Macroeconomics MCQs

Macroeconomics MCQs

Our team has conducted extensive research to compile a set of Macroeconomics MCQs. We encourage you to test your Macroeconomics knowledge by answering these multiple-choice questions provided below.
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1: What does GDP stand for?

A.   Gross Dividend Payout

B.   Gradual Decline Process

C.   Gross Domestic Product

D.   Greatest Demand Produced

2: GNP and GDP differ because:

A.   GNP represents all goods and services produced/provided by the residents of a country while GDP represents all goods and services produced/provided within a country's physical borders

B.   GDP represents all goods and services produced/provided by the residents of a country while GNP represents all goods and services produced/provided within a country's physical borders

C.   GNP will always be lower than GDP due to the adjustment for foreign taxes

D.   GDP is adjusted for inflation while GNP is not

E.   GNP is adjusted for inflation while GDP is not

3: What is it called when injections of cash in private banks by a central bank fail to lower interest rates?

A.   Liquidity trap

B.   Monetary crisis

C.   Keynesian failure

D.   Pigou effect

E.   Interest rate trap

4: The multiplier’s value can be found by using this formula.

A.   MPS * (MPC/3)

B.   MPS = 1-MPC

C.   1/MPS = 1/(1-MPC)

D.   1/MPC + MPS

5: If money growth does not affect real GDP, and velocity is stable, an increase in the money supply creates a proportional increase in

A.   Real GDP only

B.   The price level and Real GDP

C.   The price level only

D.   Nominal GDP only

E.   The price level and Nominal GDP

6: The term “Balance of Payments” means:

A.   The ratio of a country’s debt in relation to the amount of money borrowed from other countries

B.   A record of a country’s monetary transactions with the rest of the world

C.   A formula used to calculate a country’s economic well-being by deducting total imports from total exports

D.   The Gross Domestic Product adjusted to take into consideration non-market activities

7: The formula for which of the following quantities contains a term for "Planned Investment?"

A.   Producer Price Index

B.   Aggregate expenditure

C.   Gross Domestic Product

D.   Consumer Price Index

A.   Luxury goods

B.   Inferior goods

C.   Necessity goods

D.   Sticky goods

E.   Normal goods

9: The ratio of the change in national income to the change in government spending is called:

A.   Monetary multiplier

B.   Fiscal multiplier

C.   Consumer multiplier

D.   National multiplier

E.   Macroeconomic multiplier

10: The government classification of a recession is:

A.   Two consecutive quarters of Real GDP decline

B.   One quarter of GNP decline

C.   Four consecutive quarters of Real GDP decline

D.   Five consecutive quarters of Real GDP decline

E.   One quarter of Real GDP decline

11: What does raising interest rates and reducing the supply of money do?

A.   Reduce inflation

B.   Reduce unemployment

C.   Increase unemployment

D.   Increase FDI

E.   Increase inflation

12: What does PPF stand for in Economics?

A.   Production Protection Fund

B.   Production Possibility Frontier

C.   Production Probability Frontier

D.   Pension Protection Fund

E.   None of these

13: The relationship between an economy's unemployment rate and its gross national product (GNP)

A.   Okun's Law

B.   Budget deficit

C.   Washington's Law

D.   Monetary Policy

14: Which of the following would switch the aggregate demand curve to the right?

A.   Net exports fall

B.   Congress decreases military spending

C.   The price level rises

D.   Monetary policy lowers interest rates

15: What is the unemployment rate when the economy is at potential GDP?

A.   It is equal to the structural rate of unemployment

B.   It is greater than the natural rate of unemployment

C.   It is less than the natural rate of unemployment

D.   It is zero

E.   It is equal to the natural rate of unemployment

16: Which of these are a way of measuring production?

A.   Marginal benefits

B.   Unemployment rates

C.   All of these

D.   Net Domestic Product

E.   Interest rates

17: If the national output in one year is measured at $300 billion and a year later it is measured at $315 billion, then the rate of growth in that year is?

A.   5%

B.   3%

C.   15%

D.   2%

18: A good for which an increase in income leads to a decrease in demand is a:

A.   Market good

B.   Substitute

C.   Luxury good

D.   Inferior good

E.   Normal good

19: What does purchasing power parity do?

A.   Determines trade barriers

B.   Determines the type of goods available

C.   Determines the elasticity of supply

D.   Determines relative value of currencies

E.   Determines the elasticity of demand

20: True or False: It's impossible to have falling inflation and falling unemployment at the same time.

A.   True

B.   False

21: True or False: Full employment is zero unemployment.

A.   True

B.   False

22: What would be an example of Foreign Direct Investment (FDI)?

A.   GDP per capita increasing faster in poorer countries versus richer countries

B.   Countries becoming more open to foreign trade

C.   A company buying stocks issued in another country

D.   A corporation buying a factory in a foreign country

23: What is not a major goal of macroeconomics?

A.   High sustainable economic growth

B.   Capping supply

C.   Low unemployment

D.   Price stability

A.   No government intervention

B.   Government intervention in the market place for economic growth and stability

C.   Relationship between possible rates of taxation and the resulting levels of government revenue

D.   None of these

E.   Transactions between private parties are free from tariffs

25: What is pegging?

