Macroeconomics
Test Preparation
Course Introduction
Macroeconomics is the branch of economics that examines the behavior, structure, and performance of an economy as a whole, rather than individual markets. This course covers essential topics such as gross domestic product (GDP), inflation, unemployment, economic growth, fiscal and monetary policy, and international trade. Through the analysis of aggregate economic indicators and government policy tools, students will gain a deeper understanding of how national and global economies function and interact, preparing them to interpret current economic events and assess their effects on society.
Recommended Textbook
Macroeconomics Understanding the Global Economy 3rd Edition by David Miles
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21 Chapters
704 Verified Questions
704 Flashcards
Source URL: https://quizplus.com/study-set/3145
Page 2
Chapter 1: What Is Macroeconomics
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) Which of the following is probably the least relevant to a country's growth rate?
A) infrastructure such as roads or computer networks
B) the education of the workforce
C) new technological inventions
D) legal restrictions on capital mobility and investment
E) short-term interest rates
Answer: E
Q2) A general definition of economics is the study of A) money
B) the allocation of resources
C) the distribution of income
D) the production of goods
E) the role of government in society
Answer: B
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Chapter 2: The Language of Macroeconomicsthe National
Income Accounts
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Using chain-weighted prices with year one as the base year,real GDP in years one,two,and three respectively was
A) 5000, 6428, 6299
B) 5000, 6700, 7200
C) 6000, 6800, 7400
D) 6320, 8900, 8800
E) 6083, 8070, 7909
Answer: A
Q2) Nominal GDP in the three years is
A) 300 in year one, 370 in year two, and 360 in year three
B) 2500 in year one, 3700 in year two, and 4400 in year three
C) 6000 in year one, 7500 in year two, and 9000 in year three
D)5000 in year one, 7400 i n year two, and 8800 in year three
E) 40 in year one, 40 in year two, and 50 in year three
Answer: D
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Chapter 3: The Wealth of Nationsthe Supply Side
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32 Verified Questions
32 Flashcards
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Sample Questions
Q1) Consider an economy with a Cobb-Douglas production function in which capital and labor receive equal shares of national income and labor input is constant. If the capital stock grows by 2% and output grows by 4%,then the most likely explanation is
A) the marginal product of labor is increasing
B) the production function exhibits decreasing returns to scale
C) total factor productivity has increased by 3%
D) TFP has grown by 2%
E) There is a 2% change in the capital account balance
Answer: C
Q2) The "business cycle" refers to which of the following?
A) the long run trend in GDP
B) seasonal changes in output from spring to summer to autumn to winter
C) alternating periods of recession and expansion
Answer: C
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Chapter 4: Capital Accumulation and Economic Growth
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35 Verified Questions
35 Flashcards
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Sample Questions
Q1) Which of the following does not directly affect the optimal level of investment?
A) interest rates
B) the cost of capital
C) the marginal product of capital
D) the price of output
E) the price of imports
Q2) In this economy,the steady-state capital stock is
A) 1,000
B) 10,000
C) 20,000
D) 40,000
E) 50,000
Q3) The best long run growth strategy for developing economies is probably
A) the same as for mature industrial economies
B) to increase the rate of population growth
C) to export raw materials and import finished goods
D) to shift resources into research and development of new technologies
E) to increase the capital stock
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6
Chapter 5: Total Factor Productivity, human Capital, and Technology
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Rent-seeking differs from entrepreneurship in that rent-seeking
A) is conducted for profit; entrepreneurship is not B) involves risk taking; entrepreneurship does not C) is a zero-sum game; entrepreneurship is not D) involves innovations; entrepreneurship does not E) is illegal; entrepreneurship is not
Q2) An increase in TFP
A) steepens the aggregate supply curve
B) shifts the aggregate supply curve upward
C) shifts the production function upward
D) increases the rate of depreciation
E) cannot occur once a steady state has been achieved
Q3) The historically slow development of the Chinese economy may be attributable to A) geographical constraints
B) it large markets
C) rent-seeking
D) the size of the labor force
E) lack of usable natural resources
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Chapter 6: Endogenous Growth and Convergence
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) If the economy's production function is given by Output = A(physical capital)<sup>.3</sup>(human capital)<sup>.7</sup>(hours worked)<sup>.7</sup>
And human capital investments are such that human capital = ½ physical capital,then
A) the marginal product of capital is constant
B) the marginal product of hours worked is increasing
C) the marginal product of human capital is increasing
D) the marginal product of labor (human capital multiplied by hours) is constant
E) the marginal product of output is falling
Q2) Which of the following is not associated with ethno-linguistic diversity?
