Intermediate Macroeconomics
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Course Introduction
Intermediate Macroeconomics builds on foundational economic principles to explore the behavior and performance of national economies. The course examines the determinants of GDP, unemployment, inflation, and economic growth, integrating both classical and contemporary macroeconomic models. Students will analyze the roles of fiscal and monetary policy, learn about economic fluctuations and stabilization policies, and apply both theoretical and empirical tools to real-world macroeconomic issues. Emphasis is placed on understanding macroeconomic indicators, developing analytical skills, and applying models to evaluate current economic events and policy debates.
Recommended Textbook
Macroeconomics A Contemporary Introduction 9th Edition by William A. McEachern
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) A good or service is considered scarce if
A)any quantity of it can be consumed at a zero price
B)the amount people desire exceeds the amount available at a zero price
C)the amount people desire exceeds the amount available at any price
D)the amount people desire is less than the amount available at any price
E)the amount people desire is less than the amount available at a zero price
Answer: B
Q2) All economic models must involve simplifications because
A)economists would be unable to command high salaries if their models were so simple that anyone could understand them
B)human behavior is very erratic and unpredictable
C)reality is too complex to understand in its entirety, so we must reduce it to a level that we can understand
D)they always try to duplicate all possible information and cover all possible variables that might influence decision making
E)we must rely on value judgments and ignore reality
Answer: C
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3
Chapter 2: Economic Tools and Economics Systems
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Sample Questions
Q1) Which of the following provide the best evidence of specialization?
A)a firm that produces a line of related products, such as eight kinds of breakfast cereal
B)an architect who is willing to practice in only one geographic area
C)a physician that practices in a specialty area such as cardiology or orthopedic surgery
D)a family that eats at Wendy's every Thursday night
E)a retailer that sells goods but provides no services
Answer: C
Q2) Opportunity cost is the difference between the benefits and the costs of a choice.
A)True
B)False
Answer: False
Q3) It is possible for one person to have an absolute advantage in something even if she has no comparative advantage in anything.
A)True
B)False
Answer: False
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Brian is the sole proprietor owner of Long Voyage Software, which generates maps for wilderness trips. He started the business with an initial investment of $80,000. A faulty map caused one customer to get hopelessly lost. After her rescue and recuperation, she sued Long Voyage for $5,000,000. Which of the following is true?
A)The customer can be awarded only $80,000--what the firm has available to pay.
B)The customer can be awarded $5,000,000 but can get only $80,000.
C)The customer can be awarded $5,000,000, but Brian personally won't have to pay more than $80,000.
D)If $5,000,000 is awarded, Brian will have to pay none of it.
E)If $5,000,000 is awarded, Brian is personally responsible for paying all of it.
Answer: E
Q2) Which of the following taxes is based on the ability-to-pay principle?
A)tolls on a bridge
B)income taxes
C)gasoline excise taxes
D)property taxes
E)user fees that collect the same amount from each person
Answer: B
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Chapter 4: Demand Supply and Markets
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Sample Questions
Q1) The law of demand says that as the price of a good rises,
A)buyers recognize that price may be even higher in the future, and so they buy now
B)buyers purchase less in hopes that the price will fall in the future
C)buyers purchase less, in part because their real income has fallen
D)buyers purchase more, in part because the price of a substitute has risen
E)buyers purchase more, in part because it has higher status at a higher price
Q2) If a decrease in the price of a good causes a rightward shift of the demand curve for that good, then it is an inferior good.
A)True
B)False
Q3) An improvement in technology shifts the supply curve rightward.
A)True
B)False
Q4) If the demand for bicycles increases,
A)the quantity demanded decreases
B)equilibrium price increases and equilibrium quantity decreases
C)equilibrium price decreases and equilibrium quantity increases
D)quantity supplied increases
E)quantity supplied decreases
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Chapter 5: Introduction to Macroeconomics
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Sample Questions
Q1) Given the aggregate demand curve, an increase in aggregate supply would raise real GDP and reduce the price level.
A)True
B)False
Q2) An increase in aggregate supply will result in
A)lower levels of employment
B)a rightward shift of the aggregate demand curve
C)a higher price level
D)a leftward shift of the aggregate demand curve
E)an economic expansion
Q3) 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
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Chapter 6: Tracking the Us Economy
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Sample Questions
Q1) Refer to Exhibit 6-3. Between 2001 and 2002, real GDP for this nation
A)increased by slightly less than $10 billion
B)decreased by slightly more than $5 billion
C)remained constant
D)increased by only about $1 billion
E)cannot be determined from the information given
Q2) The circular flow model
A)measures identical flows through the different markets
B)shows how firms maximize profits and minimize costs
C)shows how competitive markets interact with noncompetitive markets
D)measures the value of income earned by the public sector
E)measures the value added by the business sector as it uses funds
Q3) If the price index for 2008 was 100 and the price index for 2009 was 109, then how much did prices change between 2008 and 2009?
