Macroeconomics Exam Questions
Course Introduction
Macroeconomics is a branch of economics that studies the overall functioning and structure of an economy on a national or global scale. The course covers fundamental concepts such as gross domestic product (GDP), unemployment, inflation, economic growth, fiscal and monetary policy, and international trade. Students learn how these macroeconomic indicators are measured and how different economic policies can influence a nation's economic stability and growth. By analyzing aggregate demand and supply, business cycles, and the roles of government and central banks, learners gain a comprehensive understanding of how economies operate, the challenges they face, and the policy tools available to address economic issues.
Recommended Textbook
Essentials of Economics 9th Edition by Bradley R Schiller
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17 Chapters
2470 Verified Questions
2470 Flashcards
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Chapter 1: The Challenge of Economics
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Sample Questions
Q1) A HEADLINE article in the text indicates that North Korea is expanding its missile programs.Assume North Korea is currently on its production possibilities curve.If the increase in missile production results in a decrease in food production,this is an example of:
A) Market failure.
B) An inward shift of the production possibilities curve.
C) Opportunity cost.
D) A reduction in available resources.
Answer: C
Q2) Economics is the study of how to allocate scarce resources among competing uses. A)True
B)False
Answer: True
Q3) Based on Figure 1.2,if a student studies 30 hours per week,he or she will:
A) Earn a grade-point average of between 3.5 and 4.0.
B) Earn a grade-point average of 3.0.
C) Earn a grade-point average 2.0.
D) Drop out of school because of the stress.
Answer: B
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Page 3
Chapter 2: The US Economy
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Sample Questions
Q1) Which question does the "distribution of income" relate to most directly?
A) For whom is output produced?
B) How is output produced?
C) What output is produced?
D) Why is output produced?
Answer: A
Q2) GDP is the sum of consumption,investment,government purchases,and:
A) The factors of production.
B) Net exports.
C) Saving.
D) Capital stock.
Answer: B
Q3) Productivity measures:
A) Output per worker.
B) The dollar value of investment.
C) Final goods minus intermediate goods.
D) The total amount of goods produced in the United States.
Answer: A
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Chapter 3: Supply and Demand
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Sample Questions
Q1) Refer to Figure 3.1.Consider the market for DVD players.People prefer watching movies on DVDs at home instead of going to the movie theater.
A) A
B) B
C) C
D) D
Answer: D
Q2) In the market for web design services,when more companies desire web pages,the equilibrium:
A) Price of web design services decreases.
B) Price of web design services remains unchanged.
C) Quantity of web design services increases.
D) Quantity of web design services decreases.
Answer: C
Q3) A market exists for the sale and purchase of:
A) Computer services but not nuclear warheads.
B) Nuclear warheads but not illegal drugs.
C) Illegal drugs but not medical services.
D) Illegal drugs,computer services,and nuclear warheads.
Answer: D
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Chapter 4: Consumer Demand
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Sample Questions
Q1) The demand for _______ is relatively inelastic.
A) New cars
B) TVs
C) Gasoline in the short run
D) Airline travel
Q2) The law of demand states that:
A) The greater the number of buyers in a marker,the lower the price.
B) Price and quantity demanded are directly related.
C) The lower the cost the lower the price.
D) Price and quantity demanded are inversely relateD.
Q3) The largest portion of the average U.S.consumer's dollar is spent on:
A) Food.
B) Entertainment.
C) Health care.
D) Housing.
Q4) Which of the following is a determinant of demand for a good?
A) Consumer income.
B) The number of available workers.
C) Prices of factor inputs.
D) Technology.
Page 6
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Chapter 5: Supply Decisions
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Sample Questions
Q1) Which of the following will always increase as output increases?
A) Total cost
B) Average total cost
C) Marginal cost
D) Fixed costs
Q2) Which of the following are factors of production for Terry's Taco Patio?
A) Economic costs and money
B) Average total cost and entrepreneurship
C) Productivity and labor
D) Corn tortillas and meat
Q3) The decision to build,buy,or lease a plant is known as the:
A) Output decision.
B) Profit-maximizing decision.
C) Production decision.
D) Investment decision.
Q4) When a firm produces a level of output on the production function:
A) Marginal physical product is zero.
B) Maximum efficiency is achieved.
C) Opportunity cost for resources is at a maximum.
D) Profits are maximizeD.
Page 7
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Chapter 6: Competition
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Sample Questions
Q1) When some firms are forced out of a market due to economic losses the result is a better use of our scarce resources.
