Macro Quiz

Quiz: Practice Midterm (2015-17) # Correct Answers: 4 # Incorrect Answers: 4 # Blank Answers:36 Points Awarded: 3.7

QNo Question

1 Whichofthefollowingbestdescribesthe"wealtheffect"?

0 IdonotwanttoanswerthisQuestion

1 Whenthepricelevelfalls,therealvalueofhouseholdwealthfalls.

2 Whenthepricelevelfalls,thenominalvalueofhouseholdwealthfalls.

3 Whenthepricelevelfalls,thenominalvalueofhouseholdwealthrises.

4 Whenthepricelevelfalls,therealvalueofhouseholdwealthrises.

5 noneoftheabove

CorrectAnswer:4YourAnswer:2PointsAwarded:-0.1

2 Whichofthefollowingisoneexplanationastowhytheaggregatedemandcurveslopesdownward?

Figure1


1 Increasesinthepricelevellowertheinterestrateanddecreaseconsumptionspending.

2 Increasesinthepricelevellowertheinterestrateanddecreaseinvestmentspending.

3 IncreasesintheU.S.pricelevelrelativetothepricelevelinothercountrieslowersnetexports.

4 Increasesinthepricelevelraiserealwealthandlowersconsumptionspending.

5 Alloftheabove


3 RefertoFigure1.SupposetheeconomyisatpointC.Ifgovernmentspendingdecreasesintheeconomy,wherewilltheeventuallong-runequilibriumbe?


1 A

2 B

3 C

4 D

5 noneoftheabove

CorrectAnswer:1YourAnswer:0PointsAwarded:0

4 Whichofthefollowingisconsideredanegativesupplyshock?


1 increasinginvestmentintheeconomycausesthecapitalstocktorise

2 anunexpectedincreaseinthepriceofnaturalgas

3 adeclineinwages

4 animprovementintechnology

5 alloftheabove


5 Anincreaseinaggregatedemandintheeconomywillhavewhateffectonmacroeconomicequilibriuminthelongrun?


1 Thepricelevelwillfall,andthelevelofGDPwillrise.

2 Thepricelevelwillfall,andthelevelofGDPwillfall.

3 Thepricelevelwillrise,andthelevelofGDPwillfall.

4 Thepricelevelwillrise,andthelevelofGDPwillbeunaffected.

5 noneoftheabove


6 Supposetheeconomyisatfullemploymentandfirmsbecomemoreoptimisticaboutthefutureprofitabilityofnewinvestment.Whichofthefollowingwillhappenintheshortrun?


1 Outputwilldecline.

2 Priceswilldecline.

3 Unemploymentwilldecline.

4 Aggregatedemandwillshifttotheleft.

5 noneoftheabove


7 Whydoestheshort-runaggregatesupplycurveshifttotherightinthelongrun,followingadecreaseinaggregatedemand?


1 Workersandfirmsadjusttheirexpectationsofwagesandpricesdownwardandtheyacceptlowerwagesandprices.

2 Workersandfirmsadjusttheirexpectationsofwagesandpricesdownwardandtheypushforhigherwagesandprices.

3 Workersandfirmsadjusttheirexpectationsofwagesandpricesupwardandtheypushforhigherwagesandprices.

4 Workersandfirmsadjusttheirexpectationsofwagesandpricesupwardandtheyacceptlowerwagesandprices.

5 noneoftheabove


8 Theautomaticmechanismthepricelevelinthecaseofandthepricelevelinthecaseof.


1 raises;recession;lowers;expansion

2 raises;expansionraises;recession

3 lowers;expansion;lowers;recession

4 lowers;recession;raises;expansion

5 noneoftheabove


9 Adecreaseinaggregatedemandresultsina(n)inthe.


1 recession;longrun

2 expansion;longrun

3 expansion;shortrun

4 recession;shortrun

5 noneoftheabove


10 Therehasbeenanincreaseininvestment.Asaresult,realGDPwillintheshortrun,andinthelongrun.


1 increase;increasesfurther

2 increase;decreasetoitsinitialvalue

3 decrease;decreasefurther

4 decrease;increasetoitsinitiallevel

5 noneoftheabove


11 IfrealGDPpercapitameasuredin2000dollarswas$6,000in1950and$48,000in2010,wewouldsaythatintheyear2010,theaverageAmericancouldbuytimesasmanygoodsandservices

astheaverageAmericanin1950.


