Macroeconomic Theory
Exam Materials
Course Introduction
Macroeconomic Theory explores the fundamental principles governing the overall functioning of economies at the national and global levels. This course examines key concepts such as aggregate demand and supply, inflation, unemployment, economic growth, fiscal and monetary policy, and the role of government intervention in stabilizing the economy. Students will analyze theoretical models that explain fluctuations in output and prices, and investigate how economic policies are formulated and implemented to achieve macroeconomic objectives. Emphasis is placed on understanding real-world economic issues through the lens of established models, preparing students to critically assess current macroeconomic events and policy debates.
Recommended Textbook
Macroeconomics 12th Edition by Michael Parkin
Available Study Resources on Quizplus
15 Chapters
5881 Verified Questions
5881 Flashcards
Source URL: https://quizplus.com/study-set/342 Page 2
Chapter 1: What Is Economics?
Available Study Resources on Quizplus for this Chatper
479 Verified Questions
479 Flashcards
Source URL: https://quizplus.com/quiz/5584
Sample Questions
Q1) What is the difference between scarcity and poverty?
Answer: Scarcity exists when availability is less than people want. Poverty exists when availability is less than people need. Everyone suffers scarcity; only an unfortunate minority suffers poverty.
Q2) Marginal benefit is the benefit
A) that your activity provides to someone else.
B) of an activity that exceeds its cost.
C) that arises from the secondary effects of an activity.
D) that arises from an increase in an activity.
Answer: D
Q3) "As you devote more hours to studying, your GPA increases." A graph of this relationship would show
A) a positive relationship.
B) a direct relationship.
C) an inverse relationship.
D) Both answers A and B are correct.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Economic Problem
Available Study Resources on Quizplus for this Chatper
440 Verified Questions
440 Flashcards
Source URL: https://quizplus.com/quiz/5585
Sample Questions
Q1) In the above table, the production of 3 pizzas and 35 cases of soda is
A) impossible unless more resources become available.
B) feasible but would involve unemployed or misallocated resources.
C) possible only if the economy produces with maximum efficiency.
D) possible only if there is inflation.
Answer: B
Q2) Comparative advantage is
A) the ability to perform an activity at a lower opportunity cost than anyone else.
B) the ability to perform an activity at a higher opportunity cost than anyone else.
C) the ability to perform an activity at a zero opportunity cost.
D) another name for absolute advantage.
Answer: A
Q3) Any point on a production possibilities frontier (PPF)itself is
A) production efficient.
B) unattainable.
C) inefficient.
D) equitable.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Demand and Supply
Available Study Resources on Quizplus for this Chatper
515 Verified Questions
515 Flashcards
Source URL: https://quizplus.com/quiz/5586
Sample Questions
Q1) If a technological advance takes place in the computer industry, then the equilibrium price of a computer will ________ and the equilibrium quantity will ________.
A) fall; increase
B) fall; decrease
C) rise; increase
D) rise; decrease
Answer: A
Q2) The figure above shows the demand for fruit snacks. Which movement reflects a decrease in quantity demanded but NOT a decrease in demand?
A) from point a to point e
B) from point a to point b
C) from point a to point c
D) from point a to point d
Answer: A
Q3) What are substitutes in production?
Answer: Goods are substitutes in production when one good can be produced in place of the other, that is, when the goods are produced using the same resources.
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Measuring GDP and Economic Growth
Available Study Resources on Quizplus for this Chatper
395 Verified Questions
395 Flashcards
Source URL: https://quizplus.com/quiz/5587
Sample Questions
Q1) Household production is not measured in the GDP.
A)True
B)False
Q2) Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include
A) depreciation and investment.
B) exports and imports.
C) personal taxes and corporate taxes.
D) indirect taxes and subsidies.
Q3) Several adjustments must be made to net domestic product at factor cost in order to calculate GDP. One of these adjustments is adding depreciation. What is depreciation and why must it be added?
Q4) List and discuss various types of goods and services omitted from measured GDP.
Q5) Real GDP fluctuates from year to year but is always below potential GDP.
A)True
B)False
Q6) Explain the relationship among the capital stock, gross investment, net investment, and depreciation.
Q7) Why does real GDP have limitations in determining economic welfare?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Monitoring Jobs and Inflation
Available Study Resources on Quizplus for this Chatper
407 Verified Questions
407 Flashcards
Source URL: https://quizplus.com/quiz/5588
Sample Questions
Q1) If the people who take early retirement are not counted in the working-age population, then
A) the unemployment rate would be lower.
B) the labor force participation rate would be less.
C) the unemployment rate would be higher.
D) the labor force participation rate would be higher.
Q2) The official U-3 unemployment rate includes the total number of people who
A) have jobs or are currently looking for jobs.
B) are available and looking for work but unable to find employment.