A)True
B)False
Q2) Which of the following is the best example of a perfectly competitive market?
A) The breakfast cereal industry
B) The textbook industry
C) The plasma TV market
D) The apple market
Q3) Which of the following is consistent with competitive long-run equilibrium?
A) Economic profits are maximized.
B) Average total costs of production are minimized.
C) Price equals the maximum of average total cost.
D) Marginal costs are minimized.
Q4) Which list has market structures in the correct order from the most to the least market power?
A) Perfect competition,oligopoly,monopolistic competition,monopoly
B) Monopoly,monopolistic competition,oligopoly,perfect competition
C) Monopoly,oligopoly,monopolistic competition,perfect competition
D) Oligopoly,perfect competition,monopolistic competition,monopoly
Page 8
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Chapter 7: Monopoly
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Sample Questions
Q1) Suppose a market is dominated by three firms.This type of market is called:
A) Perfect competition.
B) A monopoly.
C) Monopolistic competition.
D) An oligopoly.
Q2) Since a monopoly has market power:
A) Its demand curve is upward sloping.
B) Its marginal revenue curve is below its demand curve.
C) It must hold price constant in order to sell an additional unit of output.
D) Its costs of production are minimal.
Q3) The demand curve for a monopolist's product is the same as the market demand curve for the product.
A)True
B)False
Q4) Which market structure is characterized by a few interdependent firms?
A) Monopolistic competition.
B) Oligopoly.
C) Monopoly.
D) Perfect competition.
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Chapter 8: The Labor Market
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Sample Questions
Q1) An upward-sloping supply curve of labor reflects the:
A) Increasing opportunity cost of labor.
B) Increasing marginal utility of income as a person works more hours.
C) Increasing quantity supplied of labor as prices fall.
D) Decreasing marginal cost of labor as a firm hires more workers.
Q2) Refer to Figure 8.4.Working conditions become less pleasant.
A) A
B) B
C) C
D) D
Q3) All workers are better off when a minimum wage is imposed.
A)True
B)False
Q4) All else remaining constant,or "ceteris paribus," for an upward-sloping labor supply curve,the quantity of labor supplied varies directly with:
A) Payroll taxes.
B) The value of leisure time.
C) The derived demand for labor.
D) The wage rate.
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Chapter 9: Government Intervention
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Sample Questions
Q1) An emission charge is a:
A) Tax on the consumption of goods that are produced by pollution-causing firms.
B) Fee imposed on polluters based on the quantity of pollution they impose on society.
C) Tax levied on the third parties involved in externalities.
D) Fee imposed on free-riders for the use of a good or service.
Q2) Which of the following is most likely a public good?
A) A park
B) Electricity
C) A computer
D) Social Security payments
Q3) If you play your music too loud and your neighbor cannot study,this is an example of a negative externality.
A)True
B)False
Q4) Market failure means that the economy is definitely producing:
A) A suboptimal mix of output.
B) At a point beyond the production possibilities curve.
C) At a point inside the production possibilities curve.
D) Zero output.
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Chapter 10: The Business Cycle
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Sample Questions
Q1) An important measure of macroeconomic performance is the growth of GDP.
A)True
B)False
Q2) The CPI is used to measure the change in the average price of consumer goods and services.
A)True
B)False
Q3) If the Consumer Price Index (CPI)had a value of 128 in year Z,this means that during the period between the base year and year Z:
A) All prices increased by 28 percent.
B) All prices increased by an average of 1.28 percent.
C) Prices of goods and services that the typical consumer buys increased by an average of 28 percent.
D) Prices of goods and services that the typical consumer buys increased by an average of 128 percent.
Q4) Everyone is made worse off by inflation.
A)True
B)False
Q5) Define a recession and the effects of recession on rate of growth.
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Chapter 11: Aggregate Supply and Demand
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Sample Questions
Q1) One explanation for why the AS curve slopes upward is that when the output level rises,producers experience increased costs such as higher wages.
A)True
B)False
Q2) Keynesian theory is referred to as a:
A) Supply-side theory.
B) Demand-side theory.
C) Full-employment theory.
D) GDP gap theory.
Q3) Business cycles are the result of changes in real GDP caused by shifts in aggregate demand and aggregate supply.
A)True
B)False
Q4) Which of the following economic theories focus on aggregate demand to explain changes in unemployment and inflation?
A) Classical and supply-side
B) Keynesian and monetarist
C) Classical and Keynesian
D) Classical but not monetarist
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Chapter 12: Fiscal Policy
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Sample Questions
Q1) Fiscal restraint will definitely occur if the government:
A) Reduces its spending and reduces tax rates.
