Final exam test from macroeconomics (201 and 315 tests) Who is considered as father of modern macroeconomics?


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MACROECONOMICS TESTS FOR FINAL EXAM (201 and 315 test)


FINAL EXAM TEST FROM MACROECONOMICS (201 and 315 tests)

1. Who is considered as father of modern macroeconomics?


John Maynard Keynes.
P. C. Ray
Adam Smith
Karl Marx
2. Who used first the term microeconomics and macroeconomics
Ragnar Frisch
John Maynard Keynes
Satyardhi
Adam Smith
3. What are the main objectives of macroeconomics?
stable markets, economic prosperity, business development and protecting employment
Employment, business development
Inflation, business development
money flow, business development
4. What is the purpose of macroeconomics?
achieve stable economic growth and maximize the standard of living
preventing inflation
fulfilling unemployement
controlling finance
5. What are the tools of macroeconomics?
all of them are correct
fiscal policy
monetary policy
exchange rate policy
6.What is macroeconomics explain its importance in policy formulation?
Macroeconomics is that specialized field of economics which focuses on the overall economy. It works on the aggregate value of the various individual units, to determine its more substantial impact on the whole nation. All the prominent reforms and policies are based on this concept.
Macroeconomics is that specialized field of economics which focuses on how to keep the country's well-being. It works on the various individual units, to determine its more substantial impact on the whole nation. All the prominent reforms and policies are based on this concept.
Macroeconomics is that specialized field of economics which focuses on how to stop inflation. It works on the various individual units, to determine its more substantial impact on the whole nation. All the prominent reforms and policies are based on this concept.
Macroeconomics is that specialized field of economics which focuses on business development and protecting employment. It works on the various individual units, to determine its more substantial impact on the whole nation. All the prominent reforms and policies are based on this concept.
7. Why do we have to study Macroeconomics?
all of them are correct
Study of Macroeconomics help governments avoid the worst economic crises that have afflicted modern industrial societies in the past century—depressions and hyperinflations. These extreme situations can tear at a society’s social fabric, yet can be prevented when policy-makers apply sound economic principles.
The economic wellbeing of consumers whether rich or poor is affected by movement in interest rates, exchange rates, inflation etc. Businesses stand to gain or lose considerable amounts of money when their economic environment changes, regardless of how well they are managed.
Study of Macroeconomics help governments calculate the wealth of a country in order to know and change the tax rate and influence the economy
8. What is Circular Flow of Income Model?

The circular flow model demonstrates how money moves through society. Money flows from producers to workers as wages and flows back to producers as payment for products.


In short, an economy is an endless circular outflow of money.
liquidity of money such as how much to consume or produce of a product
Capacity of money
9. What types of questions would concern microeconomics, versus macroeconomics?
Microeconomics concerns itself with decision-making of individual consumers, firms and other organizations, such as how much to consume or produce of a product, while macroeconomics deals with aggregate production and expenditure, the level of unemployment, inflation, and interactions with the global economy.
for whom do we produce
what do we produce
how much do we produce
10. How have economists traditionally defined “economic growth,” and how is that different from “living standards growth”?
Economists have traditionally defined economic growth in terms of production of goods and services, whereas the concept of “living standards growth” encompasses the improvement in the quality of diet and housing, transportation and communication, health care, education, working conditions, entertainment, and even political freedom and social inclusion.
by inflation rate, unemployment rate
living standards growth means average income on each population while economic growth is about also country
by clarifying the disposable income
11. What are the “three basic economic questions” that economists often address when examining how much economic output is produced
all of them.
what do we produce
for whom do we produce
how do we produce
12. Once countries already have a high level of production, how might they achieve living standards growth?
Once countries achieve a high level of production, they may achieve living standards growth by improving cultural, educational and environmental conditions, raising the quality of work-life, and promoting more equity.
by stopping inflation
by giving wealth to nother countries
increasing demand and supply
13. The goal of sustainability requires that we address what three questions
The goal of sustainability requires that we address whether economic activities are financially sustainable, whether they are socially sustainable, and whether they are ecologically sustainable.
do we have enoung recources
what are we going to do after 10 years
how much are average salary
14. Can you give an example of a market in which prices may adjust very slowly; and an example of a market in which prices may adjust very quickly.
In retail markets with long supply chains, prices may adjust very slowly. In stock markets, prices may adjust very rapidly.
monopoly maket
simple market
Competetive market
15. What is GDP?
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country's economic health.
Gross National Product
gross national product (GNP), total market value of the final goods and services produced by a nation's economy during a specific period of time (usually a year), computed before allowance is made for the depreciation or consumption of capital used in the process of production.
all final prices of products
16. Why do we need GDP?
GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy.
in order to know the growth rate of a county
to compare the economical situation of countries
To increase salary
17. What kinds of factors should we take into account when calculating GDP
The four components of gross domestic product are personal consumption, business investment, government spending, and net exports. These tell you what a country is good at producing. GDP is the country's total economic output for each year.
inflation
employement
all of them
18. How can we calculate real and nominal income?
It is calculated by dividing Nominal GDP by Real GDP and then multiplying by 100.Real GDP is nominal GDP, adjusted for inflation to reflect changes in real output.
by calculating the mean of salary
by analyzing every aspect of earning ways and the wealth of population
There is no correct answer
19. What is expenditure method to measure GDP
GDP = C + Ig + G + Xn.
GDP = C +lg +W+R
GDP = I +Xn+C+R
GDP = C+G+W+R
20. How can we calculate National Income?
NI = Wages + Rents + Interest + Corp. Profits + Prop. Income.
NI= W+R
NI= R+C
NI = I+Interest
21.What is increases in real income?
Increases in actual output i.e. real GDP.
Higher living standards can be indicated by non- economic factors e.g. access to health and education. Non-economic factors can be difficult to measure
Output valued at current prices
Output valued at constant prices
22.What is Increases in productive capacity.
Increases in potential output levels i.e. the economy has the ability to produce more goods and services in the future.
Life expectancy at birth, mean years of schooling, expected years of schooling and Gross Income per capital
Shows if the economy's ability to produce more goods and services in the future has increased. Does not show if actual production has increased
Changes in actual output can be measured. Non-market production e.g. volunteer work is not included
23.What is Improvements in net social welfare.
Improvements in both economic factors e.g. output levels and non-economic factors e.g. life expectancy.

Changes in actual output can be measured. Non-market production e.g. volunteer work is not included


Life expectancy at birth, mean years of schooling, expected years of schooling and Gross Income per capital
Shows if the economy's ability to produce more goods and services in the future has increased. Does not show if actual production has increased
24.Which is Included in the Human Development Index.
Life expectancy at birth, mean years of schooling, expected years of schooling and Gross Income per capital.
Shows if the economy's ability to produce more goods and services in the future has increased and does not show if actual production has increased
Changes in actual output can be measured. Non-market production e.g. volunteer work is not included
Income distribution is not shown
25.What do they have One advantage and one disadvantage of using increases in real income.
Changes in actual output can be measured. Non-market production e.g. volunteer work is not included.
Output valued at constant prices
Higher living standards can be indicated by non- economic factors e.g. access to health and education. Non-economic factors can be difficult to measure
Shows if the economy's ability to produce more goods and services in the future has increased, does not show if actual production has increased
26.What do they have One advantage and one disadvantage of using increases in productive capacity.
Shows if the economy's ability to produce more goods and services in the future has increased. Does not show if actual production has increased.
Life expectancy at birth, mean years of schooling, expected years of schooling and Gross Income per capital
Income distribution is not shown
Shows if the economy's ability to produce more goods and services in the future has increased. Does not show if actual production has increased
27.What do you have One advantage and one disadvantage of using improvements in net social welfare.
Higher living standards can be indicated by non- economic factors e.g. access to health and education. Non-economic factors can be difficult to measure.
What is Improvements in both economic factors e.g. output levels and non-economic factors e.g. life expectancy
Output valued at current prices
Income distribution is not shown
28.Which are Common weakness or limitation of the three measures of economic growth.
Income distribution is not shown.
Higher living standards can be indicated by non- economic factors e.g. access to health and education. Non-economic factors can be difficult to measure
Shows if the economy's ability to produce more goods and services in the future has increased. Does not show if actual production has increased
Output valued at constant prices
29.What is Nominal GDP.
Output valued at current prices.
Changes in actual output can be measured. Non-market production e.g. volunteer work is not included
Income distribution is not shown
Improvements in both economic factors e.g. output levels and non-economic factors e.g. life expectancy
30.What is Real GDP.
Output valued at constant prices.
Improvements in both economic factors e.g. output levels and non-economic factors e.g. life expectancy
Output valued at constant prices
Life expectancy at birth, mean years of schooling, expected years of schooling and Gross Income per capital
31.What is national accounts

Is to keep track of the flows of money between different sectors of the economy.


Is required payments to a government
is total expenditures on goods and services by the federal, state, and local governments.
is household spending on goods and services
32.What isconsumer spending
is household spending on goods and services.
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
payments that the government makes to individuals without expecting a good or service in return. These transactions are NOT included in the calculation of GDP
Required payments to a government
33.What is Government Spending
is total expenditures on goods and services by the federal, state, and local governments.
equals to disposable income minus consumer spending, is disposable income that is not spent on consumption
payments that the government makes to individuals without expecting a good or service in return. These transactions are NOT included in the calculation of GDP
is household spending on goods and services
34.What does it mean Taxes
Required payments to a government.
is the amount of funds borrowed by the government in the financial markets
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
Spending on new productive physical capital, such as machinery and structures, and on changes in inventories
35.Which is the type of disposable income
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save.
channel private savings into investment spending and government borrowing
keep track of the flows of money between different sectors of the economy
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
36.What is government transfers
payments that the government makes to individuals without expecting a good or service in return. These transactions are NOT included in the calculation of GDP.
is the amount of funds borrowed by the government in the financial markets
payments that the government makes to individuals without expecting a good or service in return. These transactions are NOT included in the calculation of GDP
Spending on new productive physical capital, such as machinery and structures, and on changes in inventories
37.what is private saving
equal to disposable income minus consumer spending, is disposable income that is not spent on consumption.
Spending on new productive physical capital, such as machinery and structures, and on changes in inventories
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
Required payments to a government
38.What is financial markets
channel private savings into investment spending and government borrowing.
Income distribution is not shown
Spending on new productive physical capital, such as machinery and structures, and on changes in inventories

payments that the government makes to individuals without expecting a good or service in return. These transactions are NOT included in the calculation of GDP