1 1/8

2 4

3 8

4 12

5 noneoftheabove


12 IfrealGDPinasmallcountryin2005is$8billionandrealGDPinthesamecountryin2006is$8.3billion,thegrowthrateofrealGDPbetween2005and2006


1 is3.0%.

2 is3.75%.

3 is3.6%.

4 cannotbedeterminedfromtheinformationgiven.

5 noneoftheabove


13 Ifyouinvest$10,000inabondthatearns8%interest,howmanyyearswillittaketodoubleyourmoney?


1 1yearand3months

2 2yearsand6months

3 8years

4 8yearsand9months

5 noneoftheabove


14 IfrealGDPgrowsby3%in2005,3.2%in2006,and2.5%in2007,whatistheaverageannualgrowthrateofrealGDP?


1 2.6%

2 2.9%

3 3.1%

4 4.2%

5 noneoftheabove


15 Whichofthefollowingincreaseslaborproductivity?


1 anincreaseintheaggregatehoursofwork

2 decreasesintheavailabilityofcomputersandfactorybuildings

3 inventionsofnewmachinery,equipment,orsoftware

4 adeclineinthehealthofthepopulation

5 Alloftheabove


16 Thetotalamountofphysicalcapitalavailableinacountryisknowasthecountry's


1 laborproductivity.

2 savings.

3 investment.

4 capitalstock.

5 noneoftheabove


17 Humancapitalreferstowhichofthefollowing?


1 thequantityofgoodsandservicesthatcanbeproducedbyoneworkerorbyonehourofwork

2 theaccumulatedknowledgeandskillsworkersacquirefromeducationandtrainingorfromtheirlifeexperiences

3 manufacturedgoodsthatareusedtoproduceothergoodsandservices

4 physicalequipmentthatismadebyhumanlaborers,notmachines

5 noneoftheabove


18 Long-runeconomicgrowthrequiresallofthefollowingexcept


1 technologicalchange.

2 increasesincapitalperhourworked.

3 governmentprovisionofsecurepropertyrights.

4 politicalinstability.

5 Alloftheabove


19 Whichofthefollowingwouldcontributetoasustainedhighrateofeconomicgrowthinthelongruninaneconomy?


1 growthincapitalperhouraccompaniedbytechnologicalchange

2 increasesinlaborforceparticipationratesasworkerswhoareoutofthelaborforcepursuerisingwages

3 ashiftofworkersintheeconomyfromtheagriculturalsectortothenonagriculturalsector

4 aninfluxofimmigrantlaborintoaneconomywithoutanyaccompanyingtechnologicalchange

5 noneoftheabove


20 aninfluxofimmigrantlaborintoaneconomywithoutanyaccompanyingtechnologicalchange


1 firmsareproducingbelowcapacity.

2 firmsareproducingatcapacity.

3 firmsareproducingabovecapacity.

4 inflationisrising.