A) rent-seeking behavior
B) black market transactions
C) weak financial development
D) weak infrastructure
E) the Dutch disease
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Chapter 7: Unemployment and the Labor Market
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32 Verified Questions
32 Flashcards
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Sample Questions
Q1) Which of the following is not typically true of Employment Protection Legislation (EPL)?
A) countries with strong EPL have low unemployment rates
B) EPL reduces part-time work and labor force participation rates
C) EPL reduces the layoff rate
D) EPL reduces the duration of unemployment
E) EPL benefits the employed at the expense of the unemployed
Q2) Which of the following is the least likely to influence the natural rate of unemployment?
A) monopolies in the goods market
B) labor unions
C) payroll taxes
D) unemployment insurance benefits
E) monetary policy
Q3) In the 1990s the Netherlands reduced its unemployment rate by
A) reducing union density and coverage
B) cutting payroll taxes
C) reducing the unemployment insurance replacement rate
D) using active labor market expenditures and coordination
E) all of the above
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Chapter 8: International Trade
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32 Verified Questions
32 Flashcards
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Sample Questions
Q1) The Stopler-Samuelson Theory suggests that
A) Owners of capital tend to gain from trade
B) Countries will have a comparative advantage in goods produced using factors in which the country is abundant
C) Trade increase the real incomes of owners of the abundant factor of production relative to those of the owners of the scarce factor
D) Commodity prices tend to fall relative to the price of manufactured goods
E) Tariff protection can benefit a country which is large enough to influence the world price of traded goods
F) Mexico
Q2) The central prediction of the Hecksher-Ohlin theorem is that
A) international goods prices equalize under foreign trade
B) comparative advantages depend on the abundance of factor inputs
C) international trade disperses technology, speeding convergence
D) all nations move beyond their production possibilities sets with free trade
E) exchange rates adjust to ensure purchasing power parity
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Chapter 9: Globalization
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Which of the following is not alleged to be a problem associated with globalization?
A) environmental degradation
B) inefficient production
C) loss of national sovereignty
D) loss of job security
E) inequitable income redistribution
Q2) Which of the following has not been proposed as a rationale for promoting import substitution?
A) The Prebisch-Singer hypothesis
B) The belief that technological progress occurs mainly in manufacturing
C) The infant industry argument
D) The idea that imports can be a source of TFP growth
E) The fear that reliance on imports makes the economy vulnerable to external forces
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11
Chapter 10: Consumption Investment
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67 Verified Questions
67 Flashcards
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Sample Questions
Q1) The equilibrium level of national income is
A) 15,000
B) 13,500
C) 1,500
D) 5,000
E) 4,500
Q2) This firm should
A) divest itself of some of its capital
B) issue more stock
C) continue to operate as it is
D) invest in new plant and equipment
E) issue bonds
Q3) If current income rises to 363 and consumption is smoothed across periods,then consumption in each period becomes
A) 326.7
B) 363
C) 399.3
D) 350
E) 371
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Page 12
Chapter 11: Business Cycles
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) Strategic complementarity refers to
A) two trade partners producing goods in which they have the greatest relative efficiency, and sharing the benefits through trade
B) the increase in demand for one good when the price of another good falls
C) a market failure in which individual decisions are not coordinated
D) the relationship between capital and labor during a business cycle
E) government subsidies for investment
Q2) Internationally,recessions
A) are likely to begin in the smallest economies and spread to larger ones
B) are isolated events, uncorrelated across countries
C) in one region mean that world demand has shifted elsewhere, so other countries do not fall prey to downturns at the same time
D) are especially contagious among trade partners
E) are most pronounced among Socialist countries
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13
Chapter 12: Money and Prices
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) The stagflation of the 1970s is generally attributed to A) the Cold War arms race
B) the introduction of large-scale computer systems into business
C) the opening of US markets to Japanese automobiles
D) increases in oil prices
E) changing cultural values regarding work and leisure
Q2) Which of the following is an assumption used by monetarists in establishing the quantity theory of money?
