Survey of Macroeconomics Exam Practice Tests
Course Introduction
This course provides an introduction to the fundamental principles of macroeconomics, exploring the behavior and performance of economies at the aggregate level. Major topics include national income determination, economic growth, unemployment, inflation, fiscal and monetary policy, and the role of government in stabilizing the economy. Students will examine how macroeconomic indicators are measured and interpreted, and analyze how various policy tools influence economic activity. The course also addresses current macroeconomic issues and their global implications, equipping students with the analytical skills necessary to understand real-world economic events and policy debates.
Recommended Textbook
ECON for Macroeconomics 1st Edition by William
A. McEachern
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26 Chapters
3573 Verified Questions
3573 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) When constructing an economic model,economists
A) rely mostly on their own value judgments and ignore the far more complex world of facts
B) always try to duplicate reality by including all available information
C) use assumptions that are true for the individual but never true for the whole economy
D) must rely on simplifying assumptions that abstract from the complexity of the real world
E) are primarily concerned with making realistic assumptions
Answer: D
Q2) When economic choice involves an adjustment to an existing situation,marginal analysis
A) has no practical applications or real-world uses
B) eliminates incorrect decisions and bad choices
C) involves comparing the additional costs and additional benefits of an activity before deciding
D) involves examining only the total costs and total benefits of an activity before deciding
E) none of the above
Answer: C
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Chapter 2: Economic Tools and Economics Systems
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179 Verified Questions
179 Flashcards
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Sample Questions
Q1) All of the following are evidence of specialization except
A) a solo carpenter who builds a whole bedroom set
B) restaurants that range from subs to sushi
C) the credits at the end of a movie
D) professional mourners in Taiwan
E) online sellers
Answer: A
Q2) If Sam can chop up more carrots per minute than Joe can,then
A) Joe has an absolute advantage in carrot chopping
B) Joe must have a comparative advantage in carrot chopping
C) Sam has an absolute advantage in carrot chopping
D) Sam must have a comparative advantage in carrot chopping
E) we can conclude nothing about absolute advantage
Answer: C
Q3) A production possibilities frontier will shift outward if there is an improvement in technology.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) In terms of total sales,the dominant form of business firm in the U.S.economy is the
A) corporation
B) sole proprietorship
C) partnership
D) nonprofit organization
E) limited partnership corporation
Answer: A
Q2) Which of the following is an advantage of a sole proprietorship?
A) the ability to pool resources
B) limited liability
C) double tax exemption of the firm's earnings
D) ease of organization
E) ease of raising funds
Answer: D
Q3) It is difficult to exclude individuals from the use of public goods and services.
A)True
B)False
Answer: True
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Chapter 4: Demand, Supply, and Markets
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) If the price of the good described in Exhibit 4-1 is $1.60,then an economist would expect the
A) price to decrease to $1.40
B) price to decrease to $1.50
C) quantity supplied to increase to 50 units
D) quantity demanded to increase to 80 units
E) quantity demanded to increase to 90 units
Q2) Tax preparation services and IRS tax publications can be considered substitutes. A)True
B)False
Q3) In the market for chewing gum,the current price is 50 cents per pack and 100,000 packs are sold.Which of the following events would lead to a new equilibrium price of 60 cents and quantity of 90,000 packs?
A) an increase in the price of other kinds of candy
B) an increase in the price of the ingredients used to make chewing gum
C) a decrease in the number of young people in the population
D) an agreement by workers in the chewing gum industry to work for lower wages
E) an increase in income
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6
Chapter 5: Introduction to Macroeconomics
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149 Flashcards
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Sample Questions
Q1) If the economy experiences stagflation,
A) government can quickly restore full employment by doing nothing to interfere with the economy's natural self-correcting forces
B) only Keynesian policies can remedy the situation
C) only anti-unemployment policies can remedy the situation
D) Keynesian anti-inflation policies will raise the inflation rate
E) increasing a federal budget surplus will worsen inflation
Q2) If business leaders become pessimistic about future sales and profits,they will __________ spending on plant and equipment,which __________ employment and income and,therefore,their expectations are __________.
