Macroeconomics
Test Questions
Course Introduction
Macroeconomics is a foundational course that explores the behavior and performance of an economy as a whole. It examines key aggregate indicators such as GDP, inflation, unemployment, and national income, as well as the roles played by government fiscal and monetary policies. Students will analyze economic growth, business cycles, investment, and consumption patterns, while also considering international trade and finance. By understanding these macroeconomic principles, students develop the tools necessary to interpret economic trends, evaluate policy decisions, and appreciate the broader impacts of economic events on societies and markets.
Recommended Textbook
Exploring Economics 6th Edition by Robert L. Sexton
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4557 Verified Questions
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Page 2
Chapter 1: The Role and Method of Economics
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Sample Questions
Q1) Economics is the study of how people cope with:
A) fluctuations in stock prices.
B) greed.
C) limited human wants.
D) limited resources.
Answer: D
Q2) Macroeconomic topics do not usually include:
A) the rate of inflation.
B) the rate of unemployment.
C) economic growth.
D) the profit maximizing decisions of an individual manufacturer.
Answer: D
Q3) Economists need to develop abstractions in order to:
A) avoid analyzing real-world economic interactions, which are too complicated to understand.
B) distinguish normative economic behavior from positive economic behavior.
C) avoid committing the fallacy of composition.
D) understand and explain economic behavior.
Answer: D
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Page 3
Chapter 2: Economics: Eight Powerful Ideas
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Sample Questions
Q1) Differentiate between positive and negative incentives.
Answer: Positive incentives either increase benefits or reduce costs and thus result in an increased level of the related activity or behavior.Negative incentives either reduce benefits or increase costs,resulting in a decreased level of the related activity or behavior.
Q2) The expression,"There's no such thing as a free lunch" implies that:
A) everyone has to pay for his/her own lunch.
B) the person consuming a good must always pay for it.
C) costs are incurred when resources are used to produce goods and services.
D) no one has time for a good lunch anymore.
Answer: C
Q3) Government price controls
A) strip the market of its meaning for both buyers and sellers.
B) often impose harm on the same people they are trying to assist.
C) sometimes force prices above or below what they would be in a market economy.
D) all of the above
Answer: D
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Chapter 3: Scarcity, Trade-Offs, and Production Possibilities
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Sample Questions
Q1) It can be said that,ultimately,consumers are the driving force behind answers to the three basic economic questions faced by societies.Explain the consumer's role in providing these answers.
Answer: What will be produced is directly determined by businesses.However,firms are aware that the way to succeed is to offer products that consumers find desirable.What businesses produce is determined by what they believe consumers want.How goods are produced is determined by firms that seek to reduce the costs of production.Since consumers are price conscious,they will buy lower-priced products (ceteris paribus).The consumers who have earned sufficient wealth and are willing to spend their wealth on these products are the individuals who will ultimately receive these products.
Q2) Which of the following is a reason for the law of increasing opportunity cost?
A) Some goods have limited alternative uses.
B) Not all resources are equally adaptable to other uses.
C) Prices of specific final goods increase as more of those goods are produced.
D) Prices of specific final goods decrease as more of those goods are produced.
Answer: B
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Chapter 4: Demand, Supply, and Market Equilibrium
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Sample Questions
Q1) "Other things equal,when the price of a good rises,the quantity demanded of the good falls,and when the price falls,the quantity demanded rises." This relationship between price and quantity demanded is referred to as A) equilibrium.
B) the law of demand.
C) the relationship between demand and income.
D) the definition of a normal good.
Q2) If,at the current price,there is a surplus of a good,then A) the quantity supplied is greater than the quantity demanded.
B) the market must be in equilibrium.
C) the price is below the equilibrium price.
D) quantity demanded equals quantity supplied.
Q3) The law of demand illustrates a(n)____ relationship between price and ____.
A) direct; quantity demanded
B) inverse; quantity demanded
C) inverse; demand
D) direct; demand
Q4) Explain how both sales and long lines prior to store openings are characteristic of markets in disequilibrium.
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Chapter 5: Markets in Motion and Price Controls
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Sample Questions
Q1) A binding price ceiling
i.causes a surplus.
ii.causes a shortage.
iii.is set at a price above the equilibrium price.
iv.is set at a price below the equilibrium price.
A) (ii) only
B) (iv) only
C) (i) and (iii) only
D) (ii) and (iv) only
Q2) If the equilibrium price of widgets is $22,and then a price ceiling of $24 is imposed by the government,as a result,
A) there will be no effect on the widget market.
