more macro
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Review Questions:
1) The best definition for economic growth is
A) a sustained expansion of production
possibilities measured as the increase in real GDP over a given period.
B) a sustained expansion of production
possibilities measured as the increase in nominal GDP over a given period.
C) a sustained expansion of consumption goods
over a given period.
D) a sustained expansion of production goods
over a given period.
Answer: A
2) In 2008, Armenia had a real GDP of $4.21
billion and a population of 2.98 million.
In 2009, real GDP was $4.59 billion and population was 2.97 million.
What was Armenia's economic growth rate from 2008 to 2009?
A) 0.38 percent
B) 9.0 percent
C) 3.8 percent
D) 8.3 percent
Answer: B
3) During 2011, the country of Economia had a
real GDP of $115 billion and the population was 0.9 billion. In 2010, real GDP was 105 billion and the
population was 0.85 billion. In 2011,
real GDP per person was
A) $128
B) $124
C) $135
D) $117
Answer: A
4) The Rule of 70 is used to
A) estimate how much of an economy's growth rate
is due to increases in capital per hour of labor
B) calculate the standard of living
C) calculate the economy's growth rate
D) estimate how long it will take the level of
any variable to double
Answer: D
5)
Slowdonia's current growth rate of real GDP per person is 2 percent a
year. How long will it take to double
real GDP per person?
A)
half a year
B)
approximately 10 years
C)
28.6 years
D)
35 years
Answer: D
6)
The gaps between the United States and the Asian countries of Honk Kong,
Singapore, Korea and China have been
A)
decreasing
B)
increasing
C)
remaining fairly constant
D)
there are no gaps between these Asian countries and the United States
Answer: A
7) The figure
above shows the U.S. production function. From 1986 to 2008 the United States
experienced major advances in technology as well as an increase in the
working-age population. The combined effect can best be shown by a
A) movement from
point W to point X.
B) movement from
point Y to point Z.
C) movement from
point Y to point X.
D) movement from
point W to point Z.
Answer: D
8)
All of the following would stimulate economic growth EXCEPT
A)
decreasing taxes on consumption (for instance, decreasing a sales taxes) and
increasing income taxes.
B)
subsidizing basic research.
C)
decreasing tuition charges at state universities.
D)
encouraging international trade.
Answer: A
9)
A factor that turned out to be a weakness of the classical theory of growth is
its
A)
emphasis on saving and investment.
B)
assumption that the growth rate of the population increases when income
increases.
C)
reliance on constant growth in technology.
D)
neglect of the subsistence real wage.
Answer: B
10)
An assumption of the neoclassical theory of growth is that
A)
people receive only subsistence real GDP per person.
B)
all technological advances are the result of chance.
C)
the marginal product of all types of capital increases as more capital is
accumulated.
D)
knowledge has diminishing returns.
Answer: B
11)
Which theory of economic growth concludes that growth can continue
indefinitely?
A)
the classical theory
B)
the neoclassical theory
C)
the new theory
D)
all of the theories
Answer: C
12)
The term "capital," as used in macroeconomics, refers to
A)
the plant, equipment, buildings, and inventories of raw materials and
semi-finished goods.
B)
financial wealth.
C)
the sum of investment and government purchases of goods.
D)
investment.
Answer: A
13)
Which of the following items are considered physical capital?
i. shares
of Ford stock traded on the New York Stock Exchange
ii. the
Taco Bell store nearest you
iii. the
rental cars owned by Hertz Rental-A-Car
iv. the
salaries paid to Intel executives
A)
ii and iii.
B)
i and iv.
C)
i, ii and iii.
D)
i, ii and iv.
Answer: A
14)
Net investment equals
A)
capital stock minus depreciation.
B)
gross investment minus depreciation.
C)
the total quantity of plant, equipment and buildings.
D)
gross investment/depreciation.
Answer: B
15)
Which of the following is FALSE about saving?
A)
Saving adds to wealth.
