Macro Econ Review
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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) 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
3)
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
4)
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
5) Which of the following is consistent with classical growth
theory?
A) Real
GDP per person will never permanently increase.
B) Real
GDP per person will increase because technological change induces investment.
C) Competition
destroys innovation and decreases profit.
D) As
real GDP increases, there will be a decrease in the rate of population grwoth.
Answer: A
6) Which
of the following ideas apply to the neoclassical growth theory?
I. The
rate of technological change influences the rate of economic growth.
II. Technological
change promotes saving and investment.
III. Convergence
of economic growth rates across countries.
A) I
only.
B) III
only.
C) I
and II.
D) I,
II and III.
Answer: D
7)
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
8)
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
9)
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
10)
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
11)
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
12)
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
13)
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
14)
The table below shows data for the United States.
Nominal Interest Rate
|
Inflation Rate
|
|
2006
|
5.25
|
4
|
2007
|
5
|
2
|
2008
|
4.5
|
4.3
|
Between 2006 and 2007, the real interest rate
________ and caused a ________ the demand for loanable funds curve.
A) increased; rightward shift.
B) decreased; leftward.
C) increased; movement upward along
D) decreased; downward along
Answer:
C
15) If the Ricardo-Barro effect occurs, an
________ in saving finances the government budget deficit and the real interest
rate ________.
A) increase; remains the same
B) decrease; increases
C) increase; falls
D) decrease; remains the same
Answer: A
16) Real
interest rates around the world tend to
A) be equal because trading
partners would not do business otherwise.
B) be equal after adjusting for
differences in risk because financial capital seeks the highest possible
return.
C) be quite different because
no two countries are exactly the same.
D) differ because inflation
rates differ across countries.
Answer: B
17) Which
of the following does not describe a function of money?
A) a unit of account.
B) a store of value.
C) a hedge against inflation.
D) a medium of exchange.
Answer: C
18) The Federal Reserve System is the
A) law enforcement
agency that tracks counterfeit money.
B) insurance agency
the insures deposits.
C) federal
government agency that undertakes deregulation for depository institutions.
D) central bank of
the United States.
Answer: D
19) The money multiplier is
A) the amount by which a change in the
quantity of money is multiplied to determine the change in the monetary base.
B) the amount by which a change in the
monetary base is multiplied to determine the change in the quantity of money.
C) equal to bank reserves divided by the
change in the quantity of money.
D) equal to bank reserves divided by the
change in the monetary base.
Answer: B
20) The demand for money curve is the
relationship between -------- and ---------- other things remaining equal.
A) the quantity of real money demanded; the
quantity of real money supplied.
B) the quantity of real money demanded; the
nominal interest rate.
C) the money demanded; the money supplied.
D) the quantity of real money demanded; the
real interest rate.
Answer: B
21) Which of the following is the equation of exchange?
A) MV=PY
B) M=VP/Y
C) MY=PV
D) V=MY/P
Answer: A
22)
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
23)
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
24)
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
25)
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
26)
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
27) Which of the following
creates a demand for U.S. dollars
A) a
Japanese tourist catching a show in London.
B) a
U.S. restaurant purchasing Mexican tomatoes.
C) a
U.S. tourist catching a show in London.
D) Toyota,
a Japanese firm, purchasing land in Texas.
Answer: D
28) By definition, currency
depreciation occurs when the value of
A) all
currencies fall relative to gold
B) one
currency falls relative to another currency
C) one
currency rises relative to another currency
D) gold
falls relative o the value of currencies
Answer: B
29) The real exchange rate is:
A) the nominal exchange rate multiplied by the
ratio of the foreign price level to the U.S. price level.
B) the relative price of U.S. produced goods
to foreign produced goods.
C) a measure of how much currency exchanges
for a unit of another currency.
D) the money price of foreign produced goods
relative to the money price of U.S. produced goods.
Answer: B
30) When
U.S. real GDP increases, then quantity of U.S. imports
A) decreases.
B) increases.
C) remains constant.
D) at first decreases and then increases.
Answer: B
31)
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
32)
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
33)
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
34)
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
35)
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
36)
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
37)
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
38)
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
39) A change in the money wage rate shifts
A) neither the SAS nor the LAS curve.
B) the SAS curve but not the LAS curve.
C) the LAS curve but not the SAS curve.
D) both the SAS and LAS curves.
Answer: B
40) Which of the
following shifts the short-run aggregate supply curve?
I. changes in the size of the labor force
II. changes in the money wage rate 98)
______
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: C
41) Aggregate supply is:
A) the relationship between labor employment
and the real (inflation adjusted) wage rate.
B) the relationship between the quantity of
real GDP and the price level.
C) the relationship between the unemployment
rate and real GDP.
D) desired spending on output at different
price levels
Answer: B
42)
________ economists believe that active help from fiscal and monetary
policy is needed to insure that the economy is operating at full employment.
A)
Classical.
B)
Monetarist
C)
Keynesian
D) All
Answer C
43)
Aggregate demand increases when
A) foreign
incomes fall.
B) the
exchange rate rises.
C) interest
rates rise.
D) None
of the above answers is correct.
Answer: C
44) In the macroeconomic long run,
A) real GDP =
potential GDP.
B) the economy is at
full employment.
C) regardless of the
price level, the economy is producing at potential GDP.
D) All of the above
are correct.
Answer: D
45) The above figure illustrates
A) a recessionary
gap.
B) a full-employment
equilibrium.
C) an inflationary
gap.
D) an equilibrium at
the economy’s physical limits.
Answer: A
46) Keynes’ prescription for
eliminating the Great Depression required a policy action of
A) additional taxes
by government to decrease excessive spending in the economy.
B) additional
spending by government to increase total spending in the economy.
C) decreased spending
by government to decrease excessive total spending in the economy.
D) decreased spending
by government to increase private spending in the economy.
Answer: B
47) The relationship between consumption
expenditure and disposable income is called the
A) consumption
function.
B) savings
function.
C) investment
function.
D) household
aggregate demand function.
Answer: A
48) In the above figure, if the marginal
propensity to consume increases, the slope of the AE curve would
A) increase.
B) decrease.
C) stay the same but the AE curve would shift upwards.
D) stay the same but the AE curve would shift downwards.
Answer: A
49)
When disposable income equals consumption expenditure, then
A)
the MPC = zero. (MPC is marginal propensity to consume)
B)
saving is zero.
C)
the MPS = zero. . (MPS is marginal propensity to save)
D)
None of the above is correct.
Answer:
B
50) Suppose real GDP increases from
$9 trillion to $10 trillion. As a result, consumption expenditure increases
from $9 trillion to $9.75 trillion. This result implies the MPS equals
A) 0.75.
B) 0.
C) 0.25.
D) some amount that cannot be determined
without more information.
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