Issues in Macroeconomic Theory and Policy MCQs
Issues in Macroeconomic Theory and Policy MCQs
These Issues in Macroeconomic Theory and Policy multiple-choice questions and their answers will help you strengthen your grip on the subject of Issues in Macroeconomic Theory and Policy. You can prepare for an upcoming exam or job interview with these Issues in Macroeconomic Theory and Policy MCQs.
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1: An individual’s belief that the best indicator of the future is recent information on inflation and unemployment is adaptive expectations
A. True
B. False
2: ___ is use of payment contracts that automatically adjust for changes in inflation
A. Indexing
B. Changing
C. Expecting
D. None of these
3: A hypothesis that states that the economy will self-correct to the natural rate of employment is called
A. Natural rate hypothesis
B. Artificial rate hypothesis
C. Economy rate hypothesis
D. All of these
4: Real business cycle theory is the belief that economic fluctuations are the result of external negative and positive productivity shocks to the economy
A. True
B. False
5: Theory of rational expectations belief that workers and consumers incorporate the likely consequences of government policy changes into their expectations by quickly adjusting wages and prices
A. True
B. False
6: When real wages drop, unemployment ______.
A. Increases
B. Decreases
C. Temporarily disappears
D. Remains unchanged
7: How do higher prices affect people on fixed incomes?
A. They increase their real income.
B. They decrease their real income.
C. They boost their purchasing power.
D. They preserve their purchasing power.
8: High price stability corresponds with ______.
A. Low real wages
B. High unemployment
C. Low unemployment
D. High interest rates
9: In the 1960s, policy makers ______ the Phillips curve.
A. Widely followed
B. Disregarded
C. Were unaware of
D. First hypothesized
10: The idea that the economy’s employment level will self-correct is known as the ______.
A. Real business model theory
B. Rational expectation theory
C. Phillips curve
D. Natural rate hypothesis
11: The sacrifice ratio is considered to be ______.
A. Very precise
B. A rough measure
C. Independent of other variables
D. A fixed number
12: During the 1990s, expected inflation was fairly ______.
A. Volatile
B. High
C. Low
D. Erratic
13: In 2011, Professors Thomas Sargent and Christopher Sims won a Nobel Prize for their work in ______.
A. Real business cycle theory
B. Rational expectations theory
C. Supply shock
D. Inflation indexing
14: Rational expectations economists believe that ______.
A. Both wages and prices are flexible
B. Wages are flexible and prices are rigid
C. Prices are flexible and wages are rigid
D. Prices are flexible and wages are rigid
15: Rational expectations theory says that government fiscal and monetary policy work ______.
A. When the public changes its behavior in anticipation
B. Because public input shapes them
C. Only if the public is informed ahead of time
D. Only of the public is surprised
16: Real business cycle theory says that ______.
A. An inverse relationship sometimes exists between employment levels and price levels in an economy
B. Individuals believe that the best indicator of the future is recent information on inflation and unemployment
C. Economic fluctuations are the result of external negative and positive productivity shocks to the economy
D. Workers and consumers incorporate the likely consequences of government policy changes into their expectations by quickly adjusting wages and prices
17: As aggregate demand falls, ______.
A. Output rises while employment falls
B. Output falls while employment rises
C. Output and employment climb
D. Output and employment also fall
18: In 2012, the Fed stated its intent to maintain inflation at an annual rate of ______.
A. 0%
B. 1%
C. 2%
D. 3%
19: The financial crisis of 2008 caused a rise in ______.
A. Aggregate demand
B. Interest rates
C. Unemployment
D. Stock valuation
20: A hybrid approach to monetary rules and inflation targeting is known as the ______.
A. Taylor rule
B. Phillips curve
C. Liquidity trap
D. Lucas theory
21: The ____________________ in an ad/as diagram is most relevant to say?s law.
A. Steep portion of the AS curve.
B. AS curve.
C. AD curve.
D. Flat portion of the AS curve.
22: Structural unemployment usually lasts ________ period of time ________ unemployment
A. Cyclical unemployment.
B. A longer​ ; than frictional
C. Not​ unemployed; not part​ of; part of
D. I and ii
23: On average, since 1900 u.s. output has grown by roughly ____ percent per year.
A. 1
B. 2
C. 3
D. 4
24: The open market operations of the fomc are the _______________ tool of the fed.
A. Reserve requirement.
B. Debt monetiainz must not occur
C. Chicago
D. Chairperson
25: Budget deficits automatically __________ during recessions and __________ during expansions.
A. Increase, decrease
B. Decrease, increase
C. Increase, increase
D. All of this
26: As long as people have different _____, everyone has a comparative advantage in something.
A. Direct costs
B. Benefits
C. Utility
D. Opportunity costs
27: Flat taxation is present when a set rate is applied to _______ levels of income.
A. High
B. Low
C. Moderate
D. All the above
28: During cost-push inflation, aggregate output _______ and the aggregate price level _________.
A. Ises; rises.
B. Rises; falls.
C. Falls; falls.
D. Falls; rises.
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