International Macroeconomics
Chapter Exam Questions
Course Introduction
International Macroeconomics explores the dynamics of economies on a global scale, focusing on interactions among national economies through trade, investment, and financial markets. The course examines exchange rates, balance of payments, international monetary systems, and the effects of fiscal and monetary policies in an open-economy context. Students will analyze economic models to understand currency fluctuations, capital flows, and the impact of global economic policies on growth, inflation, and employment. Case studies highlight recent international economic events, providing a thorough understanding of how macroeconomic principles guide policy decisions in a globally interconnected world.
Recommended Textbook
Macroeconomics 12th Edition by Roger A. Arnold
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Chapter 1: What Economics Is About
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Q1) If variable X rises as a result of variable Y falling,then X and Y have an inverse relationship.
A)True
B)False
Answer: True
Q2) Explain how scarcity can exist in a relatively rich country such as the United States.Give examples to help support your answer.
Answer: Even in a wealthy country,the people living in the country have an infinite amount of wants for goods and services but only a finite amount of resources which can be used to produce those goods and services.Examples will vary.
Q3) Macroeconomics deals with issues involving large corporations,while microeconomics exclusively deals with issues involving small businesses.
A)True
B)False
Answer: False
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Chapter 2: Production Possibilities Frontier Framework
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Q1) An economy can produce the following combinations of goods: 50X and 0Y,40X and 10Y,30X and 20Y,20X and 30Y,10X and 40Y,and 0X and 50Y.The production possibilities frontier (PPF)for the economy is
A)concave downward because the opportunity cost of producing the 10th unit of Y is greater than the opportunity cost of producing the first unit of Y.
B)a straight (downward-sloping)line because the opportunity cost of producing the two goods is constant.
C)concave downward because the opportunity cost of producing the 40th unit of Y is less than the opportunity cost of producing the 10th unit of Y.
D)a straight (downward-sloping)line because the opportunity cost of producing the 10th unit of X is greater than the opportunity cost of producing the 40th unit of X.
E)a straight (downward-sloping)line because the opportunity cost of producing the 30th unit of Y is greater than the opportunity cost of producing the 30th unit of X.
Answer: B
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Chapter 3: Supply and Demand: Theory
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Sample Questions
Q1) Which of the following statements is true?
A)To an economist,demand is different from quantity demanded.
B)A demand schedule is the numerical tabulation of the law of demand.
C)A demand curve is the graphical representation of the direct relationship between price and quantity demanded.
D)a and b
E)a,b,and c
Answer: D
Q2) Which of the following will not shift a supply curve?
A)a change in the price of relevant resources
B)a change in the good's own price
C)a change in the number of sellers
D)a change in per-unit costs brought about by a change in taxes
Answer: B
Q3) When the price of Toyota Corollas rises,ceteris paribus,the demand for Corollas falls.
A)True
B)False
Answer: False
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Chapter 4: Prices: Free, controlled, and Relative
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Q1) Explain why it is important to differentiate between the "number of unskilled workers" and the "number of unskilled labor hours" when evaluating the impact on the market for unskilled labor of an increase in minimum wage.
Q2) If the absolute price of a new car is $40,000 and the relative price of a laptop computer in terms of cars is 1/40 of a car,it follows that the absolute price of the laptop is
A)$10,000.
B)$1,000.
C)$4,000.
D)$2,000.
E)$1,500.
Q3) A price floor set above the equilibrium price will
A)clear the market for the good.
B)result in a shortage of the good.
C)result in a surplus of the good.
D)force some firms in this industry to go out of business.
Q4) What condition is necessary for a price floor to have an impact on a market?
Describe two effects that a price floor can have on a market.
Q5) List and describe the two major jobs performed by price.
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Chapter 5: Supply,demand,and Price: Applications
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Q1) Refer to Exhibit 5-4.If television studio executives choose to charge a price of P<sub>B</sub> to view the taping of all shows,they will find that there is a shortage of tickets to view the taping of show ___________ and a surplus of tickets to view the taping of show ______________.
A)A;C
B)C;A
C)B;A
D)B;C
Q2) If patients were allowed to sue their HMO,we would expect
A)the demand curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to fall.
