Macroeconomics Test Answers
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A good for which an increase in income leads
to a decrease in demand is a:
Luxury good
Market good
Normal good
Substitute
Inferior good
What relationship does the Phillips Curve
specifically address?
Relationship between the long term real interest rate
and the supply of loanable funds
Relationship between the foreign exchange rate and
household purchases
Relationship between net exports and government
spending
Relationship between the inflation rate and the
unemployment rate
True or False: The official measure of GDP
understates the true level of national income because of the existance of the
"shadow" or informal economy.
False
True
The use of government spending and taxation to
influence the economy is the definition of which of the following terms:
Inflation
Keynesian economics
Gross Domestic Product
Fiscal policy
Which of these is a liability?
House
Computer
Utility bill
Cash
When is the economy in macroeconomic
equilibrium?
Aggregate expenditure < GDP
Aggregate expenditure > GDP
Aggregate expenditure = GDP
When the unemployment rate is high
What is Macroeconomics?
The branch of economics that focuses on the
national and global economy
The branch of economics that is no longer relevant
and has been discredited as a whole
The branch of economics that analyzes individuals
buying behavior
The branch of economics that focuses on the supply
and demand of individual firms
Which country best approximates a closed
economy?
Canada
United States
North Korea
Germany
What is the central bank of the United States?
The Federal Reserve
The United States Mint
The United States Treasury Department
The Federal Deposit Insurance Corporation
When does a shortage occur?
Quantity Demanded is greater than quantity supplied
Quantity Supplied equals quantity demanded
Quantity Supplied is greater than quantity demanded
The supply curve is nonlinear
As a recession begins, unemployment
unemployment rises and production falls
unemployment rises and production increases
unemployment falls and surplus supplies increase
employment rises and production falls
Macroeconomics can be defined as:
The interaction between individual buyers and
sellers and the factors that influence the choices made by buyers and sellers
study of individuals and business decisions
The study of the behavior of the economy at the
aggregate level
The study of patterns of supply and demand and the
determination of price and output in individual markets
What is an inferior good?
A good in which there is an inverse relationship
between income and the demand for the good
A good that is imported and is consumed in
relatively small quantities
A good that is from overseas and is taxed heavily
in domestic markets
A good in which there is a direct relationship
between income and the demand for the good
What is recession?
Supply doesn't equal demand
Two consecutive quarters of Real GDP decline
1 month of Actual GDP decline
When Real GDP and Potential GDP are the same
Economists use this term to denote an ongoing
rise in the general level of prices quoted in units of money.
National debt
Aggregate demand
Consumer Price Index
Inflation
A printer and a printer cartridge is an
example of a:
Complementary goods
None of these
Supplemental goods
Inferior goods
Necessity goods
What does "ceteris paribus" mean?
Rational expectations
Holding everything else constant
Free trade
That which is to be demonstrated
The final value of goods and services produced
in a year within the geographical boundaries of a country is known as
Gross Domestic Product
Gross National Product
Per Capita National Income
Balance of Payments
What is the slope of the consumption function
called?
Marginal Propensity to Save
Marginal Propensity to Consume
Marginal Disposable Income
Marginal Opportunity Cost
What is pegging?
A flat tax imposed on imported goods
A contract that allows households to exchange
currency for a fixed amount of gold from the central bank
A country allowing the value of its currency to be
determined by supply and demand
A country keeping the exchange rate between its
currency and another currency fixed
Keynesian theory is related to:
Transactions between private parties are free from
tariffs
Government intervention in the market place for
economic growth and stability
No government intervention
None of these
Relationship between possible rates of taxation and
the resulting levels of government revenue
What is not a major goal of macroeconomics?
Price stability
High sustainable economic growth
Low unemployment
Capping supply
If the national output in one year is measured
at $300 billion and a year later it is measured at $315 billion, then the rate
of growth in that year is?
5%
3%
2%
15%
Which of these are a way of measuring
production?
Unemployment rates
Interest rates
Net Domestic Product
Marginal benefits
All of these
What would be an example of Foreign Direct
Investment (FDI)?
A company buying stocks issued in another country
Countries becoming more open to foreign trade
GDP per capita increasing faster in poorer
countries versus richer countries
A corporation buying a factory in a foreign country
True or False: Full employment is zero
unemployment.
True
False
GDP stands for
Gross Domestic Product
Good Deflation Process
Glossy Dark Paper
Granular Dedicated Purpose
GNP and GDP differ because:
GNP will always be lower than GDP due to the
adjustment for foreign taxes
GNP is adjusted for inflation while GDP is not
GDP represents all goods and services
produced/provided by the residents of a country while GNP represents all goods
and services produced/provided within a country's physical borders
GDP is adjusted for inflation while GNP is not
GNP represents all goods and services
produced/provided by the residents of a country while GDP represents all goods
and services produced/provided within a country's physical borders
What does purchasing power parity do?
Determines the type of goods available
Determines the elasticity of demand
Determines the elasticity of supply
Determines trade barriers
Determines relative value of currencies
True or False: It's impossible to have falling
inflation and falling unemployment at the same time.
False
True
What does PPF stand for in Economics?
None of these
Production Probability Frontier
Pension Protection Fund
Production Possibility Frontier
Production Protection Fund
The government classification of a recession
is:
Two consecutive quarters of Real GDP decline
One quarter of Real GDP decline
Five consecutive quarters of Real GDP decline
One quarter of GNP decline
Four consecutive quarters of Real GDP decline
What does raising interest rates and reducing
the supply of money do?
