Macro Practice Questions
If the base year is 2011, then the CPI
increased from 2009 to 2010 and decreased from 2010 to 2011
In a simple circular-flow diagram, households buy goods and services with the income they get from...
wages, rents, and profits (all of the above)
In the simple circular-flow diagram, with households and firms, GDP can be computed
as the total expenditures by households on goods and services
Amanda talks with several different brokers at a social gathering. She hears the following advice from brokers A, B, and C. Which broker, if any, gave her incorrect advice?
Broker C: "Stocks with greater risks offer lower average returns."
Which famous company executive introduced an innovative pay system that is consistent with the theory of efficiency wages?
Henry Ford
Which of the following is not correct?
In developed countries, population growth is consistently about 3 percent per year; in developing countries it is consistently about 5 percent per year.
Which of the following policies is NOT in the Fed's monetary toolbox?
Issuing a bank run
Which of the following statements about mutual funds is correct?
On average index funds outperform managed funds.
Dividends
are cash payments that companies make to shareholders.
Which of the following is a certificate of indebtedness?
bonds but not stocks
To increase the money supply, the Fed could
decrease the reserve requirement.
Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a
default.
The GDP deflator is the ratio of
nominal GDP to real GDP multiplied by 100
From the standpoint of the economy as a whole, the role of insurance is
not to eliminate the risks inherent in life, but to spread them around more efficiently.
Monetary policy affects employment
only in the short run.
The slope of the demand for loanable funds curve represents the
negative relation between the real interest rate and investment.
If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be
$1,000 higher and M2 would be $1,500 higher.
When ranking movies by nominal box office receipts, what important fact is overlooked?
Prices, including those for movie tickets, have been rising over time.
You could borrow $1,000 today from Bank A and repay the loan, with interest, by paying Bank A $1,060 one year from today. Or, you could borrow $1,500 today from Bank B and repay the loan, with interest, by paying Bank B $1,600 one year from today. Which of the following statements is correct?
The interest rate on the loan from Bank A is lower than the interest rate on the loan from Bank B.
Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?
The real interest rate is the nominal interest rate minus the rate of inflation
Which government entity computes U.S. GDP every three months?
the Department of Commerce
In 1870, the richest country in the world was
the United Kingdom.
A previously well-respected and trusted president of a corporation is accused of fraud. At the same time interest rates unexpectedly fall. Which of the above would tend to make the price of the stock rise?
the fall in interest rates, but not the announcement
Which of the following is the correct way to compute the future value of $X that earns r percent interest for N years?
$X(1 + r)N
If the reserve ratio is 10 percent, the money multiplier is
10.
If the base year is 2009, then the consumer price index was
100 in 2009, 120 in 2010, and 116 in 2011
A typical American worker covered by unemployment insurance receives
50 percent of his former wages for 26 weeks.
In the United States in 2015, consumption represented slightly less than
70 percent of GDP
If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is
80, and this indicates that the price level has decreased by 20 percent since the base year
The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regular survey of households called the
Current Population Survey.
When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,
U.S. consumption increases by $500, net exports decrease by $500, and U.S. GDP remains the same
A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by
adjusting the price of the good to account for the quality change
Refer to Figure 27-6. Point A represents a situation in which
all of a person's savings are allocated to a class of safe assets; the person knows with certainty that his or her return will be 3 percent; the standard deviation of the person's portfolio is zero.
Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a
borrower or as a demander of funds.
When the Federal Reserve conducts open-market operations to increase the money supply, it
buys government bonds from the public.
The goal of the consumer price index is to measure changes in the
cost of living
If a person is risk averse, then she has
diminishing marginal utility of wealth, implying that her utility function gets flatter as wealth increases.
Two countries are the same, except one is poorer. Assuming the traditional assumption about the production function is made there are
diminishing returns to capital so the poor country grows faster.
People who buy newly issued stock in a corporation such as Crate and Barrel provide
equity finance and so become part owners of Crate and Barrel.
A company that produces baseball gloves is considering buying some new equipment that it expects will increase future profits. If the interest rate rises, then the present value of these future profits
falls. The company is less likely to buy the equipment.
The theory of efficiency wages provides a possible explanation as to why
firms may be inclined to keep their workers' wages above the equilibrium level.
Suppose that an American company opens and operates a restaurant in Ireland. This is an example of
foreign direct investment. American saving is used to finance Irish investment.
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called
frictional unemployment.
Other things the same, if a country increased its saving rate, in 40 years or so it would likely have
higher productivity, but not a higher growth rate of real GDP.
The effects of unionization on wages in the sectors of the economy that are unionized causes the supply of labor in other sectors of the economy to
increase, reducing wages in industries that are not unionized.
Real Foods produced 400,000 cans of diced tomatoes last year and 460,000 cans of diced tomatoes this year. It employed the same number of labor hours each year. Real Foods' productivity
increased 15%.
Over the past several decades in the United States, the labor-force participation rate of women has
increased, and the labor-force participation rate of men has decreased.
If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP
increases
The real interest rate is the
interest rate corrected for inflation.
The financial system
involves bank accounts, mortgages, stock prices, and many other items; involves decisions and actions undertaken by people at a point in time that affect their lives in the future; coordinates the economy's saving and investment. (All of the above are correct)
The bond market
is a financial market, as is the stock market.
Which of the following is an explanation for the existence of frictional unemployment?
job search
In the United States in 2015, government purchases of goods and service...
larger than investment, but smaller than consumption
Educational attainment tends to be
low in countries with high population growth.
The problems with using the consumer price index as a measure of the cost of living are important because
many government programs use the CPI to adjust for changes in the overall level of prices
Which of the following pairs correctly identify X and Z?
markets for factors of production and markets for goods and services
When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is
more than four times Ruth's salary
In 2014, the typical Bangladeshi had about
more than half the real income of a typical American a century ago.
A low P/E for a stock indicates that
people may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition.
The equipment and structures available to produce goods and services are called
physical capital.
If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?
president always gets to vote at the FOMC meetings. b. conducts open market transactions.c. is one of 12 regional Federal Reserve Banks.
The New York Federal Reserve Bank
president always gets to vote at the FOMC meetings; conducts open market transactions; is one of 12 regional Federal Reserve Banks. (all of the above)
In medieval Europe an important technological advance was the use of the padded horse collar for plowing. Once this idea was thought of, other people used it. This illustrates that knowledge is generally a
public good.
Which of the following items is not included in the most narrow definition of money, M1?
savings deposits
For purposes of calculating the CPI, the housing category of consumer spending includes the cost of
shelter, fuel and other utilities, household furnishings and operation. (All of the above are correct)
In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by
surveying consumers
The length of time until a bond matures is called the
term.
To maintain their standard of living, most people rely on
their labor earnings.
Economists use the word "money" to refer to
those assets regularly used to buy goods and services.