39.What is government borrowing
is the amount of funds borrowed by the government in the financial markets.
channel private savings into investment spending and government borrowing
Spending on new productive physical capital, such as machinery and structures, and on changes in inventories
is the amount of funds borrowed by the government in the financial markets
40.What is investment spending
Spending on new productive physical capital, such as machinery and structures, and on changes in inventories.
Shows if the economy's ability to produce more goods and services in the future has increased. Does not show if actual production has increased
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
is the amount of funds borrowed by the government in the financial markets
41.What is selling Treasury notes
borrowing more money from other countries.
giving money to other countries
printing money
selling goods to other countries
42. Where nominal exchange rates are established.
on currency financial markets
in any quotation
in import rates
in inflation
43. Real exchange rates are nominal rates corrected by...
inflation measures
import and exchange
financial market
government
44. What can influence the demand of currency aimed at real transactions
all of them
exports
imports
trade balance
45. When any deficit would imply a depreciation followed by booming exports and falling imports
when exchange rate truly sensitive to trade imbalances.
when exports are not determined by price competitiveness
when imports are determined by inflation
when inflation rate increases
46. What influence the decision of foreigners to purchase domestic currency in order to by treasury bonds
interest rates on treasury bonds.
travel agency rules
costs of goods
nothing influences
47. By what a high inflation rate should be accompanied
depreciation of the exchange rate.
foreign inflation rates
deflation

low inflation


48. The price at which one can enter into a contract today to buy or sell a currency 30 days from now is called …
forward exchange rate.
reciprocal exchange rate
effective exchange rate
exchange rate option
49. According to the Purchasing Power Parity theory, the value of a currency should remain constant in terms of what it can buy in different countries of
Goods.
bonds
stocks
labor
50. The statement "the yen rose today from 121 to 117" makes sense because …
these numbers measure yen per dollar, not dollar per yen
these numbers are indexes, defined relative to a base of 100
the yen is a reserve currency
the US gains when Japan loses
51. Forward exchange rates are useful for those who wish to…
all of them
gamble that a currency will rise in value
gamble that a currency will fall in value
exchange currencies at a point in time in the future
52.What nominal exchange rate states
how much of one currency can be traded for a unit of another currency
how many of a good or service in one country can be traded for one of that good or service in another country
none of them
a and b
53. What factors can affect to exchange rate
a and b
political
psychological
physical
54. "Purchasing Power Parity" means the same thing the real exchange rate being equal to ….
1
0
0.5
100
55. What is a relationship that must hold between the spot interest rates of two currencies if there are to be no arbitrage opportunities.
Interest rate parity
Purchasing Power Parity
interest rate
Money
56. Who is most famous for his single day gain US $1 billion on Sept. 6, 1992, which he made by short selling the British pound
George Soros.
James Mccall
Scott Forbes
Liam Bennet

57. Lowering interest rates to stimulate the economy is called:


Easy Money.
Monetary policy
Fiscal policy
Tight Money
58. Which of these is NOT a monetary policy tool?
Balance accounts.
Discount rate
Open market operations
Reserve requirements
59. Inflation is a sustained increase in the general level of __________
Prices
Accounts
Income
Profit
60. The goals of monetary policy do NOT include the promotion of _________________
Low taxes
Maximum employment
Stable prices
Moderate long-term interest rates
61. If the Federal Reserve wanted to stimulate the economy (make it grow), they might
Buy Treasury bonds.
Sell Treasury bonds
Spend more money
Spend less money
62. The central bank in the USA that regulates the monetary system
Is the FED
Is the FDIC
Is the IRS
Social Security
63. "The Fed" refers to the...
Federal Reserve System.
Federal Government
Federal Income Tax
Federal Bureau of Investigation
64. Which of the following scenarios would cause the nation’s money supply to increase?
Lowering interest rates
Raising interest rates
Selling bonds to investors
Decreasing government spending
65. The Fed keeps a certain amount of money out of circulation. This is referred to as....
Reserve requirement
Emergency Fund
Stockpile
Hoard
66. Low reserve requirements
increase the money supply
lower the money supply
no change
increase demand

67. What is an action of monetary policy?


changing reserve requirements
reduce taxes
increase spending
borrow money for deficit
68. What happens to the money circulation, when the FED orders a tight money policy?
less money is put into circulation
circulation stays the same
interest rates rise
more money is put out into circulation
69. What action would the Federal Reserve take to control inflation?
Increase the discount rate
Increase taxes
Decrease the required reserve ratio
Buy government securities
70. Fiat money is
money that is only valuable because the government says it is
specially created from the Federal Reserve
money that has intrinsic value on its own
money is checking accounts
71. The goals of monetary policy do NOT include the promotion of _____
High government spending.
Maximum employment
Stable prices
Moderate long-term interest rates
72. What is the purpose of Monetary Policy?
contribute to economic growth and stability.
keep rich people from getting too rich
Functions like Fiscal Policy
give Congress and the political parties more control of the economy
73. When the government spends more money than they take in each year is called a _________?
Deficit
Surplus
Expansionary
Debt
74. Cash that banks must keep in the vault.
required reserves
crowding out effect
fiscal policy
excess reserves
75. The exchange of goods and services without using money is known as...
bartering
double coincidence of wants
near money
fiat money
76. The primary role of the Federal Reserve Bank is to steer the economy by
controlling the money supply.
loaning out money
setting spending levels
controlling the budget

77. What information is needed in order to maximaze the usefullness of the aggregate demand curve?


The aggregate supply curve
interest rate
The price level
The output level
78. What does the aggregate supply curve show?
The total supply of goods and services in an economy
The total demand for goods and services in an economy
The supply of goods in an economy
The supply of services in an economy
79. What is the slope of the short-run aggregate supply curve
Upward
Vertical
Horizontal
Downward
80.………is the relationship between the quantity of real GDP supplied and the price level when real GDP equals potential GDP
Long-run aggregate supply
Short-run aggregate supply
Long-run aggregate demand
Short-run aggregate demand
81. Which of the following sources of purchases is not included in aggregate demand?
Foreigners
Businesses
Consumers
Government
82. When the price level is high, what is aggregate demand?
Low
Unchanged
Need more information
High
83. What is general slop of the aggregate demand curve?
Downwards
Horizontal
Vertical
Upwards
84.What happens when the aggregate demand curve shifts left?
Output decrease at all price levels
Input decrease at all price levels
Output increase at all price levels
Input increase at all price levels
85. What happens when the aggregate demand curve shifts right?
Output increase at all price level.
Input decrease at all price level
Output decrease at all price levels
Input increase at all price levels
86.When the aggregate demand increase the AD curve shifts…..
To the right
To the left
Upward

Downward


87. According to the short run aggregate supply curve, what happens as the price level rises?
Output increases
Output is unchanged
Income increases
Output decreases
88. Which of the following is not possible result of a right shift of the aggregate supply curve?
Lower output
Higer output
Left shift of the aggregate demand curve
Lower price level
89. A change is any of the following factors could cause the aggregate demand curveto shift except..
Price level
Fiscal policy
Expectations
Monetary policy
90. Aggregate supply depends on all of the following factors except
Price level
The quantity of labor
The state of technology
The quantity of capital
91. Stagflation results from
a shift of the AS curve to the left
a shift of the AD curve to the right
a shift of the AS curve to the right
a shift of the AD curve to the left
92. Aggregate supply is the relationship between the quantity of the real GDP supplied and ……
the price level
long-run aggregate supply
short-run aggregate supply
demand
93.………. is about changes in interest rate and the quantity of money in an economy
Monetary policy
Exchange rate policy
Foreign trade policy
Fiscal policy
94. What is AD-AS model?
A supply and demand model for the entire economy
A model of the interest rate
A labor market representation
A model of savings and consumption
95. What is the slope of the long-run aggregate supply curve
Vertical
Downward
Horizontal
Upward
96. The word budget is derived from…
Both A and B
Little bag
Bag

The Old French bougette


97. Taxation is used not only to raise revenue but also..
to redistribute income and and to encourage or discourage certain activities
recurring deficits or wars
to national incomes
to raise revenue
98. Traditionally the budget is raised by
the government
the market
the market policy
the authority
99. The administrative budget often excludes
trust funds and disbursements
a gross basis
total receipts
nocommercial activities
100. Governments have been reluctant to adopt the systematic distinction
between current and capital items
between cash flows and profit
12
to construct a balance sheet

101. Traditionally government expenditures have been considered


as inputs
as outputs
as taxes
none of them
102. Full employment budget is based on
receipts and expenditures
incomes
taxes
all of them
103. An analogous procedure could be used
to inflation to acceptance
to get profit
to increase income
to decrease expenditure
104. There are … principal bases for public expenditure planning
Three
two
four
six
105. The basis for most expenditure planning is in place and the volume of goods and services purchased in
base year
every quarter
every six month
every two years
106.Inflation occurs whenever
the average price of most goods and services rise
aggregate demand rises
the price of any given commodity rise

the tax rate is lower than the government spending rate


107.When prices creep up slowlyover a period of several yearsat a rate of two or three percent per year, what is theLIKELY impact on production?Such inflation will probably:
increase output in the short run
reduce output moderately
increase output dramatically
reduce output dramatically
108.Which of the following MUSTdecline in order to slowdemand-pull inflation?
Spending
taxes
NNP
production capacity
109.The general upward movement in the average level of prices of the goods and services in an economy?
Inflation.
deflation
demand-pull inflation
cost-push inflation
110.The general downward movement in the average level of prices of the goods and services in an economy?
Deflation
demand-pull inflation
cost-push inflation
inflation
111.What is a demand-pull inflation?
rising demand in an economy.
inflation rate excluding temporary factors
inflation rate excluding temporary factors
inflation caused by rising price of imports
112.What is a core inflation?
inflation rate excluding temporary factors.
increase in cost
inflation caused by rising price of imports
rising demand in an economy
113.What is a cost-push inflation?
increase in cost.
inflation caused by rising price of imports
rising demand in an economy
inflation rate excluding temporary factors
114.What is an imported inflation?
inflation caused by rising price of imports.
rising demand in an economy
inflation rate excluding temporary factors
increase in cost
115.What is a hyperinflation?
inflation of over 1000% a year.
inflation caused by rising price of imports
rising demand in an economy
inflation rate excluding temporary factors
116.What is a wage-inflation?

inflation caused by rising real wage.


inflation of over 1000% a year
inflation caused by rising price of imports
inflation rate excluding temporary factors
117.Who wins from inflation?
Debtors
creditors
citizens
companies
118.Who loses from inflation?
Creditors.
citizens
companies
debtors
119.How can we measure the inflation rate?
CPI.
Export
GNP
NNP
120.Find the percentages of creeping inflation?
1-3%.
3-10%
10-100%
100-1000%
121.Find the percentages of walking inflation?
3-10%.
10-100%
100-1000%
1-3%
122.Find the percentages of galloping inflation?
10-100%.
1-3%
3-10%
100-1000%
123.Find the percentages of hyper inflation?
100-1000%.
1-3%
3-10%
10-100%
124.What changes takes place in the economy during the stagflation?
GDP decreasesunemployment increasesdemand decreasesinflation increases.
GDP increasesunemployment decreasesdemand decreasesinflation increases
GDP decreasesunemployment increasesdemand increasesinflation decreases
GDP decreasesunemployment decreasesdemand increasesinflation increases
125.….is characterized by slow economic growth and relativelyhigh unemployment-or economic stagnation-whichis at the same time accompanied by rising prices.
Stagflation.
GDP
GNP
inflation

126. Which of the following statement is inconsistent with Say’s Law


The economy has flexible wages and prices.
The economy’s level of investment solely depends on the level of income
The economy will produce at full employment level of output
The economy has an environment of”laissez faire”
127. Marginal Propensity to Consume is
Increase in consumption due to one unit increase in income.
Total consumption divided by total income
Both (a) and (b)
Neither (a) nor (b)
128. In explaining the level of unemployment, Keynes emphasized--
Changes in technology
Aggregate demand
Inflationary expectations
Lending by financial institutions
129. Assume that the consumption function is of the form, C= 50+.8Y. If income is $ 1000/- then consumption is,-
$ 50/-.
$ 1050/-
$ 50/-
$ 850/-
130. In the simple Keynesian model consumption is a function of,
Rate of interest.
Level of income
Price level
None of the above
131. In the simple Keynesian model investment is
Fixed.
A function of level of income
Either fixed or a function of level of income
None of the above
132. Which of the following statement is incorrect,- In simple Keynesian model,-
MPC+MPS=1
APC+ APS=2
Both (a) and (b)
Neither (a) nor (b)
133. In simple Keynesian model, stability of equilibrium exists, if
APC is less than one.
APS is less than one
MPC is less than one
None of the above
134. Keynesian analysis is
A short run analysis
Long run analysis
Both short and long run analysis
Neither short nor long run analysis
135. The average propensity to consume is measured by
C/Y
C=Y
Y/C
C+Y

