Principles of Macroeconomics
Exam Questions
Course Introduction
Principles of Macroeconomics introduces students to the fundamental concepts and theories that explain the behavior of the economy as a whole. The course covers topics such as national income, inflation, unemployment, economic growth, monetary and fiscal policy, international trade, and the role of government in the economy. Through analysis of aggregate demand and aggregate supply, students gain an understanding of how various economic policies can impact overall economic performance. Real-world examples and current events are used to illustrate key concepts, equipping students with the analytical tools needed to interpret economic indicators and assess macroeconomic policy debates.
Recommended Textbook
Principles of Macroeconomics A Streamlined Approach 3rd Edition by Robert H. Frank
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13 Chapters
2266 Verified Questions
2266 Flashcards
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Chapter 1: Thinking Like an Economist
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Jody has purchased a non-refundable $75 ticket to attend a Miley Cyrus concert on Friday night. Subsequently, she is asked to go to out dinner at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going out to dinner, the opportunity cost of going out to dinner should include:
A) only the entertainment value of the concert.
B) the cost of the ticket plus the entertainment value of the concert.
C) only the cost of concert ticket.
D) neither the cost of the ticket nor the entertainment value of the concert.
Answer: A
Q2) During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why?
A) Students go to college even when the net benefit is negative.
B) The opportunity cost of attending college is lower when unemployment is high.
C) The opportunity cost of attending college is higher when unemployment is high.
D) The benefit of attending college is lower because college graduates are less likely to find jobs.
Answer: B
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Page 3
Chapter 2: Supply and Demand
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the buyer's surplus from this transaction was:
A) $195
B) $10
C) $20
D) $215
Answer: C
Q2) Everyone in the neighborhood has been complaining about the deteriorating condition of the park, but nobody has cleaned it up. Why not?
A) There is an excess demand for parks in the neighborhood.
B) There is an excess supply of parks in the neighborhood.
C) The social benefit of cleaning the park exceeds the social cost of cleaning it.
D) No single person's benefit from cleaning the park exceeds that person's cost of cleaning it.
Answer: D
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4
Chapter 3: International Trade and Trade Policy
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Ginger and Maryann are lost in the jungle, where the only things to eat are mangoes and fish. Ginger can gather more mangoes per hour than Maryann and can also catch more fish per hour than can Maryann. Therefore:
A) There are no gains to specialization and trade for Ginger.
B) There are no gains to specialization and trade for Maryann.
C) Maryann should specialize in the activity for which she has a comparative advantage.
D) Ginger should specialize in the activity for which she has an absolute advantage.
Answer: C
Q2) If the domestic consumers of a good benefit from free trade, it suggests that the country:
A) is a net importer of that good.
B) is a net exporter of that good.
C) has a comparative advantage in that good.
D) is not able to produce that good.
Answer: A
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5
Chapter 4: Macroeconomics: the Birds-Eye View of the Economy
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) Compared to the 1950-1973 period, output per worker _____ in the 1974-1995 period.
A) increased more rapidly
B) increased more slowly
C) decreased more slowly
D) decreased more rapidly
Q2) "The Federal Reserve should raise interest rates in order to keep inflation at an acceptably low level" is a _______ statement about _______ policy.
A) positive; fiscal
B) normative; fiscal
C) positive; monetary
D) normative; monetary
Q3) Major macroeconomic questions include all of the following EXCEPT:
A) Are free trade agreements beneficial?
B) Can inflation be reduced without generating additional unemployment?
C) What causes slowdowns in productivity growth?
D) How do monopoly firms set prices and determine quantities to produce?
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6
Chapter 5: Measuring Economic Activity: GDP,
Unemployment, and Inflation
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272 Verified Questions
272 Flashcards
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Sample Questions
Q1) If the price of motel rooms increases by 10% while the prices of other goods and services increase by 5% on average, the relative price of motel rooms has:
A) increased.
B) decreased by 5%.
C) decreased by 10%.
D) remained constant.
Q2) If the total expenditures of a typical family equaled $35,000 per year in 2010 and the exact same basket of goods and services cost $40,000 in the year 2015, the family's cost of living:
A) increased by 14 percent.
B) decreased by 12.5 percent.
C) decreased by 14 percent.
D) increased by 12.5 percent.
Q3) Profits, rents, interest, and royalties are examples of:
A) consumption.
B) labor income.
C) capital income.
D) investment.
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Chapter 6: Economic Growth, Productivity, and Living Standards
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162 Verified Questions
162 Flashcards
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Sample Questions
Q1) The major economic cost of growth is:
A) higher interest rates.
B) consumption sacrificed for capital formation.
C) higher inflation rates.
D) investment in stocks and bonds.
Q2) Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100 years, real GDP per person grows at a 1 percent annual rate in Alpha and at a 2 percent annual rate in Omega. After 100 years, real GDP per person in Alpha is ______ smaller than real GDP per person in Omega.
A) $2,000
B) $5,410
C) $9,080
D) $11,080
Q3) One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the:
A) growth in productivity.
B) increase in the quantity of goods.
