Macroeconomics

Multiple Choice Questions

Choose the best answer to each question. Circle the letter.

 

  1. The money multiplier will be greater when--
    1. reserve requirements are lower
    2. discount rates are lower
    3. there is a trade deficit
    4. there are fewer banks
    5. none of the above

     

  2. If GDP (real) is 500 mln. in year 1, and 600 mln. in year 2; the real economic growth rate equals:
    1. 500
    2. we don't know until inflation is measured
    3. 25%
    4. 20%
    5. the inverse of the unemployment rate

     

  3. In the country of Corduroy they produce only pants and pints (beer).

    4. Every year they produce 10, 000 pair of pants and 10 pints of beer.

    On December 31, 1935, the pants sold for 100 plops and the pints sold for 20 plops.

    On December 31, 1936, the pants sold for 110 plops and the pints sold for 40 plops.

    The inflation rate in 1936 was

    1. 55%
    2. almost 20 %
    3. 1.000179%
    4. barely over 10%
    5. 35%

     

  4. Classical economics assumes:
    1. resource markets will clear over the long run
    2. wages are flexible
    3. recessions will fix themselves
    4. all of the above
    5. none of the above

     

     

     

     

     

  5. Aggregate demand includes the following component(s):
    1. consumer spending
    2. government spending
    3. investment spending
    4. all of the above
    5. none of the above

     

  6. According to classical economics, the aggregate production and income of an economy are dependent mostly on--
    1. consumer spending
    2. investment spending
    3. government spending
    4. the availability and use of resources
    5. none of the above

     

  7. Nominal GNP is:
    1. GNP adjusted for inflation
    2. GNP unadjusted for inflation
    3. GNP less capital consumption allowances
    4. always equivalent to real GNP
    5. none of the above

     

  8. The GNP gap is:
    1. the difference between potential and actual GNP
    2. is the largest when the economy is at the peak of the business cycle
    3. should be small if the unemployment rate is high
    4. all of the above are true
    5. none of the above

     

    For the next four questions, assume that Y = C + I + G, and

    C = 400 + 3/4(Yd)

    Yd = disposable income

    T = 800

    I = 1200

    G = 600

     

  9. At what income level would the economy find equilibrium?
    1. 6400
    2. 5600
    3. 8800
    4. 1600
    5. none of the above

     

     

  10. If everything else stayed the same, what would government spending need to be to give Y* = 10,000?
    1. 900
    2. 4200
    3. 1700
    4. 1200
    5. none of the above

     

  11. What is the value of the expenditures multiplier?
    1. 1.5
    2. .25
    3. 3
    4. 4
    5. none of the above

     

  12. If taxes were 35 percent of income, the expenditures multiplier would be--
    1. larger because government would have more money to inject into the economy
    2. 0.6
    3. 1.67
    4. 2.5
    5. none of the above

     

  13. Rational expectations are part of the following school of thought:
    1. Neo Classical
    2. Monetarist
    3. Keynesian
    4. all of the above
    5. none of the above

     

  14. Neoclassical economists generally believe that monetary policy should be used to acheive:
    1. high levels of employment
    2. economic growth
    3. low inflation
    4. high inflation
    5. none of the above

     

  15. As a neoclassical economist, an anticipated increase in money supplies
    1. will increase aggregate output
    2. will not lead to higher prices
    3. will increase the velocity of money
    4. all of the above
    5. none of the above

     

  16. Monetarist economists generally believe that monetary policy should be used to acheive:
    1. high levels of employment
    2. economic growth
    3. low inflation
    4. high inflation
    5. none of the above

     

  17. Keynesian economists generally believe that monetary policy should be used to acheive:
    1. high levels of unemployment
    2. economic growth
    3. low inflation
    4. high inflation
    5. none of the above

     

  18. A graph that compares tax revenues and tax rates is called
    1. a Phillips Curve
    2. a Production Possibilities Curve
    3. a Keynesian Cross Diagram
    4. a Laffer Curve
    5. none of the above

     