B) there will be a shortage of widgets.
C) there will be a surplus of widgets.
D) the price of widgets will increase.
Q3) If a price ceiling of $4.00 per gallon is imposed on gasoline,and the market equilibrium price is $4.50,then the price ceiling is a binding constraint on the market.
A)True
B)False
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Page 7
Chapter 6: Elasticities
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Sample Questions
Q1) When demand and income move in the same direction,a good is said to be:
A) a normal good.
B) an inferior good.
C) a complementary good.
D) a substitute good.
Q2) Which of the following is associated with inelastic demand?
A) a limited amount of time for consumers to respond to a price change
B) availability of many close substitutes
C) large percentage of income spent on the good in question
D) all of the above
Q3) Given an upward sloping supply curve,the more inelastic is demand,the greater the fraction of the burden of taxation that is borne by the consumer.
A)True
B)False
Q4) Among the following pairs,which is likely to have the greatest price elasticity of demand? Why?
a.cars or Toyotas
b.electricity usage during a month or during a year
c.cable television or an apartment rental
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Chapter 7: Market Efficiency and Welfare
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Sample Questions
Q1) The more elastic the demand curve,the smaller is the deadweight loss resulting from the imposition of a tax.
A)True
B)False
Q2) As a result of a per-unit tax on output in a market:
A) the quantity traded increases.
B) the quantity traded does not change.
C) the quantity traded decreases.
D) a surplus is created at the new equilibrium price.
Q3) A government payment to producers for the difference between a target price and the price at which producers were able to sell their goods is known as a:
A) subsidy.
B) deficiency payment.
C) producer surplus.
D) price support.
Q4) How do taxes distort the incentives of buyers and sellers in a market?
Q5) How does the size of the deadweight loss from a tax depend on the price elasticities of supply and demand?
Q6) Could a price ceiling decrease consumer surplus?
Page 9
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Chapter 8: Market Failure
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Sample Questions
Q1) Which of the following is (are)true when one firm's research and production can increase another firm's access to technological advances?
A) It is called a technology spillover.
B) Other firms will imitate and improve on the new knowledge.
C) If there is no subsidy, the market equilibrium output level is less than the efficient equilibrium output level.
D) All of the above.
Q2) Public goods are:
A) any goods or services several members of the public would like produced
B) those goods for which natural monopolies exist.
C) goods which cannot be successfully produced by private firms.
D) goods which cannot be easily financed through the market system.
Q3) Private costs are those borne by:
A) the government.
B) the producer of an item.
C) both an item's producer and outside parties affected by a negative externality.
D) outside parties affected by a negative externality.
Q4) Differentiate between a public good and common resources.
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Page 10
Chapter 9: Public Finance and Public Choice
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Sample Questions
Q1) The motivation for an individual citizen to spend the necessary time and effort to resist an interest group is minimal,even if she had a guarantee that this resistance would be effective.
A)True
B)False
Q2) If Jim earns $300,000 this year and pays $75,000 in taxes and Sharon earns $80,000 this year and pays $20,000 in taxes,this tax system would appear to be
A) progressive.
B) proportional.
C) regressive.
D) none of the above
Q3) A regressive tax:
A) is designed to take a larger percentage of higher incomes as compared to lower incomes.
B) is designed in such a way that as a person's income rises, the amount of tax as a proportion of income rises.
C) takes a greater proportion of the income of lower-income groups than of higher-income groups.
D) is considered to be the most equitable type of tax.
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Page 11
Chapter 10: Consumer Choice Theory
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Sample Questions
Q1) Which of the following individuals was known for as an early contributor to behavioral economics?
A) Jeremy Bentham
B) Herbert Simon
C) Milton Friedman
D) Ben Bernanke
Q2) Economic analysis that focuses on bounded rationality and psychological insights is known as:
A) behavioral economics.
B) Keynesian economics.
C) Austrian economics.
D) supply-side economics.
Q3) "I'm tired of eating muffins for breakfast.Today I am trying a bagel." This statement most clearly reflects the:
A) ceteris paribus condition.
B) the law of supply.
C) law of diminishing marginal utility.
D) law of comparative advantage.
Q4) What do economists mean by "consumer equilibrium?"
Q5) How does the law of demand reflect the law of diminishing marginal utility?
Page 12
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Chapter 11: The Firm: Production and Costs
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Sample Questions
Q1) An implicit cost:
A) is an opportunity cost.
B) is an out-of-pocket expense.
C) does not require an outlay of money.
