chapter 7: Production and Cost
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Sample Questions
Q1) If all firms in a market have the same LRATC curve,
A) only one of them can survive in the long run
B) the lowest possible long-run price is determined by LRATC at minimum efficient scale
C) the highest possible long-run price is determined by LRATC at minimum efficient scale
D) minimum efficient scale must be zero
E) there is no minimum efficient scale
Q2) Which of the following is the best example of a variable cost?
A) property taxes
B) lease payments for equipment rental
C) rent on office space
D) wages for hourly workers
E) interest on outstanding loans
Q3) If the marginal product of labor falls,the marginal cost of output
A) declines,then increases
B) becomes negative
C) rises
D) remains constant
E) falls
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Page 9
Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) Which of the following determines the maximum price a firm may charge for a particular quantity of output?
A) the firm's supply curve
B) opportunity costs
C) explicit and implicit costs of production
D) the minimum point of the average total cost curve
E) the demand curve facing the firm
Q2) The two important contributions of entrepreneurs are
A) innovation and independent wealth
B) good management skills and honesty
C) risk taking and honesty
D) good management skills and independent wealth
E) innovation and risk taking
Q3) The change in total profit when a firm increases its output by one unit equals
A) total revenue minus total cost
B) total revenue minus marginal revenue
C) marginal revenue minus marginal cost
D) total revenue minus marginal cost
E) marginal revenue plus marginal cost
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Page 10
Chapter 9: Perfect Competition
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Sample Questions
Q1) In a perfectly competitive market,transient economic profit can be earned by
A) the firms that hire the most employees
B) the last firm to enter the market
C) those firms that supply low-income neighborhoods
D) the first firm to adopt a new technological advance
E) those firms that use the most capital-intensive methods of production
Q2) A firm in a perfectly competitive market faces a demand curve that is
A) perfectly elastic.
B) relatively elastic.
C) perfectly inelastic.
D) relatively inelastic.
Q3) If the perfectly competitive firm pictured in Figure 9-20 is maximizing profits,it is currently selling output at a price of
A) $0.
B) $5.
C) $7.
D) $10.
Q4) In a perfectly competitive market,a new firm can enter without any cost.
A)True
B)False
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Chapter 9: Perfect Competition: Part A
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Sample Questions
Q1) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
Q2) In perfect competition,technological advances will allow economic profits for
A) all firms.
B) only the firm developing the new technology.
C) early adopters.
D) none of the firms,as the advance will be immediately adopted by all of them.
Q3) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q4) Which of the following is not a characteristic of a perfectly competitive market
A) buyers and sellers are well informed about the market
B) standardized product
C) many buyers and few sellers
D) easy exit out of the industry
E) easy entry into the industry
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Chapter 10: Monopoly
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Sample Questions
Q1) All of the following are forms of price discrimination,except one.Which is the exception?
A) cents-off coupons for use at the grocery store
B) different prices for movie tickets for children and adults
C) making airline reservations 30 days in advance and receiving a lower rate
D) different prices for prescription drugs for senior citizens and others
E) different prices for "2nd day delivery" and "next day air delivery"
Q2) A patent
A) tends to discourage further innovation,since there are no other competitors to "push" the patentee
B) prevents anyone else from buying the same discovery or product for twenty years
C) grants exclusive rights over the protected firm for at least fifty years
D) is an infringement against an exclusive business right
E) prevents anyone else from selling the same discovery or product for twenty years
Q3) A monopolist can choose a price & quantity combination that is above the demand schedule.
A)True
B)False
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13
Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) In the long run,a monopolistic competitor will
A) always produce at minimum efficient scale
B) produce too little output to achieve minimum cost per unit
C) use limit pricing to forestall competition
D) earn economic profits
E) standardize its product
Q2) In the long run,equilibrium for a monopolistically competitive firm resembles equilibrium for a monopoly in the sense that
A) both types of firms are able to earn economic profits
B) marginal cost exceeds marginal revenue
C) price equals marginal cost
D) price exceeds marginal cost
E) average revenue exceeds price
Q3) Which of the following is an example of a cartel?
