Macroeconomics Quiz
Questions: 16 · 10 minutes
1. An economy produces the same quantities of final goods as last year, but all their prices rise by 10%. What happens, other things equal?
Real GDP rises by 10%, while nominal GDP is unchanged
Both nominal and real GDP remain unchanged
Both nominal and real GDP rise by 10%
Nominal GDP rises, while real GDP is unchanged
2. Which open-market action is contractionary monetary policy?
Buying government securities to increase bank reserves
Cutting taxes to increase disposable income
Selling government securities to reduce bank reserves
Increasing government purchases to raise aggregate demand
3. A government wants to raise aggregate demand during a recession through expansionary fiscal policy. Which action best fits that goal?
Selling government securities through the central bank
Raising income tax rates
Increasing government purchases
Reducing transfer payments
4. When a central bank purchases government securities in the open market, what is the usual immediate direction of its effect?
Bank reserves fall, putting upward pressure on short-term interest rates
Tax revenue rises, reducing the government budget deficit
Bank reserves rise, putting downward pressure on short-term interest rates
The labor force shrinks, reducing measured unemployment
5. Which change is most likely to support sustained growth in real output per person over the long run?
A one-time increase in the general price level
A permanent increase in currency printing with no change in productive capacity
A temporary rise in household spending financed entirely by lower saving
Continued improvement in labor productivity
6. Which is an automatic stabilizer that can soften changes in disposable income without a new legislative decision?
A one-time tariff introduced during a downturn
A newly approved infrastructure package
A central bank’s emergency interest-rate decision
Unemployment insurance payments
7. A household buys a used car from another household and pays a dealership a fee for arranging the sale. What is included in current GDP?
The used car’s sale price plus the dealership’s fee
Only the dealership’s fee
Only the used car’s sale price
Neither the car’s price nor the dealership’s fee
8. In a standard short-run Phillips curve framework, an unexpected rise in aggregate demand is most likely to produce which combination initially?
Higher unemployment and lower inflation
Higher unemployment and higher inflation
Lower unemployment and lower inflation
Lower unemployment and higher inflation
9. A fixed consumer basket cost $200 last year and $210 this year. What inflation rate does this imply for the basket?
5%
10%
2%
20%
10. The government finances a large spending increase by borrowing. If this raises market interest rates and reduces private investment, what has occurred?
Deflation
Crowding out
Currency depreciation
Capital deepening
11. An economy has nominal GDP of $525 billion and real GDP of $500 billion. What is its GDP deflator?
105
100
95
125
12. What does it mean when a country has a merchandise trade deficit?
Its government spends more than it collects in taxes
The value of its merchandise imports exceeds the value of its merchandise exports
Its national saving exceeds its domestic investment
Its central bank holds more foreign currency than domestic currency
13. In a simplified model with no taxes or imports, the marginal propensity to consume is 0.8. What is the spending multiplier?
0.8
1.25
5
4
14. Which person is counted as unemployed under the standard labor-force definition?
A person without a job who is available and has recently looked for work
A full-time student who has not sought work
A worker with a part-time job who would prefer full-time work
A retiree who does not want a job
15. A country’s currency appreciates relative to its trading partners’ currencies. Other things equal, how does this affect buyers?
Domestic exports become dearer for foreign buyers, and imports become cheaper for residents
Domestic exports become cheaper for foreign buyers, and imports become dearer for residents
Both domestic exports and imports become cheaper for residents
The relative prices of exports and imports do not change
16. A sharp increase in oil prices raises production costs across an economy. In the short-run aggregate demand–aggregate supply model, what is the most likely initial effect?
The price level falls and real output rises
The price level rises and real output falls
The price level and real output both rise
The price level and real output both fall