Macroeconomics Review Questions
Course Introduction
Macroeconomics is a foundational course that examines the behavior and performance of an economy as a whole. It explores key concepts such as gross domestic product (GDP), inflation, unemployment, national income, and economic growth. The course analyzes how governments use fiscal and monetary policies to influence economic stability and growth, and investigates the impact of international trade and finance on domestic economies. Through models and real-world case studies, students develop an understanding of macroeconomic indicators and the tools used to address major economic issues.
Recommended Textbook
Macroeconomics 4th Australian Edition by Glenn Hubbard
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15 Chapters
2116 Verified Questions
2116 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/28152
Sample Questions
Q1) What is 'equity', and how does it differ from 'efficiency'?
Answer: Equity refers to the fair distribution of economic benefits. In economics, efficiency refers to least cost production (productive efficiency)and producing according to human preferences (allocative efficiency).
Q2) Examining the conditions that could lead to a recession in an economy is an example of a macroeconomics topic.
A)True
B)False
Answer: True
Q3) The government makes all economic decisions in a market economy.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Choices and Trade Offs in the Market
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192 Verified Questions
192 Flashcards
Source URL: https://quizplus.com/quiz/28153
Sample Questions
Q1) Stella can produce either a combination of 60 silk tulips and 85 silk leaves or a combination of 70 silk tulips and 55 silk leaves. If she now produces 60 silk tulips and 85 silk leaves, what is the opportunity cost of producing an additional 10 silk tulips?
A)2.5 silk leaves.
B)10 silk leaves.
C)25 silk leaves.
D)30 silk leaves.
Answer: D
Q2) In a two-good, two-country world, if one country has an absolute advantage in the production of both goods, it must also have a comparative advantage in the production of both goods.
A)True
B)False
Answer: False
Q3) Entrepreneurs bring together the factors of production to produce goods and services.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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201 Verified Questions
201 Flashcards
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Sample Questions
Q1) The 'income effect' of a price change refers to the impact of a change in:
A)income on the price of a good.
B)demand when income changes.
C)the quantity demanded when income changes.
D)the price of a good on a consumer's purchasing power.
Answer: D
Q2) Refer to Figure 3.1. An increase in population would be represented by a movement from:
A)A to B.
B)B to A.
C)D to D .
D)D to D .
Answer: C
Q3) If the price of orchids falls, the substitution effect due to the price change will cause an increase in the:
A)demand for orchids.
B)demand for roses, a substitute for orchids.
C)quantity demanded of orchids.
D)quantity supplied of orchids.
Answer: C
Page 5
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Chapter 4: Gdp: Measuring Total Production, Income and Economic Growth
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) A company named Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP?
A)The sale of a used door to a homeowner.
B)The sale of a new door to a homeowner.
C)The sale of a used door for installation into a new home.
D)The sale of a new door for installation into a new home.
Q2) Nominal GDP measures the value of all final goods and services at base-year prices. A)True B)False
Q3) Explain the difference between 'gross domestic product' and 'gross national income'.
Q4) Nominal GDP is GDP measured in current prices and can be smaller than real GDP. A)True B)False
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Chapter 5: Economic Growth, the Financial System and Business Cycles
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) The 'rule of 70' states that it takes approximately 70 years for a developing economy to become a developed economy once economic growth begins.
A)True
B)False
Q2) Which of the following describes the growth in real GDP per person in Australia from 1901 to 2016?
A)It has decreased more times than it has increased.
B)It has increased by more than five times.
C)It has doubled.
D)Nominal GDP has increased but real GDP has slowly decreased.
Q3) Which of the following goods would usually see the largest decline in demand during a recession?
A)cars
B)food
C)clothing
D)hair cuts
Q4) A period of economic expansion ends with a business cycle trough.
A)True
B)False
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Chapter 6: Long-Run Economic Growth: Sources and Policies
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) Some economists argued that the productivity slowdown of the mid-1970s to the early 1990s was due to changes in oil prices that:
A)increased production costs, causing firms to reorganise production to conserve energy, which reduced output per worker.
B)decreased production costs, causing firms to reorganise production to conserve energy, which reduced output per worker.
C)increased production costs, causing firms to reorganise production to conserve energy, which increased output per worker.
D)decreased production costs, causing firms to increase production, which reduced output per worker.
Q2) Because of the productivity slowdown in Australia from the mid-1970s through to the early 1990s:
A)real GDP per capita grew more rapidly.
B)real GDP per capita grew more slowly.
C)the standard of living did not change.
D)the standard of living increased in Australia.
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8
Chapter 7: Unemployment
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) For purposes of unemployment, how is a full-time student who is not working categorised?
A)not in the labour force
B)a discouraged worker
C)employed
D)unemployed
Q2) An example of a 'seasonally unemployed' worker would be a:
A)software engineer who loses his job because of declining demand for the software he writes.
B)child care provider who quits her job to go back to university.
C)General Motors Holden employee who loses her job because the company is downsizing its workforce.
D)worker employed at a beachside resort who loses his job in winter.
Q3) The demand for new motor vehicles falls when the economy enters a downturn and as a result, motor vehicle manufacturers sack some workers. This would be an example of:
A)structural unemployment.
B)frictional unemployment.
C)natural unemployment.
D)cyclical unemployment.
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Chapter 8: Inflation
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) What are 'menu costs'?
A)The full list of a firm's costs of production.
B)The costs to a firm of changing prices.
