Principles of Macroeconomics Study Guide
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Course Introduction
Principles of Macroeconomics introduces students to the fundamental concepts and theories that explain the functioning of economies on a broad scale. Topics include the measurement of national income, economic growth, unemployment, inflation, fiscal and monetary policy, and international trade. The course focuses on how economic aggregates such as GDP, inflation rate, and employment levels are determined, and examines the impact of government policies and external factors on the overall health and stability of economies. Through real-world examples and case studies, students gain an understanding of macroeconomic challenges and the tools used by policymakers to address them.
Recommended Textbook
Macroeconomics 10th Edition by Stephen Slavin
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19 Chapters
5438 Verified Questions
5438 Flashcards
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Chapter 1: A Brief Economic History of the United States
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258 Flashcards
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Sample Questions
Q1) Which is the most accurate statement?
A)The problem of hunger has been virtually eliminated in the United States.
B)Farmers are less productive today than they were 40 years ago.
C)The 1990s will go down in history as one of the most prosperous decades since the founding of the republiC.
D)Oil prices declined in 1973.
Answer: C
Q2) Which statement is false?
A)Between 1789 and 1812 our population doubled.
B)Between 1812 and 1835 our population doubled.
C)Between 1835 and 1858 our population doubled.
D)None of the statements are false.
Answer: D
Q3) The economic recovery program begun by the Roosevelt Administration to end the Great Depression was known as the ____________________.
Answer: New Deal
Q4) The worst recession we had since World War II occurred in ___________.
Answer: 2007-2009
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Chapter 2: Resource Utilization
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265 Flashcards
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Sample Questions
Q1) Which statement is true?
A)Scarcity is simply a lack of money.
B)Our society has been so affluent in the last 50 years that scarcity is only a minor problem.
C)The economic problem refers to the problem of poverty.
D)If scarcity did not exist there would be no need to economize.
Answer: D
Q2) What is the opportunity cost of going from point C to point D?
Answer: 30 PCs
Q3) Why did the U.S.temporarily operate outside the production possibilities frontier in 1942,1943,and 1944?
A)The Civil War
B)World War I
C)The Great Depression
D)World War II
Answer: D
Q4) Employment discrimination leads to the _________________ of labor. Answer: underemployment
Q5) What is the opportunity cost of going from point D to point C?
Answer: 10 CAT scans
4
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Chapter 3: The Mixed Economy
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262 Flashcards
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Sample Questions
Q1) In Sweden
A)the government has kept unemployment low by offering industry and workers a series of subsidies and incentives.
B)education is free from nursery school through college.
C)women may take a year off work after child birth while receiving 80 percent of their pay.
D)All of the choices are true.
Answer: D
Q2) Which statement is false?
A)Nearly all economists prefer incentive-based regulations to command-and-control regulations to curb pollution.
B)Emissions trading originated as a result of the 1990 Amendments to the Clean Air Act.
C)In most other economically advanced countries,gasoline taxes are much higher compared to the United States.
D)Since the passage of the Clean Air Act in 1972,there has been very little improvement in air quality in the United States.
Answer: D
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Page 5
Chapter 4: Supply and Demand
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Sample Questions
Q1) If demand rises and supply rises,equilibrium price will _____ and equilibrium quantity will _____.
Q2) Statement I: A price floor will always have an effect on a market.
Statement II: A price ceiling which has been set above equilibrium will cause a shortage.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q3) When the market price is above equilibrium price,the market price will be driven
A)up by buyers.
B)up by sellers.
C)down by buyers.
D)down by sellers.
Q4) If the government set a price $24,there would be a price ___________,that would cause a ___________ of ______ units.
A)floor,shortage,10
B)floor,surplus,10
C)ceiling,shortage,10
D)ceiling,surplus,10
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Chapter 5: The Household Consumption Sector
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312 Flashcards
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Sample Questions
Q1) How much is the APS when disposable income is $8 trillion?
Q2) How much is autonomous consumption when disposable income is $24 billion?
Q3) When disposable income is 1250,saving is
A)-1000.
B)-500.
C)0.
D)500.
E)1000.
Q4) How much is induced consumption when disposable income is $10 billion?
Q5) The wealth effect is
A)the result of wealthy people increasing the savings.
