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Test answers for Macroeconomics 2016

(60 / 1) Last updated: January 27
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60 Answered Test Questions:

1. What is "crowding out"?


• When investments are limited

• When government spending replaces private sector spending

• When government does not add additional output to the economy

• When interest rates are raised

• All of these

2. The formula for which of the following quantities contains a term for "Planned Investment?"


• Consumer Price Index

• Aggregate expenditure

• Producer Price Index

• Gross Domestic Product

3. A complement good has what kind of elasticity?


• zero cross elasticity of demand

• Negative cross elasticity of demand

• Positive cross elasticity of demand

4. What does GDP stand for?


• Gradual Decline Process

• Gross Dividend Payout

• Greatest Demand Produced

• Gross Domestic Product

5. GNP and GDP differ because:


• GNP will always be lower than GDP due to the adjustment for foreign taxes

• GNP represents all goods and services produced/provided by the residents of a country while GDP represents all goods and services produced/provided within a country's physical borders

• GDP represents all goods and services produced/provided by the residents of a country while GNP represents all goods and services produced/provided within a country's physical borders

• GDP is adjusted for inflation while GNP is not

• GNP is adjusted for inflation while GDP is not

6. Which of the following choices relates to the decision made by congress and the president to lower taxes or increase government purchases?


• Expansionary Monetary Policy

• Expansionary Fiscal Policy

• Contractionary Monetary Policy

• Contractionary Fiscal Policy

7. True or False: It's impossible to have falling inflation and falling unemployment at the same time.


• True

• False

8. If the national output in one year is measured at $300 billion and a year later it is measured at $315 billion, then the rate of growth in that year is?


• 3%

• 15%

• 5%

• 2%

9. What does "ceteris paribus" mean?


• Free trade

• Holding everything else constant

• Rational expectations

• That which is to be demonstrated

10. Keynesian theory is related to:


• Government intervention in the market place for economic growth and stability

• Transactions between private parties are free from tariffs

• No government intervention

• Relationship between possible rates of taxation and the resulting levels of government revenue

• None of these

11. The final value of goods and services produced in a year within the geographical boundaries of a country is known as


• Balance of Payments

• Gross National Product

• Gross Domestic Product

• Per Capita National Income

12. What relationship does the Phillips Curve specifically address?


• Relationship between the inflation rate and the unemployment rate

• Relationship between the foreign exchange rate and household purchases

• Relationship between the long term real interest rate and the supply of loanable funds

• Relationship between net exports and government spending

13. What is the slope of the consumption function called?


• Marginal Propensity to Save

• Marginal Opportunity Cost

• Marginal Propensity to Consume

• Marginal Disposable Income

14. What is pegging?


• A flat tax imposed on imported goods

• A contract that allows households to exchange currency for a fixed amount of gold from the central bank

• A country allowing the value of its currency to be determined by supply and demand

• A country keeping the exchange rate between its currency and another currency fixed

15. A printer and a printer cartridge is an example of a:


• Necessity goods

• None of these

• Complementary goods

• Inferior goods

• Supplemental goods

16. What is not a major goal of macroeconomics?


• Low unemployment

• High sustainable economic growth

• Price stability

• Capping supply

17. The use of government spending and taxation to influence the economy is the definition of which of the following terms:


• Inflation

• Fiscal policy

• Keynesian economics

• Gross Domestic Product

18. What is an inferior good?


• A good that is imported and is consumed in relatively small quantities

• A good that is from overseas and is taxed heavily in domestic markets

• A good in which there is an inverse relationship between income and the demand for the good

• A good in which there is a direct relationship between income and the demand for the good

19. Economists use this term to denote an ongoing rise in the general level of prices quoted in units of money.


• Consumer Price Index

• Inflation

• Aggregate demand

• National debt

20. Macroeconomics can be defined as:


• The study of patterns of supply and demand and the determination of price and output in individual markets

• The study of the behavior of the economy at the aggregate level

• study of individuals and business decisions

• The interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers

21. What is recession?


• 1 month of Actual GDP decline

• Supply doesn't equal demand

• When Real GDP and Potential GDP are the same

• Two consecutive quarters of Real GDP decline

22. As a recession begins, unemployment


• unemployment falls and surplus supplies increase

• unemployment rises and production increases

• employment rises and production falls

• unemployment rises and production falls

23. True or False: The official measure of GDP understates the true level of national income because of the existance of the "shadow" or informal economy.