136. An increase in marginal propensity to consume will


Lead to the consumption function becoming steeper.
Shift the consumption function upwards
Shift the consumption function downwards
Shift the savings function upwards
137. If the Keynesian consumption function is, C=10+.8Y, if income is $ 1000/- what is total consumption.
$ 0.8/-.
$ 800/-
$ 810/-
$ 0.81/
138. An increase in consumption at any given level of income will lead to
Higher aggregate demand.
An increase in exports
A fall in taxation revenue
A decrease in import spending
139. Lower interest rates are likely to
Increase consumption
Increase cost of borrowing
Encourage saving
Decrease borrowing and spending
140. The marginal propensity to consume is equal to
Change in consumption/ Change in income
Total consumption/ Total income
Total spending/Total consumption
Change in consumption/ Change in savings
141. An increase in investment is caused by
Lower interest rates.
Expectations of lower national income
A decrease in the marginal propensity to consume
An increase in withdrawals
142. An increase in interest rates
is likely to reduce savings.
is likely to reduce external value of currency
Leads to a shift in the MEC schedule
Leads to a movement along MEC schedule
143. Which of the following are not characteristics of Keynesian consumption function?
The main influence on consumption in the short run is current disposable income.
The marginal propensity to consume is less than one
The average propensity to consume decreases as income increases
The average propensity to consume increases as income increases
144. An increase in investment is most likely to be caused by
Lower interest rates
Expectations of lower national incomes
A decrease in the marginal propensity to consume
An increase in withdrawals
145. How we calculate GDP?
income method, expenses method, added value.
income method,expenses method
income method, added value

added value


146. Net National Product at factor cost (NNPfc) is also known as…?
national income.
personal income
gross national product
net domestic product
147.The part of personal income what is actually avialable to the housholds for consumtion and saving is called _................?
Personal disposable income.
National disposable income
Personal income
None
148. GNPmp is equal to ________?
GDPMP=GDP + NFIA.
GDPMP=GDP -D
GDPMP=GDP - NFIA
None
149. Sum of all kinds of income received by the individuals from all sources is ___________?
Personal income.
Private income
National income
Personal disposable income
150. GDP=
C+I+G+(X-M).
C+I+(M-X)
C+I+G+(M-X)
C+I+G+X+M
151. To be officially unemployed , a person must be …
be in the labor force.
be waiting to be called back from a layoff
have just lost a job
be 21 years of age
152. Which of the following is NOT a macroeconomic goal of a free market economy ?
Inflation
full employment
price stability
economic growth
153. Which of the following is GDP at current prices ?
nominal GDP.
value-added GDP
real GDP
inflationary GDP
154. The labor force includes …
employed workers and people who are officially unemployed.
full-time workers , but excludes part-time workers
parmanent employees , but excludes temporary employees
employed workers , but excludes people who are officially unemployed
155. A price index is …
a comparison of the price of a market basket from a fixed point of reference
a ratio of real GDP to nominal GDP

a comparison of real GDP in one period relative to another period


all above
157. Nominal GDP is …
the sum of all monetry transactions involving final goods and services that occur in the economy in a year.
the amount of production that occurs when the economy is operating at full employment
the sum of monetary transactions that occur in the economy in a year
money GDP adjusted for inflation
158. Real and nominal income is calculated respectively at …
Constant price and current price.
Current price and constant price
Current price and current price
Constant price and constant price
159. If inflation rate equals to 1%-3%,what type of inflation occurs?
creeping
running
walking
golloping
160. Which of the followings don't influence economic growth?
all above.
natural resources
human resources
technology and innovations
161. What is net export?
the value of a nation's total export goods and services minus the value of all goods and services it imports
the value of a nation's total export goods and services plus the value of all goods and services it imports
the value of a nation's total export goods and services
None
162.Which of the following activities are not measured in GDP?
Underground economy.
Transactions between financial institutions
Investments
Export and import
163. At which phase of business cycle real GDP and employment stop declining?
Trough.
peak
contraction
expansion
164. How many phases are there a business cycle?
4
3
5
2
165. The phase of growing is called….?
Expansion
peak
contraction
trough
166. The phase of top is called….?
Peak

expansion


contraction
trough
167.The phase of shrinking is called….?
Contraction
expansion
peak
trough
168.The phase of bottom is called….?
Trough
expansion
peak
contraction
169.When the economic cycle peaks what will happen to GDP?
reaches maximum
reaches minimum
continues growing
continues shrinking
170. In which period occurs low unemployment?
Expansion
peak
contraction
trough
171.What is called a prolonged contraction ?
Recession.
bottom
trough
depression
172.When does recession become depression?
after 1 year
after 6 months
after 2 years
after 9 months
173. Different theories about business cycle can be classified into … categories?
2
3
4
1
174.Which theory is about attributing fluctuations to the economic system itself?
Keynesian
neoclassical
political
none of them
175…..….are a group of economists who generally favour laissez-faire or noninterventionist policies?
Classicals
Keynesians
politicals
none of them
176. Which indicator represents about people are looking for a job and cannot find one?

Unemployment


employment
inflation
expansion
178.Which type of unemployment results from fluctuations in economic activity?
Cyclical
frictional
structural
seasonal
179. Which unemployment is caused by economic restructuring, making some skills obsolete.
Structural
Cyclical
frictional
seasonal
180.Which unemployment type is the unemployment caused by new entrants into the job market and people quitting a job just long enough to look for and find another one
Frictional.
structural
Cyclical
Seasonal
181.How we calculate unemployment rate?
Unemployment divide by labor force.
labor force divide by unemploym
the employed + the unempl
none of them
182. An individual whose employment was involuntarily terminated or who was laid off ?
Job loser
Reentrant
Job leaver
New entrant
183. An individual who has worked a full-time job before but left the labor force and has now reentered it looking for a job
Reentrant
Job loser
Job leaver
New entrant
184. An individual who voluntarily quit
Job leaver
Reentrant
Job loser
New entrant
185. The IS curve illustrates that when income increases, the
interest rate must fall to restore equilibrium in the goods market.
interest rate must fall to restore equilibrium in the asset market
interest rate must rise to restore equilibrium in the asset market
interest rate must rise to restore equilibrium in the goods market
186. As we move down along the IS curve,
investment spending and savings both increase.
none
investment spending and savings both decline
investment spending increases but savings does not change

187. A fall in expected future output that doesn't affect labour supply would shift the IS curve _____ and the FE line _____.


down; is unchanged.
down; right
up; is unchanged
up; right
188. The LM curve
slopes upward.
is horizontal
is vertical
slopes downward
189. The LM curve will shift down when the
real money demand declines.
nominal money supply declines
expected inflation declines
price level rises
190.A decrease in money demand causes the real interest rate to _____ and output to _____ in the short run, before prices adjust to restore equilibrium.
fall; rise.
rise; rise
rise; fall
fall; fall
191. In the IS-LM analysis, the effects of a temporary adverse supply shock do not include
an increase in the consumption level.
an increase in the price level
a lower output level
an increase in real interest rates
192. Classical economists contend that an increase in the nominal money supply will
not increase the real money supply.
shift the LM curve up, causing output to decline
shift the LM curve down, causing output to increase
shift the LM curve up, causing output to increase
193. A decrease in taxes (when Ricardian equivalence holds) causes the real interest rate to _____ and output to _____ in the short run, before prices adjust to restore equilibrium
remain constant; remain constant
fall; rise
fall; fall
rise; fall
194. An increase in expected inflation causes the real interest rate to _____ and the price level to _____ in general equilibrium.
remain unchanged; rise.
fall; fall
rise; rise
remain unchanged; fall
195. A decrease in the nominal interest rate on money causes
the aggregate demand curve to shift up and to the right.
the aggregate demand curve to shift down and to the left
the short run aggregate supply curve to shift up
the short run aggregate supply curve to shift down
196. Classical economists argue that money is neutral because
prices adjust quickly to a monetary expansion.
prices are fixed in the short run
prices adjust to a monetary expansion only in the long run
prices are slow to adjust to a monetary expansion
197. Which one of the following statements best describes the rational expectations school of economic thought?
People can correctly anticipate the Fed’s actions and will adjust their expectations of inflation accordingly. Thus expansionary policy by the Fed will be ineffective.
Consumers are not rational and thus shifts in the ADE curve are unpredictable. So the government should not undertake fiscal or monetary policy because they are just as likely to be wrong as correct.
People will adjust the amount of time they spend working during the business cycle, resulting in even larger changes in economic output.
People will adjust the amount of time they spend working during the business cycle, minimizing the magnitude of the swings of the business cycle.
198. The classical-Keynesian synthesis states that …
the classical perspective holds for the long run while the Keynesian perspective holds for the short run.
the classical perspective holds for fiscal policy while the Keynesian perspective holds for monetary policy.
the classical perspective holds for the ASR curve while the Keynesian perspective holds for the ADE curve.
the classical perspective holds for the ADE curve while the Keynesian perspective holds for the ASR curve.
199. Suppose a country has a growth rate of GDP of 6% annually and a population growth rate of 2% annually. What is the growth rate of GDP per capita in this country?
4%
8%
3%
2%
200. Suppose a country has a real GDP in Year 1 of $10 trillion and a real GDP in Year 2 of $11 trillion. What is the growth rate of GDP in this country?
10%
5%
11%
20%
201. Suppose a country has a real GDP growth rate of 5% per year, and that the growth rate of real GDP per capita is 2% per year. What is the population growth rate in this country?
3%
2%
5%
7%

202. What is the GDP?


a) value of all goods and services produced within a country's borders during a specific period.
b) Total value of assets in the country
c) Total income minus expenditure in the economy
d) the total income of everyone in the economy

203.Which of the following methods can measure inflation rate most accurately?


a) Consumer Price Index (CPI).
b) Producer Price Index (PPI)
c) Gross Domestic Product (GDP) Deflator
d) None of the above

204. What is deflation?


a) A decrease in the prices of goods and services over time.
b) An increase in the prices of goods and services over time
c) Maintaining the same level of prices of goods and services over time
d) stable price over time not changeable

205.When was the Great Depression?


a) 1930s.
b) 1910s
c) 1920s
d) 1890s

206. What is the meaning of the unemployment rate?


a) The percentage of the labor force that is not employed but actively seeking work.
b) The percentage of the labor force that is employed but seeking different work
c) The percentage of the population that is working
d) The percentage of the population that is not working

207. What is the difference between real and nominal GDP?


a) Real GDP is adjusted for inflation, while nominal GDP is not.
b) Real GDP is calculated using current prices, while nominal GDP is adjusted for price changes over time
c) Real GDP measures the total output of an economy, while nominal GDP measures the total income of an economy
d) There is no difference between real and nominal GDP

208.What is a recession?


a) A period of declining economic growth and rising unemployment.
b) A period of rising economic growth and declining unemployment
c) A period of rapid economic growth and high levels of inflation
d) A period of stagnation in the economy

209.Who is regarded as the father of modern macroeconomics?


a) John Maynard Keynes.
b) Adam Smith
c) Milton Friedman
d) James Tobin

210.What is the primary measure used to evaluate a nation's economic growth?


a) Gross Domestic Product (GDP).
b) Real interest rates
c) Inflation
d) Stock market index

211.What are the two major macroeconomic policies governments use to stabilize their economies?


a) Fiscal policy and monetary policy.
b) Anti-inflation policy and trade policy
c) Industrial policy and labor policy
d) Regulatory policy and environment policy

212.What is the purpose of macroeconomic policy?


a) To promote economic growth and stability.
b) To micromanage the economy and promote social justice
c) To manipulate prices in specific industries
d) To favor particular firms and industries

213. Nominal GDP is:


a) GDP measured in current prices.
b) GDP adjusted for inflation
c) GDP that accounts for population changes
d) GDP that accounts for the environment

214.Which of the following sectors tends to drive economic growth during a recession?