A)1 percent increase
B)8 percent increase
C)9 percent increase
D)12 percent increase
E)12 percent decrease
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Chapter 7: Unemployment and Inflation
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Sample Questions
Q1) Unanticipated inflation creates problems for society because
A)it increases the wealth of people who hold cash
B)it promotes social cooperation by encouraging self-restraint
C)it reduces the desire to plan and reduces the complexity of planning
D)it redistributes wealth and income
E)it requires buyers to spend less time acquiring information about prices
Q2) Full employment
A)exists when everyone in the economy has a job
B)exists when everyone who wants a job has one
C)exists when the unemployment rate is zero
D)exists when everyone in the labor force has a job
E)will always include some unemployment
Q3) Underemployment refers to
A)seasonal unemployment
B)people working full-time though they would rather work part-time
C)the unemployment that occurs when the actual level of employment is less than the full employment level
D)people working in jobs that do not fully use their skills
E)people working part-time
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Chapter 8: Productivity and Growth
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Sample Questions
Q1) A technological improvement would make point C in Exhibit 8-1 attainable.
A)True
B)False
Q2) All of the following might cause an increase in economic growth, but which would be least certain to do so?
A)a population increase
B)an increase in the number in the labor force
C)an increase in the labor force participation rate
D)an increase in the resource base
E)technological improvements
Q3) If on-the-job experience causes labor productivity to increase, that is the result of an improvement in human capital.
A)True
B)False
Q4) The shape of the per-worker production function in Exhibit 8-1 illustrates the law of increasing marginal returns to capital.
A)True
B)False
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Chapter 9: Aggregate Expenditure
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Sample Questions
Q1) In Exhibit 9-3, the slope of the consumption function is equal to
A).33
B).5
C).67
D).7
E).9
Q2) An increase in the interest rate will increase consumption spending.
A)True
B)False
Q3) Suppose that when disposable income rises from $5.2 trillion to $6.0 trillion, consumption rises from $5.0 trillion to $5.6 trillion. What is the marginal propensity to consume?
A)0.25
B)0.33
C)0.75
D)0.67
E)0.07
Q4) The primary determinant of consumption spending is the price level. A)True
B)False
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Chapter 10: Aggregate Expenditure and Aggregate Demand
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Sample Questions
Q1) If households save $30 billion more at each level of income and the MPC = 0.9, the aggregate expenditure line will
A)not be affected
B)shift upward by $30 billion
C)shift downward by $30 billion
D)shift upward by $300 billion because of the multiplier
E)shift downward by $300 billion because of the multiplier
Q2) The smaller the marginal propensity to save, other things constant,
A)the smaller the marginal propensity to consume
B)the smaller the multiplier
C)the flatter the consumption function
D)the flatter the saving function
E)the steeper the saving function
Q3) 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
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Chapter 11: Aggregate Supply
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Sample Questions
Q1) If workers and other resource suppliers negotiate higher resource payments, which of the following is true?
A)The long-run aggregate supply curve will shift rightward.
B)There will be a leftward movement along a fixed short-run aggregate supply curve.
C)The long-run aggregate supply curve will shift leftward.
D)The short-run aggregate supply curve will shift rightward.
E)Higher resource payments will cause the price level to rise.
Q2) In the short run, there is a positive relationship between
A)inflation and unemployment
B)inflation and real GDP
C)the actual price level and aggregate quantity supplied
D)the actual price level and unemployment
E)the actual price level and consumption spending
Q3) In long-run equilibrium,
A)actual output can exceed potential output
B)potential output can exceed actual output
C)actual output must equal potential output
D)actual price levels can exceed expected price levels
E)expected price levels can exceed actual price levels
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Page 13
Chapter 12: Fiscal Policy
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Sample
Questions
Q1) John Maynard Keynes believed that
A)wages and prices were flexible
B)wages, prices and interest rates were flexible
C)wages and prices were relatively inflexible and interest rates would not fall fast enough to restore full employment
D)market forces pushed the economy toward full employment and full production
E)investment was always sufficient to bring about full employment
Q2) The classical economists believed that the economy automatically move toward equilibrium at full employment.
A)True
B)False
Q3) Government military spending affects aggregate demand the same way government payments for Social Security would.
