Macroeconomics for Managers
Chapter Exam Questions
Course Introduction
Macroeconomics for Managers explores the fundamental concepts and analytical tools of macroeconomics as they apply to managerial decision-making in a global business environment. The course examines topics such as national income determination, economic growth, inflation, unemployment, fiscal and monetary policy, and the impact of government and central bank actions on the broader economy. Through case studies, real-world data, and policy analysis, students learn how macroeconomic trends and cycles influence business strategies, investment planning, and organizational performance, equipping future managers with the knowledge to navigate economic challenges and opportunities.
Recommended Textbook
ECON MACRO4 4th Edition by William A. McEachern
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Chapter 1: The Art and Science of Economic Analysis
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Q1) Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.
A)True
B)False
Answer: True
Q2) Theory seeks to
A)simplify a complex reality
B)confront reality in all its complexity by focusing on the unique aspects of each phenomenon
C)explain phenomena without predicting them
D)predict phenomena without explaining them
E)distort reality in order to improve forecasting ability
Answer: A
Q3) Behavioral assumptions
A)make economic models more complex than if these assumptions were removed
B)pertain only to consumers
C)hold all other things constant
D)are ways to test a hypothesis
E)describe how individuals are expected to behave
Answer: E
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Chapter 2: Understanding Graphs-Appendix
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Sample Questions
Q1) Refer to exhibit 1-16. Which of the graphs illustrates an inverse or negative relationship between variable X and variable Y?
A)a
B)b
C)c
D)d
E)e
Answer: B
Q2) The slope of a steep upward-sloping line is a smaller value than the slope of a nearly flat upward-sloping line.
A)True
B)False
Answer: False
Q3) In Exhibit 1-2, at x = 10, the
A)value of y is larger on curve A than on curve B
B)value of y is smaller on curve A than on curve B
C)value of y is the same on curve A as on curve B
D)slope of line A is negative
E)slope of line B is positive
Answer: C
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Chapter 3: Economic Tools and Economics Systems
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Sample Questions
Q1) A test was scheduled for Monday morning, but you went to a party on Saturday night. If you hadn't attended the party, you could have studied for the test or gone to a movie. Which of the following is true?
A)The opportunity cost of going to the movie is studying for the test.
B)The opportunity cost of going to the party is the movie.
C)The opportunity cost of going to the party is both the movie and the study time.
D)Because you could go to the party only that night but could go to a movie any time, the opportunity cost of the party is the study time.
E)From the above information, it's not possible to determine the opportunity cost of attending the party.
Answer: E
Q2) Each point along a nation's production possibilities frontier represents efficient use of all resources.
A)True
B)False
Answer: True
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Chapter 4: Economic Decision Makers
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Sample Questions
Q1) The difference between fiscal policy and monetary policy is that
A)fiscal policy is macroeconomic policy and monetary policy is microeconomic policy
B)monetary policy is macroeconomic policy and fiscal policy is microeconomic policy
C)fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods
D)monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing
E)fiscal policy involves the promotion of competition and monetary policy involves collecting money to pay for taxes
Q2) Owners of corporations are referred to most frequently as A)entrepreneurs
B)lien holders
C)limited partners
D)managers
E)stockholders
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Chapter 5: Demand, Supply, and Markets
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Q1) If the price of the good described in Exhibit 4-1 is $1.60, then there is a
A)shortage of 30 units
B)surplus of 30 units
C)shortage of 20 units
D)surplus of 20 units
E)surplus of 10 units
Q2) Markets reduce transactions costs
A)by decreasing the time spent searching for information about goods and services
B)only when they have a highly structured set of rules like the New York Stock Exchange
C)because each market uses the same set of rules for buying and selling goods and services
D)only when the government can coordinate the plans of many buyers and sellers
E)when prices are set by the sellers and are not determined by negotiation between the buyers and the sellers
Q3) If supply increases, then quantity demanded decreases.
A)True
B)False
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Chapter 6: Introduction to Macroeconomics
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Q1) Which of the following is a flow variable?
