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Macroeconomic Multiple Choice Questions

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1) Which of the following is a long -run macroeconomic policy goal?
A) reduce unemployment (B) increase inflation (C) promote steady growth (D) eliminate recession

2)If our exports are $1.2 billion and our imports are $1.7 billion
A)the United States is lending to the rest of the world(B) U.S national saving is too high (C) the United States is borrowing from the rest of the world(D) U.S investment must decrease

3) In the expenditure approach to GDP, the largest component is
A) government purchase (B) personal consumption expenditures (C)gross private domestic investment (D) net exports

4) If a larger fraction of adult population is working, the household production
A) counted in real GDP increase(B) not counted in the real GDP increase (C) counted in real GDP decreases (D) not counted in real GDP decrease.

5) Suppose the working age population in Tiny Town is 100 people. If 25 of these people are not in the labor force , the _____ equals _____
A) unemployment rate ; 25/100X 100 (B) unemployment rate ; 25/125X100 (C) labor force; 75(D) labor force 25/100X100

6) The technique currently used to calculate the CPI implicitly assumes that over time consumer buy
A) relatively more goods whose relative price are rising (B) relatively less goods whose relative price are rising

7)The supply of real GDP is a function of
A) the total expenditures of consumers, investors and the government(B) the sum of wages, salaries, corporate profits, rents and interest(C) only the state of technology (D) the quantities of labor, capitals and the state of technology.

8)In the short run macroeconomic equilibrium
A) real GDP equals potential GDP and aggregate demand determines the price level.(B) the price level is fixed and the short -run aggregate supply determine real GDP(C) real GDP and the price level are determine by short-run aggregate supply and aggregate demand(D) real GDP is less than potential GDP

9) Because the leisure-real GDP production possibilities frontier is bowed outward then,
A) each additional unit of real GDP cost a decreasing amount of forgone labor(B) as more real GDP is produced, increasingly more productive labor is being used(C) the marginal product of labor is increasing as real GDP increases(D) the slope of the economy's production function decrease as real GDP increase.

10)Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded
A) increases (B) decrease (C) does not change because there is no change in the money wage rate.
(D) increase only if the price level also decrease

11) Convergence of the income gap has been most dramatic between
A) Hong Kong and the United States (B) The central European countries and the United States © Africa and the United States(D) South America and the United States

12) Which of the following Statement regarding human capital is incorrect?
A) Human capital is the accumulated skill and Knowledge of human being (B) Education is the only vehicle for the creation of human capital because training simply reinforce what has already been learned (C)The accumulation of human capital is the source of both increased productivity and technological (D) Writing and Mathematic the most basic of human skills are crucial element in economic progress.

13) If Y= real GDP, and L,K and T represent the quantities of labor capital and technology respectively then the most appropriate representation of the aggregate production function is.
A) L=F(K,Y,T) (B) Y= F(T,K) (C) Y=F(K,T,L) (D) T=F(Y,T,L)

14)A central proposition of the new growth theory is that
A) growth will cease but prosperity will persist(B) Knowledge is not subject to diminishing(C) government direction and oversight is necessary for consistent growth (D) growth is often just an illusion fostered by growth accounting

15) Given the list of assets below, which is the most liquid
A)$500 worth of General Motors common stock.(B) $ 500 worth of General Motors bonds (C) $500 travelers checks (D) one ounce gold coin

16) Which of the following statement concerning commercial bank is true?
A)Bank need to maintain cash reserves equal to their deposits(B) Most banks maintain cash reserves equal to a fraction of deposists(C) Cash reserves earn the highest rate of return of any asset for a bank.(D) Since the advent of the Federal Reserve bank do not need to maintain cash reserve.

17)Suppose you hold $50 to by groceries weekly and then the price of groceries increase by 5%. To be able to buy the same amount of groceries, what must happen to your nominal money holding.
A) They must increase by $5(B) They can decrease by $5 (C) They must increase $2.50 (D)They must increase, but the amount of the increase in different than the above answers

18) The Fed carries out an open market operation and buy U.S government securities the interest rate
A) falls and the quantity of money increases(B) rise and the quantity of money decrease (C) falls and the quantity of money decrease(D) rise and the quantity of money decrease

19)An initial increase in aggregate demand that is Not followed by an increase in the quantity of money results in a long-run equilibrium with .
A)A higher price level but the same real GDP(B) Higher price level and increase level of real GDP (C) the same price level and a lower level real GDP. (D) None of the above answer are correct.

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Macroeconomic Multiple Choice Questions

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

11) Monetary policy affects macroeconomics performance by
A) changing aggregate supply (B) creating budget surpluses (C) changing aggregate demand (D) creating budget deficits

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

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