A) reduce; reduces; fulfilled
B) reduce; increases; fulfilled
C) reduce; increases; not met
D) increase; increases; not met
E) increase; reduces; fulfilled
Q3) An increase in wage rates,other things constant,would shift the aggregate supply curve upward.
A)True
B)False
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Chapter 6: Productivity and Growth
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Newly industrialized countries typically have lower GDP growth rates than more developed industrialized countries.
A)True
B)False
Q2) Research and development contributes most to productivity growth through its impact on the
A) quantity of labor available
B) quantity of capital goods available
C) quality of labor available
D) quality of capital goods available
E) use of energy
Q3) The only way the standard of living can increase is for labor productivity to increase.
A)True
B)False
Q4) "The most important factor in determining a nation's standard of living in the long run is the productivity of its resources."
A)True
B)False
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Page 8
Chapter 7: Tracking the US Economy
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) Which of the following would not be an expenditure on a final good or service?
A) a farmer's purchase of a pound of hamburger
B) a medical clinic's purchase of flu vaccine
C) a factory's purchase of a spot welding machine
D) the purchase of a cup of coffee at a restaurant
E) a college student's purchase of a textbook for a medieval history class
Q2) Which of the following is true regarding Gross Domestic Product?
A) It can only be measured from the flow of total spending.
B) It can only be measured from the flow of total income in the economy.
C) It can be measured either from total spending or total expenditure.
D) It is calculated by computing total spending and total income; the larger of the two figures is counted as GDP.
E) It can only be measured from the stock of total wealth.
Q3) The final market value of a good is
A) the sum of values added at all stages of production
B) the value added at one stage of production
C) greater than the sum of all the values added at all stages of production
D) less than the sum of all the values added at all stages of production
E) less than the price for which it is sold
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Page 9
Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Which of the following is true about inflation?
A) Inflation promotes social harmony by uniting people against the government.
B) Inflation is more damaging if it is unanticipated.
C) Accurate anticipation of inflation is possible for everyone who is well informed about economic events.
D) Those who lend money at a rate above the rate of inflation suffer economic losses.
E) If people accurately anticipate inflation,their actions will prevent it.
Q2) Cyclical unemployment results from
A) a mismatch of skills
B) being in the wrong geographical location
C) monetary cost and the time it takes to find the best job
D) seasonal decreases in demand for labor
E) prolonged declines in business activity
Q3) Structural unemployment refers to unemployment that results from
A) inefficiencies in the market for labor that prolong the job search
B) being in the wrong geographical location
C) taking the time to find the best job
D) seasonal decreases in demand for labor
E) a recession in the economy
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Page 10
Chapter 9: Aggregate Expenditure
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163 Flashcards
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Sample Questions
Q1) If income increases by $100 and consumption increases by $75,the slope of the consumption function equals
A) 1/4
B) 1/5
C) 1/2
D) 3/4
E) 3/5
Q2) Imagine a macro investment demand curve that shows that,if the market interest rate is 4 percent,the quantity of investment demanded is $500 billion.Then,if the market rate rises to 5 percent,the most likely result is that the quantity of investment demanded
A) does not change
B) rises to $550 billion
C) declines to $450 billion
D) rises to $1 trillion
E) It is not possible to answer without seeing the actual curve
Q3) Purchases of existing commodities,such as gold and precious gems,are considered investment spending by economists.
A)True
B)False
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Page 11
Chapter 10: Aggregate Expenditure and Aggregate
Demand
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) An increase in planned investment would shift the
A) aggregate demand curve outward
B) aggregate demand curve inward
C) aggregate supply curve outward
D) aggregate supply curve inward
E) consumption function upward
Q2) Which is true regarding the marginal propensity to consume and the multiplier?
A) The lower the MPC,the higher the multiplier.
B) The higher the MPC,the lower the multiplier.
C) The MPC equals the multiplier.
D) The sum of the MPC and the multiplier equals 1.
E) The lower the MPC,the lower the multiplier.
Q3) If the price level increases,other things constant,consumption spending
A) increases because real income rises
B) decreases because real income rises
C) increases because the real value of wealth increases
D) decreases because the real value of wealth decreases
E) increases because nominal income increases
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Chapter 11: Aggregate Supply
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Sample Questions
Q1) Which of the following would shift the LRAS curve to the right?