A)True
B)False
Q4) Expansionary and contractionary gaps are automatically eliminated by shifts in aggregate demand.
A)True
B)False
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Chapter 13: Federal Budgets and Public Policy
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Sample Questions
Q1) A continuing resolution provides authorization for continuing agency operation even after its budget has expired.
A)True
B)False
Q2) Cyclical budget deficits refer to
A)the fact that deficits increase during expansions and decrease during contractions
B)the fact that deficits increase during contractions and decrease during expansions
C)the size of the deficit after the economy has gone through a complete business cycle
D)the size of the deficit when the economy is at potential GDP
E)none of the above
Q3) The federal budget experienced surpluses from
A)1998-2001
B)2002-2006
C)1970-1973
D)1991-1994
E)1985-1988
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Chapter 14: Money and the Financial System
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Sample Questions
Q1) When a nation's official money fails to serve as a medium of exchange,
A)nothing will replace money to help facilitate exchange
B)there will be an increase in economic efficiency
C)resources must be diverted from production to exchange
D)transactions costs of exchange will decrease
E)fewer barter exchanges will be completed
Q2) Barter is more feasible in primitive societies than in modern societies because
A)there is no inflation in primitive societies
B)there are many goods available for trade in primitive societies, so people can always find the goods that they want
C)specialization is limited and thus there are few goods available for trade in primitive societies
D)specialization is limited and thus there are many goods available for trade in primitive societies
E)people in primitive societies have limited wants
Q3) The Federal Open Market Committee was established to give the Fed the power to change reserve requirements.
A)True
B)False
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Page 16
Chapter 15: Banking and the Money Supply
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Sample Questions
Q1) If a bank has $1 million in assets and $50,000 in net worth, its liabilities must equal
A)$50,000
B)$1,050,000
C)$50 million
D)$1,000,000
E)$950,000
Q2) The distinction between M1 and M2 has blurred over time because
A)M1 is now larger than M2
B)depositors can transfer funds between accounts so easily
C)the Federal Reserve has defined them less precisely
D)M1 is becoming less liquid
E)banks are offering time deposits
Q3) The Federal Reserve may increase the money supply by
A)selling a bond to a member bank
B)selling a bond to a securities dealer
C)lending reserves to banks
D)increasing required reserve ratios
E)increasing the discount rate
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Chapter 25: The Algebra of Income and Expenditure
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Sample Questions
Q1) The nation of Omega has an MPC of 0.70 and a multiplier of 2.22. Therefore, Omega's MPM is
A)0.9
B)0.7
C)0.5
D)0.15
E)This question cannot be answered without knowing the MPS
Q2) If Y = C + I + G + (X - M) (where C = $100, I = $50, G = $50, and X - M = -$10) the equilibrium level of Y equals
A)$150
B)$180
C)$190
D)$200
E)$210
Q3) 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.
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Chapter 16: Monetary Theory and Policy
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Sample Questions
Q1) The money demand curve shifts to the right whenever there is a decrease in the interest rate.
A)True B)False
Q2) While monetary targets are important, also significant is what Fed officials have to say. Sometimes reassurance is all that's required to calm market jitters.
A)True
B)False
Q3) Which of the following would cause a downward movement along the money demand curve?
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
Q4) When the money supply increases, people get rid of their excess money by buying real assets, such as durable goods.
A)True
B)False
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Chapter 17: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) The active approach to monetary policy involves predetermined rules that are followed virtually without exception.
A)True
B)False
Q2) Advocates of policy rules rather than discretion believe that self-correction forces work too slowly when discretionary policy is used.
A)True
B)False
Q3) 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
Q4) An increase in price expectations shifts the long-run Phillips curve, but not the short-run Phillips curve.
A)True
B)False
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Page 20
Chapter 26: The Algebra of Demand-Side Equilibrium
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Sample Questions
Q1) The balanced budget multiplier
A)increases as MPC increases
B)increases as MPC decreases
C)depends on the absolute level of government spending
D)is always greater than the government multiplier
E)is equal to 1
Q2) If the government raised transfer payments by $100 million while reducing its own purchases of computers by $100 million, we would expect the net effect of these actions to be
A)an increase in aggregate demand, which is a rightward shift of the aggregate demand curve
B)an increase in aggregate demand, which is a leftward shift of the aggregate demand curve
C)a decrease in aggregate demand, which is a rightward shift of the aggregate demand curve
D)a decrease in aggregate demand, which is a leftward shift of the aggregate demand curve
E)to leave the aggregate demand curve unchanged
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21
Chapter 18: International Trade
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Sample Questions
Q1) The largest regional trading bloc is the
A)North American Free Trade Agreement
B)European Community
C)Latin American Free Trade Agreement
D)Asian Free Trade Agreement
E)East Asian Cooperation Council
Q2) 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
Q3) The source of gains from trade is
A)tariffs
B)self-sufficiency
C)autarky equilibrium
D)absolute advantage
E)comparative advantage
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22
Chapter 19: International Finance
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Sample Questions
Q1) Which of the following is not considered a unilateral transfer?