B)the supply curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to rise.
C)the supply curve for health care services provided by the HMO to shift to the right and the price of HMO-provided health care coverage to fall.
D)a and b
E)none of the above
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Chapter 6: Macroeconomic Measurements, part I: Prices and Unemployment
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Q1) Look at the following data: The frictional unemployment rate is 3 percent,the natural unemployment rate is 6.5 percent,and the cyclical unemployment rate is 2.4 percent.The structural unemployment rate is __________ percent and the actual unemployment rate (in this economy)is __________ percent.
A)3;8.9
B)3.5;8.9
C)3.5;9.5
D)5.4;2.4
E)none of the above
Q2) Discouraged workers are not counted as unemployed because they are working.
A)True
B)False
Q3) A worker is underemployed if she is working at a job for which her skills far exceed the requirements for the job.
A)True
B)False
Q4) Describe the terms frictional unemployment,structural unemployment,and cyclical unemployment.Give a hypothetical example of each to help support your answer.
Page 8
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Chapter 7: Macroeconomic Measurements, part II: GDP and Real GDP
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Q1) List and describe four of the six categories of economic exchanges that are omitted from GDP calculations.Explain why these transactions are not included in GDP and give an example of each to help support your answer.
Q2) Suppose that nondurable goods spending is $200 billion,durable goods spending is $400 billion,new residential housing spending is $500 billion,and spending on services is $700 billion.What does consumption equal?
A)$600 billion
B)$1,100 billion
C)$1,800 billion
D)$1,300 billion
E)There is not enough information to answer this question.
Q3) Suppose that fixed investment is $550 billion and (total)investment is $630 billion.What does inventory investment equal?
A)$80 billion
B)$550 billion
C)$630 billion
D)$1,180 billion
E)There is not enough information to answer this question.
Q4) List and explain the two different approaches used to measure GDP.
Page 9
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Chapter 8: Aggregate Demand and Aggregate Supply
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Q1) Refer to Exhibit 8-3.A movement from point A to point B on AD<sub>1</sub> would have been the result of
A)a decrease in the price level.
B)an increase in the price level.
C)an increase in income taxes.
D)a decrease in income taxes.
Q2) Velocity is the average number of times a dollar is spent to buy
A)final goods and services in a year.
B)final and intermediate goods and services in a year.
C)final goods,but not services,in a year.
D)services in a year.
Q3) An appreciation of the U.S.dollar against foreign currencies tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.
A)raise;right
B)raise;left
C)lower;right
D)lower;left
Q4) List and describe the three effects that help to explain why the aggregate demand (AD)curve slopes downward.
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Chapter 9: Classical Macroeconomics and the
Self-Regulating
Economy
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Q1) An economy is producing its Natural Real GDP when the unemployment rate is equal to the __________ unemployment rate.
A)frictional
B)structural
C)sum of the frictional unemployment rate and the structural
D)seasonal
E)cyclical
Q2) According to classical economists,the relationship between the amount of funds firms invest and the interest rate is A)direct.
B)inverse.
C)indirect.
D)independent.
Q3) The classical economists felt that saving would be equal to investment because A)wages are flexible.
B)prices of domestic goods are flexible.
C)interest rates are flexible.
D)prices of imports are flexible.
Q4) Explain the policy implications of the classical economists' beliefs.
Page 11
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Chapter 10: Keynesian Macroeconomics and Economic
Instability: a Critique of the Self-Regulating Economy
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Q1) One similarity between the beliefs of the classical economists and Keynes is that increased saving would necessarily stimulate an equal amount of increased investment spending.
A)True
B)False
Q2) The marginal propensity to save (MPS)can be found using the equation: (1 - MPC).
A)True
B)False
Q3) In Keynes' view,labor unions would resist wage cuts,but individual employees would go along with wage cuts initiated by his/her employer.
A)True
B)False
Q4) When the economy is in short-run equilibrium,
A)there are increases in inventory.
B)there are decreases in inventory.
C)total expenditures equal total production.
D)people want to buy more than will be produced.