B)
Income left after paying taxes can either be consumed or saved.
C)
Saving equals wealth minus consumption expenditures.
D)
Saving is the source of funds used to finance investment.
Answer: C
16)
The funds used to buy and operate physical capital are
A)
depreciation.
B)
financial capital.
C)
saving.
D)
wealth.
Answer: B
17)
Investment is financed by which of the following?
I. Government
spending
II. National
saving
III. Borrowing
from the rest of the world
A)
I, II, and III
B)
I and II only
C)
I and III only
D)
II and III only
18)
If our exports are $2.2 billion and our imports are $2.7 billion,
A)
the United States is lending to the rest of the world.
B)
U.S. national saving is too high.
C)
the United States is borrowing from the rest of the world.
D)
U.S. investment must decrease.
Answer: C
19)
Which of the following is TRUE regarding the real interest rate?
I. The
real interest rate is the opportunity cost of borrowed funds.
II. The
real interest rate equals the nominal interest rate adjusted for inflation.
A)
I
B)
II
C)
both I and II
D)
neither I nor II
Answer: C
20)
The ________ interest rate approximately equals the ________ interest rate
minus ________.
A)
nominal; real; depreciation
B)
nominal; real; the inflation rate
C)
real; nominal; depreciation
D)
real; nominal; the inflation rate
Answer: D
21)
If the nominal interest rate is 8 percent and inflation is 3 percent,
approximately what is the real interest rate?
A)
11 percent
B)
8 percent
C)
5 percent
D)
3 percent
Answer: C
22)
A firm's decision to invest in a project is based on the
A)
real interest rate and expected total revenue.
B)
nominal interest rate and expected total revenue.
C)
nominal interest rate and the expected profit.
D)
real interest rate and the expected profit.
Answer: D
23)
The demand for loanable funds is the relationship between loanable funds and
the ________ other things remaining the same.
A)
real interest rate
B)
nominal interest rate
C)
inflation rate
D)
price level
Answer: A
24)
The demand for loanable funds curve shows that as the ________ interest rate
increases, there will be a ________ curve.
A)
nominal; rightward shift in
B)
real; rightward shift in
C)
nominal; movement down along
D)
real; movement up along.
Answer: D
25)
A rise in the real interest rate
A)
shifts the demand for loanable funds curve rightward.
B)
shifts the demand for loanable funds curve leftward.
C)
creates a movement upward along the demand for loanable funds curve.
D)
creates a movement downward along the demand for loanable funds curve.
Answer: C
26)
Greater optimism about the expected profits from investment projects
A)
shifts the demand for loanable funds curve rightward.
B)
shifts the demand for loanable funds curve leftward.
C)
causes a movement upward along the demand for loanable funds curve.
D)
causes a movement downward along the demand for loanable funds curve.
Answer: A
27)
In the above figure, a decrease in the real interest rate will result in a
movement from point E to
A)
point F.
B)
point G.
C)
point H.
D)
point I.
Answer: B
28)
In the above figure, new expectations of booming business conditions and a
higher expected profit will
A)
shift the demand for loanable funds curve leftward.
B)
shift the demand for loanable funds curve rightward.
C)
have no effect on the demand for loanable funds curve.
D)
make the demand for loanable funds curve become horizontal.
Answer: B
29)
Which of the following are included in the supply of loanable funds?
i. private
saving
ii. government
budget surplus
iii. international
borrowing
A)
i, ii and iii.
B)
i and iii.
C)
ii and iii.
D)
i and ii.
Answer: A
30)
Which of the following influences household saving?
I. The
real interest rate.
II. Disposable
income.
III. Expected
future income.
A)
I only
B)
I and II
C)
I and III
D)
I, II, and III
Answer: D
31)
If households' disposable income decreases, then
A)
households' saving will decrease.
B)
households' saving will increase.
C)
investment will increase.
D)
Both B and C are correct.