D) is characterized by both (a) and (c)
Q2) Explain why some costs are considered to be variable and some fixed.How does time enter into the definition?
Q3) If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11<sup>th</sup> unit is $30,what is the average total cost of 11 units?
A) $23.00
B) $20.09
C) $30.00
D) $39.09
Q4) In the short run,some costs are fixed.
A)True B)False
Q5) In the long run,firms can vary all inputs in the production process.
A)True
B)False
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) "I'm losing money,but since my fixed costs are so high,I simply cannot afford to shut down." If the firm were attempting to maximize profit,this decision may be:
A) correct if price is less than average variable cost.
B) incorrect because a firm experiencing economic losses should never continue to operate.
C) correct if the firm is covering all of its variable costs.
D) incorrect since a firm should shut down whenever price falls below average total cost in the short run.
Q2) The demand curve facing a perfectly competitive firm is:
A) perfectly inelastic.
B) perfectly elastic.
C) unit elastic.
D) downward sloping.
Q3) The horizontal demand curve facing an individual firm in a perfectly competitive market:
A) violates the law of demand, which states that demand curves slope downward.
B) is a reflection of the firm's small size relative to the total market.
C) is maintained only with the help of high barriers to entry.
D) is a reflection of the inelastic demand for its product.
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Page 14
Chapter 13: Monopoly and Antitrust
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Sample Questions
Q1) A monopoly industry:
A) has very significant barriers to entry.
B) faces a downward sloping demand curve.
C) may earn economic profits or losses in the short run.
D) has all of the above characteristics.
Q2) A monopolist can sell 20 units a week at a price of $10 per unit.To sell 21 units a week,it would have to lower its price to $9 per unit.The marginal revenue of the 21<sup>st</sup> unit would be:
A) $9.
B) -$11
C) -$12
D) -$20
Q3) If a public utility is subject to average-cost pricing regulation,it will:
A) earn a normal rate of return.
B) produce the socially efficient level of output.
C) suffer economic losses without a subsidy.
D) earn an above-normal rate of return.
Q4) How can economies of scale lead to monopoly?
Q5) Does peak load pricing lead to greater efficiency? Explain.
Q6) What conditions should be met to practice price discrimination in a market?
Page 15
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Chapter 14: Monopolistic Competition and Product
Differentiation
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Sample Questions
Q1) Because of product differentiation,a monopolistically competitive firm:
A) possesses some degree of market power.
B) is very similar to a perfectly competitive firm.
C) faces a perfectly elastic demand curve.
D) is unaffected by the elasticity of demand.
Q2) A monopolistic competitor is like a monopolist in that:
A) it sells in the inelastic portion of its demand curve.
B) it earns zero economic profit in the long run.
C) the marginal revenue curve lies above the AR curve.
D) it faces a downward-sloping demand curve.
Q3) Under monopolistic competition:
A) there are significant barriers to entry.
B) there are few barriers to entry.
C) firms sell identical products.
D) firms face perfectly elastic demand curves.
Q4) By differentiating their products and promoting brand name loyalty,monopolistically competitive firms can raise prices without losing all their customers.
A)True
B)False
Q5) Define monopolistic competition.
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Chapter 15: Oligopoly and Strategic Behavior
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Sample Questions
Q1) In a collusive oligopoly,joint profits are maximized when a price leader establishes price based on:
A) its own demand and cost schedules.
B) the market demand for the product and the marginal costs of the various firms.
C) the market demand for the product and its own marginal cost schedule.
D) the demand curve faced by a typical competitor and its own marginal cost curve.
Q2) What impact would easy entry have on the profitability of oligopolies?
Q3) Under conditions of oligopoly,economies of large-scale production mean that:
A) firms are able to sell all of the output they desire.
B) it is difficult for a firm to determine its profit-maximizing price and output.
C) large firms would find it more profitable to break up into smaller production units.
D) small firms are at a disadvantage in competing with relatively large firms.
Q4) Whether a dominant strategy is an optimal strategy for a firm depends upon the actions of competitors.
A)True
B)False
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Page 17
Chapter 16: The Markets for Labor, Capital, and Land
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Sample Questions
Q1) The market supply curve for labor:
A) shows the relationship between the wage rate and the number of employees firms are willing to hire.
B) shows the relationship between the price of output and the number of employees firms are willing to hire.
C) shows the relationship between the wage rate and the quantity of labor that workers are willing to supply.
D) shows the relationship between the price of output and the quantity of labor that workers are willing to supply.