A)U.S. plant and equipment
B)the U.S. population
C)money supply
D)investment spending
E)household debt
Q2) In Exhibit 5-1, which of the following might cause a shift in the aggregate demand curve from AD to AD'?
A)an increase in household wealth
B)a fall in domestic interest rates
C)an increase in government spending
D)an appreciation of the dollar relative to other currencies
E)a decrease in the nation's money supply
Q3) In the 1960s, government policy makers believed that they could
A)stabilize the economy by letting the market system solve all problems
B)reduce unemployment by running federal budget surpluses
C)eliminate government's role in stabilization policy
D)use changes in the money supply to virtually eliminate business cycles
E)use taxation and government spending to fine-tune the economy
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Chapter 7: Tracking the Us Economy
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Q1) Use the following data to calculate GDP: consumption = $5,000; gross investment = $800; government purchases = $700; exports = $30; imports = $60; transfer payments = $340.
A)GDP = $7,400
B)GDP = $7,740
C)GDP = $3,140
D)GDP = $6,470
E)GDP cannot be determined due to insufficient data
Q2) Which of the following is the best indicator of the performance of the national economy?
A)the federal government budget deficit
B)the stock of capital goods (machinery) in the nation
C)the size of the nation's stock of money
D)the balance of trade with other nations
E)the flow of new goods and services produced in the nation
Q3) The State of the USA is a nonprofit organization that is developing "a key national indicator" system for the United States.
A)True
B)False
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Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Since 1980, a country that has experienced deflation is A)the U.S.
B)France
C)Germany
D)Japan
E)Italy
Q2) Inflation rates differ across regions mostly because of differences in housing prices.
A)True
B)False
Q3) Demand-pull inflation is associated with
A)decreasing aggregate demand and lower unemployment
B)increasing aggregate demand and lower unemployment
C)decreasing aggregate demand and greater unemployment
D)increasing aggregate demand and greater unemployment
E)a rising price level caused by a shift in either aggregate demand or aggregate supply
Q4) Inflation is the hardest on those living on fixed incomes.
A)True
B)False
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) If on-the-job experience causes labor productivity to increase, that is the result of an improvement in human capital.
A)True
B)False
Q2) The rules of the game include all of the following except one. Which is the exception?
A)the laws, customs, conventions and other institutional elements associated with trade
B)property rights
C)ensuring that the market process generates a fair price to all
D)a stable political environment
E)a stable legal system
Q3) Which of the following would increase labor productivity?
A)a decrease in amount of capital per unit of labor
B)technological change
C)a decrease in the unemployment rate
D)an increase in the number of inexperienced workers entering the labor force
E)a decrease in the quality of capital
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Chapter 10: Aaggregate Expenditure and Agregate Demand
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Q1) Imagine an investment demand curve that shows that, if the market interest rate is 4 percent, the quantity of investment demanded is $500 billion. Then, if the market rate rises to 5 percent, the most likely result is that the quantity of investment demanded
A)does not change
B)rises
C)declines
D)rises then falls
E)It is not possible to answer without seeing the actual curve
Q2) Investment
A)is about as volatile as consumption, except during recession years
B)has averaged about one-sixth of GDP over the past decade
C)is about as volatile as GDP, except during recession years
D)is the largest component of aggregate spending
E)has averaged about two-thirds of GDP over the past decade
Q3) When economists say investment is autonomous, they mean that investment is independent of the level of saving.
A)True
B)False
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Chapter 11: Aggregate Expenditure and Aggregate Demand
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Q1) If the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10, which of the following must be true?
A)The spending multiplier is larger in your classmate's nation than in your country.
B)The spending multiplier is smaller in your classmate's nation than in your country.
C)Autonomous consumption is higher in your classmate's nation than in your country.
D)Autonomous consumption is lower in your classmate's nation than in your country.
E)Total consumption is lower in your classmate's nation than in your country.