A) real GDP is equal to the multiplicative product of the money supply and the price level
B) the velocity of money is constant
C) households exhibit rational expectations
D) households exhibit money illusion
E) all of the above
Q3) In the 1970s when US President Richard M.Nixon ended the gold standard,
A) barter became the predominant method of transacting business
B) silver took the place of gold
C) hyperinflation occurred
D) he created a pure fiat money
E) a run on banks ensued
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Chapter 13: Monetary Policy
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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) Which of the following is not a valid reason for adopting inflation targeting?
A) policy rules are often too restrictive
B) discretionary policy can reduce credibility
C) constrained discretion operates with excessive lags
D) inflation targeting provides flexibility for dealing with shocks
E) inflation targeting examines trends in several variables, whereas policy rules use limited information
Q2) According to the simple Quantity Theory of Money,if velocity is constant and real GDP grows by 2% per year,then money supply growth of 3% per year generates
A) an interest rate of 1%
B) an inflation rate of 1%
C) an unemployment rate of 1%
D) an exchange rate of 1%
E) an output gap of 1%
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Chapter 14: Fiscal Policy and the Role of Government
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Balancing the government's budget each year would
A) allow tax rates to remain constant from year to year
B) reduce uncertainty over future tax rates and net income
C) exacerbate recessions
D) stabilize short run GDP
E) generate smaller economic distortions than a policy of countercyclical deficits and surpluses
Q2) When government runs a budget deficit,
A) interest rates decline
B) tax revenues exceed public expenditures
C) the national debt increases
D) inflation rates decline
E) the outstanding stock of government bonds is reduced
Q3) With a tax of $12,hours of work become
A) H = 8
B) H = 9
C) H = 10
D) H = 11
E) H = 12
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Page 16
Chapter 15: Stabilization Policy
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37 Flashcards
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Sample Questions
Q1) Central bank independence
A) allows the central bank to pursue full employment policies without regard to inflation
B) shortens the information lag associated with monetary policy
C) prevents the central bank from having any significant impact on economic variables
D) removes the central bank from political influence and the government's inflationary bias
E) is a myth, since Federal Reserve chairmen have historically done the bidding of American presidents
Q2) If consumers expect an inflation rate of .06,the natural rate of unemployment is .05,and the actual unemployment rate is .07,then the actual inflation rate is
A) .02
B) .04
C) .06
D) .08
E) .10
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Chapter 16: Financial Markets: Equities and Bonds
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51 Verified Questions
51 Flashcards
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Sample Questions
Q1) Suppose the dividend yield is currently 5%. If annualized short term nominal interest rates are 6%,expected inflation is 1% per year,and the equity risk premium is 3%,then annual dividend growth is expected to be
A) 1%
B) 2%
C) 3%
D) 4%
E) 5%
Q2) Which of the following may help to explain the equity premium puzzle?
