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
8: Negative income elasticity of demand is related to ?
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
24: Keynesian theory is related to:
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
51: The aggregate demand and aggregate supply model explains the relationship of
A. real GDP and price level
B. wages and employment
C. price an quantity of a certain good
D. unemployment and output
52: Which is not a reason why the aggregate demand curve is downward sloping?
A. Positive Technological Change
B. The Interest Rate Effect
C. The International Trade Effect
D. The Wealth Effect
53: If we look at the behavior of the U.S. CPI over the last four decades we realize that inflation
A. was at its highest in the early 1980s
B. was, on average, lower in the 1990s than in the 1960s
C. steadily increased in the 1970s
D. never exceeded 10 percent
54: Income elasticity of demand of a good is less than 1 if it is a:
A. Luxury good
B. None of these
C. Necessity good
D. Normal good
E. Inferior Good
55: If price level increases the LM curve will shift to
A. The right
B. The left
C. No shifting
56: Which scenario is related to an unplanned decrease in inventories?
A. Aggregate Expenditure < GDP and the economy is in a recession
B. Aggregate Expenditure > GDP and the economy is in a recession
C. Aggregate Expenditure > GDP and the economy is in an expansion phase
D. Aggregate Expenditure = GDP and the economy is in an expansion phase
57: The term “aggregate-supply curve,” describes which of the following?
A. The total supply of goods and services produced within an economy at a given overall price level
B. The total supply of goods and services produced within an economy at a given overall price level
C. Excess of spending over income for a government, corporation, or individual over a particular period of time
D. the relationship between price levels and the quantity of output that firms are willing to provide.
58: Which is not part of the M1 definition of the Money Supply?
A. Holdings of traveler's checks
B. Checking account deposits
C. Savings account balances
D. Currency in circulation
59: In the long run Philips' curve becomes
A. vertical
B. Slopes upward
C. Downward sloping
D. horizontal
60: In the very short run
A. the position of the AD-curve cannot be changed by fiscal or monetary policy
B. a chance in fiscal and monetary policy will not affect the level of output
C. a change in monetary policy will affect both the price level and the level of output
D. the position of the AD-curve determines the level of output
61: Which of the following is NOT a characteristic of Monopolistic Competition?
A. Many producers and many consumers in the market
B. Producers have a high degree of control over price
C. Consumers view that there are non-price differences among the competitors' products/services
D. Many barriers to entry and exit
62: A complement good has what kind of elasticity?
A. zero cross elasticity of demand
B. Negative cross elasticity of demand
C. Positive cross elasticity of demand
63: Which of the following refers to the situation that occurs when a currency is "pegged"?
A. A flat tax is imposed on imported goods
B. A contract exists that allows households to exchange currency for a fixed amount of gold from the central bank
C. The central banks keeps the exchange rate between its currency and another currency fixed
D. The central bank allows the value of its currency to be determined by supply and demand
64: As the interest rate rises, businesses invest __________ and the ad curve shifts to the __________.
A. Less; left
B. Rises; less
C. Less wealthy; buy less.
D. Rises; falls
65: Economists agree that ________________ inflation reduces real output.
A. Cost-push inflation
B. Negative
C. Cost-push
D. Increases
66: The unemployment rate that is consistent with full employment is known as __________________.
A. 10 percent
B. The artificial rate of unemployment
C. The natural rate of unemployment
D. None of these
67: ________ are financial securities that represent promises to repay a fixed amount of funds.
A. Stocks
B. Bonds
C. Interest rates
D. Mutual funds
68: A tax cut ________ aggregate demand and ________.
A. Decreases; shifts the AD curve leftward
B. Decreases; shifts the AD curve rightward
C. Does not change; does not shift the AD curve
D. Increases; shifts the AD curve leftward
E. Increases; shifts the AD curve rightward
69: An expansionary fiscal policy either _____ government spending or _____ taxes.
A. Increases; decreases
B. Decreases; increases
C. Decreases;decreases
D. Increases; increases
70: An increase in taxes on labor income shifts the labor supply curve ________ and the ________.
A. Increases; decreases
B. Decreases; increases
C. Decreases;decreases
D. Increases; increases
71: An increase in wealth leads to ________ loanable funds.
A. Plus net investment
B. A decrease in supply of
C. Depreciation
D. Leftward; falls
72: Demand for a given good is inelastic, so it follows that if price rises, __________ will rise, too.
A. Quantity demanded
B. Total revenue
C. Total cost
73: Demand is said to be ____ when the quantity demanded changes the same proportion as the price.
A. Independent
B. Inelastic
C. Unit elastic
D. Elastic
74: During a business cycle expansion, total production ________ and total employment ________.
A. Increases; increases
B. Increases; decreases
C. Decreases; increases
D. Decreases; decreases
75: Everything else held constant, a decrease in net exports ________ aggregate ________.