  19. Adaptive expectations are part of the following school of thought:
    1. Neo Classical
    2. Monetarist
    3. Keynesian
    4. all of the above
    5. none of the above

     

  20. "Crowding out" is best described as
    1. lost investment due to the higher interest rates that follow government deficit spending
    2. lost consumption due to the higher prices caused by excessive monetary growth
    3. lost savings due to failures in the banking sector
    4. lost investment due to taxes of foreign products
    5. none of the above

     

  21. The money multiplier will be greater when
    1. reserve requirements are higher
    2. reserve requirements are lower
    3. there is a trade deficit
    4. there is a greater number of banks
    5. none of the above

     

  22. The investment accelerator describes
    1. the speed with which investors pull their money out of profit depleting enterprise
    2. the tendancy for investors--in a collective attempt to minimize risk--to smooth out the business cycle
    3. individual investor response to profits that leads to accentuated changes in the business cycle
    4. the respending of investment money resulting in a multiplier effect on incomes
    5. none of the above

     

  23. The accelerator describes
    1. the spending multiplier as it applies to trade markets
    2. the response of investors to changes in demand that tends to inflate the business cycle
    3. a moderation of the otherwise wide fluctuations of the business cycle
    4. consumer responses to price discounts
    5. none of the above

     

  24. Adaptive expectations are part of the following school of thought:
    1. Neo Classical
    2. Monetarist
    3. Keynesian
    4. all of the above
    5. none of the above

     

  25. Neoclassical economists generally believe that monetary policy should be used to acheive:
    1. high levels of empoloyment
    2. economic growth
    3. low inflation
    4. high inflation
    5. none of the above

     

  26. "Crowding out" is best described as
    1. lost investment due to the higher interest rates that follow government deficit spending
    2. lost consumption due to the higher prices caused by excessive monetary growth
    3. lost savings due to failures in the banking sector
    4. lost investment due to taxes of foreign products
    5. none of the above

     

  27. The money multiplier will be greater when
    1. reserve requirements are higher
    2. reserve requirements are lower
    3. there is a trade deficit
    4. there is a greater number of banks
    5. none of the above

     

  28. An anticipated increase in money supplies
    1. will increase aggregate (nominal) demand
    2. will not lead to higher prices
    3. will increase the velocity of money
    4. all of the above
    5. none of the above

     

  29. If GDP (nominal) is 2500 in year 1, and 3000 in year 2; the nominal economic growth rate equals:
    1. 500
    2. we don't know until inflation is measured
    3. 25%
    4. 20%
    5. the inverse of the unemployment rate.

     

  30. If inflation is estimated at 5% and real growth is 7%, nominal growth will be about
    1. 12%
    2. +2%
    3. 1.08
    4. 35%
    5. . -2%

     

  31. Classical economics assumes:
    1. resource markets will clear over the long run
    2. wages are flexible
    3. recessions will fix themselves
    4. all of the above
    5. none of the above

     

  32. Keynesian economists--
    1. focus on the short run
    2. dislike classical economists
    3. use a vertical aggregate supply curve
    4. were responsible for the great depression in the U.S.
    5. all of the above

     

  33. The paradox of thrift--
    1. describes the influence of investment in accelerating the business cycle
    2. describes how decisions to save might lead to a decreased ability to save
    3. explains Marx's mistake in his arguments on surplus
    4. points out that government deficits mean government borrowing
    5. is also called the sharings paradox

     

  34. Aggregate demand includes the following component(s):
    1. consumer spending
    2. national income
    3. disposable income
    4. all of the above
    5. none of the above

     

  35. According to classical economics, the aggregate production and income of an economy are dependent mostly on--
    1. consumer spending
    2. investment spending
    3. government spending
    4. the availability and use of resources
    5. none of the above

     

  36. The "accelerator" describes
    1. the spending multiplier as it applies to trade markets
    2. the response of investors to changes in demand that tends to inflate the business cycle
    3. a moderation of the otherwise wide fluctuations of the business cycle
    4. consumer responses to price discounts
    5. none of the above
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