B) Reduces its spending and increases tax rates.
C) Increases its spending and reduces tax rates.
D) Increases its spending and increases tax rates.
Q2) Fiscal stimulus is most effective in changing the level of real output without causing inflation when the aggregate supply curve is:
A) Horizontal.
B) Vertical.
C) Upward sloping to the right.
D) Downward sloping to the right.
Q3) The greater the upward slope of the aggregate supply curve,the greater the increase in the price level when aggregate demand increases.
A)True
B)False
Q4) The use of government spending and taxes to change the level of aggregate demand is fiscal policy.
A)True
B)False
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Chapter 13: Money and Banks
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Sample Questions
Q1) Which of the following functions like money but is not included in M1?
A) Checking accounts
B) Cash
C) Traveler's checks
D) Money-market mutual funds
Q2) Since banks are required to keep only a fraction of total deposits as bank reserves,the reserve ratio is always greater than one.
A)True
B)False
Q3) Even if an economy has a form of money,if the money loses its value then people may resort to barter.
A)True
B)False
Q4) Which of the following is not an essential characteristic of money?
A) It is a store of value.
B) It is backed by gold or silver.
C) It is a standard of value.
D) It is a medium of exchange.
Q5) How do banks create money?
Q6) Why are people willing to accept printed paper as money?
Page 15
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Chapter 14: Monetary Policy
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Sample Questions
Q1) Using Figure 14.2,a shift in aggregate demand from AD<sub>4</sub> to AD<sub>5</sub> will cause,ceteris paribus:
A) An increase in real output and an increase in the price level.
B) An increase in real output but no change in the price level.
C) An increase in the price level but no change in real output.
D) A decrease in the price level but no change in real output.
Q2) Based on the information in Table 14.1,the required reserve ratio is:
A) 8.7 percent.
B) 10.0 percent.
C) 13.3 percent.
D) 66.7 percent.
Q3) Given an upward-sloping aggregate supply curve,which of the following is most likely to occur if the Fed pursues restrictive monetary policy,ceteris paribus?
A) The equilibrium price level and output will both decrease.
B) The equilibrium price level and output will both increase.
C) The equilibrium price level will decrease but output will stay the same.
D) The equilibrium output will decrease but the price level will stay the same.
Q4) Discuss the effects of the money supply when the Fed sells bonds in the open market.
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Chapter 15: Economic Growth
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Sample Questions
Q1) Which of the following is definitely true when nominal GDP increases?
A) The standard of living improves.
B) The amount of output increases.
C) The value of output increases.
D) The production possibilities curve shifts outward.
Q2) If real GDP was $750 billion in 2006 and $800 billion in 2007,the economic growth rate was approximately ___ percent.
A) 6.7
B) 6.3
C) 5.0
D) 3.3
Q3) When an economy moves from a point inside its production possibilities curve to a point on its production possibilities curve,it is using all of its productive capacity.
A)True
B)False
Q4) Crowding in directly limits private investment and can constrain economic growth. A)True
B)False
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Chapter 16: Theory and Reality
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Sample Questions
Q1) The Fed has traditionally been willing to sacrifice interest rate stability in order to achieve low levels of inflation.
A)True
B)False
Q2) The idea that no one knows for certain the shape of the aggregate supply curve contributes to:
A) Goal conflicts.
B) Measurement problems.
C) Design problems.
D) Implementation problems.
Q3) Which of the following is true about the U.S.economy during the 1970s?
A) It experienced low levels of inflation.
B) It experienced high employment levels.
C) It met the goal for economic growth each year.
D) It experienced two recessions.
Q4) Tools for supply-side policy include:
A) Changes in tax incentives.
B) Open-market operations.
C) Changes in government spending.
D) Changes in the discount rate.
Page 18
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Chapter 17: International Trade
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Sample Questions
Q1) Exports are the goods and services bought from foreign sources.
A)True
B)False
Q2) Which group is most likely to be adversely affected when foreign steel is imported?
A) Consumers of products for which steel is an input.
B) Domestic steel producers.
C) Domestic workers in industries where steel is an input.
D) Foreign steel producers.
Q3) The United States is less dependent on foreign trade,as measured by the ratio of exports to GDP,than most other nations.
A)True
B)False
Q4) If there are only two countries in the world and one has a trade deficit,the other country must:
A) Also have a trade deficit.
B) Have a trade surplus.
C) Have a comparative advantage in all goods.
D) Have trade restrictions in place.
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