a) Government spending.
b) Investment spending
c) Consumer spending
d) Foreign spending

215.What is inflation?


a) An increase in the overall price level of an economy.
b) A period of declining economic growth and rising unemployment
c) A period of rising economic growth and declining unemployment
d) A decline in the overall price level of an economy

216.What are sticky prices?


a) Prices that are slow to adjust or respond to changes in supply or demand.
b) Prices that are systematically set too high or too low
c) The tendency for prices to adjust quickly, even when there are shifts in aggregate demand or supply
d) Prices that tend to be the same across all markets

217. The supply of goods in the Solow model?


a) Y = F(K, L).
b) Y/L = F(K/L, 1)
c) y = f(k)
d) MPK = f(k + 1) − f(k)

218. What is a key determinant of the economy’s output?


a) capital stock.
b) old capital
c) GDP
d) no correct answer

219. Two forces influence the capital stock: investment and….


a) depreciation.
b) money
c) GDP
d) consumption

220. …. is expenditure on new plant and equipment, and it causes the capital stock to rise.


a) investment.
b) depreciation
c) saving
d) product

221. …..is the wearing out of old capital, and it causes the capital stock to fall


a) depreciation.
b) investment
c) saving
d) product

222. If the saving rate is…, the economy will have a large capital stock and a high level of output in the steady state.


a) high.
b) low
c) medium
d) stable

223. If the saving rate is …, the economy will have a small capital stock and a low level of output in the steady state


a) low.
b) medium
c) stable
d) high

224. At the Golden Rule level of capital, the marginal product of capital equals the….


a) depreciation rate.
b) GDP
c) net export
d) net import

225. At the Golden Rule level of capital, the marginal product of capital net of depreciation (MPK – d ) equals…


a) 0.
b) 1
c) 0.1
d) 10

226. Policies that alter the steady-state growth rate of income per person are said to have …


a) a growth effect.
b) a level effect
c) saving rate
d) income

227. A higher saving rate is said to have a ….


a) a level effect.
b) a growth effect
c) saving rate
d) income

228. ….shows that in the long run, an economy’s rate of saving determines the size of its capital stock and thus its level of production.


a) The Solow growth model.
b) Steady state
c) Golden Rule level of capital
d) The Kremerian Model

229. In ….an increase in the rate of saving has a level effect on income per person: it causes a period of rapid growth, but eventually that growth slows as the new steady state is reached.


a) the Solow model.
b) Steady state
c) Golden Rule level of capital
d) The Kremerian Model

230. The level of capital that maximizes steady-state consumption is called …


a) Golden Rule level.
b) the Solow model
c) Steady state
d) The Kremerian Model

231. …shows that an economy’s rate of population growth is another long-run determinant of the standard of living.


a) The Solow model.
b) Golden Rule level
c) Steady state
d) The Kremerian Model

232. What is the primary determinant of aggregate demand in the short-run?


a) The level of real wealth in the economy.
b) The level of investment spending
c) Consumer confidence
d) The level of government spending

233. According to the dynamic Model of Aggregate Demand and Aggregate Supply, what happens to output and the price level in the short-run when there is an increase in consumption?


a) Output increases and the price level increases.
b) Output increases and the price level decreases
c) Output decreases and the price level increases
d) Output decreases and the price level decreases

234. What is the difference between short-run and long-run aggregate supply?


a) Long-run aggregate supply is vertical while short-run aggregate supply is upward sloping.
b) Short-run aggregate supply is vertical while long-run aggregate supply is upward sloping
c) Both short-run and long-run aggregate supply are always vertical
d) Long-run aggregate supply is determined by the capital stock and technology while short-run aggregate supply is determined by prices and wages

235. What happens to output in the long-run when the economy experiences a change in aggregate demand?


a) Output returns to the natural level of output.
b) Output remains at the new level in the long-run
c) Output continues to increase in the long-run
d) Output decreases in the long-run

236. Which of the following will shift the long-run aggregate supply curve to the right?


a) An increase in the capital stock.
b) A decrease in labor productivity
c) An increase in the price level
d) A decrease in technology

237. In the dynamic Model of Aggregate Demand and Aggregate Supply, what happens in the long-run when there is an increase in government spending?


a) There is no change in long-run output but the price level increases.
b) Long-run output increases but the price level remains the same
c) Long-run output and the price level both increase
d) There is no change in long-run output or the price level

238. What happens to the price level in the short-run when there is a decrease in short-run aggregate supply?


a) The price level increases.
b) The price level decreases
c) The price level remains the same
d) It depends on the cause of the decrease in short-run aggregate supply

239. What happens to the long-run aggregate supply curve when there is a change in labor productivity?


a) The curve shifts to the right.
b) The curve shifts to the left
c) The slope of the curve becomes steeper
d) The slope of the curve becomes flatter

240. What is the slope of the aggregate demand curve?


a) Downward-sloping.
b) Upward-sloping
c) Vertical
d) Horizontal

241. What happens to output in the short-run when there is a decrease in aggregate demand?


a) Output decreases.
b) Output remains the same
c) Output increases
d) It depends on the cause of the decrease in aggregate demand

242. In the dynamic Model of Aggregate Demand and Aggregate Supply, what happens to the price level in the long-run when there is an increase in the money supply?


a) The price level increases in the long-run.
b) The price level remains the same in the long-run
c) The price level decreases in the long-run
d) It depends on the cause of the increase in the money supply

243. What happens to investment spending in the short-run when there is an increase in interest rates?


a) Investment spending decreases.
b) Investment spending increases
c) Investment spending remains the same
d) It depends on the specific circumstances affecting investment decisions

244. What is the primary determinant of long-run aggregate supply?


a) Labor productivity and the capital stock.
b) The level of investment spending
c) The level of real wealth in the economy
d) The level of government spending

245. Which of the following will shift the short-run aggregate supply curve to the left?


a) A decrease in technology.
b) An increase in the capital stock
c) An increase in the price level
d) A decrease in the money supply

246. What happens to the price level in the short-run when there is a change in government spending?


a) The price level increases but output remains the same.
b) The price level and output both increase
c) The price level and output both decrease
d) The price level remains the same but output increases

247. What is the name of the theory proposed by Keynes in The General Theory to explain how interest rates are determined?


a) Keynesian Theory of Liquidity Preference.
b) Theory of Monetary Supply
c) Theory of Banking Assets
d) None of the above

248. What is the most liquid asset in the economy, according to the Theory of Liquidity Preference?


a) Money.
b) Bank deposits
c) Coins & Currency
d) Bonds

249. According to the Theory of Liquidity Preference, what is the assumption about the supply of real money balances?


a) It is fixed and does not depend on the interest rate.
b) It varies with interest rate changes
c) It is unlimited
d) It is unknown

250. What is an exogenous variable in the Theory of Liquidity Preference?


a) The supply of money (M).
b) The demand for money
c) Both a and b
d) None of the above

251. What is the opportunity cost of holding money, according to the Theory of Liquidity Preference?


a) The interest rate.
b) The inflation rate
c) The fiscal policy of the government
d) None of the above

252. In the market for loanable funds, the supply comes from:


a) Individuals saving their income.
b) The banking system
c) The government
d) The Federal Reserve

253. The demand for loanable funds comes from:


a) All of the above.
b) Businesses investing in capital goods
c) Consumers buying homes
d) The government borrowing to finance its budget deficit

254. The interest rate is determined by:


a) The market for loanable funds.
b) The government
c) The Federal Reserve
d) None of the above

255. An increase in the supply of loanable funds will:


a) Decrease the equilibrium interest rate and increase investment.
b) Increase the equilibrium interest rate and decrease investment
c) Increase both the equilibrium interest rate and investment
d) Decrease both the equilibrium interest rate and investment

256. When the government runs a budget deficit, it:


a) Increases the demand for loanable funds.
b) Decreases the supply of loanable funds
c) Increases the supply of loanable funds
d) Decreases the demand for loanable funds

257. The crowding out effect refers to:


a) The decrease in investment due to an increase in the interest rate caused by government borrowing.
b) The increase in investment due to a decrease in the interest rate caused by government borrowing
c) The reduction in consumption caused by an increase in government spending
d) The increase in consumption caused by a decrease in government spending

258. Fiscal policy refers to:


a) Changes in government spending and taxation to affect aggregate demand.
b) Changes in the money supply to affect the interest rate
c) Changes in the exchange rate to affect international trade
d) None of the above

259. The multiplier effect refers to:


a) The effect of a change in government spending or taxation on aggregate demand.
b) The effect of a change in investment on the economy's potential output
c) The effect of a sudden increase in consumer spending on the economy
d) The effect of a change in the interest rate on borrowing and investment

260. According to the Phillips curve, there is a trade-off between:


a) Inflation and unemployment.
b) Inflation and economic growth
c) Unemployment and economic growth
d) None of the above

261. The natural rate of unemployment refers to:


a) The rate of unemployment that exists when the economy is at its potential output.
b) The rate of unemployment that is consistent with stable inflation
c) The rate of unemployment that is caused by government policies
d) None of the above

262. What does the process of job search lead to?


a) frictional unemployment.
b) structural unemployment
c) ceaselessly unemployment
d) permanent unemployment

263.We know that the time of people’s unemployment is existed in 2 types (long and short term).What does long-term unemployment likely to be?


a) structural.
b) frictional
c) permanent
d) always

264. If the goal is to lower substantially the natural rate of unemployment, policies must aim at?


a) long-term.
b) short-term
c) average-term
d) whole-term

265.What are two possible causes for a high rate of unemployment?


a) a low rate of job finding and a high rate of job separation.
b) a low rate of job losing and a high rate of job separation
c) a high rate of job losing and a high rate of job separation
d) a low rate of job finding and a low rate of job separation

266.When economists study data on the transition of individuals between employment and unemployment, they find that those groups with high unemployment tend to have high rates of?


a) job separation.
b) job losing
c) job finding
d) job maintaineance

267. How many types of hypothesis to calculate trends in unemployment?


a) 3.
b) 4
c) 6
d) 10

268. In standard theories of the labor market, higher productivity means greater labor demand and thus higher real wages, but what is unchanged?


a) unemployment.
b) wage
c) demand
d) request

269.What proportion of the unemployed have only recently entered the labor force?


a) 1/3.
b) 1/5
c) 1/2
d) 1

270.Government spending on unemployment insurance seems to raise what?


a) unemployment.
b) employment
c) wages
d) earns

271.How affect government spending on “active” labor-market policies on unemployment?


a) decrease.
b) rise
c) stable
d) oscillate

272.Which country has historically had a high rate of unemployment?


a) Spain.
b) the USA
c) the UK
d) Russia

273.In short what does unemployment represent?


a) wasted reources.
b) beneficial resource
c) essential resources
d) leisureness

274.Whether the public policy is powerfull in the fight to reduce unemployment or not?


a) yes.
b) no
c) possibly
d) all of above

275. How many facts are reflected by the difference in hours worked ?


a) 2.
b) 3
c) 5
d) 7

276. The average employed person in the United States works more hours per year than the average employed person in where?


a) Europe.
b) the UK
c) the India
d) the UAE

277. What is national income?


a) Total income earned by all factors of production in the country.
b) Total income earned by firms in the country
c) Total income earned by the government in the country
d) Total income earned by individuals in the country

278. What is the formula for gross domestic product (GDP)?


a) GDP = C + I + G + (X - M).
b) GDP = C + S + T
c) GDP = C + S + G + (X - M)
d) GDP = C + I + T + G

279. Which sector is known as the 'engine of growth'?


a) Tertiary sector.
b) Primary sector
b) Secondary sector
d) None of the above

280. Which is the best method to calculate national income accounting?


a) Product method.
b) Income method
c) Expenditure method
d) Consumption method

281. What is GDP per capita?


a) Gross domestic product divided by total population.
b) Gross national product divided by total population
c) Gross national product minus depreciation
d) Gross domestic product minus net exports

