Past Exams: Macro

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Which of the following is not one of the five fundamental questions? A.) What prices will be charged for goods and services? B.) Who will get the goods and services? C.) What goods and services will be produced? D.) How will the system promote progress?

A. What prices will be charged for goods and services?

An economic system: A.) requires a grouping of private markets linked to one another. B.) is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem. C.) requires some sort of centralized authority (such as government) to coordinate economic activity. D.) is a plan to scheme that allows a firm to make money at some other firm's expense.

B.) is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

Assuming everyone in the question below is in the adult population, which of the following is not correct? A.) Elmo works as a baby sitter. The BLS counts him as employed and in the labor force. B.) Anna is a full-time student not looking for a job. The BLS counts her as unemployed and in the labor force. C.) Jim is on temporary layoff. The BLS counts him as unemployed and part of the labor force. D.) Liz is seeking work, but has not found it. The BLS counts her as unemployed and in the labor force.

B.) Anna is a full-time student not looking for a job. The BLS counts her as unemployed and in the labor force.

Identify the type of inflation that the United States is currently experiencing. A.) Demand-pull inflation. B.) Cost-push inflation. C.) Natural inflation. D.) None of the above.

B.) Cost-push inflation.

In which industry or sector of the economy is output most likely to be affected by the business cycle? A.) food production. B.) automobile production. C.) medical service. D.) legal service.

B.) automobile production

Inflation that occurs when total spending is great than the economy's ability to produce output as the existing price level is: A.) anticipated inflation. B.) demand-pull inflation. C.) cost-push inflation. D.) unanticipated inflation.

B.) demand-pull inflation

A trough in the business cycle occurs when: A.) cyclical unemployment is at a minimum point. B.) employment and output reach their lowest levels. C.) the natural rate of unemployment is at a minimum point. D.) the inflation rate is at its lowest level.

B.) employment and output reach their lowest levels.

Harry's Pepperoni Pizza Parlor produced 8,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 9,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $11 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas: A.) increased nominal GDP, but left real GDP unchanged. B.) increased both nominal GDP and real GDP. C.) increased real GDP, but left nominal GDP unchanged. D.) none of the above.

B.) increased both nominal GDP and real GDP.

In the labor market, A.) job applicants are the "buys" while employers are the "sellers". B.) job applicants are the "sellers" while employers are the "buyers". C.) job applicants and employers are both "buyers". D.) job applicants and employers are both"sellers".

B.) job applicants are the "sellers" while employers are the "buyers".

Which of the following is used to measure directly the average standard of living across countries? A.) real GDP. B.) output per capita. C.) nominal GDP. D.) none of the above.

B.) output per capita

"Economics is concerned with the efficient allocation of limited resources." This statement is: A.) positive, but incorrect. B.) positive and correct. C.) normative and correct. D.) normative, but incorrect.

B.) positive and correct

In contrast to investment, consumption is: A.) relatively unstable. B.) relatively stable. C.) measurable. D.) unmeasurable.

B.) relatively stable.

Macroeconomics approaches the study of economics from the viewpoint of: A.) government units. B.) the aggregate economy. C.) the operation of specific product and resource markets. D.) individual firms.

B.) the aggregate economy.

The service Kelly performs when she cleans up her yard is not included in GDP because: A.) this is nonproduction activity. B.) this is a nonmarket activity. C.) multiple counting would be involved. D.) none of the above.

B.) this is a nonmarket activity.

Which of the following statements is correct? A.) frozen fruit is an inferior good because the demand rises with income. B.) frozen fruit is an inferior good because the demand declines as income rises. C.) frozen fruit is a normal good because the demand declines as income rises. D.) None of the above.

B.) frozen fruit is an inferior good because the demand declines as income rises.

A market is in equilibrium: A.) provided there is no shortage of the product. B.) if the amount producers want to sell is equal to the amount consumers want to buy. C.) provided there is no surplus of the product. D.) none of the above.

B.) if the amount producers want to sell is equal to the amount consumers want to buy.