C)The cost to a household of borrowing money when there is deflation.
D)The opportunity cost of dining in a restaurant instead of at home.
Q2) If the nominal interest rate is 8% and the inflation rate is 3%, then the real interest rate is:
A)4%.
B)8%.
C)3%.
D)5%.
Q3) If inflation is completely anticipated:
A)no-one loses.
B)borrowers lose.
C)lenders lose.
D)firms lose because they incur menu costs.
Q4) 'Anticipated inflation' increases the amount of taxation paid by firms and individuals.
A)True
B)False
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Chapter 9: Aggregate Expenditure and Output in the Short Run
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Improvements in inventory control help to reduce fluctuations in real GDP.
A)True
B)False
Q2) An example of assets that are included in the measure of household wealth would be:
A)shares, bonds and savings accounts.
B)shares, loans owed and savings accounts.
C)shares, bonds and mortgages.
D)shares, credit cards and savings accounts.
Q3) In Figure 9.4, assume that potential GDP equals $100 billion. The economy is currently producing GDP which is equal to $90 billion. If the MPC is 0.8, then how much must spending change for the economy to move to potential GDP?
A)-$2 billion
B)$2 billion
C)$18 billion
D)-$18 billion
Q4) A change in induced expenditure will lead to a shift in the aggregate expenditure line.
A)True
B)False
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Chapter 10: Aggregate Demand and Aggregate Supply Analysis
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.
A)True
B)False
Q2) What is a 'supply shock', and why might a supply shock lead to 'stagflation'?
Q3) When the price level in Australia rises relative to the price level of other countries, ceteris paribus, ________ will rise, ________ will fall, and ________ will fall.
A)imports; exports; net exports
B)exports; imports; net exports
C)net exports; exports; imports
D)net exports; imports; exports
Q4) 'Stagflation' occurs when short-run aggregate supply decreases.
A)True
B)False
Page 12
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Chapter 11: Money, Banks and the Reserve Bank of Australia
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123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/28162
Sample Questions
Q1) 'Fiat money' is generally issued by:
A)private banks.
B)central banks.
C)brokerage firms.
D)major multinational corporations.
Q2) A person's 'wealth' is:
A)something owned by them.
B)something they owe to someone else.
C)the difference between their assets and liabilities.
D)the same as all their income earned.
Q3) 'Broad money' is usually less than M3 in Australia.
A)True
B)False
Q4) 'Fiat money':
A)has no or very little value except as money.
B)is rarely used in modern economies.
C)functions well only if it can be redeemed for gold or other precious metals.
D)serves well as a medium of exchange, but not as a store of value.
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Chapter 12: Monetary Policy
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/28163
Sample Questions
Q1) One goal of monetary policy (according to the Reserve Bank Act (1959))is:
A)maintaining a strong exchange rate for the dollar relative to other currencies.
B)a high rate of unemployment.
C)price stability.
D)a high rate of employment.
Q2) The Reserve Bank of Australia is able to use monetary policy to keep real GDP exactly at its potential level.
A)True
B)False
Q3) Inflation targeting is when the Reserve Bank of Australia uses monetary policy with the aim of keeping the inflation rate at an annual average of between 2% and 3% in the medium term.
A)True
B)False
Q4) Briefly discuss the effect of a fall in the cash rate on consumption.
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Chapter 13: Fiscal Policy
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) 'Contractionary fiscal policy' aims to reduce the rate of increase in aggregate demand.
A)True
B)False
Q2) Which of the following would be considered a fiscal policy action?
A)A city changes its rates of land tax.
B)A federal government creates a subsidy for hybrid cars to encourage the purchase of fuel-efficient cars.
C)Foreign aid is given to Indonesia.
D)A tax cut is designed to stimulate spending during an economic contraction.
Q3) Suppose the federal government reduces income taxes. Assume that the movement from A to B in Figure 13.6 represents normal growth in the economy before the tax change. If the tax change is not effective and labour supply and savings do not increase because of the tax change, then the tax change will:
A)decrease the price level below P .
B)increase output above Y .
C)not change the price level.
D)shift LRAS to the right.
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Chapter 14: Macroeconomics in an Open Economy
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Any ________ by Australian residents from overseas are ________ additions to the current account.
A)payments received; negative
B)payments made; positive
C)payments made; negative
D)payments received; neutral
Q2) A country's balance of payments is best described as a system that records:
A)the physical flow of goods and services between countries.
B)international trading, borrowing and lending flows.
C)only official transactions between the government and governments of other countries.
D)the flow of investment between countries.
Q3) According to the saving and investment equation, if net foreign investment rises by $35 million:
A)national saving in excess of domestic investment will increase by $35 million.
B)national savings will increase by $35 million.
C)domestic investment will fall by $35 million.
D)national saving in excess of domestic investment will decrease by $35 million.
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16
Chapter 15: The International Financial System
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Under the Bretton Woods System, Germany did not want to revalue its currency because the revaluation would:
A)make imports more expensive to Germans.
B)rapidly increase the money supply, causing inflation.
C)make exported goods more expensive.
D)cause a recession.
Q2) Suppose that China wants to fix its exchange rate for United States (US)dollars below the equilibrium exchange rate, making the yuan undervalued against the US dollar and many other currencies. How does that benefit China? Does it harm anyone in China?
Q3) Australian currency continues to be backed by the gold standard to this day. A)True
B)False
Q4) Both countries involved in an exchange rate peg must agree to the peg. A)True
B)False
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