Q2) If the multiplier is 4, a $10 billion increase in autonomous investment will cause a
A)$10 billion increase in equilibrium investment
B)$40 billion increase in equilibrium investment
C)$40 billion increase in equilibrium real GDP demanded
D)$400 billion increase in equilibrium real GDP demanded
E)$40 billion increase in consumption spending
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Chapter 12: Aggregate Supply
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Sample Questions
Q1) The expected price level is significant because
A)it is the equilibrium price level in the short run
B)it determines the actual price level in the short run
C)it determines the actual price level in the long run
D)firms and resource owners make long-term agreements based on the expected price level
E)the difference between the expected and actual price levels is equal to the actual inflation rate
Q2) Which of the following would be evidence that a contractionary gap exists?
A)Rapid deflation during a period in which plant capacity utilization is below average.
B)A steady price level and a 5 percent unemployment rate.
C)Help wanted advertising lower than usual, and the consumer price index lower than expected.
D)Inflation has risen markedly and the Dow Jones average is at record levels.
E)The number of new unemployment claims has skyrocketed and the price level is rising.
Q3) Supply shocks are unexpected events that affect aggregate supply.
A)True
B)False
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Chapter 13: Fiscal Policy
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Sample Questions
Q1) Although discretionary fiscal policy worked fairly well in the U.S. in the 1960s, it worked even better during the stagflation years of the 1970s.
A)True
B)False
Q2) The tax cut of 1964 (proposed by President Kennedy)
A)was the last time fiscal policy was used
B)was the greatest failure as a demand-management tool
C)actually increased investment, consumption, and employment
D)shifted the aggregate demand curve leftward
E)was the first time the focus moved away from managing aggregate demand to focus exclusively on aggregate supply
Q3) When government purchases increase, the spending multiplier tells us the
A)amount of movement along the aggregate demand curve
B)amount of movement along the aggregate supply curve
C)size of the rightward shift of the aggregate demand curve at a given price level
D)size of the rightward shift of the aggregate supply curve at a given price level
E)size of the expansionary gap
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Chapter 14: Federal Budgets and Public Policy
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Q1) The President's budget is presented to Congress each year
A)in the Economic Report of the President
B)in a report followed shortly by the Economic Report of the President
C)at the beginning of the fiscal year
D)in a form that must be voted up or down within 60 days
E)and requires a two-third vote for ratification
Q2) If aggregate output is falling,
A)both b and e
B)tax revenue increases
C)automatic stabilizers will tend to increase the size of the deficit
D)automatic stabilizers will tend to decrease the size of the deficit
E)transfer payments decrease as fewer people become eligible for public assistance
Q3) A continuing resolution is
A)an annual determination on the part of Congress to improve the budget process
B)a decision to maintain a specific spending level for five years
C)a temporary extension of spending authority into the new fiscal year
D)the official name for the entire budget package when it is finally enacted
E)the result of a budget surplus
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Chapter 15: Money and the Financial System
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Sample Questions
Q1) Money market mutual funds
A)offer higher rates of interest than bank checking accounts but lack check writing privileges
B)offer higher rates of interest than bank checking accounts and also offer check writing privileges
C)usually pay lower rates of interest than bank checking accounts
D)were originally developed and offered by banks to their customers
E)usually do not offer any check writing privileges
Q2) In a barter system,
A)an individual offers one good or service to get another good or service
B)an individual offers money to get a good or service
C)an individual offers a good or service to get money
D)different kinds of money are exchanged for each other
E)individuals are self-sufficient
Q3) Bank notes created by a goldsmith in a fractional reserve system were
A)not backed by anything of value
B)commodity money, since they were backed by gold
C)not commodity money fully, since not all the gold was there
D)representative of commodity money
E)fiat money
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Chapter 16: Banking and the Money Supply
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Q1) Stores need not accept your check but must accept currency because A)currency is backed by gold
B)checks are not money but currency is C)currency is legal tender; checks are not
D)currency is easier to handle
E)currency is a medium of exchange; checks are not
Q2) Exeter Bank has $100 million in checkable deposits and $10 million in net worth. With a 10% reserve requirement, Exeter Bank must maintain ______ in reserves.