A) AFL-CIO
B) OPEC
C) United Auto Workers Union
D) NATO
E) Organization of American States
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Page 14
Chapter 12: Labor Markets
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Sample Questions
Q1) As applied to labor demand,the marginal approach to profit
A) is irrelevant
B) requires setting marginal cost equal to the wage rate
C) requires setting marginal revenue equal to the wage rate
D) says that a firm should increase employment if doing so adds more to revenue than it adds to cost
E) says that a firm should decrease employment if doing so adds more to cost than it adds to revenue
Q2) The marginal revenue product of labor
A) increases as more labor is hired
B) is independent of the quantities of other inputs used by the firm
C) is measured while varying the amounts of all inputs used by the firm
D) is independent of the price of the firm's output
E) depends on the quantities of other inputs used by the firm
Q3) In factor markets,firms __________ and households ____________.
A) demand resources;supply resources
B) supply resources;demand resources
C) demand resources;demand goods
D) supply resources;demand goods
E) supply resources;supply goods
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Chapter 12: labor Markets: Part A
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Sample Questions
Q1) Men and women in a particular industry are equally qualified.If one employer has a preference for male employees,then in the long run
A) men will receive higher wages
B) women will receive higher wages
C) there will be no wage differential between men and women
D) comparable worth laws would create wage differentials between men and women
E) the demand for male employees will decrease
Q2) Figure 12-2 depicts labor demand and supply in a nonunionized labor market.The original equilibrium is at point A.If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20,then
A) the labor supply curve and the labor demand curve will shift leftward by equivalent amounts
B) there will be an excess supply of 3,000 workers
C) there will be an excess demand of 7,000 workers
D) there will be an excess supply of 4,000 workers
E) there will be an excess supply of 7,000 workers
Q3) More enjoyable professions tend to enjoy compensating wage differentials.
A)True
B)False
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Page 16
Chapter 13: Capital and Financial Markets
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Sample Questions
Q1) Agrophonic.com has issued 80 million shares of stock.You own 5 million of them.You also own Agrophonic.com bonds with a present value of $1 million.What percentage of Agrophonic.com do you own?
A) zero
B) 7.1%
C) 6.3%
D) 5.9%
E) 4.7%
Q2) The efficient markets theory of stock prices,says that new information
A) is quickly and completely incorporated into stock prices
B) is incorporated into stock prices only when discovered by fundamental analysis
C) causes stock prices to increase
D) has little impact on stock prices
E) is incorporated into stock prices with a time lag of a few days
Q3) The supply curve for a particular bond is vertical.
A)True B)False
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Chapter 14: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) If the market supply curve is perfectly elastic and an excise tax is imposed,
A) all of the tax is paid by buyers
B) all of the tax is paid by sellers
C) the tax burden is divided equally between buyers and sellers
D) the market price will not change
E) the market price will fall by the amount of the tax
Q2) Pareto improvements that require the use of side payments typically are easy to coordinate and tend to enhance economic efficiency.
A)True
B)False
Q3) Total net benefits gained in a market
A) minus any side payments equals total revenue from producing the good (or,equivalently,total expenditure on the good)
B) is the sum of producer and consumer surplus in that market
C) is the difference between consumer surplus and producer surplus in that market
D) are maximized when the market price equals zero
E) always exceeds the sum of total expenditure on the good and the total cost of providing it
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Chapter 15: Governments Role in Economic Efficiency
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Sample Questions
Q1) Suppose that Pat has the legal right to fly an extremely noisy airplane over Chris's apartment and that he values that right at $1,000 per year.Chris would be willing to pay $1,200 per year to avoid the noise.In that case
A) Pat will be required to eliminate the overflight
B) Chris will move to a new apartment
C) Pat and Chris have a powerful incentive to agree to eliminate the overflight because both would benefit from it
D) some governmental agency will step in to require Pat to choose a different flight pattern
E) some governmental agency will require Chris to move to a new apartment
Q2) If a firm is not forced to take account of a negative externality it creates,it will produce the quantity at which
A) the marginal cost of production equals the marginal private benefit
B) the marginal cost of production equals the marginal social benefit
C) the marginal social cost of production the equals marginal private benefit
D) the marginal social cost of production equals the marginal social benefit
E) price equals marginal social benefit
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Page 19
Chapter 16: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) A nation's comparative advantage
A) can almost always be traced to its natural resources
B) is often based on its natural resources
C) is often based on barriers to international trade
D) is reflected in the shape of its demand curve for imported goods
E) is a result of increasing marginal returns
Q2) For each watch Switzerland produces,it gives up the opportunity to produce 50 pounds of cheese.Germany can produce one watch at a cost of 100 pounds of cheese.Which of the following is true?
A) The opportunity cost of producing watches is lower in Switzerland.
