more extensive macro economics
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1)
The marginal propensity to consume measures
A)
the cyclical deficit.
B)
the structural deficit.
C)
how much consumption expenditure occurs at the equilibrium level of
income.
D)
how much of a change in consumption expenditure results from a change
in disposable income.
Answer:
D
2)
Suppose disposable income increases from $11 trillion to $12
trillion. At the same time, consumption expenditure increases from
$4.2 trillion to ________. Thus the MPC
must equal ________.
A)
$5.0 trillion; 0.50
B)
$5.0 trillion; 0.80
C)
$4.4 trillion; 0.40
D)
$5.5 trillion; 0.50
Answer:
B
3)
Which of the following is true?
A)
The structural deficit changes over the business cycle.
B)
MPS
+ MPC
= 1.
C)
At equilibrium expenditure, unplanned changes in inventory must be
positive.
D)
In the real business cycle model, there is no AD
curve.
Answer:
B
4)
The multiplier effect
A)
is nonexistent in the Keynesian model.
B)
has no effect if the cyclical deficit is positive.
C)
magnifies small changes in spending into larger changes in output and
income.
D)
increases the MPC.
Answer:
C
5)
The presence of imports ________ the size of the ________.
A)
increases; government budget deficit
B)
increases; multiplier
C)
decreases; multiplier
D)
decreases; government budget deficit
Answer:
C
6)
Which of the following shifts the supply curve of broccoli?
A)
an increase in income
B)
a newly discovered increase in the nutritional value of broccoli
C)
a newly discovered link between broccoli consumption and tooth decay
D)
the destruction of much of this year's broccoli crop by hurricanes
Answer: D
7)
Gross domestic product is a measure of the total value of all
A)
sales in an economy over a period of time.
B)
consumer income in an economy over a period of time.
C)
capital accumulation in an economy over a period of time.
D)
final goods and services produced in an economy over a period of
time.
Answer:
D
8)
In the
United States, GDP is typically measured
A)
monthly.
B)
quarterly.
C)
daily.
D)
weekly.
Answer:
B
9)
Of the following, which is correct?
A)
Nominal GDP does not change when the production of goods and services
increases.
B)
Nominal GDP is not affected by changes in prices of goods and
services.
C)
Nominal GDP increases when the prices of goods and services increase.
D)
Real GDP changes only when the prices of goods and services really
change.
Answer:
C
10) Doubling counting in GDP
accounting is avoided by not including
A) net exports.
B) intermediate goods.
C) illegal activities.
D) depreciation.
Answer; B
11) An
increase in exports of goods or services with no change in imports of
goods or services
A) decreases GDP.
B) increases GDP.
C) may increase or decrease GDP
depending on whether it is the export of goods or the export of
services that increased.
D) has no effect on GDP.
Answer: B
12)
Purchasing
power parity prices are used to construct GDP data that
A)
do not omit the underground economy.
B)
can be used to make more valid comparisons between one country and
another.
C)
is a proper measure of economic welfare.
D)
adjust for differences in population.
Answer:
B
13)
The
working-age population is defined as the number of
A)
people over the age of 16 who are not in jail, hospital, or other
institution.
B)
people who have a job.
C)
people working full-time jobs who are over the age of 16.
D)
people looking for work.
Answer:
A
14)
The employment-to-population ratio is defined as
A)
total employment divided by labor hours then multiplied by 100.
B)
the labor force divided by the working-age population then multiplied
by 100.
C)
total employment divided by the labor force then multiplied by 100.
D)
total employment divided by the working-age population then
multiplied by 100.
Answer:
D
15) The
difference between nominal GDP and real GDP is that real GDP
eliminates the effects from
A) depreciation.
B) inflation.
C) the unemployment rate.
D) changes in productivity.
Answer: B
16)
A sustained increase in the price level is defined as
A)
a recession.
B)
a growth boom.
C)
inflation.
D)
an expansion.