B)the increase in savings and consumption resulting from increases in residential house prices and gains in the stock markets.
C)the increase in the number of wealthy individuals in a country.
D)the result of large increases in the balance sheets of the banks.
Q6) If the APS falls by .01 how much does total saving fall?
Q7) When disposable income is 2000,how much is saving?
Q8) How much is the APC when disposable income is $1200 billion?
Q9) How much is the MPS?
Q10) Calculate the APS. Page 7
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Page 8
Chapter 6: The Business Investment Sector
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295 Flashcards
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Sample Questions
Q1) If depreciation exceeds gross investment,we can say that
A)the economy's stock of capital may be either growing or shrinking.
B)the economy's stock of capital is shrinking.
C)the economy's stock of capital is growing.
D)net investment is zero.
E)net investment is positivE.
Q2) Which statement is true?
A)A firm that uses its own funds,rather than borrow money,does not need to take the going rate of interest into account.
B)The only consideration that a firm undertaking an investment project needs to consider is the interest rate.
C)The concept of opportunity cost may be applied to a firm that is considering using its own funds for an investment project.
D)None is true.
Q3) How low did the capacity utilization rate go during the Great Recession?
A)80.1 percent
B)75.6 percent
C)68.3 percent
D)59.5 percent
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Page 9
Chapter 7: The Government Sector
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301 Verified Questions
301 Flashcards
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Sample Questions
Q1) In the United States,federal government tax receipts are somewhat less than _____ percent of GDP.
A)10
B)20
C)30
D)40
E)50
Q2) Which statement is true?
A)State and local governments are expected to provide more and more services while their tax bases are limited.
B)State and local governments are expected to provide less and less services while their tax bases are relatively unlimited.
C)Public education has traditionally been the role of the federal government.
D)None of these statements is true.
Q3) Fiscal year 2008 started on (give month,day and year)____ / _____ / _____.
Q4) If your marginal tax rate is higher than your average tax rate on the federal personal income tax,that means that your marginal tax rate must be at least _____ percent.
Q5) Interest payments on the national debt are projected to be about _____% by 2046.
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Page 10
Chapter 8: The Export-Import Sector
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177 Flashcards
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Sample Questions
Q1) International trade is ________ important to the Netherlands than it is to the United States.
Q2) The world's two main free trade areas (or organizations)are ____________ and _______________.
Q3) The world trade agreement that was drafted in 1947 was known as _____________.
Q4) Statement I: The U.S.trade deficit has gone up with Mexico since the passage of NAFTA,but we are running a trade surplus with Canada.
Statement II: There is little evidence that the NAFTA agreement has cost American's more than 200,000 jobs.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q5) The main criticism Joseph Stiglitz levels at the IMF is that
A)it provides too many loans that are not repaid.
B)it no longer promotes economic growth,but rather contraction.
C)it does not provide enough loans.
D)it does not sufficiently promote the market system.
Q6) The largest merchandise exporting country is _____________.
Page 11
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Chapter 9: Gross Domestic Product
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336 Flashcards
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Sample Questions
Q1) If the GDP deflator were 200 in the current year,prices have
A)risen by 100 percent since the base year.
B)prices have risen by 200 percent since the base year.
C)prices have remained constant since the base year.
D)prices have fallen by 100 percent since the base year.
E)prices have fallen by 200 percent since the base year.
Q2) National income
A)minus depreciation equals NDP.
B)plus depreciation plus indirect business taxes equals GDP.
C)minus inflation equals real GDP.
D)plus transfer payments equals personal income.
Q3) The largest component of national income is
A)corporate profits.
B)compensation of employees.
C)rental income.
D)proprietors' income.
Q4) A GDP deflator of 138 means that prices have _____ percent since the base year.
Q5) Find gross domestic product.
Q6) If the GDP of Country X were $3 trillion and its population were 600 million,calculate its per capita GDP.
Page 12
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Chapter 10: Economic Fluctuations, unemployment, and Inflation
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394 Flashcards
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Sample Questions
Q1) An increase in the quality of items included in the Consumer Price Index would cause the index to
A)overstate the true amount of unemployment.
B)overstate the true amount of inflation.
C)understate the true amount of unemployment.
D)understate the true amount of inflation.
Q2) The unemployment rate is the
A)ratio of unemployed to employed workers.