B) The opportunity cost of producing cheese is lower in Switzerland.
C) The opportunity cost of producing watches is the same in both countries.
D) It is impossible to compare costs because the two countries are not the same size.
E) In Germany,the cost of a pound of cheese is one watch.
Q3) A high-wage country cannot afford free trade with a low-wage country.The highwage country will either be undersold or its workers will be forced to accept lower living standards.
A)True
B)False
Page 20
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Chapter 17: What Macroeconomics Tries to Explain
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Sample Questions
Q1) Which of the following is not an important macroeconomic goal?
A) Stable prices
B) Full employment
C) Rapid economic growth
D) Low interest rates
E) None of the above is an important macroeconomic goal
Q2) How many times in the last 80 years has the official unemployment rate in the United States reached 0 percent?
A) 0
B) 1
C) 2
D) 3
E) 4
Q3) The group of economists who believed that the macroeconomy worked very well on its own were
A) microeconomists
B) macroeconomists
C) classical economists
D) Keynesian economists
E) Marxist economists
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Chapter 18: Production, income, and Employment
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Sample Questions
Q1) Suppose GDP for 2009 was $1,500,wages and salaries were $800,rent payments were $200,consumption was $1000,and interest payments were $200.What must the value of profits have been?
A) $200
B) $500
C) $0
D) $100
E) $300
Q2) Which of the following would be classified as private investment?
A) An individual's purchase of a used car
B) A family's purchase of groceries
C) An individual's purchase of a General Electric bond
D) A family's purchase of a newly built home
E) A family's purchase of a new car
Q3) An example of a service counted in this year's GDP is
A) buying shampoo to give your pet a bath
B) cleaning your house
C) trimming your own hair
D) hiring a gardener to weed your garden
E) polishing your friend's car as a friendly gesture
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Chapter 19: The Price Level and Inflation
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Sample Questions
Q1) Parvez is trying to decide whether or not he should lend $1,000 to Eli for a year.Eli would pay a fixed nominal interest rate of 8 percent.Parvez expects the inflation rate to be 4 percent for the year.If he does not lend the $1,000 to Eli,Parvez will purchase an indexed savings bond that pays an interest rate of 4 percent,or he will put the money in a (nonindexed)savings account earning 6 percent.Parvez
A) will earn 4 percent in real terms if he loans Eli the money,0 percent in real terms if he buys the bond,and 6 percent in real terms if he puts the money into a savings account
B) is better off holding his money as cash
C) is indifferent between lending the money to Eli and buying the bond because the real interest rate is the same in either case
D) should purchase the bond because it earns the highest real rate of interest
E) earns the highest real rate of interest if he puts his $1,000 into a savings account
Q2) Whenever prices are rising,the inflation rate is rising.
A)True B)False
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Chapter 20: The Classical Long-Run Model
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Sample Questions
Q1) Investment spending is inversely related to the interest rate.
A)True
B)False
Q2) Crowding out refers to a(n)
A) decrease in the amount of goods produced after too many goods have crowded onto the market
B) business tactic used to steal a competitor's customers
C) increase in one sector's spending caused by an increase in another sector's spending
D) decrease in the price level after too many goods have crowded onto the market
E) decline in one sector's spending caused by an increase in another sector's spending
Q3) Refer to Figure 8-4.Based on these graphs,what is the total quantity of loanable funds demanded at an interest rate of 5 percent?
A) $0.8 trillion
B) $1.0 trillion
C) $1.4 trillion
D) $1.8 trillion
E) $2.2 trillion
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24
Chapter 20: Part A: The Classical Model in an Open Economy
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Sample Questions
Q1) In the classical model with an open economy,an increase in government purchases can affect a country's exchange rate,causing its imports and exports to change.
A)True
B)False
Q2) In the classical model with an open economy,an increase in government purchases may not cause complete crowding out,but crowding out will be complete worldwide.
A)True
B)False
Q3) In the classical model,when an open economy has balanced trade,Say's law does not hold.
A)True
B)False
Q4) Which of the following is a leakage in an open economy?
A) Planned investment
B) Imports
C) Exports
D) Government purchases
E) Money
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Chapter 21: Economic Growth and Rising Living Standards
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Sample Questions
Q1) An increase in human capital would lead to
A) a decrease in the standard of living
B) an upward shift of the production function
C) a decrease in productivity
D) cutbacks in government skill-training programs
E) a decrease of the capital stock
Q2) If the labor demand decreases,what will happen to the real wage,employment,and output,assuming no change in the labor supply?