Answer:
C
17) The
bias in the CPI is one that
A) overstates inflation.
B) underestimates inflation.
C) about half the time overstates
and about half the time understates the inflation rate.
D) cannot be measured or estimated.
Answer: A
18) An economy recovering from a
recession
A)
moves up from its trough to a period of expansion.
B)
moves up from its peak to a period of expansion.
C)
moves down from its trough to a period of depression.
D)
moves down from its peak to a period of expansion.
Answer:
A
19)
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
20) The gap between real GDP per person in
Africa and real GDP per person in the United States has been
A)
increasing.
B)
decreasing.
C)
remaining fairly constant.
D)
there is no gap in real GDP per person between Africa and the United
States.
Answer:
A
21)
An increase in the population will ________ potential GDP, ________
employment, and ________ the real wage.
A)
decrease; increase; raise
B)
increase; increase; raise.
C)
increase; decrease; lower
D)
increase; increase; lower
Answer:
D
22)
If productivity constantly increases, then the real wage rate
________ and employment ________.
A)
constantly rises; constantly increases
B)
does not change; constantly decreases
C)
constantly decreases; does not change
D)
constantly rises; does not change
Answer:
A
23)
The ________ growth theory assumes that population growth is not
driven by real GDP per person and the ________ growth theory predicts
that differences in the economic growth rate can last indefinitely.
A)
new; classical
B)
neoclassical; new
C)
classical; neoclassical
D)
neoclassical; neoclassical
Answer:
B
24)
When money is accepted as payment in a market transaction, it is
functioning as
A)
a factor that shifts the aggregate production function
B)
the velocity of circulation.
C)
a medium of exchange.
D)
the real interest rate.
25)
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
26)
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
27)
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
28)
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
29).
In
2008, Armenia had a real GDP of approximately $4.21 billion and a
population of 2.98 million. In 2009, real GDP was $4.59 billion and
population was 2.97 million. Armenia's real GDP per person in 2009
was
A)
$1,545
B)
$380
C)
$1,413
D)
$132
Answer:
A
30)
An assumption of neoclassical growth theory is that
A)
technological change is random.
B)
technological change can be influenced by savings.
C)
more growth encourages more technological change.
D)
None of the above answers is correct.
Answer:
A
31)
The
chain-weighted output index method of measuring real GDP is based on
A)
using current prices rather than base year prices
B)
averaging the market value of the expenditures over a two year period
and then comparing with a base period.
C)
using the prices of two adjacent years to calculate the growth rate
of real GDP.
D)
averaging the nominal and real measures of GDP to come up with a more
accurate figure.
Answer:
C
32)
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
33
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
34)
The funds used to buy and operate physical capital are
A)
depreciation.
B)
financial capital.
C)
saving.
D)
wealth.
Answer:
B
35) U.S.
investment is financed from
A)
private saving, government budget surpluses, and borrowing from the
rest of the world.
B)
private saving, government budget deficits, and borrowing from the
rest of the world.
C)
private borrowing, government budget deficits, and lending to the
rest of the world.
D)
private saving and borrowing from the rest of the world only.
Answer:
A
36) 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
37) 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
38)
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
39)
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
40) 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
41)
The
main policy-making organ of the Federal Reserve System is
A)
the Board of Governors.
B)
the Federal Reserve branch banks.
C)
the Federal Reserve chairman and the Federal Reserve branch bank
presidents.
D)
the Federal Open Market Committee.
Answer:
D
42) 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
43 ) The
demand for money is ________ related to the nominal interest rate.
A)
positively
B)
negatively
C)
not related
D)
None of the above answers is correct because the relationship between
the demand for money and the interest rate varies with the inflation
rate.
Answer:
B
44) 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
45}
The
velocity of circulation is
A)
equal to the price level multiplied by real GDP.
B)
equal to the quantity of money multiplied by nominal GDP.
C)
the average number of times a dollar bill is used in a year to buy
the goods and services in GDP.