A)foreign aid from one government to another
B)income earned from foreign investments
C)personal gifts to friends in foreign countries
D)donations to foreign countries from non-government domestic charities
E)government transfers to foreign residents
Q2) In 2009, the United States balance of trade deficit with China was about 4 times as large as the balance of trade deficit with Canada
A)True
B)False
Q3) The gold standard
A)has been in operation since the establishment of the Federal Reserve Board
B)has been in operation since shortly after World War I
C)has been in operation since the Bretton Woods agreement was signed
D)was in operation for about 50 years before World War I
E)was in operation from the date of the Bretton Woods agreement until the devaluation of the U.S. dollar in 1971
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Chapter 20: Economic Development
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Sample Questions
Q1) Which of the following creates an obstacle to pursuing freer international trade?
A)Consumers do not recognize their potential gains
B)Losses are widespread
C)Domestic producers do not recognize their potential losses
D)Government has plenty of political will and support to remove trade barriers
E)Consumers can easily organize to demand free trade
Q2) Foreign aid often becomes a source of discretionary funds that benefit poor people in developing countries and not the countries' leaders.
A)True
B)False
Q3) Labor productivity depends on the
A)the effectiveness of government
B)the size of the economy
C)the proportion of the labor force that is unionized
D)the amount of capital
E)All of the answers are correct
Q4) In 2010 the unemployment rate in Zimbabwe was 95%
A)True
B)False
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Chapter 21: National Income Accounts
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Sample Questions
Q1) In Exhibit 6-5, National Income equals
A)$420 billion
B)$390 billion
C)$365 billion
D)$385 billion
E)$375 billion
Q2) The income approach to GDP reveals that compensation of employees (i.e., wages and salaries) is larger than profits.
A)True
B)False
Q3) In Exhibit 6-4, Personal Income equals
A)$420 billion
B)$385 billion
C)$375 billion
D)$365 billion
E)$390 billion
Q4) Disposable Income is Personal Income minus personal taxes.
A)True B)False
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Chapter 22:Understanding Graphs
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Sample Questions
Q1) The slope of a line is defined as the
A)change in the value of the variable on the vertical axis divided by the change in the value of the variable on the horizontal axis
B)value of the variable on the horizontal axis divided by the value of the intercept on the vertical axis
C)change in the value of the variable on the horizontal axis divided by the increase in the value of the variable on the vertical axis
D)value of the variable on the vertical axis divided by the value of the variable on the horizontal axis
E)change in the value of the variable on the vertical axis times the increase in the value of the variable on the horizontal axis
Q2) If x causes y, then
A)x and y are inversely related
B)y is a dependent variable
C)other variables don't matter
D)y must, in turn, cause x
E)x and y are always in a direct relation to each other
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Chapter 23:Variable Net Exports
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Sample Questions
Q1) U.S. economic growth does not contribute to a U.S. trade deficit.
A)True
B)False
Q2) Which of the following factors is not assumed constant along the U.S. net export function?
A)U.S. price levels and foreign price levels
B)interest rates in the U.S. and abroad
C)exchange rates between the U.S. and other currencies
D)foreign income levels
E)income levels in the U.S.
Q3) U.S. net exports will fall if
A)U.S. income rises
B)U.S. income falls
C)U.S. imports decrease
D)the value of the U.S. dollar falls
E)U.S. exports increase and U.S. imports are autonomous
Q4) An increase in the value of the U.S. dollar relative to other currencies will increase U.S. imports.
A)True
B)False
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Chapter 24: Variable Net Exports Revisited
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Q1) If the MPC = 0.9 and the MPM = 0.1, then the spending multiplier with variable net exports equals 8.
A)True
B)False
Q2) In a model which includes variable net exports, the spending multiplier equals 1/(MPS + MPM).
A)True
B)False
Q3) Imports are a leakage from the circular flow.
A)True
B)False
Q4) The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).
A)True
B)False
Q5) Adding variable net exports to aggregate expenditure always increases the slope of the aggregate expenditure line.
A)True
B)False
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