• False

• True

24. Which of these is a liability?


• House

• Cash

• Utility bill

• Computer

25. When is the economy in macroeconomic equilibrium?


• When the unemployment rate is high

• Aggregate expenditure = GDP

• Aggregate expenditure > GDP

• Aggregate expenditure < GDP

26. Which country best approximates a closed economy?


• North Korea

• Canada

• Germany

• United States

27. What is the central bank of the United States?


• The United States Treasury Department

• The Federal Deposit Insurance Corporation

• The Federal Reserve

• The United States Mint

28. What is Macroeconomics?


• The branch of economics that focuses on the national and global economy

• The branch of economics that analyzes individuals buying behavior

• The branch of economics that is no longer relevant and has been discredited as a whole

• The branch of economics that focuses on the supply and demand of individual firms

29. When does a shortage occur?


• Quantity Supplied is greater than quantity demanded

• Quantity Supplied equals quantity demanded

• Quantity Demanded is greater than quantity supplied

• The supply curve is nonlinear

30. GDP stands for


• Good Deflation Process

• Gross Domestic Product

• Glossy Dark Paper

• Granular Dedicated Purpose

31. What would be an example of Foreign Direct Investment (FDI)?


• Countries becoming more open to foreign trade

• A company buying stocks issued in another country

• GDP per capita increasing faster in poorer countries versus richer countries

• A corporation buying a factory in a foreign country

32. Which of these are a way of measuring production?


• Interest rates

• Net Domestic Product

• Unemployment rates

• All of these

• Marginal benefits

33. True or False: Full employment is zero unemployment.


• True

• False

34. What does purchasing power parity do?


• Determines the elasticity of supply

• Determines the type of goods available

• Determines trade barriers

• Determines relative value of currencies

• Determines the elasticity of demand

35. A good for which an increase in income leads to a decrease in demand is a:


• Market good

• Normal good

• Inferior good

• Luxury good

• Substitute

36. According to Keynes, if government earns ??1 as tax revenue and spends it as public expenditure what will be the net effect on national income?


• National income will rise by ??1

• There will be no effect

• national income will decrease by ??1

• The net effect is uncertain

37. The relationship between an economy's unemployment rate and its gross national product (GNP)


• Washington's Law

• Budget deficit

• Monetary Policy

• Okun's Law

38. Periods of very high inflation rates


• most often are caused by sharp increases in aggregate demand

• most often occur when actual GDP is less than potential GDP

• can only occur in a situation when the AS-curve is vertical

• can only occur if the output gap is large

39. What does PPF stand for in Economics?


• Pension Protection Fund

• Production Probability Frontier

• Production Protection Fund

• None of these

• Production Possibility Frontier

40. The government classification of a recession is:


• Four consecutive quarters of Real GDP decline

• One quarter of GNP decline

• Five consecutive quarters of Real GDP decline

• Two consecutive quarters of Real GDP decline

• One quarter of Real GDP decline

41. What does raising interest rates and reducing the supply of money do?


• Reduce unemployment

• Increase FDI

• Reduce inflation

• Increase unemployment

• Increase inflation

42. Can the unemployment rate go below the natural rate of unemployment?


• No. The unemployment rate is always at the natural rate of unemployment

• Yes. The unemployment rate can go below the natural rate of unemployment in the short term and remain below the natural rate of unemployment in the long term

• Yes. The unemployment rate can go below the natural rate of unemployment in the short term

• No. The unemployment rate flucuates due to the business cycle, however it can never go below the natural rate of unemployment