282. What is the difference between nominal GDP and real GDP?


a) Nominal GDP is calculated by using current market prices, while real GDP is adjusted for inflation using base-year prices.
b) Real GDP is calculated by using current market prices, while nominal GDP is adjusted for inflation using base-year prices
c) Real GDP is calculated by using current market prices and is not subject to inflation, while nominal GDP is adjusted for inflation
d) Nominal GDP is calculated by using the prices set by the government, while real GDP is adjusted for inflation using base-year prices

283. What is disposable income?


a) Income after taxes and transfers have been deducted.
b) Total income earned by individuals and households
c) Income before taxes and transfers have been deducted
d) None of the above

284. Which of the following is a limitation of national income accounting?


a) All of the above.
b) It ignores non-monetary factors
c) It does not account for illegal activities
d) It assumes a constant price level

285. Which of the following is not a component of GDP?


a) Private savings.
b) Private consumption expenditure
c) Government expenditure
d) Net exports

286. Which of the following is an example of a transfer payment?


a) Unemployment benefits.
b) Salary earned by an employee
c) Interest earned on savings
d) Profit earned by a business

287. What is national income equal to?


a) GDP – Depreciation.
b) GNP - Depreciation
c) GDP - Taxes
d) GNP – Taxes

288. Which factor is not included in the calculation of national income?


a) Interest earned on savings.
b) Profits of businesses
c) Wages and salaries
d) Transfer payments

289. Which of the following is an example of an intermediate good?


a) Flour used to make bread.
b) A new laptop
c) A car sold to a consumer
d) All of the above

290. What is the difference between GDP and GNP?


a) GDP measures the total value of goods and services produced within the borders of a country, while GNP measures the total value of goods and services produced by a country's residents.
b) GDP measures the total value of goods and services produced by a country's residents, while GNP measures the total value of goods and services produced within the borders of a country
c) GDP measures the total income earned by residents within a country, while GNP measures the total income earned by a country's businesses
d) GDP measures the total income earned by a country's businesses, while GNP measures the total income earned by residents within a country

291. What is the most comprehensive measure of a country's economic performance?


a) Human Development Index.
b) GDP
c) Net national product
d) Gross national income

292. What is the result of an increase in the saving rate when the economy begins with less capital than in the Golden Rule steady state?


a) A fall in consumption and a rise in investment.
b) A rise in consumption and a fall in investment
c) A rise in both consumption and investment
d) A fall in both consumption and investment

293. Does reaching the Golden Rule steady state immediately raise economic welfare?


a) No, it requires an initial period of reduced consumption.
b) Yes
c) It is not clear
d) None of the above

294. What is the main problem with high population growth in the Solow growth model?


a) It forces the capital stock to be spread more thinly, reducing output per worker.
b) It leads to higher output per worker
c) It has no effect on output per worker
d) It causes workers to become more productive

295. What are two potential effects of population growth that are not considered in the Solow growth model?


a) Natural resource availability and technological progress.
b) Resource depletion and income inequality
c) Climate change and political instability
d) Urbanization and environmental pollution

296. Who first introduced the idea that population growth could lead to poverty?


a) Thomas Robert Malthus.
b) Adam Smith
c) Robert Solow
d) John Maynard Keynes

297. According to Malthus, what is the only check on population growth?


a) Poverty and misery.
b) Income inequality
c) Climate change
d) Technological progress

298. What breakthroughs have allowed farmers to feed ever-greater numbers of people?


a) Mechanized farm equipment and new crop varieties.
b) Advances in birth control methods
c) Increased government support for farmers
d) Higher taxes on farmland

299. What is the Solow growth model?


a) A model of economic growth.
b) A model of planetary motion
c) A model of population genetics
d) A model of gas laws

300. Why does high population growth reduce output per worker in the Solow model?


a) It forces the capital stock to be spread more thinly.
b) It leads to more capital per worker
c) It increases technological progress
d) It has no effect on output per worker

301. What is the main check on population growth according to Malthus?


a) Misery and vice.
b) Technological progress
c) Food production capacity
d) Economic growth

302. How has the world population changed over the past two centuries?


a) It has increased about sixfold.
b) It has decreased
c) It has remained about the same
d) It has increased tenfold

303. How has technological progress affected food production in the centuries since Malthus's writings?


a) It has allowed farmers to feed ever greater numbers of people.
b) It has had no effect
c) It has made food production less efficient
d) It has increased the need for more farmers

304. How has the link between passion and population growth changed in modern times?


a) It has weakened due to modern birth control.
b) It has gotten stronger
c) It has disappeared entirely
d) It has been replaced by technological progress

305. In which case should the policymaker pursue policies aimed at reducing the rate of saving?


a) When the economy starts with too little capital.
b) When the economy starts with too much capital
c) When the economy is already at the Golden Rule steady state
d) When investment is higher than depreciation

306. What is the main difference between the two cases of transitioning to the Golden Rule steady state?


a) The starting capital stock.
b) The impact on consumption during the transition
c) The need for more investment
d) The policy actions needed to achieve the steady state

307. Who wrestled in vain with a rising rate of inflation in the 1970s


a) Richard Nixon, Gerald Ford and Jimmy Carter.
b) Bill Clinton, Geral Ford and Geroge Bush
c) Barack Obama, Richard Nixon
d) Jimmy Carter, Adam Smith and Geral Ford

308. Inflation became most severe during the late 1970s , when prices rose at a rate of almost … percent per year.


c) 10. a) 12
b) 11
d) 9

309. What is the meaning of inflatsion rate?


a) Measuring the percentage change in the average level from the year before.
b) The percentage of the population that is working
c) Anti-inflatsion policy in the average prices
d) Manipulating prices in specific industries

310. Prices are rising but at a slower rate, if what does it decline but remains positive?


a) Inflation rate.
b) Labor rate
c) Death rate
d) Recession

311. Economic variables…


a) GDP, inflation and unemployment.
b) GDP and inflation
c) Inflation and unemployment
d) GDP and unemployment

312. How many kinds of variables have models?


a) 2.
b) 5
c) 4
d) 3

313. How kind of variables that a model tries to explain?


a) Endogenous.
b) Exogenous
c) Monetary
d) Policy

314. The key assumption of the classical model is that …


a) prices are flexible.
b) market clearing is flexible
c) economic flucluations are sticy
d) Real GDP is increse

315. Microeconomics is study of the economy as a …


a) Whole.
b) financial instrument
c) financial feature
d) basic foundation

316. How much higher Real GDP per person today than it was in 1990?


a) About 8 times.
b) About 6 times
c) About 5 times
d) About 9 times

317. What Did president George Bush do to help end the recession, but the tax cut also contributed to a reemergence of budget deficits?


a) reduced taxes.
b) increased taxes
c) remove taxes
d) picked taxes

318. In … and …, officials in the Tresuary, Federal Reserve, and other parts of government were acting vigorously to prevent a recurrence of that outcome.


a) 2008, 2009.
b) 2008, 2010
c) 2007, 2009
d) 2009, 2010

319.Who is the winner of Nobel prize in economics?


a) Robert Lucas.
b) Dogre Kuntuz
c) Hafiz Taram
d) Aslan Terun

320. What describe models with flexible prices?


a) The economy in the long run.
b) The economy in the short run
c) The economy in the brief
d) The economy

321. How does the economy models with sticky prices?


a) the short run.
b) the long run
c) funds
d) features
322. What is the name of the theory proposed by Keynes in The General Theory to explain how interest rates are determined?
a) Keynesian Theory of Liquidity Preference.
b) Theory of Monetary Supply
c) Theory of Banking Assets
d) None of the above

323. What is the most liquid asset in the economy, according to the Theory of Liquidity Preference?


a) Money.
b) Bank deposits
c) Coins & Currency
d) Bonds

324. According to the Theory of Liquidity Preference, what is the assumption about the supply of real money balances?


a) It is fixed and does not depend on the interest rate.
b) It varies with interest rate changes
c) It is unlimited
d) It is unknown

325. What is an exogenous variable in the Theory of Liquidity Preference?


a) The supply of money (M).
b) The demand for money
c) Both a and b
d) None of the above

326. What is the opportunity cost of holding money, according to the Theory of Liquidity Preference?


a) The interest rate.
b) The inflation rate
c) The fiscal policy of the government
d) None of the above

327. When the interest rate rises, what happens to the demand for money, according to the Theory of Liquidity Preference?


a) It decreases.
b) It increases
c) It remains constant
d) It has no effect

328. What is the main idea behind the theory of liquidity preference?


a) It explains how the interest rate is determined.
b) It explains how income affects money demand
c) It explains how consumption patterns change with income
d) It explains the index of demand for product

329. How is the quantity of real money balances demanded related to the interest rate and income?


a) Positive relationship with interest rate and negative relationship with income.
b) Positive relationship with both interest rate and income
c) Negative relationship with both interest rate and income
d) Negative relationship with only interest rate

330. What happens to the equilibrium interest rate when the level of income changes according to the theory of liquidity preference?


a) The interest rate increases.
b) The interest rate remains unchanged
b) The interest rate decreases
d) The interest rate fluctuate

331. What does the LM curve represent?


a) The interest rate that equilibrates the money market at any level of income.
b) The level of income that equilibrates the money market at any interest rate
c) The relationship between supply and demand for real money balances
d) It represents how to calculate interest rate

332. What factor(s) does the equilibrium interest rate depend on?


a) Both the supply of real money balances and the level of income.
b) Only the supply of real money balances
c) Only the level of income
d) Only the level of demand

333. How does a decrease in the supply of real money balances affect the LM curve?


a) It shifts the LM curve up.
b) It shifts the LM curve down
c) It has no effect on the LM curve
d) It changes the LM curve down

334. Why does a decrease in the supply of real money balances raise the interest rate according to the theory of liquidity preference?


a) Because people want to hold more money when the supply decreases, leading to an increase in demand for money and thus a higher interest rate.
b) Because people want to hold less money when the supply decreases, leading to a decrease in demand for money and thus a higher interest rate
c) Because a decrease in the money supply raises income, leading to an increase in demand for money and thus a higher interest rate
d) Because a decrease in the money supply raises income, leading to an increase in income for money and thus a higher interest rate

335. What does the LM curve show when considering a change in the supply of real money balances?


a) The new equilibrium interest rate.
b) The new equilibrium level of income
c) The new equilibrium level of unemployment
d) The new equilibrium level of employment

336. What is the intersection of the IS and LM curves used to determine in the IS-LM model?


a) The equilibrium interest rate and income.
b) The equilibrium level of employment
c) The equilibrium price level
d) The equilibrium level of unemployment

337. What is the macroeconomic problem that affects people most directly and severely?


a) unemployment.
b) inflation
c) recession
d) employment

338. What policies can help alleviate the hardships faced by the unemployed?


a) job-training programs.
b) tax increases
c) elimination of labor unions
d) job loss

339. What is the natural rate of unemployment?


a) the average rate of unemployment around which the economy fluctuates.
b) the highest possible rate of unemployment
c) the lowest possible rate of unemployment
d) no correct answer

340. What policies may inadvertently affect the prevalence of unemployment?


a) laws mandating a high minimum wage.
b) unemployment insurance
c) job-training programs
d) elimination of labor unions

341. What does the natural rate of unemployment consider?


a) the average rate of unemployment around which the economy fluctuates.
b) the rate of unemployment at any moment in time
c) the peak rate of unemployment during any recession
d) the lowest possible rate of unemployment

