Macro Practice Tests

b) the same proportion.

A constant returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by: a) exactly double the proportion. b) the same proportion. c) a smaller proportion. d) a larger proportion.

c) rises by 0.5%.

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate: a) rises by 1%. b) falls by 1%. c) rises by 0.5%. d) falls by 0.5%.

a) The cost of the raw milk purchased from farmers. d) The cost of sugar.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Which of the following are variable costs for Amul Food Factory? (Select ALL that apply.) a) The cost of the raw milk purchased from farmers. b) The cost of buying the robotic assembly lines. c) The cost of buying industrial freezers. d) The cost of sugar.

d) the purchase of a freezer by an ice-cream parlor.

An example of investment spending is: a) funds raised by the government in financial markets. b) the purchase of government bonds by a private household. c) purchases of stock by a mutual fund. d) the purchase of a freezer by an ice-cream parlor.

d) works part-time but wants to find a full-time job.

An involuntarily part-time worker is one who: a) is marginally attached to the labor force. b) has taken a part-time job in order to go to school full-time. c) works full-time but wants to find a part-time job. d) works part-time but wants to find a full-time job.

b) there is a positive relationship between price and quantity supplied.

An upward-sloping supply curve shows that a) sellers are willing to sell less when the prices are higher in the market. b) there is a positive relationship between price and quantity supplied. c) there is no relationship between price and quantity supplied. d) there is an inverse relationship between price and quantity supplied.

b) Four

Charles McCoy is a manager at a coffee shop and is making hiring decisions. With one worker, he can make 15 drinks that sell for $3 on average in a single hour. With a second worker, he can make an additional 12 drinks in a single hour. The marginal product of each additional worker decreases by three drinks with each additional hire. Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charles hire for each hour? a) Three b) Four c) Six d) Five

a) allows a business to produce goods together.

Complements-in-production a) allows a business to produce goods together. b) are always priced the same. c) use substitute inputs in production. d) allows a business to have alternative uses of its resources by manufacturing other products using the same inputs.

d) is when buying an additional item yields a smaller marginal benefit than the previous item.

Diminishing marginal benefit: a) is when consumers do not follow the rational rule. b) is not important in determining a consumer's purchase decision. c) is when buying an additional item yields a larger marginal benefit than the previous item. d) is when buying an additional item yields a smaller marginal benefit than the previous item.

b) 1%

During 2000 and 2001, nominal GDP in the United States grew by 3.2%, and the rate of inflation was 2.2%. What was the growth rate of real GDP between the two years? a) 2.2% b) 1% c) 4.4% d) 5.4%

a) more; menu

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _____ frequently than they did before. This is an example of _____ costs. a) more; menu b) less; menu c) more; unit-of-account d) less; unit-of-account

b) market value of all final goods and services produced within a country in a given year.

GDP is defined as the: a) market value of all consumer goods purchased within an economy. b) market value of all final goods and services produced within a country in a given year. c) value of all intermediate goods produced within a country in a given year. d) value of all output produced by businesses within a country in a given year.

b) a worker's skills, made possible by education, training, and knowledge.

Human capital refers to improvements in: a) robotics technology that can substitute for human workers. b) a worker's skills, made possible by education, training, and knowledge. c) production processes, made possible by better machines and equipment. d) technology made available to the workforce.

b) extremely high rates of inflation.

Hyperinflation is: a) a period of high money growth in an economy. b) extremely high rates of inflation. c) very high rates of economic growth. d) inflation that occurs when the economy is in a recession.

d) there was a surplus of the product in the store.

If a store runs a sale on a product to clear out its stock, we can conclude that: a) the demand for the product is larger than the supply of the product. b) there was a shortage of the product in the store. c) the product must be very close to its expiration date. d) there was a surplus of the product in the store.

a) the equilibrium rate of unemployment is 3.75%.

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that: a) the equilibrium rate of unemployment is 3.75%. b) the labor force participation rate has fallen significantly. c) there is 2.25% actual unemployment.

b) $35,290

In 2004, Canada's GDP was approximately $1.13 trillion, and its population was about 32 million. What was Canada's approximate GDP per person in 2004? a) $36,160 b) $35,290 c) $43,500 d) $3,530

15

In 2014, the action movie John Wick made about $14.5 million in its opening weekend. In 2017, John Wick: Chapter 2 made about $30.5 million in its opening weekend. The consumer price index in 2014 was 235.7. If the consumer price index in 2017 was 243.7, the first John Wick movie make in 2017 dollars was $ ______ million [round to the nearest tenth of a million].

5.0

In December of 2018, West Virginia reported a civilian labor force of 786,419 people. The number of employed people was 747,368. The unemployment rate was _________ % [round to the nearest tenth of a percent].

d) the economy stops growing unless something else changes.

In the Solow growth model, if a country reaches its steady state: a) the capital stock disappears. b) capital accumulation starts. c) capital accumulation keeps generating economic growth. d) the economy stops growing unless something else changes.

b) households buy goods and services.

In the market for outputs: a) households sell goods and services. b) households buy goods and services. c) firms buy resources. d) firms supply resources.

d) benefit of purchasing one more coffee is less than the marginal cost.

Joshua Murphy is planning on studying late into the night for his economics exam. He is contemplating how many coffees to buy tonight. Joshua should not buy an additional coffee during the evening if the marginal a) benefit of purchasing one more coffee exceeds the marginal cost. b) benefit of purchasing one more coffee is positive. c) cost of purchasing one more coffee is positive. d) benefit of purchasing one more coffee is less than the marginal cost.

d) occurs; both Ivan and Samantha receive

Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $50,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a) does not occur; only Ivan receives b) occurs; only Samantha receives c) does not occur; neither Ivan nor Samantha receives d) occurs; both Ivan and Samantha receive

d) your forgone enjoyment of the taco.