Assume MPC= 0.5, if consumers increase their spending by $25 billion but businesses reduce their investment by $15 billion, then GDP will: A.) increase by $10billion. B.) increase by $25billion. C.) decrease by $15 billion. D.) increase by $20 billion.

D.) increase by $20 billion.

Each of the following is a determinant of demand except: A.) consumer income. B.) preferences. C.) prices of related goods. D.) input prices.

D.) input prices.

A nation's real GDP will decline due to: A.) a rising number of workers. B.) higher labor productivity. C.) technological progress. D.) none of the above.

D.) none of the above

Efficient financial institutions foster the flow of: A.) spending and income. B.) resources and products. C.) inventories and ideas. D.) saving and investment.

D.) saving and investment.

A negative demand shock occurs when: A.) there are unexpected rising desires to buy goods and services. B.) there are unexpected changes in the ability of firms to produce and sell goods and services. C.) there are short-run fluctuations in the output and employment. D.) the actual demand is lower than the expected demand.

D.) the actual demand is lower than the expected demand.

What economic concept would be most closely associated with a situation where General Motors expends it operations and use extensive computerizations in the production line to reduce per-costs of production? A.) Infrastructure. B.) Human capital. C.) Network effects. D.) Economies of scale.

D.) Economies of scale

Which of the following will result in the largest increase in real GDP? A.) a tax-cut by $35 billion. B.) a tax-cut of $15 billion combined with an increase in government spending by $20 billion C.) a tax-cut of $20 billion combined with an increase in government spending by $15 billion. D.) an increase in investment spending by $35 billion.

D.) an increase in investment spending by $35 billion

When constructing a demand curve for product X: A.) consumer preferences are held constant. B.) the prices of other goods are held constant. C.) consumer income is assumed constant D.) all of the above.

D.) all of the above

Inflation is defined as: A.) an increase in the price of a particular good. B.) the rate of growth in nominal GDP. C.) the rate of growth in real GDP. D.) an increase in the overall price level.

D.) an increase in the overall price level.

If a lump-sum tax of $20 billion is levied at each level of income and the MPC is 0.8, the consumption schedule will shift. A.) upward by $4 million. B.) upward by $16 million. C.) downward by $4 billion. D.) downward by $16 billion.

D.) downward by $16 billion.

The market system's answer to the fundamental question "What will be produced?" is essentially: A.) "Goods and services that are profitable." B.) "Low cost goods and services." C.) "Goods and service that can be produced using large amounts of capital." D.) "Goods and services that posses lasting value."

A.) "Goods and services that are profitable."

Who is structurally unemployed given the information below? Jullie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer Henry used to work in an automotive assembly plant. He was laid off six month ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. Emma worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for a similar work for a year but no company seems interested in her aircraft design skills. Tim lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. A.) Emma B.) Tim C.) Harry D.) Jullie

A.) Emma

Rent control is an example of A.) a price ceiling. B.) a price floor. C.) a price control that is not binding. D.) none of the above.

A.) a price ceiling

Economic growth is best defined as an increase in: A.) either real GDP or real GDP per capita. B.) nominal GDP. C.) wealth in the economy. D.) total consumption expenditures.

A.) either real GDP or real GDP per capita.

A person's real income will increase by 1.5% if her nominal income: A.) increases by 4.5% while the price index rises by 3%. B.) increases by 3% while the price index rises by 4.5%. C.) increases by 4.5% while the price index falls by 3%. D.) increases by 3% while the price index falls by 4.5%.

A.) increases by 4.5% while the price index rises by 3%.

The negative relationship between price and quantity demanded is called A.) law of demand. B.) law of supply. C.) invisible hand. D.) dollar votes

A.) law of demand.

Other things equal, a reduction in a consumer's money income: A.) shifts the demand curve for a normal good to the left. B.) shifts the demand curve for a normal goods to the right. C.) shifts the supple curve for a normal good to the right. D.) None of the above.

A.) shifts the demand curve for a normal good to the left.