A) a decline in the size of the labor force
B) a reduction in the quality of the labor force
C) a reduction in the cost of using computers
D) an increase in the price level
E) an increase in aggregate demand
Q2) As actual output rises above the potential level,which of the following must be true?
A) more resources become unemployed
B) prices remain constant
C) real GDP rises
D) nominal GDP remains constant
E) production falls
Q3) The long-run equilibrium price level is the price level the economy is expected to reach when the
A) economy produces its potential output
B) Fed has stabilized interest rates
C) federal budget is balanced
D) discount rate equals the prime rate
E) inflation rate is zero
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Page 13
Chapter 12: Fiscal Policy
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208 Flashcards
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Sample Questions
Q1) Which of the following is a difference between John Maynard Keynes and the classical economists?
A) Keynes did not believe that unemployment was a serious long-term problem; the classical economists did.
B) Keynes did not believe that the economy was always in equilibrium; the classical economists did.
C) Keynes did not believe that the economy necessarily settled at full employment; the classical economists did.
D) Keynes believed that the economy was always in equilibrium; the classical economists did not.
E) Keynes believed that a general glut of output was a good thing for the economy; the classical economists believed a glut created an unemployment problem for the economy.
Q2) A $100 billion increase in government purchases will have the same effect on real GDP as a $100 billion decrease in taxes.
A)True
B)False
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Page 14
Chapter 13: Federal Budgets and Public Policy
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Deficits that arise discretionary fiscal policy lead to
A) increased private demand for money,which is offset by the sale of more government securities
B) decreased private demand for money,which is offset by the sale of more government securities and higher interest rates
C) increases in the number of government securities sold to the public and higher interest rates
D) decreases in the number of government securities sold to the public and higher interest rates
E) increases in the public's demand for money and increases in the number of government securities sold to the public,leading to lower interest rates
Q2) When there are large federal budget deficits,the trade deficit (i.e.,exports minus imports)tends to shrink.
A)True
B)False
Q3) The federal government spends more for national defense than for anything else. A)True
B)False
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15
Chapter 14: Money and the Financial System
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) Under the Federal Reserve System,
A) there is one Federal Reserve Bank,located in Washington,DC
B) there is one Federal Reserve Bank,whose location changes every 14 years
C) there is a Federal Reserve bank in each Congressional district
D) there is a Federal Reserve bank in each state
E) there are 12 Federal Reserve banks
Q2) The currency of Camelot is the noble.King Arthur orders the minting of a five-noble gold coin,but it costs only four nobles to mine and process the amount of gold in the coin.Which of the following statements is true?
A) The seigniorage that King Arthur has to pay is five nobles.
B) The seigniorage that King Arthur has to pay is four nobles.
C) The seigniorage that King Arthur has to pay is one noble.
D) The five-noble coin is token money.
E) The five-noble coin is fiat money.
Q3) To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.
A)True
B)False
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Chapter 15: Banking and the Money Supply
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213 Verified Questions
213 Flashcards
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Sample Questions
Q1) All of the following are part of M2 except one.Which is the exception?
A) money market deposit accounts
B) coins
C) travelers checks
D) large denomination time deposits
E) savings deposits
Q2) Which of the following is not true of Federal Reserve notes?
A) They are fiat money.
B) They are a liability of the Fed.
C) They are redeemable for other Federal Reserve notes.
D) They are redeemable for gold.
E) They are counted as currency in the money supply.
Q3) Banks are permitted to lend all of their excess reserves.
A)True
B)False
Q4) When the Fed buys U.S.government securities from a bank,that bank's excess reserves and total reserves increase,but there is no change in required reserves.
A)True
B)False
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Chapter 16: Monetary Theory and Policy
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Sample Questions
Q1) Which of the following,other things constant,will shift the money demand curve to the left?