D)
average quantity of money that exists during a year.
Answer:
C
46)
If
portable disk players made in China are imported into the United
States, the Chinese manufacturer is paid with
A)
dollars.
B)
yuan, the Chinese currency.
C)
international monetary credits.
D)
euros, or any other third currency.
Answer:
B
47) 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
48)
In the figure above, the equilibrium exchange rate is: $1 U.S. equals
A)
$2.00 Canadian.
B)
$1.50 Canadian.
C)
$0.50 Canadian.
D)
none of the above
Answer:
B
49)
The exchange rate is the price at which the ________ of one country
exchanges for the ________ of another country.
A)
currency; goods
B)
goods; goods
C)
currency; currency
D)
currency; financial instruments
Answer:
C
50)
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
51
) 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
52)
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
53)
When
talking about aggregate supply, it is necessary to
A) focus on the short run.
B) focus on the long run.
C) distinguish between long-run aggregate
supply and short-run aggregate supply.
D) distinguish between long-run full employment
and short-run full-employment.
Answer:
C
54)
Which of the following events will increase long-run aggregate
supply?
A)
an increase in the interest rate
B)
an increase in resource prices
C)
a decrease in expected profit
D)
an advance in technology
Answer:
D
55)
An aggregate supply curve depicts the relationship between
A)
the price level and nominal GDP.
B)
household expenditures and household income.
C)
the price level and the aggregate quantity supplied.
D)
the price level and the aggregate quantity demanded.
Answer:
C
56)
The short-run aggregate supply curve
A)
shows what each producer is willing and able to produce at each level
of income holding constant potential GDP and all resource prices.
B)
shows the relationship between aggregate production and the price
level holding constant potential GDP and all resource prices.
C)
becomes vertical if there is excess production capacity within the
economy.
D)
shows a negative relationship between the price level and real
national income holding constant potential GDP and all resource
prices.
Answer:
B
57)
The AD
curve slopes
A)
downward due to the wealth and price effects.
B)
downward due to the wealth and substitution effects.
C)
upward due to the price and substitution effects.
D)
upward due to the wealth and substitution effects.
Answer:
B
58)
Which of the following does NOT
shift the aggregate demand curve?
A)
a decrease in the quantity of money
B)
an increase in people's expected future incomes
C)
an increase in the price level
D)
an increase in current foreign income
Answer:
C
59)
A monetarist economist believes that
A)
if the economy was left alone, it would rarely operate at full
employment.
B)
the economy is self-regulating and always at full employment.
C)
the economy is self-regulating and will normally, though not always,
operate at full employment if monetary policy is not erratic.
D)
the economy is self-regulating and will normally, though not always,
operate at full employment if fiscal policy is not erratic.
Answer:
C
60)
The Keynesian model of aggregate expenditure describes the economy in
A) the short run.
B) the long run.
C) both the short run and the long run.
D) only a strong expansion.
Answer:
A
61)
The components of aggregate expenditure include
I. imports.
II. consumption.
III. government
transfer payments.
A)
I and II
B)
II only
C)
II and III
D)
I, II and III
Answer:
A
62)
If a $75 billion
increase in autonomous expenditure increases equilibrium expenditure
by $150 billion, then the multiplier is ________.
A)
$225 billion
B)
0.625
C)
$75 billion
D)
2
Answer:
D
63)
A consumption function shows a
A)
negative (inverse) relationship between consumption expenditure and
saving.
B)
positive (direct) relationship between consumption expenditure and
price level.
C)
negative (inverse) relationship between consumption expenditure and
disposable income.
D)
positive (direct) relationship between consumption expenditure and
disposable income.
Answer:
D
64)
The graph of the consumption function has consumption expenditure on
the vertical axis and
A)
the interest rate on the horizontal axis.
B)
time on the horizontal axis.
C)
disposable income on the horizontal axis.
D)
the Consumer Price Index on the horizontal axis.
