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1 Which of the following is a central issue in macroeconomics?

A) the deregulation of the banking industry

B) inflation of prescription drug prices

C) the effect of excise taxes on consumers’ buying patterns

D) none of the above

2 Which of the following is NOT an issue in macroeconomics?

A) issues relating to the balance of payment

B) the determination of prices in the agricultural sector

C) the relationship between inflation and unemployment

D) the possible effect of budget deficit increases on the level of investment

3 In studying growth theory

A) we focus on the very long run

B) we ignore recessions and booms

C) we assume that all inputs are fully employed

D) all of the above

4 In the very long run

A) the position of the AD-curve depends on the productive capacity of the economy

B) the position of the AS-curve depends on the degree of consumer confidence

C) the position of the AS-curve essentially determines the level of output

D) the position of the AD-curve is affected by changes in efficiency improvements

5 The position of the long-run AS-curve is determined by

A) the full-employment level of output

B) consumer confidence

C) fiscal policy

D) monetary policy

6 In the very long run,

A) the AS-curve is vertical

B) the AS-curve is horizontal

C) the AS-curve is upward sloping

D) the level of output is solely determined by the position of the AD-curve

7 Which of the following is NOT true in the very short run?

A) a shift in the AD-curve will change output but not prices

B) a shift in the AD-curve will change prices but not output

C) the AS-curve is horizontal

D) the position of the AD-curve can be influenced by fiscal policy

8 In the very short run

A) the position of the AD-curve determines the level of output

B) the position of the AD-curve cannot be changed by fiscal or monetary policy

C) a change in monetary policy will affect both the price level and the level of output

D) a change in fiscal policy will not change the level of output

9 In the very short run

A) the level of prices can change quite rapidly, but the level of output is fixed

B) the level of prices is unaffected by the level of output

C) the level of prices and the level of output change with a shift in aggregate demand

D) the level of prices and the level of output are both fixed

10 In the medium run, restrictive fiscal policy will cause

A) a decrease in the level of output but no change in the level of prices

B) a decrease in the level of prices but no change in the level of output

C) a decrease in both the level of prices and the level of output

D) a decrease in real GDP with no change in nominal GDP

11 In the medium run, monetary policy can be used to

A) shift the AD-curve, but this will only result in a price change, not in a change in real GDP

B) affect nominal GDP, but this will not have any effect on real GDP

C) lower the price level while increasing the level of real GDP

D) lower the price level but only at the cost of also lowering the level of real GDP

12 Periods of very high inflation rates

A) can only occur in a situation when the AS-curve is vertical

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

C) can only occur if the output gap is large

D) most often occur when actual GDP is less than potential GDP

13 Potential GDP is

A) always greater than actual GDP

B) the level of GDP if unemployment is zero

C) equal to nominal GDP adjusted for inflation

D) none of the above

14 Which of the following does NOT affect the trend path of GDP over time?

A) efficiency improvements

B) an increase in population growth

C) fluctuations in the unemployment rate

D) the availability of capital equipment

15 The output gap is defined as

A) nominal GDP minus real GDP

B) potential GDP minus actual GDP

C) nominal GDP adjusted for inflation

D) actual output minus the output that could be produced if the capital stock remained constant

16 One of the main controversies in macroeconomics is

A) whether the AS-curve is really flat in the very short run

B) whether the AD-curve can be shifted by fiscal or monetary policy

C) how steep the medium run AS-curve really is

D) whether the level of output can be changed by an increase in the efficiency of the factors of production

17 If we compare the trend path of GDP with the behavior of actual GDP in the U.S. over the last four decades, we realize that

A) actual GDP never went above potential GDP

B) the output gap was never more than 5 percent of GDP

C) the output gap never was negative

D) none of the above

18 If we look at the growth of real GDP per capita around the world from 1913-98, we see that

A) the U.S. had the highest growth rate among industrial nations

B) the U.S. growth rate was about twice as high as that of the United Kingdom

C) the U.S. growth rate was only about half of Japan’s

D) Japan was the only country with a growth rate higher than the U.S.

19 Increases in the rate of inflation

A) generally are inversely related to the output gap

B) are more pronounced in periods of recession

C) always coincide with a decrease in the unemployment rate

D) generally do not occur in periods of high growth in money supply

20 If we look at the behavior of the U.S. CPI over the last four decades we realize that inflation

A) never exceeded 10 percent

B) steadily increased in the 1970s

C) was, on average, lower in the 1990s than in the 1960s

D) was at its highest in the early 1980s

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