1) For an economy at full employment, an increase in the quantity of money will lead to which of the following sequence of shifts in aggregate demand and supply curves
A) Decrease aggregate demand, increase short -run aggregate supply constant long-run aggregate supply (B) Decrease aggregate demand, decrease short -run aggregate supply constant long-run aggregate supply (C) Increase aggregate demand, increase short-run aggregate supply, increase long-run aggregate supply(D) Increase aggregate demand, increase short-run aggregate supply, decrease long-run aggregate supply
2) By itself, an increase in the price of oil shift to be
A)short-run aggregate supply curve leftward and does not shift the aggregate curve (B) short-run aggregate supply curve rightward and does not shift the aggregate curve (C) aggregate demand curve leftward and does not shift the short-run aggregate supply curve. (D) ) aggregate demand curve rightward and does not shift the short-run aggregate supply curve
3) The marginal propensity to consume equals 1 minus the
A ) marginal propensity to invest (B) ) marginal propensity to save (C) ) marginal propensity to import (D) marginal propensity to pay taxes
4) Which of the following are included in autonomous expenditure?
A) investment (B) government purchase (C) autonomous consumption expenditure (D) all of the above
5) In a recession,
A) investment is low and the capital stock grows quickly (B) investment is low and the capital stock grows slowly (C)investment is high and consumption is low (D) consumption is high and government spending is low
6) According to the Keynesian theory of business cycle , a(n)
A) decrease in profits expectation will decrease investment only and will not change real GDP or consumption expenditure (B) decrease in profits expectation will decrease investment, real GDP and consumption expenditure (C) increase in profits expectation will increase investment only and will not change real GDP or consumption expenditures (D) decrease in sale expectation will affect the price level and not real GDP
7)If the real interest rate is 4% and workers expect real wages to be 2% year higher next year, according to the real business cycle theory worker will work
A) more this year and less next year (B) less this year and less next year (C) more this year and more this year (D) less this year and more next year
8) All of the following are government expenditure items except
A) interest on government debt (B) transfer payment (C) purchase of corporate bonds (D) purchase of goods and service
9) Suppose the tax rate on interest income is 25%, the real interest rate is 4% , and the inflation rate is 4% . In this case , the real after-tax interest rate is
A) .5% (B) 3.5 % (C) 4.0 % (D) 2.0%
10) With steep short run aggregate supply curve,
A) an increase in government spending will not have an impact on the price level (B) fiscal policy will be an effective tool to reduce unemployment without raising price too much (C) an increase in taxes that does not change potential GDP will not decrease real GDP by much (D) There is a large change in real GDP whenever the price level rises
12) Suppose that the Feds is using this feedback rule: Every time real GDP exceeds potential GDP is less than potential GDP, contractionary policy is used and whenever real GDP is less than potential GDP, expansionary policy is used GDP equals potential GDP and then aggregate demand increase . As a consequence of the policy action taken is the resulting
A) contractionary policy will lower the price level from what it otherwise would be (B) contractionary policy will decrease unemployment from what it otherwise would be (C) expansionary policy will decrease unemployment from what it otherwise would be (D) expansionary policy will lower the price level from what it otherwise would be
13) A foreign student from Hong Kong studying in an American University who has no income from U.S source get a hair cut from a local salon . This hair cut will
A) increase the volume of exports from Hong Kong to the U.S (B) decrease the volume of imports from Hong Kong to the U.S (C) increase the volume of exports from the U.S to Hong Kong. (D) decrease the volume of imports from the U.S to Hong Kong
14) Country A and Country B both consume and produce only food and clothing. Both countries use only labor to produce these two products. A worker in country A can produce 6 units of clothing or 10 units of food each day while worker in country B can produce 4 units of clothing and 8 units of food . Which statement is true .
A) The opportunity cost of clothing production in country A is greater than that of country (B) The opportunity cost of food production in country A is greater than that of country B (C) The opportunity cost of food production in country A is the same as than that of country B (D) The opportunity cost of clothing production in country B is less than that of country A
15) A decrease in a country's tariffs will:
A) not change its imports or exports (B) increase both its imports and exports (C) increase its imports but not its exports(D) increase its exports but not its imports
16) Which of the following is a factor that determine the amount of dollars supplied in the foreign exchange market?
A) The exchange rate (B) U.S interest rate (C) Interest rate in foreign country (D) Allof the above affects the number of dollars supplied in the foreign exchange market.
17) Suppose the target exchange rate set by the Fed is 150 yen per dollar. If the demand for dollars permanently decrease the fed
A) Can permanently meet the target by selling the dollar (B) Can permanently meet the target by buying the dollar (C) must violate both interest parity and purchasing power parity to permanently meet the target. (D) cannot permanently maintain the target rate.
18) The U.S interest rate minus the foreign interest rate is called _____
A) foreign interest rate differential (B) U.S bond rate differential (C) U.S interest rate differential (D) U.S stock yield differential
Macroeconomic Multiple Choice Questions are discussed in great detail in this solution.