5 noneoftheabove


21 WhichofthefollowingwasNOTtrueduringtheGreatDepression?


1 InvestmentasashareofGDPwasbelow3percent

2 Unemploymentaveragedabout18.8percent

3 Pricesdroppedbyone-fourth

4 Outputfellbynearly30percent

5 BothBandC


22 TheKeynesianaggregatesupplycurveimpliesthat


1 Theeconomyisalwaysatthefull-employmentlevelofoutput

2 ThepricelevelisunaffectedbycurrentlevelsofGDP

3 Wagesareperfectlyflexible

4 RealmoneybalancesdecreaseastheAD-curveshiftstotheright

5 AnincreaseinnominalmoneysupplywillnotaffectthelevelofrealGDP


23 GiventheKeynesianAS-curve,expansionarymonetarypolicywill


1 Increasethelevelofoutputbutleavethepricelevelunchanged

2 Increasethepricelevelbutleavethelevelofoutputunchanged

3 Increaseboththelevelofoutputandthepricelevel

4 Leavethelevelofoutputandthepricelevelunchanged

5 Increasethelevelofoutputbutdecreasethepricelevel


24 Adecreaseinrealmoneysupplycausedbyanincreaseinthepricelevelisgraphicallyrepresentedby


1 AshiftoftheAD-curvetotheright

2 AshiftoftheAD-curvetotheleft

3 MovementalongtheAD-curvetotheright

4 MovementalongtheAD-curvetotheleft

5 AshiftoftheAS-curvetotheright


25 Tomaintainafixedlevelofaggregatedemand,theFedwouldhavetorespondtoataxincreaseby


1 Increasingreserverequirements

2 Increasingthediscountrate

3 Buyingbondsintheopenmarket

4 Sellingbondsintheopenmarket

5 Urgingbankstorationcredit


26 Ifoutputisatitsfull-employmentlevel,then


1 Theactualunemploymentrateiszero

2 Thenaturalrateofunemploymentiszero

3 Therearenofrictionsinthelabormarketsincewageshavereachedtheirmarket-clearinglevel

4 .Thereisstillsomepositivelevelofunemploymentduetofrictionsinthelabormarket

5 Nobodywhoiscurrentlyemployedislookingforanewjob


27 InanormalAD-ASdiagramwithanupward-slopingAS-curve,ifthegovernmentwantedtomaintainafixedlevelofoutput,itwouldneedtorespondtoadecreaseinmoneysupplyby


1 Decreasinggovernmentexpenditures

2 Increasinggovernmenttransferpayments

3 UrgingtheFedtosellbondsintheopenmarket

4 Increasingincometaxes

5 Decreasingtaxesandgovernmentspendingbythesameamount


28 InanAD-ASdiagramwithanupward-slopingAS-curve,ifataxdecreaseiscombinedwithmoneyexpansion,


1 Outputwillremainrelativelyunaffectedbutinterestrateswilldecrease

2 Outputwillremainrelativelyunaffectedbutinterestrateswilldefinitelyincrease

3 Aggregatedemand,thepricelevel,andoutputwillalldecrease

4 Aggregatedemand,thepricelevel,andoutputwillallincrease

5 Thepricelevelwillincreasebutwecan'tsaywhatwillhappentooutputorinterestrates


29 .IntheAD-ASmodel,fiscalormonetarypolicycannotaffectthelevelofoutputin


1 Themediumrunandthelongrun

2 Themediumrunandtheshortrun

3 Theshortrunonly

4 Themediumrunonly

5 Thelongrunonly


30 WhenwesaythatpotentialGDPisexogenouswithrespecttothepricelevel,wereferto


1 Thefactthatchangesinrealmoneybalancescauseoutputtorise

2 Thefactthatthelong-runAS-curveshiftstotherightovertime

3 Theshort-runAS-curve

4 Themedium-runAS-curve

5 TheKeynesianAS-curve


31 ExpansionarymonetarypolicywillincreasenominalGDP


1 IntheKeynesiancase

2 Intheclassicalcase

3 Inthemediumrun

4 Alloftheabove

5 OnlyAandC


32 Expansionaryfiscalpolicyisveryeffectiveinsignificantlyincreasingthelevelofoutput


1 IftheAS-curveistotallypriceinelastic

2 Intheclassicalcase

3 Iftheeconomyisclosetofullemployment

4 Iftheeconomyisinarecession

5 BothAandD


33 Anincreaseinaggregatedemandcanbecausedby


1 Anincreaseingovernmentexpenditures

2 Anincreaseinnominalmoneysupply

3 Adecreaseintaxes

4 Anincreaseinbusinessandconsumerconfidence

5 Alloftheabove


34 "NotethatthepercentchangeintheGDPdeflatorisbeingusedasthemeasureofinflationratherthanthemorefamiliarCPI.TheGDPdeflatorisapriceindexthatsamples___,notjustthose