A) sample selection bias
B) self-fulfilling prophecies
C) mismeasured rates of return
D) risk neutrality, or indifference to risk
E) none of the above
Q3) The stock is currently
A) undervalued by 10%
B) undervalued by 20%
C) overvalued by 10%
D) overvalued by 15%
E) overvalued by 20%
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Chapter 17: The Banking Sector
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Shareholders in a bank may encourage excessive risk taking by the bank because
A) shareholders are generally risk neutral
B) shareholders are generally risk averse
C) shareholders are generally risk loving
D) limited liability means that shareholder losses are limited
E) limited liability means that shareholder gains are limited
Q2) A bank is said to be highly leveraged if
A) it has made a large number of risky loans
B) it is highly dependent on the interbank market for funding
C) its assets are very large in relation to its equity
D) its assets are very large in relation to its deposits
E) it liabilities are very large
Q3) Generally speaking the maturity mismatch of banks is due to
A) having short term liabilities and long term assets
B) having long term liabilities and short term assets
C) liabilities that pay a fixed rate of interest and assets that pay a variable rate
D) depositors that are willing to keep their money in the bank for many years whilst loans are often short term
E) all of the above
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Page 19
Chapter 18: Sovereign Debt and Default
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25 Verified Questions
25 Flashcards
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Sample Questions
Q1) The tendency for developing countries to be forced into default at surprisingly low levels of debt is called
A) The Debt Relief Laffer Curve
B) Original Sin
C) Serial Default
D) Debt Intolerance
E) Sovereign Default
Q2) Debt forgiveness may benefit the lender because
A) They may receive a larger payment on remaining debt as a result for faster economic growth of the borrower
B) They will gain a reputation for forgiving debt
C) They in turn may be forgiven their debt in future
D) They can charge a higher interest rate on future borrowing
E) The IMF or World Bank will reimburse them
Q3) The debt relief Laffer curve implies that
A) Expected debt repayments always rise with the level of debt
B) Expected debt repayments always fall with the level of debt
C) Expected debt repayments first rise and then fall with the level of debt
D) Expected debt repayments first fall and then rise with the level of debt
E) Expected debt repayments and the level of debt are unrelated
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Chapter 19: Exchange Rate Determination I the Real
Exchange Rate
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42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/62274
Sample Questions
Q1) A country's current account does not include
A) income repatriated from operations overseas
B) foreign direct investment
C) net transfers from abroad
D) net exports of services
E) net exports of goods
Q2) Which of the following would be subtracted from Italy's financial account?
A) Ford Motor Company builds a factory in Rome
B) 1.2 million Ford autos are imported by Italy
C) an Italian bank buys $0.5 million in Ford Motor Co. bonds
D) Ford opens a Eurodollar account at an Italian bank
E) Ford repatriates $1 million in profits to the US from its Italian operations
Q3) Which of the following does not explain why the law of one price fails?
A) products have different standard sizes and features in different countries
B) transporting a good to a distant market raises its cost
C) goods imported across borders are often subject to tariffs
D) nominal exchange rates do not change as often as product prices
E) firms may set prices to be competitive in local markets regardless of production and distribution costs
Page 21
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Chapter 20: Exchange Rate Determination Iinominal
Exchange Rates and Asset Markets
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24 Verified Questions
24 Flashcards
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Sample Questions
Q1) Assuming no inflation and no interest rate changes abroad,which of the following would leave the spot market exchange rate essentially unchanged?
A) an increase in nominal interest rates from 4% to 5% when inflation is expected to rise from 0% to 1%
B) an increase in nominal interest rates from 6% to 8% when the consumer price index is expected to rise from 206 to 208
C) a reduction in nominal interest rates from 7% to 4% when the inflation rate is expected to be 3%
D) a decrease in bond prices by 1% when deflation of 1% is expected
E) a reduction of interest rates from 5% to 3% when the consumer price index is expected to rise from 103 to 105
Q2) The difference between the number of market participants seeking to buy a currency and the number seeking to sell it is called
A) a currency crisis
B) the market shortage
C) order flow
D) uncovered interest parity
E) the forward premium
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Chapter 21: Currency Crises and Exchange Rate Systems
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) When a country experiences a currency crisis,the IMF
A) provides loans and grants to the government to purchase and distribute food and other necessities
B) purchases the country's currency, to signal international confidence in the currency
C) lends foreign reserves to the country's central bank
D) makes loans to public and private institutions within the country on a long term basis with relatively few restrictions
E) lends funds to neighboring countries, which can then purchase exports from the country experiencing the crisis
Q2) A resource-based Sovereign Wealth Funds can benefit a nation by
A) Converting a temporary resource windfall into a longer term income stream
B) Mitigating the 'Dutch disease'
C) Investing the proceeds of persistent FX buying by the Central Bank
D) Both a) and b)
E) Stabilizing the price of the natural resource
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