Q2) In the backward-bending portion of a labor supply curve:
A) a worker will increase the quantity of labor supplied in response to an increase in the wage.
B) the substitution effect of a wage change outweighs the income effect.
C) the income effect of a wage change outweighs the substitution effect.
D) the substitution effect of a wage change equals the income effect.
Q3) Labor unions create barriers to entry in certain work settings.
A)True
B)False
Q4) How does monopsony power evolve? What factors might aid its continued presence?
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Chapter 17: Income, Poverty, and Health Care
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Q1) From a purely economic point of view,discrimination is established if:
A) black teenagers earn more than white teenagers do.
B) all factors are earning an amount equivalent to their marginal revenue product.
C) women earn less than men do.
D) equivalent factors earn different payments for equal contributions to output.
Q2) Which of the following countries has the least degree of measured income inequality?
A) India
B) Brazil
C) Mexico
D) United States
Q3) Many economists conclude that in-kind income programs have served to increase levels of inequality significantly from the levels suggested by aggregate income statistics.
A)True
B)False
Q4) Income inequality is greater within nations than among nations.
A)True
B)False
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Chapter 18: Introduction to Macroeconomics:
Unemployment, Inflation, and Economic Fluctuations
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Q1) The portion of unemployment that is attributable to an overall decline in the economy's business activity is called:
A) frictional unemployment.
B) underemployment.
C) cyclical unemployment.
D) structural unemployment.
Q2) The unemployment rate may underestimate the true extent of unemployment if:
A) many part-time employees would like to work full-time, but are unable to get the additional work.
B) employees increase the number of hours they work overtime.
C) there are a large number of people working in the underground economy.
D) any of the above occur.
Q3) Unemployment caused by a contraction in the economy is called:
A) frictional unemployment.
B) cyclical unemployment.
C) structural unemployment.
D) seasonal unemployment.
Q4) Why does the term full employment imply an unemployment rate greater than zero? Discuss your answer in terms of the types of unemployment.
Page 20
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Chapter 19: Measuring Economic Performance
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Sample Questions
Q1) Fixed investment includes spending on all of the following goods except:
A) machinery.
B) inventory.
C) tools.
D) factory buildings.
Q2) GDP equals $8 trillion.If consumption equals $5.5 trillion,investment equals $500 billion,and government spending equals $1.5 trillion,then:
A) exports exceed imports by $500 billion.
B) imports exceed exports by $500 billion.
C) net exports equal zero.
D) exports exceed imports by $1 trillion.
Q3) Transfer payments are included in which category under the expenditure approach to GDP accounting?
A) consumption
B) government purchases
C) net exports
D) Transfer payments are not directly included in GDP calculations.
Q4) Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.
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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) The slower the rate of capital formation:
A) the greater the rate of economic growth.
B) the slower the rate of economic growth.
C) the greater the rate of population growth.
D) the slower the rate of growth of the money supply.
Q3) Improvements in literacy stimulate economic growth by:
A) reducing the barriers to the flow of information.
B) improving the flow of resources to more productive uses.
C) imparting skills, which raises labor productivity.
D) doing all of the above.
Q4) According to Malthus,how do economic growth and population relate to each other?
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Chapter 21: Financial Markets, Saving, and Investment
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Q1) Explain how a consumption tax could lead to a decrease in real interest rates.
Q2) The 2008 financial crisis was caused by the decline of real estate values as well as several other factors.
A)True
B)False
Q3) A government budget deficit will lead to:
A) an increase in the supply of loanable funds and an increase in real interest rates.
B) a decrease in the supply of loanable funds and an increase in real interest rates.
C) an increase in the supply of loanable funds and a decrease in real interest rates.
D) a decrease in the supply of loanable funds and a decrease in real interest rates.
Q4) Housing prices peaked in:
A) 1997.
B) 2000.
C) 2003.
D) 2006.
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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) Keynes believed that prices were ____ and that recessions would be relatively ____.
A) inflexible; long
B) inflexible; brief C) flexible; brief D) flexible; long
Q3) A trade deficit means that net exports are positive.
A)True
B)False
Q4) The general shape of the short-run aggregate supply curve is:
A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.
Q5) Identify four changes in the economy that would cause the aggregate demand curve to decrease (shift to the left).
Q6) Discuss the impact of efficiency wages on unemployment and wage inflexibility.
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Chapter 23: The Aggregate Expenditure Model
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Q1) If consumption spending is the only variable of aggregate expenditure dependent on income,the multiplier is MPC/(1 - MPC).