King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is: a) $5. b) $5 and your forgone enjoyment of the taco and the nachos. c) $5 and your forgone enjoyment of the taco. d) your forgone enjoyment of the taco.

b) tend to predict the future state of the economy.

Leading indicators are variables that: a) reflect the effects of monetary policy. b) tend to predict the future state of the economy. c) follow the business cycle with a delay. d) reflect the effects of fiscal policy.

c) less; $200

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $20. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. a) greater; $100 b) less; $100 c) less; $200 d) greater; $200

c) machine tools.

Physical capital includes: [check all that apply] a) shares of stock. b) money. c) machine tools. d) a worker's education or knowledge.

b) convergence in real GDP per person between poorer countries and richer countries.

Rapid growth in poorer countries leads to: a) higher dependency ratios. b) convergence in real GDP per person between poorer countries and richer countries. c) inadequate enforcement of property rights. d) divergence in real GDP per person between poorer countries and richer countries.

a) the market value of total output must be equal to total spending. b) all flows of resources are matched by flows of money. d) total spending must equal total income.

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that: [check all that apply] a) the market value of total output must be equal to total spending. b) all flows of resources are matched by flows of money. c) all inputs are provided by businesses. d) total spending must equal total income.

a) rise above the equilibrium unemployment rate.

Suppose that an economy is in a recession. You would expect to see the unemployment rate: a) rise above the equilibrium unemployment rate. b) be equal to the equilibrium unemployment rate. c) fall below the equilibrium unemployment rate. d) be zero.

50

Suppose a labor market is described by the demand equation, Qd = 200 - 3w, and the supply equation, Qs = -300 + 7w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $45, ________ Million workers will be willing to work in this market. (Round to the nearest whole million.)

a) benefits are greater than the costs.

The cost-benefit principle states that a decision should be pursued only if the a) benefits are greater than the costs. b) costs are negative. c) costs are greater than the benefits. d) benefits are positive.

a) price that businesses pay over time for the inputs used in the production process.

The Producer Price Index is an index that tracks the: a) price that businesses pay over time for the inputs used in the production process. b) average price that consumers pay over time for a representative basket of goods and services. c) highest prices consumers pay over time for imported goods and services. d) price of all goods and services produced domestically.

a) compares the benefit of buying an additional unit of the item to the cost of that item.

The Rational Rule for Buyers a) compares the benefit of buying an additional unit of the item to the cost of that item. b) compares the cost of production of an item to the price of the item. c) only applies to buyers who are buying necessities as opposed to luxury items. d) compares the total benefit of all units to the total price of all units purchased.

a) Y = f(L, H, K)

The aggregate production function is represented as: a) Y = f(L, H, K). b) K = f(L, H, Y). c) L = f(Y, H, K). d) H = f(L, Y, K).

b) Three

The price of coffee at a local coffee shop is $2.50. Cheryl is willing to pay $8 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase? a) Two b) Three c) One d) Four

c) how long it will take something to double if you divide 70 by its annual growth rate.

The rule of 70 tells us roughly: a) what the total amount of expenditure is in the economy. b) how much unemployment exists in the economy. c) how long it will take something to double if you divide 70 by its annual growth rate. d) how income is distributed in the country.

c) investment equals depreciation.

The steady state in the Solow growth model occurs when: a) depreciation reaches zero. b) savings increases in the economy. c) investment equals depreciation. d) capital accumulation begins.

d) lenders to borrowers.

When inflation is higher than expected, there is redistribution from: a) borrowers to the government. b) lenders to the government. c) borrowers to lenders. d) lenders to borrowers.

a) have short and sharp recessions, followed by long and gradual expansions.

Typically, business cycles: a) have short and sharp recessions, followed by long and gradual expansions. b) last over 20 years. c) do not display persistence. d) have short and sharp expansions, followed by long and gradual recessions.

b) 105.2

What is Fiji's GDP deflator if its nominal GDP is $5.48 billion (in current US$) and the real GDP is $5.21 billion? a) 103.9 b) 105.2 c) 122.3 d) 115.4

a) only variable costs.

When you calculate marginal costs for a seller, they should include: a) only variable costs. b) only fixed costs. c) the market price of the product. d) both the variable and fixed costs.

d) the invention of the light bulb

Which of the following can be classified as technological progress? [check all that apply] a) a rise in the labor force participation rate b) a baby boom c) an increase in the retirement age of a population d) the invention of the light bulb

a) The consumer price index

Which of the following is a broad indicator? a) The consumer price index b) Agricultural sector output c) Starbucks stock returns d) Labor demand in the agricultural industry

b) Keele, who lost her job after her company lost a lot of customers during an economic downturn

You have four friends. Which of your friends can be described as "cyclically unemployed"? a) Regan, who is in a nursing home b) Keele, who lost her job after her company lost a lot of customers during an economic downturn c) Arthur, who quit his job to look for a better job d) Martha, who is a full-time stay-at-home parent

d) GDP does not change.

You just bought two used textbooks for $25 each. How much does GDP change because of your purchase? a) GDP rises by $50. b) GDP falls by $50. c) GDP rises by $25. d) GDP does not change.

0.6

You purchase a certificate of deposit that pays an advertised rate of 2.30% interest per year. Your real rate of return if the actual inflation rate is 1.70% is ____% [round to the nearest hundredth of a percent].