Answer:
C
65)
Which of the following will NOT
shift the consumption function upward?
A)
an increase in disposable income
B)
a fall in the real interest rate
C)
an increase in wealth
D)
None of the above shift the consumption function upward.
Answer:
A
66)
In the above figure, consumption and disposable income are equal at
A)
any point along the consumption function.
B)
a saving level of $1 trillion and disposable income level of $4
trillion.
C)
a disposable income level of $0.
D)
a disposable income level of $2 trillion.
Answer:
D
67)
The marginal propensity to consume is found by
A)
dividing consumption expenditure by disposable income.
B)
dividing disposable income by consumption expenditure.
C)
dividing the change in disposable income by the change in consumption
expenditure.
D)
dividing the change in consumption expenditure by the change in
disposable income.
Answer:
D
68)
Which of the following is true?
A)
MPS
= MPC
B)
MPS
+ MPC
= 1
C)
MPS
+ MPC
= 0
D)
MPS
- MPC =
1
Answer:
B
Disposable
income
(thousands
of dollars)
|
Consumption
expenditure
(thousands
of dollars)
|
200
|
225
|
300
|
300
|
400
|
375
|
500
|
450
|
69)
According to the data in the above table, at what level of disposable
income is savings negative?
A)
200
B)
300
C)
400
D)
Never because saving cannot be negative.
Answer:
A
70)
The marginal propensity to import reflects the relationship between
changes in imports and changes in
A)
consumption expenditure.
B)
investment spending.
C)
exports.
D)
real GDP.
Answer:
D
71)
________ increases real GDP.
A)
A fall in the price level
B)
An increase in employment
C)
An increase in the natural rate of unemployment
D)
A decrease in government spending
Answer:
B
72)
An increase in the amount of capital leads to ________ the aggregate
production function ________ and a technological advance leads to
________ the aggregate production function.
A)
a movement along; a movement along
B)
a movement along; an upward shift
C)
an upward shift; an upward shift
D)
a downward shift; an upward shift
Answer:
C
73)
Purchasing new capital ________.
A)
creates an upward movement along the aggregate production function
B)
creates a downward movement along the aggregate production function
C)
shifts the aggregate production function upward
D)
shifts the aggregate production function downward
Answer:
C
74) The demand for
labor ________ and the accumulated skill and knowledge of human is
called ________.
A)
increases when productivity rises; technology
B)
depends on the nominal wage rate; human capital
C)
depends on the real wage rate; human capital
D)
is independent of technology; the marginal product of labor
Answer:
C
75)
An increase in the productivity will ________ potential GDP, ________
employment, and ________ the real wage.
A)
decrease; increase; raise
B)
increase; increase; raise.
C)
increase; decrease; lower
D)
increase; increase; lower
Answer:
B
76)
The opportunity cost of holding money is the
A)
price level.
B)
real interest rate.
C)
velocity of circulation.
D)
nominal interest rate.
Answer:
D
77)
If the Fed makes an open market ________ of securities, in the
quantity theory M
________ and V
________.
A)
purchase; increases; increases
B)
sale; increases; decreases
C)
purchase; does not change; does not change
D)
sale; decreases; does not change
Answer:
D
78)
The velocity of circulation is
A)
equal to the price level multiplied by real GDP.
B)
the same as the aggregate demand curve.
C)
the average number of times a dollar bill is used in a year to buy
the goods and services in GDP.
D)
increased when the Fed lowers the required reserve ratio.
Answer:
C
79)
According to the quantity theory of money,
A)
the only way the Fed can change the quantity of money without
affecting the velocity of circulation is by using open market
operations.
B)
a change in the discount rate changes real GDP.
C)
a decrease in the quantity of money will decrease the velocity of
circulation.
D)
a decrease in the quantity of money will decrease the price level.
Answer:
D
80)
The major component of the capital and finance account is
A)
net exports.
B)
investment both abroad and domestically.
C)
imports and exports of services.
D)
the official settlements account.
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