A) an increase in the interest rate
B) a decrease in the interest rate
C) a decrease in real GDP
D) an increase in real GDP
E) an increase in the price level
Q2) The money demand curve will shift when there is a change in
A) interest rates
B) velocity
C) the money supply
D) the opportunity cost of holding money
E) nominal GDP
Q3) An increase in the price level will
A) shift the money demand curve to the right
B) shift the money demand curve to the left
C) increase the quantity of money people want to hold
D) decrease the quantity of money people want to hold
E) have no impact on the money demand curve
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Page 18
Chapter 17: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) A Phillips curve shows the relationship between
A) the price level and the number of workers unemployed
B) the inflation rate and the unemployment rate
C) the unemployment rate and the level of GDP
D) the inflation rate and the supply of money
E) the inflation rate and the level of government spending
Q2) Economist A.W.Phillips believed that
A) the Fed should follow a policy rule because it does not know the lag structure
B) the Fed should follow a policy rule to avoid monetary surprises
C) there is an inverse relationship between inflation and unemployment
D) private sector spending is inherently unstable
E) government spending is inherently unstable
Q3) Which of the following is not a valid criticism of discretionary fiscal policy?
A) Implementation of fiscal policy is sometimes difficult.
B) Time lags in fiscal policy are long.
C) Fiscal policy works only during periods of stagflation.
D) Fiscal policy often affects only current income,but many economic decisions are made on the basis of permanent income.
E) Fiscal policy might have undesirable long-term effects on aggregate supply.
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Page 19
Chapter 18: International Trade
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Sample Questions
Q1) The General Agreement on Tariffs and Trade (GATT)was established in
A) 1870 to protect U.S.industries and decrease world trade
B) 1921 to manage legal and accounting requirements for U.S.tariffs and quotas
C) 1947 to reduce trade restrictions among 23 countries
D) 1973 to increase trade restrictions,after OPEC significantly raised oil prices
E) 1990 to create a common market
Q2) The World Trade Organization (WTO)
A) members are required to eliminate tariffs and customs duties
B) supervises trade in merchandise and in services
C) supervises merchandise trade only
D) members are required to eliminate ad valorem tariffs but not specific tariffs
E) includes all nations with populations greater than 10 million,with the exception of North Korea and Cuba
Q3) In determining comparative advantage,cost is measured in terms of
A) foreign currency
B) domestic currency
C) gold only
D) units of weight and measure
E) opportunities forgone
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Page 20
Chapter 19: International Finance
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Sample Questions
Q1) Suppose that U.S.tastes for British goods increase.Then,in Exhibit 18-4
A) the supply curve shifts from S<sub>1</sub> to S<sub>2</sub>
B) the supply curve shifts from S<sub>2</sub> to S<sub>1</sub>
C) the demand curve shifts from D<sub>2</sub> to D<sub>1</sub>
D) the demand curve shifts from D<sub>1</sub> to D<sub>2</sub>
E) both demand and supply shift to the right
Q2) What replaced the Bretton Woods system?
A) the gold standard
B) a pooled currency system
C) a free float system
D) a managed float system
E) fixed exchange rates
Q3) If the exchange rate has been $1.50 per British pound but now falls to $1.25 per British pound,there will be
A) more U.S.imports from Great Britain because the price of pounds has fallen
B) more exports to Great Britain because the price of pounds has risen
C) fewer exports to Great Britain because the price of the pound has risen
D) more U.S.exports to Great Britain since the price of the dollar has fallen
E) no change in either exports or imports
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Page 21
Chapter 20: Developing and Transitional Economies
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Sample Questions
Q1) A requirement for development is
A) an unreliable system of financial institutions
B) a lack of saving by households and firms
C) low confidence in domestic currency
D) low and predictable inflation that encourages saving
E) None of the answers is correct
Q2) Usually the poorest fifth of the population in a developing country receives more than 20 percent of the country's income.
A)True
B)False
Q3) Developing countries
A) do not benefit from foreign aid
B) do not benefit from private investment
C) generate less than half of their annual flow of foreign exchange from exports
D) must acquire foreign exchange in order to pay for imports
E) need to decrease labor productivity
Q4) Education makes people more receptive t new ideas and methods,which leads to economic development.