B)number of employed workers minus the number of workers who are not in the labor force.
C)percentage of the civilian labor force which is out of work.
D)percentage of the total population which is out of work.
Q3) A high school dropout with poor work habits,little experience,and no vocational training,who has been out of work for three years but is actively seeking employment,would be _____ unemployed.
A)frictionally
B)structurally
C)cyclically
Q4) Too many dollars chasing too few goods is a description of _____ inflation.
Page 13
Q5) Disinflation began in the year ____.
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Chapter 11: Classical and Keynesian Economics
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241 Flashcards
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Sample Questions
Q1) Aggregate demand is ____________.
Q2) Which of the following supports the classical theory of employment?
A)The interest rate will not always equalize savings and investment.
B)Not everything produced will necessarily be purchased.
C)Saving and investing are done by different people for different reasons.
D)Wages and prices are flexible downwards.
Q3) If aggregate demand increases and,as a result,the price level increases but equilibrium real GDP and employment remain unchanged,we can assume that the aggregate demand curve
A)intersects the upward-sloping segment of the aggregate supply curve.
B)intersects the vertical segment of the aggregate supply curve.
C)intersects the horizontal segment of the aggregate supply curve.
D)is horizontal.
Q4) Which best describes the classical theory of employment?
A)We will always have a great deal of unemployment.
B)We will usually have a great deal of unemployment.
C)We will occasionally have some unemployment,but our economy will automatically move back toward full employment.
D)We never have any unemployment.
Q5) Keynesians believe that the two basic cures for a recession are _____ and ____.
Page 14
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Chapter 12: Fiscal Policy and the National Debt
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377 Flashcards
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Sample Questions
Q1) If our deficit falls steadily over the next five years our national debt will
A)increase at an increasing rate.
B)increase at a decreasing rate.
C)decrease at an increasing rate.
D)decrease at a decreasing rate.
Q2) Statement I: The balanced budget amendment to the Constitution went into effect in the year 1996.
Statement II: The federal government could easily balance its budget every year.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q3) If an economist says that fiscal policy "crowds out," she believes that
A)government spending has caused workers to lose their jobs.
B)government subsidies have caused a monopoly in an industry.
C)government borrowing has pushed private borrowers out of the financial market.
D)tax rates are so high that workers are encouraged to leave the labor market.
Q4) If equilibrium GDP is $300 billion greater than full employment GDP and there is an inflationary gap of $50 billion,how much is the multiplier?
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Chapter 13: Money and Banking
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278 Flashcards
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Sample Questions
Q1) How much is M3?
Q2) If a person writes a check on a Tulsa bank to purchase a new Oldsmobile,he is employing money as:
A)a medium of exchange.
B)a store of value.
C)a measure of value.
D)All of the choices are correct.
Q3) Which is the most accurate statement?
A)The savings and loan debacle did not cost the taxpayers a penny,since all deposits were insured.
B)Much of the money lost in the savings and loan debacle was due to the risky real estate loans made in the early 1980s.
C)The savings and loan debacle ended up costing the taxpayers nearly $100 billion.
D)No one can really be blamed for the savings and loan debacle.
Q4) Which one of the following is NOT money?
A)A NOW account
B)A debit account
C)A two-dollar bill
D)Traveler's checks
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Chapter 14: The Federal Reserve and Monetary Policy
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Sample Questions
Q1) If all banks are subject to a uniform 20% reserve requirement and demand deposits are the only form of money,a $1,000 open market purchase by the Fed would cause the money supply to
A)increase by $1,000.
B)decrease by $1,000.
C)decrease by $5,000.
D)increase by $5,000.
Q2) The principal source of borrowed reserves is the
A)Federal Reserve System.
B)United States Treasury.
C)federal funds market.
D)Federal Home Loan Bank BoarD.
E)Federal Deposit Insurance Corporation.
Q3) Federal Reserve Notes are
A)the currency part of the United States money supply.
B)United States government securities owned by the Fed.
C)the backing for all bank account balances.
D)used exclusively by the government to pay off its debt.
Q4) Secondary reserves consist of (1)________; (2)________; (3)_________;and (4)______.
Page 17
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Chapter 15: A Century of Economic Theory
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Sample Questions
Q1) The school of economic thought that emphasized the importance of incentives to encourage savings,investment,and productivity is known as ________ economics.
