Macro Econ Final Exam Questions

Generally speaking, the greater the MPS, the: A. Smaller would be the increase in income which results from an increase in consumption spending B. Larger would be the increase in income which results from an increase in consumption spending C. Larger would be the increase in income which results from a decrease in consumption spending D. Smaller would be the increase in income which results from a decrease in consumption spending

A. Smaller would be the increase in income which results from an increase in consumption spending

A contraction of the money supply: A. increases the interest rate and decreases aggregate demand. B. increases both the interest rate and aggregate demand. C. lowers the interest rate and increases aggregate demand. D. lowers both the interest rate and aggregate demand.

A. increases the interest rate and decreases aggregate demand.

If the cyclically-adjusted budget shows a deficit of about $100 billion and the actual budget shows a deficit of about $150 billion, it can be concluded that there is: A. Built-in stability B. A cyclical deficit C. An expansionary fiscal policy D. A contractionary fiscal policy

B. A cyclical deficit

In recent years, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in targets for the: A. Exchange rate B. Federal funds rate C. Prime interest rate D. Consumer price index

B. Federal funds rate

The amount by which government expenditures exceed revenues during a particular year is the: A. public debt. B. budget deficit. C. full-employment. D. GDP gap.

B. budget deficit.

The asset demand for money: A. is unrelated to both the interest rate and the level of GDP. B. varies inversely with the rate of interest. C. varies inversely with the level of real GDP. D. varies directly with the level of nominal GDP.

B. varies inversely with the rate of interest.

If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is: A. $360 billion. B. $660 billion. C. $320 billion. D. $20 billion.

C. $320 billion.

A nation has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under 16 years old. There are 210 million who are employed and 10 million who are unemployed. What is the unemployment rate? A. 3.3 percent B. 3.6 percent C. 4.5 percent D. 5.2 percent

C. 4.5 percent

If the Congress passes legislation to cut taxes to counter the effects of a severe recession, then this would be an example of a: A. Political business cycle B. Contractionary fiscal policy C. Expansionary fiscal policy D. Nondiscretionary fiscal policy

C. Expansionary fiscal policy

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is: A. Cyclical B. Frictional C. Structural D. Natural

C. Structural

The level of GDP will tend to increase when: A. Reserve requirements are increased B. There is an increase in the discount rate C. The Federal Reserve buys government securities in the open market D. The Federal Reserve sells government securities in the open market

C. The Federal Reserve buys government securities in the open market

If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule: A. May shift either upward or downward B. Will shift downward C. Will shift upward D. Will not shift

C. Will shift upward

The multiplier effect means that: A. consumption is typically several times as large as saving. B. a change in consumption can cause a larger increase in investment. C. an increase in investment can cause GDP to change by a larger amount. D. a decline in the MPC can cause GDP to rise by several times that amount.

C. an increase in investment can cause GDP to change by a larger amount.

Stabilizing a nation's price level and the purchasing power of its money can be achieved: A. only with fiscal policy. B. only with monetary policy. C. with both fiscal and monetary policy. D. with neither fiscal nor monetary policy.

C. with both fiscal and monetary policy.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: A. 80 percent. B. 8 percent. C. 2 percent. D. 20 percent.

D. 20 percent.

An inverse relationship between the rate of interest and the level of: A. Income is suggested by the consumption function B. Prices is suggested by the aggregate supply curve C. Employment is suggested by the aggregate demand curve D. Investment spending is suggested by the investment-demand curve

D. Investment spending is suggested by the investment-demand curve

Which is an important consequence of the public debt of the United States? A. It will threaten to bankrupt the Federal government B. It transfers a portion of output from foreign nations to the U.S C. It decreases the inequality in the distribution of income in the U.S D. It leads to fewer incentives to bear risk and innovate

D. It leads to fewer incentives to bear risk and innovate

When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is: A. Cyclical B. Variable C. Discretionary D. Nondiscretionary

D. Nondiscretionary

The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are: A. military goods and capital goods. B. services and nondurable consumer goods. C. clothing and education. D. capital goods and durable consumer goods.

D. capital goods and durable consumer goods.

During periods of full employment the: A. burden of unemployment is quite evenly distributed among males and females, African-Americans and whites, and young and old workers. B. unemployment rate for teenagers is below the rate for the labor force as a whole. C. unemployment rate for women is considerably lower than that for men. D. unemployment rate for African-Americans is about twice the rate for whites.

D. unemployment rate for African-Americans is about twice the rate for whites.