The two topics of primary concern in macroeconomics are: A.) short-run fluctuations in output and employment, and long-run economic growth. B.) unemployment, and wage rates in labor markets. C.) monopoly power of corporations and small business profitability. D.) oil prices and housing markets.

A.) short-run fluctuations in output and employment, and long-run economic growth.

The business cycle depicts: A.) short-run fluctuations in output and employment. B.) the evolution of technology over time. C.) the phases a business goes through from when it first opens to when it finally closes. D.) fluctuations in the general price level.

A.) short-run fluctuations in output and employment.

During the Great Recession of 2007-2009, the investment demand curve shifted: A.) to the left because of decline in expected returns. B.) to the left because of increases in expected returns. C.) to the left because of very low interest rates. D.) to the right because of very low interest rates.

A.) to the left because of decline in expected returns.

If competitive industry Z is experiences substantial economic losses, output will: A.) fall in industry Z, and firms will likely leave the market. B.) expand in industry Z, as more resources will move to that industry. C.) fall in all industries. D.) fall in industry Z, as more resources will move to that industry.

A.) fall in industry Z, and firms will likely leave the market.

In the 1990s the U.S stock market boomed, causing U.S consumption to rise. Economists refer to this outcome as the A.) wealth effect. B.) interest-rate effect. C.) multiplier effect. D.) Keynes effect.

A.) wealth effect.

What was the unemployment rate in Meditor in 2005? This table shows the 2005 data for ages 16 and above in the imaginary country of Meditor. 1. Not in labor force: 80 million 2. Unemployed: 20 million 3. Employed: 80 million A.) 11.11% B.) 25% C.) 20% D.) 30%

C.) 20%

Other things equal, which of the following would lower the rate of economies growth, as measured by the percentage change in real GDP? A.) An increase in the educational attainment of the labor force. B.) A permanent reduction in frictional unemployment. C.) A decrease in the amount of capital per worker. D.) An increase in the labor force participation rate.

C.) A decrease in the amount of capital per worker.

Under what circumstances do growth rates of GDP overstate the growth of economic well-being? A.) Economic growth has occurred due to improved technology. B.) Product quality has been improved. C.) Air quality has declined as real GDP continued to rise. D.) none of the above.

C.) Air quality has decline as real GDP continued to rise.

Which of the following statements is correct? A.) Productive efficiency cannot occur without allocative efficiency. B.) Productive efficiency requires producing the combination of goods and services most valued by society. C.) Allocative efficiency requires that there be productive efficiency. D.) None of the above

C.) Allocative efficiency requires that there be productive efficiency.

The positive slope of a typical supply curve reflects which of the following concepts? A.) Price is negatively related to quantity supplied B.) There is a negative relationship between price and quantity demanded. C.) There is a positive relationship between price and quantity supplied. D.) When the price falls, sellers are willing to sell more.

C.) There is a positive relationship between price and quantity supplied.

Competition is more likely to exist when: A.) the government purchases most goods and services. B.) a government-issued license is required to set up a firm in an industry. C.) there is easy entry into and exit out of industries. D.) economic power is concentrated among a few large firms.

C.) There is easy entry into and exit out of industries.

Which of the following events would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity? A.) an increase in supply and an increase in demand. B.) an increase in supply and a decrease in demand. C.) a decrease in supply and an increase in demand. D.) a decrease in supply and a decrease in demand.

C.) a decrease in supply and an increase in demand.

If Jim's disposable income increases from $1,000 to $1,500 and his level of saving increases from $100 to $200, his marginal propensity to: A.) consume is one-fifth. B.) save is two-fifths. C.) consume is four-fifths. D.) save is four-fifths.

C.) consumer is four-fifths

Which of the following is a distinguishing feature of a command system: A.) wide-spread private ownership of capital. B.) a circular flow of goods, resources, and money. C.) government ownership of resources. D.) none of the above.

C.) government ownership of resources

Supply shocks: A.) always have a negative impact on the economy. B.) refer to unexpected changes in the desire to buy goods and services. C.) refer to unexpected changes in the ability of firms to produce and sell goods and services. D.) always have a positive impact on the economy.