Answer: A
32) If households expect an increase in their
future incomes, they will save
A)
less and consume more today
B)
more and consume less today
C)
and consume more today
D)
and consume less today
Answer: A
33)
The supply of loanable funds is the relationship between loanable funds and
________ other things remaining the same.
A)
real GDP
B)
the price level
C)
the real interest rate
D)
the inflation rate
Answer: C
34)
Changes in all of the following shift the supply curve of loanable funds
EXCEPT
A)
the real interest rate.
B)
wealth.
C)
disposable income.
D)
expected future income.
Answer: A
35)
An increase in the real interest rate results in a
A)
rightward shift in the supply of loanable funds curve.
B)
leftward shift in the supply of loanable funds curve.
C)
movement along the supply of loanable funds curve.
D)
None of the above.
Answer: C
36)
In the loanable funds market, if the interest rate is above the equilibrium
level
A)
there is a shortage of loanable funds.
B)
there is a surplus of loanable funds.
C)
expected profit falls.
D)
government expenditure decreases.
Answer: B
37)
If net taxes exceed government expenditures, the government sector has a budget
________ and government saving is ________.
A)
surplus; positive
B)
surplus; negative
C)
deficit; positive
D)
deficit; negative
Answer: A
38)
The idea that a government budget deficit decreases investment is called
A)
government dissaving.
B)
the crowding-out effect.
C)
the Ricardo-Barro effect.
D)
the capital investment effect.
Answer: B
39)
If the government has a budget deficit, crowding out might occur. Crowding out
leads to all of the following EXCEPT
A)
a higher real interest rate.
B)
a decreased quantity of investment.
C)
a smaller capital stock in the future.
D)
decreased private saving.
Answer: D
40)
The tendency for private saving to increase in response to growing government
deficits is known as the
A)
crowding out effect.
B)
money illusion effect.
C)
Keynes effect.
D)
Ricardo-Barro effect.
Answer: D
41)
According to the Ricardo-Barro effect,
A)
government deficits raise the real interest rate.
B)
taxpayers fail to foresee that government deficits imply higher future taxes.
C)
households increase their personal saving when governments run budget deficits.
D)
government budget deficits increase households' expected future disposable
income.
Answer: C
42)
In the global loanable funds market,
A)
funds flow into countries with the highest risk-adjusted interest rates and out
of countries with the lowest risk-adjusted interest rates.
B)
funds flow into countries with the lowest risk-adjusted interest rates and out
of countries with the highest risk-adjusted interest rates.
C)
when funds leave a country, a shortage of funds lowers the real interest rate.
D)
when funds enter a country, a surplus of funds raises the real interest rate.
Answer: A
43)
Real interest rates around the world tend to
A)
be quite different because no two countries are exactly the same.
B)
be equal after adjusting for differences in risk because financial capital
seeks the highest possible return.
C)
differ because inflation rates differ across countries.
D)
be equal because trading partners would not do business otherwise.
Answer: B
44) The functions of
money are
A) medium of exchange
and the ability to buy goods and services.
B) medium of exchange,
unit of account, and means of payment.
C) pricing, contracts,
and means of payment.
D) medium of exchange,
unit of account, and store of value.
Answer: D
45)
Barter is
A)
another type of money.
B)
printing too much money.
C)
the exchange of goods and services directly for other goods and services.
D)
the exchange of goods and services for any type of money.
Answer: C
46)
In the United States today, money consists of
A)
currency only.
B)
deposits at banks only.
C)
coins only.
D)
currency and deposits at banks.
Answer: D
47)
M1 includes
A)
currency, checking deposits and traveler's checks.
B)
money, stocks and bonds.
C)
money, checking deposits and traveler's checks.
D)
money market mutual funds, stocks and bonds.
Answer: A
48)
Which of the following is NOT included in M1?
A)
currency
B)
checking deposits owned by individuals
C)
saving deposits
D)
traveler's checks
Answer: C
49)
M2 ________.