Reduce unemployment
Increase FDI
Increase inflation
Reduce inflation
Increase unemployment
According to Keynes, if government earns £1 as
tax revenue and spends it as public expenditure what will be the net effect on
national income?
National income will rise by £1
The net effect is uncertain
There will be no effect
national income will decrease by £1
The relationship between an economy's
unemployment rate and its gross national product (GNP)
Washington's Law
Monetary Policy
Budget deficit
Okun's Law
Can the unemployment rate go below the natural
rate of unemployment?
Yes. The unemployment rate can go below the natural
rate of unemployment in the short term and remain below the natural rate of
unemployment in the long term
No. The unemployment rate is always at the natural
rate of unemployment
Yes. The unemployment rate can go below the natural
rate of unemployment in the short term
No. The unemployment rate flucuates due to the
business cycle, however it can never go below the natural rate of unemployment
Periods of very high inflation rates
can only occur if the output gap is large
can only occur in a situation when the AS-curve is
vertical
most often are caused by sharp increases in
aggregate demand
most often occur when actual GDP is less than
potential GDP
What is the unemployment rate when the economy
is at potential GDP?
It is zero
It is equal to the structural rate of unemployment
It is less than the natural rate of unemployment
It is equal to the natural rate of unemployment
It is greater than the natural rate of unemployment
What is the interest rate stated on a loan
that does not account for inflation or compounding?
Nominal interest rate
Annual percentage rate (APR)
Effective interest rate
Real interest rate
What is "crowding out"?
When government does not add additional output to
the economy
When investments are limited
All of these
When interest rates are raised
When government spending replaces private sector
spending
Which of the following would switch the
aggregate demand curve to the right?
Monetary policy lowers interest rates
Net exports fall
The price level rises
Congress decreases military spending
Which of the following choices relates to the
decision made by congress and the president to lower taxes or increase
government purchases?
Expansionary Monetary Policy
Contractionary Fiscal Policy
Expansionary Fiscal Policy
Contractionary Monetary Policy
The ratio of the change in national income to
the change in government spending is called:
Macroeconomic multiplier
Monetary multiplier
Consumer multiplier
Fiscal multiplier
National multiplier
What is it called when injections of cash in
private banks by a central bank fail to lower interest rates?
Liquidity trap
Keynesian failure
Pigou effect
Interest rate trap
Monetary crisis
Negative income elasticity of demand is
related to ?
Sticky goods
Necessity goods
Normal goods
Inferior goods
Luxury goods
The formula for which of the following
quantities contains a term for "Planned Investment?"
Consumer Price Index
Producer Price Index
Gross Domestic Product
Aggregate expenditure
The term “Balance of Payments” means:
A record of a country’s monetary transactions with
the rest of the world
The Gross Domestic Product adjusted to take into
consideration non-market activities
A formula used to calculate a country’s economic
well-being by deducting total imports from total exports
The ratio of a country’s debt in relation to the
amount of money borrowed from other countries
The multiplier’s value can be found by using
this formula.
1/MPC + MPS
MPS = 1-MPC
1/MPS = 1/(1-MPC)
MPS * (MPC/3)
The aggregate demand and aggregate supply
model explains the relationship of
price an quantity of a certain good
unemployment and output
real GDP and price level
wages and employment
Which is not a reason why the aggregate demand
curve is downward sloping?
Positive Technological Change
The International Trade Effect
The Wealth Effect
The Interest Rate Effect
If money growth does not affect real GDP, and
velocity is stable, an increase in the money supply creates a proportional
increase in
Nominal GDP only
The price level only
Real GDP only
The price level and Nominal GDP
The price level and Real GDP
If we look at the behavior of the U.S. CPI
over the last four decades we realize that inflation
steadily increased in the 1970s
was at its highest in the early 1980s
was, on average, lower in the 1990s than in the
1960s
never exceeded 10 percent
Income elasticity of demand of a good is less
than 1 if it is a:
None of these
Inferior Good
Normal good
Necessity good
Luxury good
If price level increases the LM curve will
shift to
The left
No shifting
The right
Which scenario is related to an unplanned
decrease in inventories?
Aggregate Expenditure > GDP and the economy is
in an expansion phase
Aggregate Expenditure > GDP and the economy is
in a recession
Aggregate Expenditure = GDP and the economy is in
an expansion phase
Aggregate Expenditure < GDP and the economy is
in a recession
Which is not part of the M1 definition of the
Money Supply?
Holdings of traveler's checks
Savings account balances
Currency in circulation
Checking account deposits
In the long run Philips' curve becomes
vertical
horizontal
Slopes upward
Downward sloping
The term “aggregate-supply curve,” describes
which of the following?
the relationship between price levels and the
quantity of output that firms are willing to provide.
The total supply of goods and services produced
within an economy at a given overall price level
Excess of spending over income for a government,
corporation, or individual over a particular period of time
The total supply of goods and services produced
within an economy at a given overall price level
In the very short run
the position of the AD-curve cannot be changed by
fiscal or monetary policy
the position of the AD-curve determines the level
of output
a chance in fiscal and monetary policy will not
affect the level of output
a change in monetary policy will affect both the
price level and the level of output
Which of the following is NOT a characteristic
of Monopolistic Competition?
Consumers view that there are non-price differences
among the competitors' products/services
Many barriers to entry and exit
Producers have a high degree of control over price
Many producers and many consumers in the market
A complement good has what kind of elasticity?
zero cross elasticity of demand
Negative cross elasticity of demand
Positive cross elasticity of demand
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