A)True
B)False
Q2) When the Keynesian-cross model is in equilibrium,income equals output and aggregate expenditure equals output.
A)True
B)False
Q3) Unplanned inventory decreases prompt firms to cut back on production until equilibrium output is restored.
A)True
B)False
Q4) Explain the concept of autonomous consumption.
Q5) The Keynesian-cross model is based on the idea that the ____ must equal total output.
A) components of consumption
B) components of aggregate supply
C) components of aggregate demand
D) net exports
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Chapter 25: Monetary Institutions
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Q1) A bank may hold secondary reserves,such as U.S.government securities because:
A) they pay higher interest rates than deposits at the Fed, and are easily converted into cash assets.
B) they pay higher interest rates than deposits at the Fed, even though they are hard to convert assets.
C) they pay lower interest rates than deposits at the Fed, but are more easily converted into cash assets.
D) they pay lower interest rates than deposits at the Fed, and are hard to convert into cash assets.
Q2) A depositor cannot directly write checks against:
A) demand deposits.
B) transaction deposits.
C) nontransaction deposits.
D) money market mutual fund accounts.
Q3) Money functioning as a medium of exchange results in an increase in transactions costs.
A)True
B)False
Q4) How is money destroyed in the banking system?
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Chapter 26: The Federal Reserve System and Monetary Policy
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Q1) Monetary policy can influence interest rates,which in turn can change spending.
A)True
B)False
Q2) What can the Fed do to decrease the supply of money?
A) open market purchases of government bonds
B) increase reserve requirements
C) decrease the discount rate
D) any of the above
Q3) When the economy is initially at full employment:
A) contractionary monetary policy can result in increased real output, but only in the short run.
B) contractionary monetary policy can result in increased real output in both the short run and long run.
C) contractionary monetary policy can result in decreased real output, but only in the short run.
D) contractionary monetary policy can result in decreased real output in both the short run and long run.
Q4) Outline the policy choices for contractionary and expansionary options of the Fed.
Page 27
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Chapter 27: Issues in Macroeconomic Theory and Policy
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Q1) Rational expectation theory implies that accurately anticipated change in aggregate demand:
A) will increase RGDP in the long run.
B) will affect RGDP and inflation only in the long run.
C) may affect RGDP but not nominal GDP.
D) will tend to be offset by the actions of input suppliers as they react to their inflation expectations.
Q2) Rational expectations theory suggests that government or central bank policies designed to change aggregate demand will be effective.
A)True
B)False
Q3) When expansionary policy is unanticipated,it leads to a short-run expansion in output and employment.
A)True
B)False
Q4) Rules advocates believe that the central bank should change interest rates in an attempt to fine tune the economy.
A)True
B)False
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Chapter 28: International Trade
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Q1) Exhibit 28-1 Alpha can produce either 18 tons of oranges or 9 tons of apples in a year,while Omega can produce either 16 tons of oranges or 4 tons of apples.
Refer to Exhibit 28-1.If the terms of trade are established as 1 ton of apples for 2 tons of oranges:
A) there are no incentives for Omega to engage in international specialization and trade of apples and oranges.
B) it is in the interest of Omega to grow oranges and trade for apples.
C) it is in the interest of both countries to specialize and trade with one another.
D) there are no incentives for Alpha to specialize and trade with Omega.
Q2) Suppose that in the absence of trade,the U.S.price for bicycles was higher than the world price for bicycles.Would allowing international trade,mean that the U.S.would import or export bicycles? Who in the U.S.would benefit and who would lose with a free trade policy,and would the gains be greater than the losses?
Q3) Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.
A)True
B)False
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Chapter 29: International Finance
Available Study Resources on Quizplus for this Chatper
138 Verified Questions
138 Flashcards
Source URL: https://quizplus.com/quiz/53318
Sample Questions
Q1) Which of the following would be a credit in the U.S.balance of payments?
A) the purchase of a German car by an American
B) the purchase of insurance from Lloyds of London by a U.S. resident
C) a trip to Japan by an American student
D) a short-term loan extended to a South American country by the United States government
Q2) If the rate of inflation overseas rises relative to the rate of inflation in the United States,U.S.net exports will tend to ____,causing the exchange value of the U.S.dollar to ____.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
Q3) Is it possible for a currency to appreciate relative to another currency,and depreciate relative to a third?
A) No, this is not theoretically possible; a currency rises or falls against all others.
B) No, although this could occur under a strict gold standard.
C) Yes, this is possible in a world of floating exchange rates.
D) Yes, in theory, but it does not happen in reality.
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