A)
does not include currency
B)
does not include traveler's checks
C)
is a broader measure of money than M1
D)
does not include checking deposits held at credit unions
Answer: C
50)
Liquidity is the
A)
speed with which the price of an asset changes as its intrinsic value changes.
B)
inverse of the velocity of money.
C)
same as the velocity of money.
D)
ease with which an asset can be converted into money.
Answer: D
51)
The Federal Reserve System is the
A)
insurance agency the insures deposits.
B)
central bank of the United States.
C)
law enforcement agency that tracks counterfeit money.
D)
federal government agency that undertakes deregulation for depository
institutions.
Answer: B
52)
Monetary policy is conducted
A)
only by the Federal Reserve.
B)
by the Federal Reserve and the President of the United States.
C)
by the Federal Reserve, the President of the United States, and Congress.
D)
by the Federal Reserve with veto power residing with the President of the
United States.
Answer: A
53)
The interest rate banks charge other banks for overnight loans is
A)
the federal funds rate.
B)
targeted by the FDIC
C)
higher than interest rates for securities and loans.
D)
lower than interest rates for loans, but higher than interest rates for
securities.
Answer: A
54)
The Federal Reserve has ________ regional Federal Reserve banks and ________
members of the Board of Governors.
A)
12; 12
B)
12; 7
C)
7; 12
D)
7; 7
Answer: B
55)
The monetary base is the sum of
A)
U.S. Treasury notes and other government securities.
B)
Federal Reserve notes, coins, and deposits of depository institutions.
C)
foreign and domestic deposits at the Fed.
D)
coins, currency, and checkable deposits.
Answer: B
56)
Which of the following is NOT a monetary policy tool of the Federal
Reserve?
A)
changes in required reserves
B)
last resort loans
C)
deposit insurance
D)
open market operations
Answer: C
57)
Reserve requirements are the
A)
minimum percentages of deposits that banks must hold as reserves.
B)
minimum amount of an owner's financial resources that must be placed in a
depository institution.
C)
rules covering the types of deposits that banks may offer.
D)
rules covering the types of assets that banks may purchase.
Answer: A
58)
When the Federal Reserve lends reserves to depository institutions, it charges
them interest. That interest rate is called the
A)
federal funds rate.
B)
loan rate.
C)
prime rate.
D)
discount rate.
Answer: D
59)
An open market operation occurs when the ________ buys or sells securities
________.
A)
Federal Reserve System; from or to the federal government
B)
Federal Reserve System; in the open market
C)
a commercial bank; from or to the federal government
D)
a commercial bank; from or to the public
Answer: B
60) In an open market purchase, the Fed ________
government securities, which ________ bank reserves.
A)
buys, increases
B)
buys, decreases
C)
sells, increases
D)
sells, decreases
Answer: A
61) A bank creates money
by
A)
lending its excess reserves
B)
purchasing currency from the Federal Reserve
C)
buying bonds from the Federal Reserve
D)
printing more checks
Answer: A
62)
If required reserves are $150 and deposits are $1000, what is the required
reserve ratio?
A)
10 percent
B)
15 percent
C)
5 percent
D)
85 percent
Answer: B
63)
The money multiplier determines how much
A)
real GDP will be expanded given an increase in autonomous investment.
B)
the monetary base will be expanded given a change in the quantity of money.
C)
the quantity of money will be expanded given a change in the monetary base.
D)
money demand will expand given a change in the quantity of money.
Answer: C
64)
If the United States sells beef to Japan, the U.S. beef producer is paid with
A)
dollars.
B)
yen, the Japanese currency.
C)
international monetary credits.
D)
euros, or any other third currency.
Answer: A
65)
If the dollar's value changes from 120 yen per dollar to 110 yen per dollar,
the dollar has
A)
depreciated.
B)
appreciated.
C)
demanded.
D)
devalued.
Answer: A
66)
When people who are holding the money of some other country want to exchange it
for U.S. dollars, they ________ U.S. dollars and ________ that other country's
money.