342. What steady-state condition determines the rate of unemployment?


a) fU = sE.
b) U/L = s/f
c) E/U = s/f
d) E = L – U

343. What factors determine the rate of unemployment?


a) s and f.
b) L and E
c) U and L
d) L and U

344. When is the labor market in a steady state?


a) when the number of people finding jobs equals the number of people losing jobs.
b) when the labor force is changing rapidly
c) when the unemployment rate is rising
d) no correct answer

345. What is the equation that can be used to find the steady-state unemployment rate?


a) fU = sE.
b) U/L = s/f
c) E = L – U
d) E/U = s/f

346. What does a policy aimed at lowering the natural rate of unemployment need to do?


a) reduce the rate of job separation.
b) increase the rate of job separation
c) decrease the rate of job finding
d) changes in the labor market

347. What is frictional unemployment?


a) unemployment caused by the time it takes workers to search for a job.
b) unemployment caused by job separation
c) unemployment caused by changes in the labor market
d) workers have different preferences and abilities

348. What is wage rigidity?


a) the failure of wages to adjust to a level at which labor supply equals labor demand.
b) the flexibility of wages, even above market-clearing levels
c) priority given to labor supply and labor demand over wages
d) a model that assumes constant change in the real wage

349a) unemployment caused by real-wage rigidity and job rationing.


b) unemployment caused by job finding taking time
c) unemployment caused by government regulations
d) workers have different preferences and abilities

350. What do the insiders and outsiders have in terms of interests?


a) conflicting interests.
b) complementary interests
c) identical interests
d) no correct answer

351. What is an instance of conflict between different groups of workers?


a) unemployment caused by unions and the threat of unionization.
b) wage rigidity
c) the aggregate labor market
d) the market-clearing wage

352. Capital per effective worker?


a) k = K/(E × L).
b) y = Y/(E × L) = f(k)
c) Y/L = y × E
d) Y = y × (E × L)

353. Output per effective worker?


a) y = Y/(E × L) = f(k).
b) Y/L = y × E
c) Y = y × (E × L)
d) k = K/(E × L)

354. Output per worker?


a) Y/L = y × E.
b) Y = y × (E × L)
c) k = K/(E × L)
d) y = Y/(E × L) = f(k)

355. Total output?


a) Y = y × (E × L).
b) k = K/(E × L)
c) y = Y/(E × L) = f(k)
d) Y/L = y × E

356. Y = F(K, L × E), E-?


a) Efficiency of labor.
b) Effectiveness
c) Export rate
d) Efficiency of capital

357. The rate of labor-augmenting technological progress-?


a) g.
b) L
c) n
d) F

358. According to the …, only technological progress can explain sustained growth and persistently rising living standards.


a) Solow model.
b) The Kremerian model
c) Market-clearing model
d) Golden Rule

359. Steady-state consumption is maximized if…


a) MPK = d + n + g,
b) MPK=d+g
c) MPK+d=n+g
d) MPK-d=n-g

360. The world’s poor economies will tend to catch up with the world’s rich economies.This property of catch-up is called …


a) Convergence.
b) Balanced growth
c) Karl Marx’s theory
d) Technological process

361. In the steady state of the Solow growth model, the growth rate of income


per person is determined solely by the … rate of technological progress.
a) Exogenous.
b) Employment
c) Growth
d) Income

362.MPK-?


a) Marginal product of capital.
b) Total income
c) Steady-state rate of growth
d) Labour argument

363. k = K/(E × L)


a) Capital per effective worker.
b) Output per effective worker
c) Output per worker
d) Total output

364. y = Y/(E × L) = f(k)


a) Output per effective worker.
b) Output per worker
c) Total output
d) Capital per effective worker

365. Y/L = y × E


a) Output per worker.
b) Total output
c) Capital per effective worker
d) Output per effective worker

366. Y = y × (E × L)


a) Total output.
b) Capital per effective worker
c) Output per effective worker
d) Output per worker

367. What is the second name of net export?


a) The second name of net export is balance of trade.
b) The second name of net export is trade surplus
c) The second name of net export is trade deficit
d) The second name of net export is gross domestic product

368. What is the nominal exchange rate?


a) The nominal exchange rate is the rate at which a country's currency can be exchanged for another country's currency.
b) The nominal exchange rate is the rate at which a country's exports exceed its imports
c) The nominal exchange rate is the rate at which a country's inflation rate is calculated
d) The nominal exchange rate is the rate at which a country's GDP is calculated

369. What is the formula of real exchange rate?


a) The formula for the real exchange rate is (Nominal exchange rate x Domestic price level) / Foreign price level.
b) The formula for the real exchange rate is (Nominal exchange rate x Foreign price level) / Domestic price level
c) The formula for the real exchange rate is (Nominal exchange rate x Inflation rate) / GDP
d) The formula for the real exchange rate is (Exports - Imports) / Nominal exchange rate

370. What is the dependence between real exchange rate and trade balance?


a) The real exchange rate and trade balance are positively related, meaning that an increase in the real exchange rate leads to an increase in the trade balance.
b) The real exchange rate and trade balance are negatively related, meaning that an increase in the real exchange rate leads to a decrease in the trade balance
c) There is no relationship between the real exchange rate and trade balance
d) The relationship between the real exchange rate and trade balance depends on other factors such as income levels and government policies

371. How many determinants of real exchange rate?


a) There are three determinants of real exchange rate.
b) There is only one determinant of real exchange rate
c) The number of determinants of real exchange rate varies depending on the country
d) The determinants of real exchange rate are irrelevant to the overall economy

372. What are dterminants of nominal exchange rate?


a) The determinants of nominal exchange rate are different for each country.
b) The determinants of nominal exchange rate include only the country's GDP
c) The determinants of nominal exchange rate have no impact on international trade
d) The determinants of nominal exchange rate are solely determined by the central bank

373. What is net capital outflow?


a) Net capital outflow refers to the difference between a country's total outward investment and its total inward investment.
b) Net capital outflow refers to the difference between a country's total exports and its total imports
c) Net capital outflow refers to the difference between a country's government spending and its tax revenue
d) Net capital outflow refers to the difference between a country's GDP and its national debt

374. What is the law of one price?


a) The law of one price states that identical goods should have the same price in different markets.
b) The law of one price states that goods can have different prices in different markets, even if they are identical
c) The law of one price only applies to goods that are produced domestically
d) The law of one price only applies to luxury goods and not necessities

375. What is the purchasing-power parity?


a) Purchasing-power parity refers to the exchange rate between two currencies that allows for the same purchasing power in each country.
b) Purchasing-power parity refers to the exchange rate between two currencies that only applies to luxury goods
c) Purchasing-power parity refers to the exchange rate between two currencies that is only relevant for international trade
d) Purchasing-power parity refers to the exchange rate between two currencies that is fixed and does not change over time

376. What is the trade deficit?


a) A trade deficit occurs when a country's imports exceed its exports.
b) A trade deficit occurs when a country's exports exceed its imports
c) A trade deficit occurs when a country has no imports or exports
d) A trade deficit occurs when a country's currency is stronger than other currencies

377. How many expenditures of open economy?


a) There are four expenditures of open economy output.
b) There are two expenditures of open economy output
c) There are three expenditures of open economy output
d) There is only one expenditure of open economy output

378. What is the opening economy?


a) An open economy is a type of economy that allows for free trade and international exchange.
b) An open economy is a type of economy that has no trade relations with other countries
c) An open economy is a type of economy that only allows for trade with neighboring countries
d) An open economy is a type of economy that is closed off from the rest of the world

379. What is the trade surplus?


a) Trade surplus refers to a situation where a country's exports exceed its imports.
b) Trade surplus refers to a situation where a country's imports exceed its exports
c) Trade surplus refers to a situation where a country has no trade relations with other countries
d) Trade surplus refers to a situation where a country's economy is in recession

380. What is the international flow of goods and capital?


a) It refers to the movement of goods and capital between countries.
b) It refers to the movement of only goods between countries
c) It refers to the movement of only capital between countries
d) It refers to the movement of goods and services within a country

381. When was the trade deficit in USA?


a) 1980s, 1990s,2000s.
b) 1940s, 1950s, 1960s
c) 1950s, 1960s, 1970s
d) 2000s,

382. Increases in the money supply shift the aggregate demand curve to……


a) Right.
b) Left
c) Up
d) Down

383. Reductions in the money supply shift the aggregate demand curve to……


a) Left.
b) Right
c) Up
d) Down

384. In the long run, the level of output does not depend on …….


a) Price level.
b) Aggregate supply
c) Aggregate demand
d) Interest rate

385. If all prices are fixed in the short run, short run curve will be …….


a) Horizontal.
b) Vertical
c) Curved
d) Diagonal

386. Over long periods of time, prices are …….., the aggregate supply curve is……


a) Flexible/vertical.
b) Sticky/vertical
c) Flexible/horizontal
d) Sticky/horizontal

387. Over short periods of time, prices are ……, the aggregate supply curve is…….


a) Sticky/horizontal.
b) Sticky/vertical
c) Flexible/horizontal
d) Flexible/vertical

388. Economists call exogenous events that shift Aggregate supply and aggregate demand curves, …


a) Shocks.
b) Strikes
c) Influences
d) Effects

389. Economists use the term ……… to refer to policy actions aimed at reducing the severity of short-run economic fluctuations.


a) Stabilization policy.
b) Monetary policy
c) Fiscal policy
d) Consolidation policy

390. Because supply shocks have a direct impact on the price level, they are sometimes called ….


a) Price shocks.
b) Favorable shocks
c) Direct shocks
d) Adverse shocks

391. A new environmental protection law that requires firms to reduce their


emissions of pollutants. What will happen to prices?
a) Increase.
b) No changes
c) Uncertain
d) Decrease

392. What is the long-run equilibrium in the economy?


a) When the aggregate demand and aggregate supply curves intersect.
b) When the aggregate demand curve shifts to the right
c) When the aggregate supply curve shifts to the left
d) When the economy is experiencing high inflation

393. What happens to the aggregate supply curve when there is an increase in labor productivity?


a) The aggregate supply curve shifts to the right.
b) The aggregate supply curve shifts to the left
c) The aggregate supply curve remains unchanged
d) None of the above

394. What is aggregate demand?


a) Total quantity of goods and services demanded by households, businesses, and the government.
b) Total quantity of goods and services produced in the economy
c) Total quantity of goods and services supplied by firms in the economy
d) Total quantity of money exchanged in the economy

395. What is the slope of the aggregate demand curve?


a) Negative slope.
b) Positive slope
c) Zero slope
d) Infinite slope

396. What is the foundation of aggregate supply?


a) The cost of production in the economy.
b) The level of technology in the economy
c) The amount of labor and capital in the economy
d) The demand for goods and services in the economy

397. What is the overall increase in prices called ?


a) inflation.
b) Revaluation
c) Depression
d) Decrease

398. How many functions does money have ?


a) 3.
b) 5
c) 4
d) 2

399. Money that has no intrinsic value is called …


a) Fiat money.
b) Silver money
c) State money
d) Gold money

400. Money that takes the form of a physical commodity with intrinsic value is called… .


a) Commodity money.
b) Silver money
c) intrinsic money
d) Gold money

401. The quantity of money available in an economy is called …


a) Money supply.
b) Gross domestic product
c) Inflation rate
d) Market value

402. What is the term used to describe the government's control over the supply of money in an economy?


a) Monetary policy.
b) Economic stimulus
c) Market regulation
d) Fiscal policy

403. Which of the following equations represents the relationship between Money supply,* Velocity of money, Price and* Transactions in an economy?


a) M × V = P × T.
b) M × V = P + T
c) M / V = P × T
d) M = P × T / V

404. What is the term used to describe the rate at which money circulates in an economy?


a) Velocity of money.
b) Economic growth
c) Fiscal policy
d) Money supply

405. What term refers to the sum of outstanding paper money and coins that are currently in circulation in an economy?


a) Currency.
b) Consumer price index
c) Gross domestic product
d) Fiscal policy

406. The institution which is given the responsibility of conducting monetary policy in many countries …


a) The Central Bank.
b) The Securities and Exchange Commission
c) The Internal Revenue Service
d) The Treasury Department