A) The real wage will increase,employment will decrease,and real output will increase.
B) The real wage will decrease,employment will decrease,and real output will increase.
C) The real wage will increase,employment will decrease,and real output will decrease.
D) The real wage will increase,employment will increase,and real output will increase.
E) The real wage will decrease,employment will decrease,and real output will decrease.
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Chapter 22: Economic Fluctuations
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Sample Questions
Q1) Half of American recessions since the early 1950s have been caused at least in part by rapid increases in oil prices.
A)True
B)False
Q2) Which of the following shocks could trigger an expansion?
A) A large cut-back in military spending.
B) A large increase in the price of oil.
C) A sudden decrease in consumption.
D) A large military buildup.
E) A sudden decrease in investment.
Q3) In the classical model,an increasing demand for labor will
A) cause an expansion with higher employment and a higher real wage.
B) cause a shortage of labor because the labor market always clears.
C) cause a recession with lower employment and a lower real wage.
D) cause a recession because wages are fixed in the short run.
E) cause an expansion with lower employment and a higher real wage.
Q4) The assumption that labor markets clear makes it very easy for the classical model to explain recessions.
A)True
B)False
Page 27
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Chapter 23: The Short-Run Macro Model
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Sample Questions
Q1) Suppose a $30 billion increase in government purchases increased GDP by $120 billion,what is the value of the MPC?
A) 4.00
B) 0.75
C) 0.25
D) 0.50
E) 0.33
Q2) If the interest rate increased,which of the following would occur?
A) Nothing would occur.
B) The consumption-income line would shift downward.
C) The consumption-income line would shifts upward.
D) There would be an rightward movement along the consumption-income line.
E) There would be a leftward movement along the consumption-income line.
Q3) In the short-run macro model,planned investment is defined as
A) plant and equipment purchases by business firms plus inventory changes
B) plant and equipment purchases by business firms plus new home construction
C) plant and equipment purchases by business firms
D) new home construction plus inventory changes
E) inventory changes
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Page 28
Chapter 24: Fiscal Policy
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Sample Questions
Q1) When the U.S.government runs a deficit,it usually does the following:
A) It buys government bonds from the public
B) It asks the Treasury Department to print money to pay for the deficit
C) It sells new government bonds to the public
D) It borrows money directly from the Federal Reserve
E) It asks the Federal Reserve to print money to pay for the deficit
Q2) As long as debt grows by the same percentage as nominal GDP,the debt-to-GDP ratio will stay constant but the interest payments-to-GDP ratio will increase.
A)True
B)False
Q3) A key tool of countercyclical fiscal policy is
A) the interest rate
B) the federal funds rate
C) the tax code
D) the regulatory code
E) Presidential executive orders
Q4) To judge the size of government debts and deficits,we should use real values.
A)True
B)False
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Chapter 25: Money,banks,and the Federal Reserve
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242 Flashcards
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Sample Questions
Q1) When a bank needs to increase its reserves,it will
A) call in all its loans
B) stop paying interest on its saving accounts
C) borrow money from the government
D) call in a loan or reduce new lending
E) increase the number of loans it makes
Q2) The Federal Reserve Open Market Committee allows representatives of the President and Congress to sit on its meetings.
A)True
B)False
Q3) The Federal Open Market Committee is important because A) its deliberations are extremely private
B) it sets the course for the nation's money supply
C) it is composed of people who are most knowledgeable about the economy
D) it discusses unemployment and inflation
E) of its influence on fiscal policy
Q4) Banks are not allowed to hold reserves in excess of those required by law.
A)True
B)False
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Chapter 26: The Money Market and Monetary Policy
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146 Flashcards
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Sample Questions
Q1) The secondary market for bonds is
A) where new issues of bonds are purchased
B) of less importance to our economy than is the primary market
C) of less importance to our economy than the stock market
D) where bonds that were issued in previous periods are purchased
E) a key determinant of the money supply
Q2) Equilibrium in the money market means that the quantity of money people are holding equals
A) their entire wealth
B) their entire income
C) the quantity of money that they want to hold
D) the money supply
E) the value of bonds in their financial portfolios
Q3) Which of the following is the opportunity cost of money?