A)$1 million
B)$2 million
C)$5 million
D)$10 million
E)$11 million
Q3) The majority of the Fed's assets are
A)discount loans
B)U.S. government securities
C)loans to member banks
D)Federal Reserve notes
E)reserves of member banks
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Chapter 17: Monetary Theory and Policy
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Q1) When people exchange money for financial assets, the interest rate rises.
A)True
B)False
Q2) If the Federal Reserve is targeting the money supply when the demand for money decreases, their proper response is to
A)decrease the money supply
B)keep the money supply on a path of constant, predictable growth
C)increase the money supply to match the increase in the demand for money
D)stimulate inflation to increase the demand for money
E)stimulate a decrease in the price level to increase the demand for money
Q3) If the demand for money increases,
A)the interest rate will fall
B)there will be a movement downward along the money demand curve
C)there will be a movement upward (to the left) along the money demand curve
D)there will be a rightward shift of the money demand curve
E)there will be a leftward shift of the money demand curve
Q4) In the long run, increases in the money supply increase the economy's potential output level.
A)True
B)False
Page 19
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Chapter 18: Macro Policy Debate: Active or Passive
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Q1) The long-run Phillips curve is
A)downward-sloping
B)vertical
C)upward-sloping
D)horizontal
E)U-shaped
Q2) All of the following are true along a long-run Phillips curve except one. Which is the exception?
A)unemployment is at the natural rate
B)employers and workers have the time and ability to adjust fully to unexpected changes in aggregate demand
C)the only choices for policy makers are different levels of inflation
D)inflation and unemployment are inversely related
E)changes in aggregate demand will have no effect in the long run on unemployment
Q3) The short-run Phillips curve is drawn for a given expected inflation rate and so it shifts as inflation expectations change.
A)True
B)False
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Chapter 19: International Trade
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Q1) Which of the following is not a problem with trade restrictions?
A)the high cost of rent-seeking activities such as lobbying
B)the high cost of enforcement
C)the unintended effects on related industries
D)the inability to save U.S. jobs in the short run in industries that compete with imports
E)the possibility of retaliation
Q2) Which of the following is not true of declining industries?
A)Job loss is not a problem in a declining industry because the workers can easily find jobs in expanding industries.
B)Jobs may be lost by declining industries but new jobs are created in expanding industries.
C)Over 60 million new jobs have been created in the United States since 1960.
D)One way to solve the problems posed by declining industries is for the government to fund programs to retrain workers for jobs that are in greater demand.
E)One way to solve the problems posed by declining industries is for the government to offer wage subsidies or special tax breaks that decline over time.
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Chapter 20: International Finance
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Q1) The theory that changes in the exchange rate reflect only changes in the price levels of two countries is called
A)the floating exchange rate theory
B)the fixed exchange rate theory
C)the flexible exchange rate theory
D)purchasing power parity
E)the managed exchange rate theory
Q2) Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?
A)U.S. demand for foreign exchange, in general, and British pounds, in particular, will increase.
B)U.S. demand for foreign exchange, in general, and British pounds, in particular, will decrease.
C)U.S. demand for British pounds will increase, but the demand for foreign exchange will probably decrease.
D)U.S. demand for British pounds will decrease, but the demand for foreign exchange will probably increase.
E)There is no effect on foreign exchange.
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Chapter 21: Economic Development
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Q1) If the country of Deficitland is experiencing trade deficits, they are more likely to cut imports of
A)beef
B)cocoa
C)coffee
D)capital goods
E)soybeans
Q2) The average value added per U.S. farm worker is about __________ times that of farm workers in low- and middle-income countries.
A)one half
B)one
C)ten
D)seventy-five
E)five hundred
Q3) Which of the following groups has the lowest life expectancy at birth?
A)middle-income economies
B)low-income economies
C)high-income economies
D)sub-Saharan African economies
E)all the world's economies
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