Q2) What was the dominant economic theory used to attempt to recover from the Great Recession?
A)Classical
B)Monetarist
C)Keynesian
D)Behaviorist
E)Supply side
Q3) Which one of the following statements best describes the monetarist view of economic stabilization?
A)Discretionary policies often do more harm than good.
B)Monetary policy should be used to fine-tune the economy.
C)Fiscal policy is more effective than monetary policy.
D)Both monetary and fiscal policy are unable to influence output,employment,and the price level.
E)Discretionary policies are not very helpful but neither are they particularly harmful.
Q4) If P were 6,V were 10,and Q were 2,000,how much is M?
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Page 18
Chapter 16: Economic Growth and Productivity
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Sample Questions
Q1) Statement I: America leads the world in medical administrative cost and amount of time wasted filling out forms.
Statement II: Health care costs are 20 percent of our GDP.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q2) Which is the most accurate statement about the Chinese economy?
A)Within 10 years it will be larger than ours,although its per capita GDP will still be much smaller.
B)It has a large and growing free market system.
C)Is one of the poorest nations in the world.
D)Is adheres to the communist ideology formulated by Mao Tse-tung,and private ownership is strictly forbidden.
Q3) With the advent of the Great Recession,the combined state,local,and federal deficit was $_______ in 2009.
Q4) In 2009,_____% of all retail sales were through the internet.
Q5) Once a nation reaches a certain stage in its economic development,we may expect its birth rate to ___.
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Chapter 30: Income Distribution and Poverty
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Sample Questions
Q1) A more equal distribution of income
A)might hurt the incentive to work.
B)would not hurt the incentive to work.
C)would be opposed by nearly all Americans.
D)would hurt the poor.
Q2) Conservatives and liberals ___ on the causes of poverty and ___ on how to solve the poverty problem.
A)agree;agree
B)agree;disagree
C)disagree;agree
D)disagree;disagree
Q3) William Gates and Warren Buffet,each has a personal fortune worth more than
A)$45 million.
B)$5 billion.
C)$45 billion.
D)$400 billion.
Q4) According to the U.S.Department of Commerce,______% of all Americans are poor.
Q5) The reason poor,young,unmarried women allow themselves to get pregnant is so they can get on welfare,according to conservatives like __________.
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Chapter 31: International Trade
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Sample Questions
Q1) What is the Portugal's opportunity cost of producing 3 bottles of wine?
Q2) What is Spain's domestic exchange equation?
Q3) Italy has an absolute advantage in the production of which product?
Q4) Which of the following is not an argument against free trade?
A)Diversification and defense
B)Comparative advantage
C)Dumping by monopolistically inclined exporters
D)Infant industries
Q5) When he was president,George W.Bush proposed drilling for oil in Alaskan wildlife preserves.If the drilling were placed and oil discovered,once a pipeline is constructed to deliver that oil,this would
A)tend to raise our trade deficit.
B)tend to lower our trade deficit.
C)have no affect on our trade deficit.
Q6) A tariff
A)legally specifies maximum import or export ceilings.
B)increases allocative efficiency.
C)is a special tax applied only to internationally traded goods.
D)lowers the prices of imported goods.
Q7) What is Italy's opportunity cost of producing 5 pairs of shoes?
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Chapter 32: International Finance
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Sample Questions
Q1) A deficit in a country's current account balance occurs whenever
A)money outflows from the country exceed its money inflows.
B)money inflows into a country exceed its money outflows.
C)its currency falls in value relative to other currencies.
D)the country is alone in maintaining a strict gold standarD.
Q2) During the 1980s,foreigners expanded their role in the United States as
A)both creditors and owners.
B)neither creditors nor owners.
C)as owners but not as creditors.
D)as creditors but not as owners.
Q3) If 40 Russian rubles = $1 U.S. ,
A)1 ruble = $.025
B)1 U.S.cent = 4 rubles
C)40 U.S.cents = 100 rubles
D)$4 = 120 rubles
E)25 rubles = 80 U.S.cents
Q4) China has a ______ exchange rate with the United States,while Japan's exchange rate with the U.S.is determined by ___________.
Q5) When the U.S.dollar rises in value,this tends to _____ our imports and ______ our exports.
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