Q5) As portrayed in terms of total expenditures (TE)and total production (TP),discuss at least three assumptions that sum up the workings of the simple Keynesian model.
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Chapter 11: Fiscal Policy and the Federal Budget
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Q1) When the economy is in a recessionary gap,Keynesian economists will often advocate expansionary policy measures.Why?
A)Keynesians believe the economy sometimes gets stuck in a recessionary gap and can't get itself out without government intervention.
B)Keynesians believe the economy itself sometimes takes too long to eliminate the recessionary gap and return to full-employment output.
C)Keynesians are generally in favor of increasing taxes.
D)a and b
E)a and c
Q2) The transmission lag is the period that elapses between the time fiscal policy is enacted and the time it is put into effect.
A)True
B)False
Q3) Explain the difference between a progressive income tax,a proportional income tax and a regressive income tax.Under which type of system is the federal income tax?
Q4) Explain how tax cuts can impact both aggregate demand and aggregate supply.Give an example of each.
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Chapter 12: Money,banking,and the Financial System
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Q1) M1 is comprised of currency held outside banks + traveler's checks + __________.
A)credit cards
B)savings deposits
C)gold
D)checkable deposits
E)money market mutual funds
Q2) A savings account functions as
A)a unit of account.
B)a store of value.
C)a medium of exchange.
D)none of the above
Q3) The store of value function of money refers to the ability of money to
A)facilitate the exchange of goods and services.
B)maintain its value over time.
C)express relative scarcity.
D)earn interest over time.
E)increase its value over time.
Q4) Small-denomination time deposits are part of M2,but not part of M1.
A)True
B)False
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Chapter 13: The Federal Reserve System
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Q1) If the Fed _____________________,the money supply will ultimately
A)raises the discount rate relative to the federal funds rate;decrease B)lowers the discount rate relative to the federal funds rate;increase C)lowers the discount rate relative to the federal funds rate;decrease D)raises the discount rate relative to the federal funds rate;increase E)a and b
Q2) Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.At the end of this process of money creation,what is the total amount of new checkable deposits?
A)$1,000,000
B)$1,000
C)$10,000
D)$100,000
Q3) The Board of Governors of the Federal Reserve is comprised of
A)seven persons,each appointed to a seven-year term.
B)seven persons,each appointed to a fourteen-year term.
C)fourteen persons,each appointed to a seven-year term.
D)twelve persons,each appointed to a seven-year term.
E)twelve persons,each appointed to a fourteen-year term.
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Chapter 14: Money and the Economy
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Q1) If the nominal interest rate is 4 percent and the expected inflation rate is 1 percent,the real interest rate is
A)3 percent.
B)5 percent.
C)4 percent.
D)1.50 percent.
E)0.25 percent.
Q2) If GDP is $9,000 billion and the money supply is $1,800 billion,velocity is approximately
A)0.20.
B)6.00.
C)4.15.
D)5.00.
E)There is not enough information provided to answer this question.
Q3) In symbols,the equation of exchange says
A)MP = QV.
B)MQ = PV.
C)MV = PQ.
D)MP = MQ.
Q4) Describe the expectations (or Fisher)effect.
Page 16
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Chapter 15: Monetary Policy
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Q1) Suppose that an individual can hold her wealth in only two forms: money and bonds.A _______________ in the bond market would then imply that there is a ________________ in the money market.
A)surplus;surplus
B)shortage;shortage
C)surplus;shortage
D)shortage;surplus
E)c and d
Q2) Monetary policy refers to
A)actions taken by banks and other financial institutions regarding their approaches to lending,account management,etc.
B)changes in the money supply to achieve particular economic goals.
C)changes in government expenditures and taxation to achieve particular economic goals.
D)the change in private expenditures that occurs as a consequence of changes in the money supply.
Q3) Explain how,according to the theory of PSST (patterns of specialization and sustainable trade),economic activity can decline in the face of unchanged aggregate demand.Give a hypothetical example to help support your answer.
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Chapter 16: Expectations Theory and the Economy
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Q1) The Phillips curve that Samuelson and Solow fitted to their data was A)upward sloping.
B)downward sloping.
C)vertical.