A)
demand, supply
B)
supply, supply
C)
supply, demand
D)
demand, demand
Answer: A
67)
As the value of U.S. exports ________, the quantity of ________ demanded
increases.
A)
increases; foreign currencies
B)
increases; dollars
C)
decreases; dollars
D)
None of the above is correct because the value of U.S. exports has nothing to
do with the quantity of dollars or foreign currency demanded.
Answer: B
68)
In the foreign exchange market, an increase in the world demand for U.S.
exports shifts
A)
demand curve for U.S. dollars rightward
B)
demand curve for U.S. dollars leftward
C)
supply curve for U.S. dollars leftward
D)
supply curve for U.S. dollars rightward
Answer: A
69)
The U.S. interest rate minus the foreign interest rate is called the ________.
A)
foreign interest rate differential
B)
U.S. bond rate differential
C)
U.S. interest rate differential
D)
U.S. stock yield differential
Answer: C
70)
In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when
A)
the expected future exchange rate decreases.
B)
the U.S. interest rate rises.
C)
people expect that the dollar will depreciate.
D)
foreign interest rates increase.
Answer: B
71)
With everything else the same, in the foreign exchange market which of the
following increases the supply of U.S. dollars?
I. a
fall in the U.S. interest rate
II. a fall
in interest rates in foreign countries
III. a rise
in expected future exchange rate
A)
I only
B)
I and II only
C)
I and III only
D)
I, II, and III
Answer: A
72)
Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a
2 percent interest rate. People must expect the yen to
A)
depreciate by 2 percent.
B)
appreciate by 2 percent.
C)
depreciate by 6 percent.
D)
appreciate by 6 percent.
Answer: A
73)
The idea that the value of money is equal across countries is known as
A)
interest rate parity.
B)
the expected profit parity effect.
C)
purchasing power parity.
D)
exchange rate parity.
Answer: C
74)
A country's balance of payments accounts record
A)
the country's net indebtedness to foreigners.
B)
its international trading, borrowing, and lending.
C)
the flow of human and nonhuman resources between it and its trading partners.
D)
only its official transactions with other governments.
Answer: B
75)
Which of the following is recorded in the U.S. balance of payments account?
I. foreign
investment in the United States
II. U.S.
investment abroad
III. the
U.S. government deficit or surplus
A)
III only
B)
I and II
C)
I and III
D)
I, II and III
Answer: B
76)
Which international account is used to record payments for imports, receipts
from exports, net interest paid abroad and net transfers?
A)
the capital and financial account
B)
the current account
C)
the official settlements account
D)
the trade account
Answer: B
77)
The account that records changes in the U.S. government's holdings of foreign
currency is the
A)
capital and financial account.
B)
official settlements account.
C)
current account.
D)
U.S. official reserves account.
Answer: B
78)
To pay for a current account deficit, a country can
A)
borrow money from abroad
B)
lend money abroad
C)
increase official reserves to cover the shortfall
D)
transfer money from the capital account to the official settlements account
Answer: A
79)
If a country during its entire history has invested more in the rest of the
world than the rest of the world has invested in it, the country is a
A)
net borrower.
B)
debtor nation.
C)
net lender.
D)
creditor nation.
Answer: D
80)
Suppose X - M = net exports; T - G = government
sector balance; and S - I = private sector balance. What
relationship exists among these variables?
A)
(X - M ) + (T - G ) + (S - I ) = 0
B)
(X - M ) = (T - G ) + (S - I )
C)
(T - G ) + (X - M ) = (S - I )
D)
(T - G ) = (X - M ) + (S - I )
Answer: B
If you have any test reviews, homeworks, guides, anything school related that you think can be posted on this website, reach out to me at makingschooleasier@gmail.com
If you have any test reviews, homeworks, guides, anything school related that you think can be posted on this website, reach out to me at makingschooleasier@gmail.com