407. What term describes an economy in which gold is used as money or in which paper money is redeemable for gold?


a) Gold standard.
b) Commodity market
c) Currency exchange
d) Gold market

408. If I work today and earn $100, I can save the money by storing, and spend it tomorrow, next week, or next month. This can be an example of … function of money.


a) Store of value function.
b) Medium of exchange function
c) Future mobile function
d) Unit of account function

409. A classic example of hyperinflation is Germany in 1923, when prices increased an average of … percent per month.


a) 500.
b) 50000
c) 0.1
d) 10

410. What term is used to describe the ease with which an asset can be converted into the medium of exchange and used to buy goods and services?


a) Asset liquidity.
b) Asset allocation
c) Asset devaluation
d) Asset volatility

411. The central bank of the United States


a) Federal Reserve.
b) Washington bridge
c) Policy institution
d) Sweden Banko

412. What is the primary purpose of public policies designed to stimulate technological progress?


a) To encourage private sector investment in innovation.
b) To benefit individual inventors
c) To help foreign countries "free ride" on research
d) To discourage firms from engaging in research and development

413. What is an example of an institutional factor that may have contributed to the productivity slowdown in the 1970s and 1980s?


a) Reduced public investment in education and infrastructure.
b) Increased investment in education and infrastructure
c) Strong labor unions and worker advocacy groups
d) Advances in technology and the growth of the tech sector

414. What was the primary hypothesis to explain the productivity slowdown?


a) Increase in oil prices.
b) Changes in worker quality
c) Resource constraints
d) Depletion of ideas

415. How did changes in the labor force possibly contribute to the productivity slowdown?


a) Changes in the labor force lowered the average level of experience among workers.
b) Average productivity increased due to many workers entering the labor force
c) Average productivity decreased due to social norms encouraging women to leave full-time housework
d) All of the above

416. What is the key difference between the endogenous growth model and the Solow model?


a) Endogenous growth models assume constant returns to capital.
b) Endogenous growth models assume exogenous technological change
c) Endogenous growth models assume diminishing returns to capital
d) Endogenous growth models do not take into account investment

417.According to the endogenous growth theory, what is the main source of growth?


a) Knowledge accumulation.
b) Exogenous technological change
c) Labor
d) Capital accumulation

418. What are the two main versions of endogenous growth theory?


a) Solow and Romer models.
b) Exogenous and endogenous R&D
c) Public good and private good
d) Labor and capital

419.How do firms balance the benefits and costs of investing in research and development (R&D)?


a) By evaluating the potential benefits of getting temporary monopoly profits with the costs of R&D.
b) By trying to capture temporary monopolies to recoup their costs and earn profits
c) By investing in education, infrastructure, or basic science research to promote the development of new ideas
d) By investing in physical capital to increase their productive capacity

420.Why is it difficult to connect the microeconomic facts of research and development with the macroeconomic growth models previously discussed?


a) The micro and macro aspects of growth are fundamentally different phenomena.
b) The patent system does not promote innovation or growth
c) The costs and benefits of R&D are not relevant to growth models
d) Firms do not innovate in sectors other than manufacturing or universities

421. What is the most important determinant of a nation's economic well-being according to macroeconomists?


a) Long-run economic growth.
b) Trade deficits
c) Unemployment
d) Inflation

422. What is an example of a positive externality?


a) A person getting vaccinated against a contagious disease.
b) Someone buying a new television
c) Someone going to the hair salon
d) Oil prices increased later than when the productivity slowdown began

423. What is the difference between an implicit and an explicit tax?


a) An implicit tax is a tax that is not easily visible, while an explicit tax is a tax that is easily seen.
b) An implicit tax is a tax that is deliberately imposed by the government, while an explicit tax is a tax that is not deliberately imposed
c) An implicit tax is a tax that is levied on a good, but not collected by the government, while an explicit tax is a tax that is collected by the government
d) All of the above

424. What was the primary hypothesis to explain the productivity slowdown?


a) Increase in oil prices.
b) Changes in worker quality
c) Resource constraints
d) Depletion of ideas

425. According to the article, why is the hypothesis that the productivity slowdown was caused by an increase in oil prices less likely?


a) The cost of petroleum-based products is not significant to explain the productivity slowdown.
b) Political turmoil in OPEC caused oil prices to plummet in the 1980s, but productivity did not speed up
c) Oil prices increased later than when the productivity slowdown began
d) All of the above

426. How did changes in the labor force possibly contribute to the productivity slowdown?


a) Changes in the labor force lowered the average level of experience among workers.
b) Average productivity increased due to many workers entering the labor force
c) Average productivity decreased due to social norms encouraging women to leave full-time housework
d) All of the above

427. What is a third cost of inflation?


a) Firms increase their production costs due to higher rates of inflation.
b) The overall price level increases that result in higher costs for consumers
c) Inflation induces variability in relative prices, leading to microeconomic inefficiencies
d) None of the above

428. What happens to firms' relative prices when inflation occurs?


a) They constantly change over the year.
b) They do not change
c) Their relative prices fall as inflation increases
d) None of the above

429. How does inflation impact a firm issuing a catalog?


a) Sales will be low early and high later in the year due to the variability in prices caused by inflation.
b) Sales will be low throughout the year regardless of inflation
c) Sales will be high throughout the year regardless of inflation
d) None of the above

430. Why does inflation causing variability in relative prices lead to inefficiencies in resource allocation?


a) None of the above.
b) It increases overall production and consumption costs
c) It makes it more difficult for consumers to make purchasing decisions
d) It makes it harder for the government to collect taxes

431. What is a fourth cost of inflation according to the passage?


a) Tax laws that do not consider the effects of inflation.
b) Firms facing menu costs change prices infrequently causing price variability
c) None of the above
d) The overall price level increases that result in higher costs for consumers

432. Why does inflation often alter individuals' tax liability?


a) Many provisions of the tax code do not take into account the effects of inflation.
b) Tax laws are too complex and need to be simplified
c) Inflation causes individuals to pay more taxes
d) None of the above

433. How do lawmakers intend for tax provisions to account for inflation?


a) None of the above.
b) By increasing taxes in line with the inflation rate
c) By adjusting tax brackets and deductions to account for inflation
d) By keeping taxes constant regardless of inflation

434. Overall, what are the effects of inflation on the economy?


a) None of the above.
b) Inflation can have both positive and negative effects
c) Inflation causes only negative effects.
d) It has no impact

435. If a bank pays 8% interest annually, how much more money would you have in your savings account after withdrawing your savings and accumulated interest after one year?


a) 8% more.
b) Depends on the inflation rate
c) 10% more
d) None of the above

436. How would you describe the relationship between nominal interest rate, real interest rate, and inflation rate?


a) R = i – p.
b) R = i x p
c) R = i ÷ p
d) R = i + p

437. What happens to your purchasing power if the inflation rate exceeds the nominal interest rate?


a) It decreases.
b) It increases
c) It stays the same
d) None of the above

438. What is the concept of opportunity cost?


a) The price of holding money.
b) The cost of holding money instead of other assets
c) The real returns on alternative assets
d) The nominal interest rate

439. Why is the nominal interest rate considered the opportunity cost of holding money?


a) Because it is what you give up by holding money instead of other assets.
b) Because it is what you earn by holding money instead of other assets
c) Because it fluctuates more than other asset prices
d) None of the above

440. What does the money demand function state?


a) The demand for real money balances is independent of the level of income and the nominal interest rate.
b) The demand for real money balances depends on the nominal interest rate only
c) The demand for real money balances depends on both the level of income and the nominal interest rate.
d) The demand for real money balances depends on the level of income only

441. Why do people consider inflation a social problem?


a) It makes them poorer.
b) It decreases their wealth
c) It reduces their salary increments
d) All of the above

442. Which of the following sources provides the most systematic and objective information about the economy?


a) Economic data.
b) Casual observation
c) Anecdotal evidence
d) Personal opinions

443. What was the main issue with relying on casual observation a century ago?


a) It was difficult to combine individual experiences into a coherent whole.
b) It was too expensive to gather information in any other way
c) It relied too heavily on personal opinions
d) It provided too much information to make sense of

444. What is the purpose of GDP?


a) To measure economic activity in a given period of time.
b) To measure individual income levels
c) To measure total expenditures in the economy
d) To measure total income in the economy

445. What are the two primary sources used to calculate GDP?


a) Statistical data and primary data sources.
b) Statistical data and anecdotal evidence
c) Administrative data and personal opinions
d) Government reports and financial statements

446. Which of the following is NOT true about GDP?


a) It measures individual income levels.
b) It is a single number representing the dollar value of economic activity in a given period of time
c) It can be viewed as either total income or total expenditure on the economy's output of goods and services
d) It is computed every three months by the Bureau of Economic Analysis

447. Why must income equal expenditure for the economy as a whole?


a) Because every transaction has a buyer and a seller.
b) Because there are a finite number of transactions
c) Because personal opinions affect both income and expenditure
d) Because anecdotal evidence supports this claim

448. What do economists use to develop and test their theories?


a) Economic data.
b) Personal opinions
c) Casual observation
d) Anecdotal evidence

449. Why is GDP considered the best measure of economic performance?


a) It provides a single number representing economic activity.
b) It is easy to calculate
c) It reflects personal opinions
d) It primarily measures individual income levels

450. Who is responsible for computing GDP every three months?


a) The Bureau of Economic Analysis.
b) The U.S. Department of Commerce
c) The government agency responsible for economic data
d) The primary data sources

451. What types of information are collected from households and firms in government surveys?


a) Economic activity, such as earnings and prices charged.
b) Personal opinions about the state of the economy
c) Anecdotal evidence about the economy
d) Financial statements

452. What is the difference between statistical data and administrative data?


a) Statistical data comes from surveys of economic activity while administrative data are byproducts of government functions.
b) Statistical data comes from government surveys while administrative data is personal opinions
c) Statistical data is computed every three months while administrative data is collected from government functions
d) Statistical data measures economic activity while administrative data measures personal opinions

453. Which statement is false?


a) Economic policy making was easier a century ago due to increased data sources.
b) Economists rely on theory and observation to understand economic situations
c) Every transaction has a buyer and a seller, which means expenditure equals income
d) GDP can be viewed as both total income and total expenditure

454. How often is GDP computed?


a) Every three months.
b) Every six months
c) Every year
d) Every month

455. What is the purpose of combining many individual experiences into a coherent whole?


a) To provide a more systematic and coherent picture of economic conditions.
b) To reflect personal opinions
c) To eliminate anecdotal evidence
d) To gather data from primary sources

456. What is the relationship between GDP and economic performance?


a) A large output of goods and services can better satisfy demands in the economy.
b) GDP measures how well individuals in the economy are performing
c) GDP reflects governmental policy making
d) There is no relationship between GDP and economic performance

457. What is the purpose of national income accounting?


a) To measure GDP and related statistics.
b) To measure the quantity of goods produced in the economy
c) To measure the quantity of money spent in the economy
d) To distinguish between stocks and flows in economic variables

458. What is the difference between stocks and flows?


a) Stocks are the accumulation of the flow, while flows represent the change in the stock.
b) Stocks are a quantity measured per unit of time, while flows are measured at a given point in time
c) Stocks are measured in different units than flows
d) Stocks and flows are not related to each other

459. What is GDP?


a) The total quantity of goods produced in a given period of time.
b) The total quantity of money spent in a given period of time
c) The total income in the economy
d) The total flow of dollars around the economy's circular flow per unit of time