A)True
B)False
Page 22
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Chapter 21: Understanding Graphs
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Sample Questions
Q1) In Exhibit 1-8,the slope of the line is
A) negative for all values of x
B) positive for all values of x
C) zero at x = 7
D) first negative,then positive as x increases
E) negative for all values of y
Q2) In Exhibit 1-3,for any value of x,the
A) value of y is larger on curve A than on curve B
B) value of y is smaller on curve A than on curve B
C) value of y is the same on curve A as on curve B
D) slope of line A is increasing
E) slope of line B is negative
Q3) The slope of a vertical straight line is infinity.
A)True
B)False
Q4) Any point on a graph represents a combination of particular values of two variables.
A)True
B)False
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23
Chapter 22: National Income Accounts
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Sample Questions
Q1) Personal income equals national income minus personal taxes.
A)True
B)False
Q2) In Exhibit 7-4,Net Domestic Product equals
A) $365 billion
B) $375 billion
C) $385 billion
D) $390 billion
E) $420 billion
Q3) Factors that explain the differences between National Income and Personal Income include all of the following,except one.Which is the exception?
A) Social Security contributions paid by employers
B) corporate income taxes
C) undistributed corporate profits
D) government and business transfers
E) indirect business taxes
Q4) Disposable Income is Personal Income minus personal taxes.
A)True
B)False
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Chapter 23: Variable Net Exports
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Sample Questions
Q1) An increase in U.S.consumers' incomes will decrease U.S.exports.
A)True
B)False
Q2) If the U.S.economy were to go through a severe recession by itself (i.e.,without it being contagious to the rest of the world),we would typically observe an increase in the U.S.trade deficit.
A)True
B)False
Q3) If one British pound originally exchanges for one U.S.dollar and then is revalued to exchange for two U.S.dollars,what should happen to U.S.net exports?
A) Since the pound costs more,net exports will increase.
B) Since the dollar costs more,net exports will increase.
C) Since the dollar costs less,net exports will decrease.
D) Since the dollar costs more,net exports will decrease.
E) Since the dollar costs less,net exports will increase.
Q4) As U.S.income rises,U.S.imports will rise.
A)True
B)False
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Page 25
Chapter 24: Variable Net Exports Revisited
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Sample Questions
Q1) In a model which includes variable net exports,the spending multiplier equals 1/(MPS + MPM).
A)True
B)False
Q2) If the marginal propensity to consume (MPC)equals 0.75 (3/4)and the multiplier equals 2.0,the marginal propensity to import (MPM)must equal
A) 0.25
B) 0.50
C) 0.75
D) 1.00
E) 1.25
Q3) When variable net exports are included in aggregate expenditures,the two leakages from the circular flow are
A) exports and saving
B) exports and consumption
C) exports and investment
D) imports and saving
E) imports and investment
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26
Chapter 25: The Algebra of Income and Expenditure
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Q1) If C = a + bY,which of the following is true?
A) If a increases,autonomous saving will increase.
B) If a increases,the multiplier will increase.
C) If a increases,the multiplier will decrease.
D) If b increases,the multiplier will increase.
E) If b increases,the multiplier will decrease.
Q2) Investment is the only autonomous spending component in aggregate expenditure.
A)True
B)False
Q3) If C = $3,000 + 0.9Y,which of the following will not be true?
A) If income is less than $30,000,saving must be negative.
B) If income is $30,000,then consumers are not saving.
C) If income equals $40,000,saving must be $0.
D) The marginal propensity to consume is 0.9.
E) Autonomous consumption is $3,000.
Q4) If the marginal propensity to import increases,the spending multiplier increases.
A)True
B)False
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Chapter 26: The Algebra of Demand-Side Equilibrium
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Sample Questions
Q1) If the government wants to increase equilibrium income by $150 billion but does not want to change the size of the deficit,it should
A) increase G and decrease T by $150 billion
B) increase G and T by $150 billion
C) decrease G and T by $150 billion
D) decrease C and increase T by $150 billion
E) We cannot answer the question without knowing the MPC.
Q2) If the MPC = 0.8 and both government purchases and autonomous net taxes fall by $100 billion,by how much does the equilibrium level of real GDP demanded change (assuming neither income taxes nor net exports exist)?
A) -$100 billion
B) +$100 billion
C) -$500 billion
D) +$500 billion
E) +$200 billion
Q3) The balanced budget multiplier is always negative.
A)True
B)False
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