D)horizontal.
Q2) As the price level falls,real wage ____________and people choose to work ___________.
A)rises;more B)rises;less C)falls;more D)falls;less
Q3) The Friedman natural rate theory implies that there is a tradeoff between inflation and unemployment in A)neither the short run nor the long run. B)both the short run and the long run.
C)the short run,but not in the long run.
D)the long run,but not in the short run.
Q4) In what ways does the original Phillips curve differ from the Phillips curve created by economists Samuelson and Solow? What conclusions did economists draw based on the findings of Phillips,Samuelson and Solow?
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Chapter 17: Economic Growth: Resources, technology, ideas, and Institutions
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Q1) The Real GDP of country X doubled in 10 years.It follows that
A)the per-capita Real GDP doubled during this time,too.
B)the per-capita Real GDP remained stable during this time.
C)the per-capita Real GDP fell during this time.
D)disposable income also doubled during this time.
E)none of the above
Q2) In the production function Real GDP = T (L,K),the T stands for tax coefficient.
A)True
B)False
Q3) List and describe four factors that can contribute to economic growth.
Q4) Property rights are a tangible factor in producing economic growth.
A)True
B)False
Q5) Real GDP in a small country is worth $8 billion.The population of the country is 200,000.What is per capita Real GDP?
A)$30,000
B)$40,000
C)$60,000
D)$300,000
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Chapter 18: The Financial Crisis of 2007-2009
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Q1) For financial institutions,securitization is the means by which regulatory capital arbitrage lowers capital requirements.
A)True
B)False
Q2) According to Alan Greenspan,the Taylor rule is ________________ when trying to figure out the causes of sharp increases in housing prices.His opinion is based,in part,on his assertion that the Taylor rule addresses ____________ inflation,not ____________ inflation.
A)inappropriate;product-price;asset-price
B)inappropriate;asset-price;product-price
C)appropriate;product-price;asset-price
D)appropriate;asset-price;product-price
Q3) In February 2009,Congress passed (and President Obama signed)a $787 billion fiscal stimulus bill in an attempt to improve the economy.
A)True
B)False
Q4) Describe how,according to some economists,the Fed's actions and the"global savings glut" both contributed to rising U.S.housing prices in the early 2000s.
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Chapter 19: Debates in Macroeconomics Over the Role and Effects
of Government
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Q1) Which of the following persons is most likely to become informed on the National Endowment for the Arts?
A)an attorney
B)a mayor of a city
C)a farmer
D)a student of agriculture
E)a sculptor
Q2) According to public choice theorists,people in the market sector and people in the public sector behave differently because
A)people in the two sectors have different motives.
B)the two sectors have different institutional arrangements.
C)government employees do not act in their own self-interest.
D)there are economies of scale in the market sector.
Q3) What is the median voter model? Describe four different ways in which this theory is predicted to impact the behavior of political candidates.
Q4) Simple majority voting will generate the same result whether taxes are equally divided or unequally divided.
A)True
B)False
21
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Chapter 20: Public Choice and Special-Interest-Group
Politics
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Q1) Which of the following theories is not falsifiable or refutable?
A)Everything that has happened to Jane throughout her life happened to her specifically because she was born on June 23,1993.
B)People with blue eyes tend to be more sensitive to light than people with brown eyes.
C)Women who are electrical engineers tend to have fewer children than women who are retail cashiers.
D)People who watch more than six hours of television per day tend to weigh more than people who watch fewer hours of television daily.
E)all of the above
Q2) For economic imperialists,economics is more of a method of analysis than a specific field of study.
A)True
B)False
Q3) Scientists prefer to advance irrefutable theories,rather than refutable theories.
A)True
B)False
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Chapter 21: Building Theories to Explain Everyday Life: From
Observations to Questions to Theories to Predictions
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Q1) The term outsourcing is used to describe work done for a company by individuals working for another company in a different country.
A)True
B)False
Q2) Which of the following statements about a tariff and a quota is true?
A)With a tariff the government collects revenues,but not with a quota.
B)With a quota the quantity of imports falls,but not with a tariff.
C)With a tariff the domestic price of the good increases,but not with a quota.