C.) refer to unexpected changes in the ability of firms to produce and sell goods and services.

When construction a supply curve for product X: A.) input costs are allowed to vary. B.) the prices of other goods are allowed to vary. C.) technology is held constant. D.) none of the above.

C.) technology is held constant.

When we draw an investment demand curve we hold constant all of the following except: A.) operating and maintenance costs. B.) business taxes. C.) the real interest rate. D.) the present stock of capital goods.

C.) the real interest rate.

Which of the following is most likely to be an indication of declining standard of living? A.) An increase in nominal GDP per person. B.) An increase in real GDP per person. C.) A reduction in real GDP per person. D.) A reduction in nominal GDP per person.

C.) A reduction in real GDP per person.

An increase in the price of digital cameras will: A.) shift the demand curve for memory cards to the right. B.) cause the demand curve for memory cards to become vertical C.) shift the demand curve for memory cards to left. D.) none of the above.

C.) shift the demand for memory cards to the left.

Other things equal, if the price of a key input used to produce product X declines, the: A.) demand curve for X will shift to the right. B.) supply curve for X will shift to the left. C.) supply curve for X will shift to the right. D.) demand curve for X will shift to the left.

C.) supply curve for X will shift to the right.

Goods X and Y are substitute goods if: A.) an increase in the price of goods X leads to a reduction in the demand for good Y B.) a reduction in the price of good Y leads to an increase in the demand for good X. C.) a reduction in the price of good X leads to a reduction in the demand for good Y. D.) none of the above.

C.) a reduction in the price of good X leads to a reduction in the demand for good Y.

Capital goods, because their purchases can be postponed like ______ consumer goods, tend to contribute to ________ in investment spending. A.) nondurable; instability B.) durable; stability C.) nondurable; stability D.) durable; instability

D.) durable; instability

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially: A.) "With as much machinery as possible." B.) "Using the latest technology." C.) "By exploiting labor." D.) "Using the least-cost production techniques."

D.) "Using the least cost-production techniques."

Which of the following will result in an inward shift of the production possibilities curve? A.) A shift from unemployment to full employment. B.) A change in the needs and wants of the society. C.) An increase in the total amount of resources available. D.) A reduction in the quality of resources.

D.) A reduction in the quality of resources.

Which of the following statements is correct? A.) Real GDP has been adjusted for changes in the price level. B.) Real GDP embodies changes in physical output, but not changes in the price level. C.) Nominal GDP reflects changes in both physical output and the price level. D.) All of the above.

D.) All of the above.

Which of the following is correct? A.) MPC + MPS = 1 B.) APC + APS = 1 C.) MPC + APS = 1 D.) Both a and b.

D.) Both a and b.

At the point where the consumption schedule intersects the 45-degree line: A.) saving is equal to consumption. B.) the APC is 1. C.) the APS is 0. D.) Both b and c.

D.) Both b and c.

Suppose there are rising numbers of buyers and sellers in a market. What should we expect to happen? A.) The equilibrium price would increase, but the equilibrium quantity would decrease if the supply curve shifts more than the demand curve. B.) The equilibrium price would decrease, but the equilibrium quantity would increase if the demand curve shifts more than the supply curve. C.) Both the equilibrium quantity and the equilibrium price would decrease if the demand curve shifts more than the supply curve. D.) Both the equilibrium quantity and the equilibrium price would increase if the demand curve shifts more than the supply curve.

D.) Both the equilibrium quantity and the equilibrium price would increase if the demand curve shifts more than the supply curve.

The highly influential book written by Adam Smith is titled: A.) The Worldly Philosophers. B.) The Affluent Society. C.) The Age of the Economist. D.) The Wealth of Nations.

D.) The Wealth of Nations.

An upward shift of the consumption schedule might be caused by a(an): A.) increased ability to borrow. B.) wealth effect, caused by an increase in stock market prices. C.) a reduction in real interest rate. D.) all of the above

D.) all of the above