43. Which of the following would switch the aggregate demand curve to the right?


• Net exports fall

• The price level rises

• Monetary policy lowers interest rates

• Congress decreases military spending

44. What is the unemployment rate when the economy is at potential GDP?


• It is equal to the structural rate of unemployment

• It is zero

• It is equal to the natural rate of unemployment

• It is greater than the natural rate of unemployment

• It is less than the natural rate of unemployment

45. What is it called when injections of cash in private banks by a central bank fail to lower interest rates?


• Liquidity trap

• Monetary crisis

• Keynesian failure

• Pigou effect

• Interest rate trap

46. The ratio of the change in national income to the change in government spending is called:


• Macroeconomic multiplier

• Fiscal multiplier

• Monetary multiplier

• National multiplier

• Consumer multiplier

47. Negative income elasticity of demand is related to ?


• Sticky goods

• Inferior goods

• Normal goods

• Necessity goods

• Luxury goods

48. The multiplier???s value can be found by using this formula.


• MPS * (MPC/3)

• MPS = 1-MPC

• 1/MPC + MPS

• 1/MPS = 1/(1-MPC)

49. The term ???Balance of Payments??? means:


• The Gross Domestic Product adjusted to take into consideration non-market activities

• A formula used to calculate a country???s economic well-being by deducting total imports from total exports

• The ratio of a country???s debt in relation to the amount of money borrowed from other countries

• A record of a country???s monetary transactions with the rest of the world

50. The aggregate demand and aggregate supply model explains the relationship of


• real GDP and price level

• unemployment and output

• price an quantity of a certain good

• wages and employment

51. Which is not a reason why the aggregate demand curve is downward sloping?


• The Interest Rate Effect

• The International Trade Effect

• The Wealth Effect

• Positive Technological Change

52. If we look at the behavior of the U.S. CPI over the last four decades we realize that inflation


• never exceeded 10 percent

• steadily increased in the 1970s

• was, on average, lower in the 1990s than in the 1960s

• was at its highest in the early 1980s

53. If money growth does not affect real GDP, and velocity is stable, an increase in the money supply creates a proportional increase in


• Real GDP only

• The price level only

• The price level and Nominal GDP

• The price level and Real GDP

• Nominal GDP only

54. If price level increases the LM curve will shift to


• The left

• The right

• No shifting

55. Income elasticity of demand of a good is less than 1 if it is a:


• Inferior Good

• None of these

• Necessity good

• Luxury good

• Normal good

56. Which scenario is related to an unplanned decrease in inventories?


• Aggregate Expenditure = GDP and the economy is in an expansion phase

• Aggregate Expenditure > GDP and the economy is in a recession

• Aggregate Expenditure < GDP and the economy is in a recession

• Aggregate Expenditure > GDP and the economy is in an expansion phase

57. In the long run Philips' curve becomes


• Slopes upward

• Downward sloping

• horizontal

• vertical

58. The term ???aggregate-supply curve,??? describes which of the following?


• Excess of spending over income for a government, corporation, or individual over a particular period of time

• The total supply of goods and services produced within an economy at a given overall price level

• The total supply of goods and services produced within an economy at a given overall price level

• the relationship between price levels and the quantity of output that firms are willing to provide.

59. In the very short run


• the position of the AD-curve determines the level of output

• the position of the AD-curve cannot be changed by fiscal or monetary policy

• a chance in fiscal and monetary policy will not affect the level of output

• a change in monetary policy will affect both the price level and the level of output

60. Which of the following is NOT a characteristic of Monopolistic Competition?


• Many producers and many consumers in the market

• Producers have a high degree of control over price

• Many barriers to entry and exit

• Consumers view that there are non-price differences among the competitors' products/services

1 NOT Answered Yet Test Questions:

(hold on, will be updated soon)
61. What is the interest rate stated on a loan that does not account for inflation or compounding?


• Effective interest rate

• Nominal interest rate

• Annual percentage rate (APR)

• Real interest rate