C) non-market production.
D) change in the price level.
Page 8
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Chapter 7: The Labor Market: Workers, Wages, and Unemployment
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The extra production gained by employing one more worker is called the: A) real wage of labor.
B) price of labor.
C) marginal product of labor.
D) opportunity cost of labor.
Q2) Macroland produces dishes and glassware. Before trade, a set of dishes sells for $100 and a set of glasses sells for $50. When Macroland opens to trade, foreign demand for domestically produced china is strong, raising the price of a set of dishes to $125. But foreign competition reduces the demand for domestically produced glasses, so they now sell for $25 a set. Assuming workers cannot move between industries, the wages of workers producing dishes will ______ and the wages of workers producing glasses will
A) increase; increase
B) increase; not change
C) increase; decrease
D) decrease; increase
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9
Chapter 8: Saving and Capital Formation
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174 Flashcards
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Sample Questions
Q1) The excess of government purchases over tax collections is:
A) national income.
B) national saving.
C) national wealth.
D) the government budget deficit.
Q2) Other things equal, the combination of a ______ saving rate and a ______ real interest rate will result in the largest accumulation of wealth over time.
A) high; high
B) high; low
C) high; zero
D) low; high
Q3) Social Security benefits, welfare payments, and farm support payments are examples of:
A) consumption spending.
B) public interest payments.
C) investment spending.
D) transfer payments.
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10
Chapter 9: Money, The Federal Reserve, and Global
Financial Markets
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) In an open economy, an increase in capital inflows ______ the equilibrium domestic real interest rate and ______ the quantity of domestic investment.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
Q2) The maturation date of a bond is the date at which:
A) coupon payments will be made.
B) the principal will be repaid.
C) dividend payments will be made.
D) taxes on the bond are due.
Q3) In an open economy, an increase in the government's budget deficit will ______ the domestic real interest rate and ______ the level of capital investment in the country, holding other factors constant.
A) increase; increase B) increase; decrease
C) decrease; decrease
D) decrease; increase
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Chapter 10: Short-Term Economic Fluctuations and Fiscal Policy
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190 Verified Questions
190 Flashcards
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Sample Questions
Q1) The larger the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in spending on short-run equilibrium output.
A) larger; larger
B) larger; smaller
C) smaller; smaller
D) smaller; larger
Q2) For an economy starting at potential output, an increase in investment in the short run results in a(n):
A) expansionary output gap.
B) recessionary output gap.
C) increase in potential output.
D) decrease in potential output.
Q3) Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect ______ as well as aggregate demand and that fiscal policy is _______.
A) consumption; too flexible
B) potential output; not flexible enough
C) consumption; offset by automatic stabilizers
D) potential output; offset by automatic stabilizers
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Chapter 11: Stabilizing the Economy: The Role of the Fed
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) If the Federal Reserve wants to increase the money supply, it should:
A) increase reserve requirements.
B) increase the discount rate.
C) conduct open-market purchases.
D) increase the interest that it pays on reserves.
Q2) The interest rate the Federal Reserve charges commercial banks to borrow reserves is called the ______ rate.
A) Fed funds
B) prime
C) discount
D) Federal
Q3) Because an increase in the nominal interest rate raises the opportunity costs of holding money, the money demand curve:
A) shifts to the right.
B) shifts to the left.
C) slopes upward.
D) slopes downward.
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13
Chapter 12: Inflation and Aggregate Supply
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Sample Questions
Q1) Starting from long-run equilibrium, a sharp drop in oil prices results in ____ output in the short run and _____ output in the long run.
A) higher; higher
B) higher; potential
C) lower; potential
D) lower; higher
Q2) At a short-run equilibrium output equals _____, while at a long-run equilibrium output equals _____.
A) potential output; an output level consistent with the inflation rate
B) an output level consistent with the inflation rate; potential output
C) the monetary policy reaction function; aggregate demand
D) aggregate demand; the monetary policy reaction function
Q3) When actual output exceeds potential output, there is ______ output gap and the inflation rate will ____.
A) an expansionary; exceed the expected rate of inflation
B) an expansionary; be lower than the expected rate of inflation
C) no; be equal to the expected rate of inflation
D) a recessionary; exceed the expected rate of inflation
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Chapter 13: Exchange Rates and the Open Economy
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) An alternative to maintaining an undervalued currency is to ____ the fundamental value of the exchange rate by ______ monetary policy.
A) increase; tightening
B) increase; easing
C) decrease; tightening
D) decrease; easing
Q2) In an open economy with flexible exchange rates, monetary policy affects consumption and investment by changing the ______ and affects net exports by changing the _____.
A) inflation rate; unemployment rate
B) exchange rate; real interest rate
C) growth of domestic real GDP; growth of foreign real GDP
D) real interest rate; exchange rate
Q3) A currency appreciation is a(n):
A) increase in the value of a currency relative to other currencies.
B) decrease in the value of a currency relative to other currencies.
C) reduction in the official value of a currency in a fixed-exchange-rate system.
D) increase in the official value of a currency in a fixed-exchange-rate system.
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