C) would like to have a job but have stopped seeking work.
D) would like to have a full-time job but are working part-time.
Q3) Cyclical unemployment occurs when
A) individuals enter into the labor market making the rounds of potential employers.
B) individuals with skills no longer valued in the labor market cannot find employment.
C) individuals give up the search for employment.
D) a business cycle recession decreases employment.
Q4) Why is unemployment a problem?
Q5) How is the GDP deflator is calculated.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Economic Growth
Available Study Resources on Quizplus for this Chatper
353 Verified Questions
353 Flashcards
Source URL: https://quizplus.com/quiz/5589
Sample Questions
Q1) Classical growth theory states that
A) growth is maximized when everyone is fully employed.
B) growth is followed by increases in the population, eventually leaving real GDP per person unchanged.
C) growth in real GDP per person is difficult in the beginning but easier in the later stages.
D) advances in technology will always insure a permanent increase in real GDP per person.
Q2) The classical model of Malthus predicted that economies would A) continue to grow indefinitely.
B) experience rapid technological progress.
C) reach a state where the growth of real GDP per person stopped.
D) experience significant productivity growth.
Q3) Workers who pursue an education directly increase their A) financial capital.
B) physical capital.
C) human capital.
D) saving.
Q4) How will an increase in physical capital affect labor productivity, labor demand, and potential GDP?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Finance, Saving, and Investment
Available Study Resources on Quizplus for this Chatper
225 Verified Questions
225 Flashcards
Source URL: https://quizplus.com/quiz/5590
Sample Questions
Q1) Technological progress that increases the expected profit shifts the demand for loanable funds curve
A) leftward and reduces the real interest rate.
B) rightward and increases the real interest rate.
C) rightward and reduces the real interest rate.
D) leftward and increases the real interest rate.
Q2) In 2008, Australia had a government budget surplus of $21.7 billion. This budget surplus shifts the demand for loanable funds curve ________
A) leftward and lowers the real interest rate.
B) leftward and creates a crowding-out effect.
C) rightward and creates a crowding-out effect.
D) rightward and creates a Ricardo-Barro effect.
Q3) At the beginning of the year, Tom's Tubes had a capital stock of 5 tube inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's gross investment for the year totaled
A) 1 machine.
B) 2 machines.
C) 3 machines.
D) 6 machines.
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Money, the Price Level, and Inflation
Available Study Resources on Quizplus for this Chatper
578 Verified Questions
578 Flashcards
Source URL: https://quizplus.com/quiz/5591
Sample Questions
Q1) The Federal Reserve reports that it has coins valued at $10 billion, bank reserves at the Fed of $15 billion, gold valued at $10 billion, Federal Reserve notes of $400 billion, and U.S. government securities of $300 billion. What is the size of the monetary base?
Q2) Which of the following decreases the demand for nominal money?
A) a decrease in the nominal interest rate
B) an increase in real GDP
C) an increase in the quantity of money
D) a decrease in the price level
Q3) Which of the following is true regarding the required reserve ratio?
A) The ratio determines the legally required amount of reserves a bank must hold.
B) The ratio determines the amount of excess reserves a bank must hold.
C) The ratio is only enforced against banks that are operating in a risky manner.
D) None of the above answers is correct.
Q4) What is the FOMC? Who are the members of the FOMC? What policy does the FOMC decide?
Q5) Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: The Exchange Rate and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
492 Verified Questions
492 Flashcards
Source URL: https://quizplus.com/quiz/5592
Sample Questions
Q1) A decrease in the demand for U.S. exports ________ the demand for U.S. dollars and shifts the demand curve for U.S. dollars ________.
A) increases; rightward
B) decreases; rightward
C) decreases; leftward
D) increases; leftward
Q2) Using the data in the above table, suppose imports equal $250 billion and investment equals $1,000 billion. Hence government expenditure equals
A) $1,000 billion.
B) $750 billion.
C) $500 billion.
D) $250 billion.
Q3) In the foreign exchange market, the higher the dollar's exchange rate, the A) larger the supply of dollars.
B) smaller the quantity supplied of dollars.
C) smaller the supply of dollars.
D) larger the quantity supplied of dollars.
Q4) What role can the Fed play in the foreign exchange market?
Q5) What is purchasing power parity?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Aggregate Supply and Aggregate Demand
Available Study Resources on Quizplus for this Chatper
428 Verified Questions
428 Flashcards
Source URL: https://quizplus.com/quiz/5593
Sample Questions
Q1) In the short run, an increase in aggregate demand
A) lowers the price level and decreases real GDP.
B) lowers the price level and increases real GDP.
C) raises the price level and increases real GDP.
D) raises the price level and decreases real GDP.
Q2) In Japan in 2000 the price level fell by 5 percent and the money wage rate did not change. As a result, there was a
A) movement down along Japan's short-run aggregate demand curve.