D)With a quota the domestic production of the good increases,but not with a tariff.
E)all of the above
Q3) Raquel,who earns $900 a week,bought a television set and gained $70 consumers' surplus.What price did she pay for the good?
A)$40
B)$830
C)$160
D)$5
E)There is not enough information to answer the question.
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Chapter 22: International Trade
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Q1) Which of the following statements is false?
A)When the value of a country's imports is greater than the value of its exports,the country's net exports will be a positive value.
B)A country is running a trade deficit when the value of its imports is greater than the value of its exports.
C)A country is running a trade surplus when the value of its exports is greater than the value of its imports.
D)Net exports are sometimes referred to as the balance of trade.
Q2) If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.008 = 1 yen,but currently the exchange rate is $0.007 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________,and the dollar will __________.
A)increase;appreciate
B)decrease;appreciate
C)increase;depreciate
D)decrease;depreciate
Q3) One example of an optimal currency area is the states within the United States.
A)True
B)False
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Chapter 23: International Finance
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Q1) If an economy's exports are $600 billion and its imports are $750 billion,its net exports are
A)$1,550 billion
B)$150 billion
C)-$150 billion
D)1.07.
Q2) Between 1990 and 2003,college tuition went up 130 percent,which is __________ the increase in the prices of housing,gasoline,and medical care. A)slightly more than B)less than C)about the same as D)considerably more than
Q3) When the dollar depreciates,this shifts the AD curve rightward and the SRAS curve leftward,leading to a higher price level.
A)True
B)False
Q4) When World War II ended,the new era of globalization began.
A)True
B)False
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Chapter 24: Globalization and International Impacts on the Economy
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Q1) Person A argues that government is unnecessary and often does more harm than good.Economist A disagrees.What does economist A --- who believes that there is a legitimate case that can be made for government --- most likely say to support his position?
A)Government almost always does more good than harm.
B)Without government,life would be anarchy.
C)There are some things that individuals want done that can't get done without government.
D)There are better people going into government work than are going into the private sector.
E)none of the above
Q2) A special interest group has a good chance of redistributing (transferring)income from others to itself if the
A)costs of the transfer are spread over a very large number of people.
B)costs of the transfer are spread over a very small number of people.
C)costs of the transfer are spread over the same number of people that comprise the special interest group.
D)the number of members in the special interest group is greater than 100.
E)none of the above
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Chapter 25: The Economic Case for and Against
Government: Five Topics Considered
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Q1) If the stock market quote in the newspaper reads 752 in the column headed "Vol 00s",it means that 752 shares of this stock were traded on this particular day.
A)True
B)False
Q2) The acronym NASDAQ (one of the stock exchanges)stands for
A)National Academy of Stock Dealers Automated Quotations
B)New American Securities Dealers Automated Quotations
C)National Association of Securities Dealers Automated Quotations
D)North American Stock Dealers Automated Quotations
Q3) Another term for stocks is equity.
A)True
B)False
Q4) A person buys a bond with a face value of $10,000 for $9,325.Each year until the maturity date the bond buyer receives a coupon payment of $650 from the issuer of the bond.The coupon rate on the bond is
A)9.11 percent.
B)6.5 percent.
C)7.0 percent.
D)6.75 percent.
Page 27
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Chapter 26: Stocks, bonds, futures, and Options
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Q1) Refer to Exhibit 39-4.The price support of $6 per bushel results in private citizens spending __________ on wheat.
A)$600
B)$3,000
C)$3,600
D)$4,800
E)$6,600
Q2) Under an acreage allotment program,
A)the government sets a limit on the quantity of a product that a farmer is allowed to bring to market,which is intended to cause farmers to cut back on the number of acres they cultivate.
B)farmers are paid to take part of their land out of cultivation.
C)farmers are given limits as to the number of acres that can be farmed.
D)farmers are paid the difference between the market price of their product and a governmentally determined price that would maintain an established price parity.
E)the government establishes a minimum price that farmers will be paid for their product,which causes the farmers to cut back on the number of acres planted.
Q3) Explain how nonrecourse loans operate and how they help to support crop prices.
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