paidbyconsumers."Theblankshouldbe


1 allprices,includingimports

2 pricesofalldomestically-producedgoodsandservices

3 pricesofalldomestically-producedgoodsandservicesexceptexports

4 pricesofalldomestically-producedgoodsandservicesexceptthoseproducedbygovernment

5 noneoftheabove


35 "Asbestwecantell,respondedthecentralbankgovernor,thecenterofthe2percentinflationtarget,namely1percent,appearstocorrespondtogenuinepricestabilityoncethevarious

sourcesofbiasintheCPIareallowedfor."AnexampleofbiasintheCPImeasureisthatit


1 ignoresimportprices

2 ignoresinvestmentgoods

3 ignoresmostqualitychanges

4 valuesgovernmentoutputatcost

5 noneoftheabove


36 ThatGDPtendstooverstateanation'seconomicwell-beingisillustratedbyitstreatmentofwhichofthefollowing


1 youbuyanewgeneratorforyourbarn

2 youdecidetostayhometocareforyourchildren

3 youdecidetoworkfewerhourstoenjoylifemore

4 thegovernmentspendsmillionscleaningupafteranoilspill

5 noneoftheabove


37 WhichofthefollowingraisesmeasuredGDP


1 youarehiredbyGMtoshufflepaperuselesslyfor$200

2 asteelcompanysellssomesteeltoanautomobilemanufacturer

3 youarehiredbythegovernmenttoshufflepaperuselesslyfor$200

4 botha)andc)above

5 noneoftheabove


38 Ifatypicalmarketbasketofgoodsandservicescost$120in1975,thebaseyear,and$180in1985,thepriceindexin1985wouldbe


1 120

2 150

3 160

4 180

5 200


39 ThelevelofGDPthatcorrespondstofullemploymentinthelabormarketiscalled


1 PotentialGDP

2 RealGDP

3 NominalGDP

4 NaturalGDP

5 GDPpercapita


40 MosteconomistspriortoKeynesthoughtthat


1 Unemploymentcouldbeeliminatedbyactivefiscalpolicies

2 Theeconomyalwaysadjustedtofullemployment

3 Theeconomyalwaysadjustedtoanaturalrateofinflation

4 Monetarypolicycouldbeemployedtoeliminatethebusinesscycle

5 Governmentinterventionwasneededtoavoidpersistentunemployment


41Ifthenominalinterestrateis10%,theexpectedrateofinflationis7%,andthegrowthrateofthemoneysupplyis6%,thentherealinterestrateis


1 -4%

2 -3%

3 3%

4 4%

5 9%


42 Changesinthecompositionofdemandamongindustriesorregionsarecalled


1 fractionalshirts.

2 sectoralshirts

3 structuralshifts

4 temporaryshifts

5 bandc


43 Theideaofpayingworkersanefficiencywageisthat


1 doingsoismoreefficientthanpayingthemthemarketwage.

2 payingthemlessgivesthemtheincentivetoworkharder.

3 workersandmanagementgainattheexpenseofthestockholdersofthecompany.

4 workershavetheicentivetodohigh-qualitywork.

5 Noneoftheabove.


44 Inasimplemodelwithnogovernmentorforeignsector,theamountofinvoluntaryinventoryaccumulationatequilibriumis


1 Dependentupontheamoutnfoconsumption

2 Equaltooutputminusconsumption

3 Zero

4 Alwayspositive

5 Usuallynegative

CorrectAnswer:3YourAnswer:2PointsAwarded:-0

Macro Quiz

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