A. Increases; demand
B. Decreases; demand
C. Decreases; supply
D. Increases; supply
76: Everything else held constant, an autonomous monetary policy easing ________ aggregate ________.
A. Increases; demand
B. Decreases; demand
C. Decreases; supply
D. Increases; supply
77: Inflation that is ________ than what is expected benefits ________ and hurts ________.
A. Short-run aggregate supply
B. Natural rate of unemployment.
C. Less; lenders; borrowers
D. Natural rate of output
78: A change in the price level produces a ________ the aggregate demand curve.
A. Shift in
B. Change in the slope of
C. Movement along
79: Government expenditure ________ change potential gdp and taxes ________ change potential gdp.
A. Can; can
B. Cannot; can
C. Can; cannot
D. Cannot; cannot
80: According to the classical dichotomy, when the money supply decreases, _____ will decrease.
A. The price level
B. Decrease; increase
C. -4 percent.
D. Decreased 2 percent.
81: As income taxes rise, disposable income __________, causing __________ the ad curve.
A. Increases; movement down along
B. Increases; a rightward shift of
C. Decreases; movement up along
D. Decreases; a leftward shift of
82: The crowding out effect refers to the ________ from ________ in the government's budget deficit.
A. Increase in investment; an increase
B. Increase in consumption; an increase
C. Decrease in employment; an increase
D. Decrease in consumption; a decrease
E. Decrease in investment; an increase
83: The money multiplier for the united states is __________.
A. Between 2 and 3
B. Between 4 and 5
C. Between 5 and 6
D. Between 6 and 7
84: A government budget surplus _______ loanable funds.
A. Decreases the demand for
B. Decreases the supply of
C. Increases the supply of
85: In the factor market, firms ________ and households ________.
A. That the poorest 20 percent of households receive less than 4 percent of total income
B. Supply goods and services; purchase goods and services
C. The goods market and the factor market
D. Pay rent, wages, interest, and profit; earn rent, wages, interest, and profit
86: The change in inventories, a component of aggregate supply, comprises roughly __________ of gdp.
A. 1%
B. 10%
C. 20%
D. 0.6%
87: A recessionary gap occurs when ________ so that real gdp is ________ potential gdp.
A. Aggregate supply increases; less than
B. Aggregate supply decreases; less than
C. Aggregate demand increases; greater than
D. Aggregate demand decreases; less than
E. Potential GDP decreases; greater than
88: A rise in mpc makes the total expenditures (te) curve __________ and __________ the multiplier.
A. Steeper; raises
B. Steeper; lowers
C. Flatter; raises
D. All of these
89: ________ is the human resource that organizes labor, land, and capital.
A. Factors of production
B. Entrepreneurship
C. Factor markets
D. Human capital
E. National debt
90: An inferior good is one for which a(n) _____ in buyers' income causes a(n) _____.
A. Focus on the effects of only one change at a time.
B. Decrease the demand for good A.
C. An increase in consumer incomes
D. Increase; decrease in demand
91: At macroeconomic equilibrium, total ________ equals total ________.
A. Investment ; inventories.
B. Spending ; production.
C. Consumption ; production.
D. Taxes ; transfers
92: Consumption spending refers to ________ spending on goods and services.
A. Household
B. Business
C. Government
D. Foreign
93: Content convergence describes convergence in the design, production, and ________ of content.
A. Sales
B. Distribution
C. Marketing
D. Consumption
94: Potential gdp ______ and potential gdp per hour of labor ______.
A. Increase;increase
B. Decreases; increases;
C. Increases; decreases
D. Both of these
95: Potential gdp in the u.s. will be unaffected by ____________________.
A. Technology
B. The amount of capital available
C. The unemployment rate
D. Government institutions
96: Unexpectedly high inflation ______ borrowers and ______ lenders.
A. Helps; hurts
B. Hurts; helps
C. Hurts;hurts
D. None of these
97: When ________ in a market, the total net benefit to society is maximized.
A. Deadweight loss is maximized
B. A competitive equilibrium is achieved
C. Consumer surplus is minimized
D. Producer surplus is minimized
98: When real gdp increases, the change in consumption expenditure equals _______.
A. The marginal propensity to consume x the increase in real GDP
B. Decreases;increases;decreases
C. Aggregate planned expenditure equals real GDP
D. Below target; increases
99: When tax revenue ________ outlays is negative, then the government has a budget ________.
A. Divided by; surplus
B. plus; surplus
C. minus; surplus
D. Minus; deficit
100: In a perfectly competitive market, sellers _________ and buyers _________.
A. Make S2 higher up than S1 and label the intersection with D1 A
B. Cannot charge more than the market price, cannot pay less than the market price
C. Lose all or almost all of its customers
D. Plot point e2 further left on the D1 line than e1 and have S2 pass through e2, parallel to S1
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