460. What is the relationship between stocks and flows?


a) The stock represents the accumulation of the flow, while the flow represents the change in the stock.
b) Stocks and flows are not related
c) The stock is always measured in different units than the flow
d) The flow represents the accumulation of the stock, while the stock represents the change in the flow

461. Which economic variable is considered the most important flow variable in economics?


a) GDP.
b) A person's wealth
c) The number of unemployed people
d) The amount of capital in the economy

462. What is the relationship between a person's wealth, income, and expenditure?


a) Wealth and income are stocks, while expenditure is a flow.
b) Wealth and expenditure are stocks, while income is a flow
c) Income and expenditure are stocks, while wealth is a flow
d) Wealth, income, and expenditure are all stocks

463. What is the difference between government debt and a government budget deficit?


a) Government debt is a stock, while a government budget deficit is a flow.
b) Government debt is a flow, while a government budget deficit is a stock
c) Government debt and a government budget deficit are both stocks
d) Government debt and a government budget deficit are both flows

464. What happens to the unsold bread that a firm produces and its effect on GDP?


a) The unsold bread does not alter GDP.
b) The unsold bread reduces GDP
c) The unsold bread raises GDP
d) It depends on how the firm handles the unsold bread

465. How does the increase in inventory affect GDP?


a) It raises GDP.
b) It does not affect GDP
c) It reduces GDP
d) It depends on how the inventory is used

466. What happens when a firm sells bread out of inventory?


a) It raises GDP.
b) It reduces GDP
c) It does not affect GDP
d) It depends on the combination of positive and negative spending

467. How does the treatment of inventories ensure that GDP reflects the economy's current production of goods and services?


a) It only includes the production for inventory when it is later sold.
b) It disregards any production for inventory
c) It includes any production for inventory
d) It depends on the type of inventory produced

468. What is an intermediate good?


a) A good used in the production of other goods and services.
b) A final product ready for consumption
c) A good used for trade between countries
d) A final service ready for consumption

469. Why do we not include intermediate goods in GDP?


a) Including intermediate goods would result in double counting.
b) Intermediate goods are not valuable
c) We only include the value of final goods and services produced
d) Intermediate goods are already included in the value of final goods and services

470. What is the value added of a firm?


a) The value of the firm's output less the value of the intermediate goods that the firm purchases.
b) The value of the firm's output
c) The value of the intermediate goods that the firm purchases
d) The total market price of the firm's output

471. How do we compute the value of all final goods and services?


a) By only including the value of final goods produced.
b) By summing the value of all intermediate goods and final goods produced
c) By summing the value added at each stage of production
d) By only including the value of intermediate goods produced

472. How can the situation be simplified in the goods-market equilibrium condition?


a) By assuming perfect capital mobility.
b) By fixing the exchange rate
c) By increasing government purchases G
d) By decreasing imports

473. What is the IS* equation in the Mundell-Fleming model?


a) Y = C(Y − T ) + I(r*) + G + NX(e).
b) Y = C(Y − T ) + I(r) + G + NX(e)
c) Y = C(Y + T) + I(r*) − G + NX(e)
d) Y = C(Y + T ) + I(r*) + G − NX(e)

474. What does the * in IS* equation mean?


a) The equation assumes the domestic interest rate r is equal to the world interest rate r*.
b) The equation simplifies the complex interaction between the interest rate and capital mobility
c) The equation relates the exchange rate to net exports
d) The equation shows the impact of government purchases on income

475. How is the IS* equation represented on a graph?


a) On a graph with income on the horizontal axis and exchange rate on the vertical axis.
b) On a graph with interest rate on the horizontal axis and net exports on the vertical axis
c) On a graph with consumption on the horizontal axis and investment on the vertical axis
d) On a graph with price level on the horizontal axis and output on the vertical axis

476. What affects expenditure on goods and services in the IS* equation?


a) The interest rate and the exchange rate.
b) The interest rate and the net exports
c) The exchange rate and the government purchases
d) The consumption and the investment

477. According to the text, why does a rightward shift in the net-exports schedule puts upward pressure on income Y?


a) Because net exports are a component of investment.
b) Because net exports are a component of government purchases
c) Because net exports are a component of GDP
d) none of tem

478. How does an increase in income Y affect money demand, according to the text?


a) It puts upward pressure on money demand.
b) It puts downward pressure on money demand
c) It has no effect on money demand
d) All of them

479. What is the role of foreign capital in the domestic economy in the context discussed in the text?


a) To push the interest rate back to the world interest rate r*.
b) To decrease the interest rate r*
c) To cause the domestic currency to depreciate in value
d) no correct answer

480. What is a stated goal of policies to restrict trade, as presented in the text?


a) To increase net exports.
b) To decrease net exports
c) To have no effect on net exports
d) a and c

481. Does a trade restriction affect the trade balance in the Mundell-Fleming model under floating exchange rates, according to the text?


a) No, it does not affect the trade balance.
b) Yes, it increases the trade balance
c) Yes, it decreases the trade balance
d) none of them

482. What was the gold standard?


a) Countries exchanging their currencies for gold.
b) A system of flexible exchange rates
c) The practice of hoarding gold by countries
d) A policy that allowed countries to freely print money

483. What did the international transport of gold by arbitrageurs do during the era of the gold standard?


a) Increased the money supply in one country and decreased it in another.
b) Made it very easy to move gold across the Atlantic
c) Eliminated the need for a fixed exchange rate
d) Led to large and persistent movements in exchange rates

484. How does fiscal policy affect a small open economy with a fixed exchange rate?


a) It leads to an automatic monetary expansion.
b) It puts downward pressure on the market exchange rate
c) It results in a decrease in the money supply
d) It lowers aggregate income

485. Why is monetary policy usually ineffectual under a fixed exchange rate?


a) The central bank doesn't have control over the money supply
b) The LM* curve doesn't shift when the exchange rate is fixed
c) Arbitrageurs don't respond to changes in the money supply
d) Governments don't have the authority to change the exchange rate

486. What is a devaluation in the Mundell-Fleming model?


a) A reduction in the official value of the currency.
b) A shift in the LM* curve to the left
c) A policy that leads to a decrease in government spending
d) A situation where the exchange rate cannot be changed

487. Which of the following is NOT a determinant of aggregate supply?


a) Aggregate demand.
b) Resource prices
c) Taxes and regulations
d) Technology

488. When there is a positive supply shock:


a) The price level decreases and real GDP increases.
b) The short-run aggregate supply curve shifts to the left
c) The price level increases and real GDP decreases
d) There is no effect on the economy

489. Which of the following is true about the long-run aggregate supply curve?


a) It is vertical at the level of potential output.
b) It shifts to the right when there is a positive supply shock
c) It is backward-bending
d) It is upward-sloping in the short-run

490. In the imperfect-information model, what is the assumption about the price level and output level?


a) They are known to some but not all.
b) They are perfectly unknown by all
c) They are known on average by all
d) They are perfectly known by all

491. How do firms respond to a higher demand for their products in the imperfect-information model?


a) They raise prices before adjusting output.
b) They wait for others to increase output first
c) They immediately increase output
d) They decrease output before adjusting prices

492. According to the imperfect-information model, what is the reason for nominal rigidity?


a) Firms are unable to change prices.
b) Firms are not responsive to changes in demand
c) Firms are unaware of changes in demand and supply
d) Firms are unable to adjust output
493. Which of the following is true about the Phillips curve?
a) It shows an inverse relationship between unemployment and inflation.
b) It shows a direct relationship between unemployment and inflation.
c) It shows a direct relationship between GDP and inflation.
d) It shows an inverse relationship between GDP and inflation.
494. According to the aggregate supply curve, what happens to prices when there is a decrease in unemployment?
a) Prices increase.
b) Prices decrease
c) Prices remain unchanged
d) Prices are unpredictable

495. What is the relationship between the short-run Phillips curve and the aggregate supply curve?


a) They show opposite relationships between unemployment and inflation.
b) The Phillip's curve is a graphical representation of the aggregate supply curve
c) They are the same thing
d) There is no relationship between the two

496. According to the Phillips Curve, what is the tradeoff between inflation and unemployment in the short run?


a) Lower unemployment leads to higher inflation.
b) There is no tradeoff
c) Higher unemployment leads to higher inflation
d) Higher unemployment leads to lower inflation

497. Which hypothesis does hysteresis challenge?


a) The natural-rate hypothesis.
b) The Phillips curve hypothesis
c) The demand-pull hypothesis
d) The cost-push hypothesis

498. What is the phenomenon of hysteresis?


a) The tendency for unemployment to persist even after the economy has started expanding again.
b) The tendency for inflation to persist even after the economy has started contracting again
c) The tendency for interest rates to remain high even after the central bank has lowered them
d) The tendency for exchange rates to remain stable even after economic variables have changed

499. Which of the following might cause hysteresis in the labor market?


a) An increase in the minimum wage.
b) A decrease in government spending
c) A decrease in taxes
d) An increase in interest rates
500. What can policymakers do to mitigate the effects of hysteresis?
a) All of the following.
b) Increase government spending to stimulate aggregate demand
c) Lower interest rates to encourage borrowing and investment
d) Implement supply-side policies to increase potential output

501. How does hysteresis challenge the natural-rate hypothesis?


a) It suggests that the natural rate of unemployment may shift over time.
b) It suggests that the economy may not always return to its equilibrium level of output
c) It suggests that the level of inflation may be more persistent than previously thought
d) It suggests that monetary policy may be ineffective in stabilizing the economy

502. National income is the total value of all goods and services produced by a country in a given year. Which of the following is not included in national income?


a) Interest earned from bank deposits.
b) Wages and salaries
c) Rent received from a property
d) Profits earned by a corporation

503. Which of the following is not a method used to calculate national income?


a) Auction approach.
b) Income approach
c) Output approach
d) Expenditure approach

504. Which of the following is a factor determining the level of national income?


a) Government policies.
b) Exchange rate
c) Consumer preferences
d) Natural disasters

505. Which of the following is not a component of GDP?


a) Saving.
b) Consumption
c) Government expenditure
d) Investment

506. Which of the following is not an example of investment in macroeconomics?


a) Purchasing a new car.
b) Buying shares in a company
c) Building a new factory
d) Buying a new house

507. What is the difference between nominal and real GDP?


a) Nominal GDP reflects inflation, real GDP doesn’t
b) Real GDP reflects inflation, nominal GDP doesn’t
c) They are calculated using different methodologies
d) They show the same value but in different units

508. Which of the following is not a limitation of using GDP as a measure of national income?


a) It doesn’t take into account international trade.
b) It doesn’t take into account income inequality
c) It doesn’t account for non-market activities
d) It doesn’t consider environmental costs

509. Which of the following is a measure of economic growth?


a) GDP growth rate.
b) Inflation rate
c) Unemployment rate
d) Interest rate

510. Which of the following is not a component of national income?


a) Household savings.
b) Personal income
c) Corporate profits
d) Government spending

511. What is the difference between disposable income and personal income?


a) Personal income includes taxes, disposable income doesn’t
b) Disposable income includes taxes, personal income doesn’t
c) They are the same thing
d) None of the above

512. Which of the following factors can reduce national income?


a) Decrease in investment.
b) Increase in consumer spending
c) Increase in exports
d) Increase in government spending

513. Which of the following is not a measure of income distribution?


a) Unemployment rate.
b) Gini coefficient
c) Lorenz curve
d) Poverty rate

514. Which of the following is an example of transfer payments?


a) Unemployment benefits.
b) Interest earned from bank deposits
c) Wage earned from a day job
d) Profits earned by a corporation

515. Which of the following is not a measure of inflation?


a) PPF.
b) CPI
c) GDP deflator
d) PPI

516. Which of the following is not a determinant of national income?


a) Foreign investment.
b) Level of technology
c) Labour productivity
d) Government regulation
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