A.   A flat tax imposed on imported goods

B.   A country keeping the exchange rate between its currency and another currency fixed

C.   A country allowing the value of its currency to be determined by supply and demand

D.   A contract that allows households to exchange currency for a fixed amount of gold from the central bank

26: What is the slope of the consumption function called?

A.   Marginal Opportunity Cost

B.   Marginal Disposable Income

C.   Marginal Propensity to Consume

D.   Marginal Propensity to Save

27: The final value of goods and services produced in a year within the geographical boundaries of a country is known as

A.   Gross Domestic Product

B.   Per Capita National Income

C.   Balance of Payments

D.   Gross National Product

28: What relationship does the Phillips Curve specifically address?

A.   Relationship between net exports and government spending

B.   Relationship between the foreign exchange rate and household purchases

C.   Relationship between the inflation rate and the unemployment rate

D.   Relationship between the long term real interest rate and the supply of loanable funds

29: The use of government spending and taxation to influence the economy is the definition of which of the following terms:

A.   Fiscal policy

B.   Inflation

C.   Gross Domestic Product

D.   Keynesian economics

30: What does "ceteris paribus" mean?

A.   Holding everything else constant

B.   Rational expectations

C.   Free trade

D.   That which is to be demonstrated

31: A printer and a printer cartridge is an example of a:

A.   Inferior goods

B.   None of these

C.   Complementary goods

D.   Necessity goods

E.   Supplemental goods

32: Economists use this term to denote an ongoing rise in the general level of prices quoted in units of money.

A.   Aggregate demand

B.   Inflation

C.   Consumer Price Index

D.   National debt

33: As a recession begins, unemployment

A.   employment rises and production falls

B.   unemployment rises and production increases

C.   unemployment rises and production falls

D.   unemployment falls and surplus supplies increase

34: What is recession?

A.   Two consecutive quarters of Real GDP decline

B.   Supply doesn't equal demand

C.   When Real GDP and Potential GDP are the same

D.   1 month of Actual GDP decline

35: Macroeconomics can be defined as:

A.   study of individuals and business decisions

B.   The interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers

C.   The study of the behavior of the economy at the aggregate level

D.   The study of patterns of supply and demand and the determination of price and output in individual markets

36: What is an inferior good?

A.   A good that is from overseas and is taxed heavily in domestic markets

B.   A good in which there is an inverse relationship between income and the demand for the good

C.   A good in which there is a direct relationship between income and the demand for the good

D.   A good that is imported and is consumed in relatively small quantities

37: True or False: The official measure of GDP understates the true level of national income because of the existance of the "shadow" or informal economy.

A.   False

B.   True

38: When is the economy in macroeconomic equilibrium?

A.   Aggregate expenditure < GDP

B.   Aggregate expenditure = GDP

C.   Aggregate expenditure > GDP

D.   When the unemployment rate is high

39: Which of these is a liability?

A.   Utility bill

B.   House

C.   Cash

D.   Computer

40: Which country best approximates a closed economy?

A.   United States

B.   Germany

C.   Canada

D.   North Korea

41: What is the central bank of the United States?

A.   The United States Treasury Department

B.   The Federal Reserve

C.   The Federal Deposit Insurance Corporation

D.   The United States Mint

42: What is Macroeconomics?

A.   The branch of economics that focuses on the national and global economy

B.   The branch of economics that focuses on the supply and demand of individual firms

C.   The branch of economics that analyzes individuals buying behavior

D.   The branch of economics that is no longer relevant and has been discredited as a whole

43: When does a shortage occur?

A.   The supply curve is nonlinear

B.   Quantity Supplied equals quantity demanded

C.   Quantity Supplied is greater than quantity demanded

D.   Quantity Demanded is greater than quantity supplied

44: What is the interest rate stated on a loan that does not account for inflation or compounding?

A.   Real interest rate

B.   Nominal interest rate

C.   Effective interest rate

D.   Annual percentage rate (APR)

45: Periods of very high inflation rates

A.   most often occur when actual GDP is less than potential GDP

B.   most often are caused by sharp increases in aggregate demand

C.   can only occur in a situation when the AS-curve is vertical

D.   can only occur if the output gap is large

46: Can the unemployment rate go below the natural rate of unemployment?

A.   No. The unemployment rate flucuates due to the business cycle, however it can never go below the natural rate of unemployment

B.   Yes. The unemployment rate can go below the natural rate of unemployment in the short term and remain below the natural rate of unemployment in the long term

C.   No. The unemployment rate is always at the natural rate of unemployment

D.   Yes. The unemployment rate can go below the natural rate of unemployment in the short term

47: Which of the following choices relates to the decision made by congress and the president to lower taxes or increase government purchases?

A.   Expansionary Monetary Policy

B.   Expansionary Fiscal Policy

C.   Contractionary Fiscal Policy

D.   Contractionary Monetary Policy

48: According to Keynes, if government earns £1 as tax revenue and spends it as public expenditure what will be the net effect on national income?

A.   There will be no effect

B.   The net effect is uncertain

C.   National income will rise by £1

D.   national income will decrease by £1

49: What is "crowding out"?

A.   When government spending replaces private sector spending

B.   When government does not add additional output to the economy

C.   All of these

D.   When investments are limited

E.   When interest rates are raised

50: GDP stands for

A.   Good Deflation Process

B.   Granular Dedicated Purpose

C.   Glossy Dark Paper

D.   Gross Domestic Product