B) movement down along Japan's short-run aggregate supply curve.
C) rightward shift in Japan's short-run aggregate supply curve.
D) movement down along Japan's long-run aggregate supply curve.
Q3) In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP?
Q4) In the above figure, the movement from point B to point A might be the result of A) an increase in government expenditures because of a war.
B) an increase in government expenditures because of increases in education expenditures.
C) an increase in the demand for manufacturing goods because of new technology. D) a fall in the price level.
Q5) What is the difference between a recessionary gap and an inflationary gap?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Expenditure Multipliers
Available Study Resources on Quizplus for this Chatper
469 Verified Questions
469 Flashcards
Source URL: https://quizplus.com/quiz/5594
Sample Questions
Q1) How is it possible for consumption expenditure to be positive even when disposable income is zero?
Q2) If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals
A) 0.8.
B) 1.0
C) 4.0.
D) 5.0.
Q3) In the long run, the multiplier
A) is greater than 1 because of the position and slope of the SAS curve.
B) is twice the short-run multiplier.
C) is zero.
D) depends on the slope of the AD curve.
Q4) Autonomous consumption
A) increases with income.
B) is independent of income.
C) is independent of income and must be equal to zero.
D) decreases with income.
Q5) What effect does an increase in the MPC have on the slope of the AE curve?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Business Cycle, Inflation, and Deflation
Available Study Resources on Quizplus for this Chatper
410 Verified Questions
410 Flashcards
Source URL: https://quizplus.com/quiz/5595
Sample Questions
Q1) One assumption of the new classical model is that A) money wage rates are rigid.
B) prices are "sticky" upward.
C) people make rational expectations about aggregate demand.
D) markets are not purely competitive.
Q2) Which of the diagrams in the above figure best illustrates a long-run Phillips curve?
A) Figure A
B) Figure B
C) both Figure A and Figure B
D) neither Figure A nor Figure B
Q3) In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is anticipated by the public, the economy moves to a point such as point
A) B.
B) C.
C) D.
D) E.
Q4) "The short-run Phillips curve shifts leftward when the inflation rate rises." Is the previous statement correct or incorrect?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
263 Verified Questions
263 Flashcards
Source URL: https://quizplus.com/quiz/5596
Sample Questions
Q1) The Laffer curve is the relationship between
A) government purchases and potential GDP.
B) tax rates and potential GDP.
C) tax revenue and potential GDP.
D) tax rates and tax revenue.
Q2) "European Economic Recovery Plan"
"The European Commission urged EU governments to jointly combat the economic slowdown with 200 billion euros ($256 billion)in spending and tax cuts to boost growth and consumer and business confidence." The plan "...would see the 27 EU governments spend 1.5 percent of the bloc's gross domestic product to halt the slowdown that has already pushed some European nations into recession." www.iht.com, 11/26/2008
Which of the following describe the EU's plan?
i.It is discretionary fiscal policy
iI.It will generate a cyclical surplus.
A) I and II
B) II only
C) I only
D) neither I nor II
Q3) How can discretionary fiscal policy be used to close a recessionary gap?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Monetary Policy
Available Study Resources on Quizplus for this Chatper
227 Verified Questions
227 Flashcards
Source URL: https://quizplus.com/quiz/5597
Sample
Questions
Q1) "As the Fed Chases Inflation, Critics Shout, 'Faster!'"
"For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "...the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake."
Www)nytimes, 7/1/2004
The goal of the Fed's policy in 2004 was to decrease
A) the exchange rate
B) consumption expenditure
C) the long-term interest rate
D) the short-term interest rate
Q2) Monetary policy affects real GDP by
A) changing aggregate supply.
B) creating budget surpluses.
C) changing aggregate demand.
D) creating budget deficits.
Q3) Why does the Fed pursue price stability as its ultimate goal?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: International Trade Policy
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/5598
Sample Questions
Q1) Comparative advantage implies that a country will
A) import those goods in which the country has a comparative advantage.
B) export those goods in which the country has a comparative advantage.
C) find it difficult to conclude free trade agreements with other nations.
D) export goods produced by domestic industries with low wages relative to its trading partners.
Q2) The reason that average labor costs are higher in the United States than in Haiti is that
A) workers are more productive in the United States.
B) U.S. workers have a comparative advantage.
C) Haitian workers have a comparative advantage.
D) Haitian workers do not have union representation.
Q3) The United States decides to follow its comparative advantage and specialize in the production of airplanes. Which of the following will occur?
A) More airplanes will be produced in the United States.
B) There will be no change in the price of airplanes in the United States.
C) The world price of airplanes will increase.
D) The quantity of airplanes demanded in the United States will increase.
Q4) Explain the effects of a quota.
To view all questions and flashcards with answers, click on the resource link above. Page 17