A) The use of money as a means of payment
B) The trouble of having to get money out of the bank
C) The interest forgone by holding money
D) The ability to purchase things at a moment's notice
E) Commissions paid to brokers
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Chapter 26: Feedback Effects From GDP to the Money
Market
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Sample Questions
Q1) If autonomous consumption decreases,which of the following is the most likely effect in the short run?
A) a decrease in output,an increase in money demand,and an increase in the interest rate
B) an increase in output,a decrease in money demand,and a decrease in the interest rate
C) a decrease in output,a decrease in money demand,and a decrease in the interest rate
D) an increase in output,an increase in money demand,and a decrease in the interest rate
E) an increase in output,an increase in money demand,and an increase in the interest rate
Q2) In the long run,the crowding-out effect of an increase in government purchases is A) more complete than in the short run
B) canceled out by increases in infrastructure spending
C) less complete than in the short run
D) canceled out by improved consumer confidence
E) a multiple of the initial change in spending
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Chapter 27: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Refer to Figure 15-2.If the economy is initially at equilibrium at $7 trillion,what is the least likely cause of the shift of the aggregate expenditure line from AE<sub>1 </sub>to AE<sub>2</sub>,and the shift of the aggregate demand curve from AD<sub>1</sub> to AD<sub>2</sub>?
A) An increase in government purchases
B) A decrease in taxes
C) An increase in autonomous consumption
D) An increase in the money supply
E) A decrease in the price level
Q2) A decrease in the price level will reduce business confidence and cause a decrease in equilibrium GDP.
A)True
B)False
Q3) The economy's self-correcting mechanism is such that demand shocks are offset in the long run by shifts of aggregate supply and supply shocks are offset by shifts of aggregate demand.
A)True
B)False
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33
Chapter 28: Inflation and Monetary Policy
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Sample Questions
Q1) The outcome of monetary policy can never be certain because
A) unemployment is always changing
B) the concept of a natural rate of unemployment is still not accepted by all policy makers
C) the slope of the AS curve is never clear
D) time lags disrupt policy planning
E) the natural rate of unemployment lags behind the actual rate of unemployment
Q2) The Federal Reserve has been quite successful in keeping the inflation rate low for the past 20 years.
A)True
B)False
Q3) If money demand falls on its own (i.e. ,not in response to a spending shock),what must the Fed do to stabilize GDP?
A) Increase the money supply
B) Decrease the money supply
C) Leave the money supply and money demand unchanged
D) Increase money demand
E) Decrease money demand
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34
Chapter 29: Exchange Rates and Macroeconomic Policy
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Sample Questions
Q1) The hard-landing scenario begins with A) a US recession.
B) a decline in foreign demand for US assets.
C) an increase in foreign demand for dollars.
D) an increase in foreign demand for assets.
E) a US expansion.
Q2) Which of the following would lead to a decrease of the U.S.demand for euros?
A) A decrease in the U.S.interest rate,with no change in the European interest rate
B) An increase in U.S.GDP
C) Resurgence of interest in European precision tools
D) Expectations of a rise in the dollar price of the euro
E) A sudden increase in anti- European sentiment.
Q3) If we know that the exchange rate is $1.60 per pound then the exchange rate of pounds per dollar is
A) greater than 1.60
B) 0.80
C) 1.00
D) 0.625
E) 1.60
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Page 35
Chapter 30: Appendix-finding Equilibrium GDP
Algebraically
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Sample Questions
Q1) If autonomous consumption is $1,000,the MPC is 0.75,net taxes are $500,investment spending is $800,and government purchases equals $500,and NX = $0,what is equilibrium GDP?
A) $1,800
B) $1,925
C) $2,566.7
D) $7,200
E) $7,700
Q2) If autonomous consumption is $5,000,the MPC is 0.7,net taxes are $2,000,investment spending is $4,000,and government purchases equal $2,500,and NX = $0,what is equilibrium GDP?
A) $14,428.6
B) $33,666.7
C) $40,800
D) $43,000
E) $45,000
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36
Chapter 31: Appendix: Capital and Leverage
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Sample Questions
Q1) Deleveraging is the process of reducing leverage,and therefore increasing the risk to capital from any further declines in asset prices.
A)True
B)False
Q2) One way to decrease leverage is increasing capital.
A)True
B)False
Q3) It was the rapid and system-wide deleveraging that contributed to the downward spiral of the 2008 financial crisis.
A)True
B)False
Q4) Deleveraging is the process of reducing leverage,and therefore reducing the risk to capital from any further declines in asset prices.
A)True
B)False
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