Intro to Econ 201-02 MacroEconomics Exam 2 Sample Questions

1) The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is
A) the aggregate supply curve.
B) the aggregate production function.
C) the production possibilities frontier. D) the aggregate demand curve.
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1) The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is
A) the aggregate supply curve.
B) the aggregate production function.
C) the production possibilities frontier. D) the aggregate demand curve.
A) the aggregate supply curve.
2) The aggregate supply curve
A) is the sum of the individual supply curves in the economy.
B) is a market supply curve.
C) embodies the same logic that lies behind an individual firm's supply curve. D) relates output with the price level.
D) relates output with the price level.
3) Refer to Figure 11.1. This economy reaches capacity at
A) $500 billion.
B) $1,000 billion.
C) $1,500 billion.
D) an output level that is indeterminate from this information because aggregate demand is not given.
C) $1,500 billion.
4) Refer to Figure 11.1. At aggregate output levels below $500 billion, this economy is most likely experiencing
A) rapid increases in the growth rate of the money supply.
B) a boom.
C) excess demand.
D) excess capacity.
D) excess capacity.
5) Coal is used as a source of energy in many manufacturing processes. Assume a long strike by coal miners reduced the supply of coal and increased the price of coal. This would cause
A) the short-run aggregate supply curve to shift to the right.
B) the short-run aggregate supply curve to become flatter.
C) the short-run aggregate supply curve to shift to the left.
D) the short-run aggregate supply curve to become nearly vertical at all levels of output.
C) the short-run aggregate supply curve to shift to the left.
Which of the following causes the economy to move from Point A to Point E? (shift to the left)
A) an oil embargo that increases the price of oil
B) technological progress
C) an influx of immigrants
D) an increase in the price level
A) an oil embargo that increases the price of oil
7) Refer to Figure 11.4. During the 1990s, many firms in the United States were investing in new capital. If the economy was originally at Point A, this would have caused a movement to Point
A) E.
B) B.
C) C.
D) D.
D) D.
8) When the aggregate supply curve is ________ the price of factors of production is fixed, with little or no upward pressure on price.
A) horizontal
B) vertical
C) upward sloping
D) downward sloping
A) horizontal
9) When the aggregate supply curve is ________ any increase in the price level will not cause an increase in aggregate output.
A) horizontal
B) vertical
C) upward sloping
D) downward sloping
B) vertical
10) Which of the following equations represents equilibrium in the goods market?
A) AE = I(r)
B) Y = AD + AS
C) Y = S + I
D) AE = C + I + G
D) AE = C + I + G
11) A decrease in government purchases shifts the ________ curve to the ________. A) aggregate demand; left B) aggregate supply; left C) aggregate demand; right D) aggregate supply; rightA) aggregate demand; leftRefer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. A decrease in the Z factors ________ equilibrium output and ________ the price level. A) decreases; leaves unchanged B) leaves unchanged; increases C) increases; increases D) increases; decreasesC) increases; increases13) Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably A) increase both the equilibrium output and the price level. B) decrease the equilibrium output and increase the price level. C) increase the equilibrium output and decrease the price level. D) decrease both the equilibrium output and the price level.B) decrease the equilibrium output and increase the price level.14) The aggregate demand curve slopes downward because at higher price levels A) the purchasing power of consumers' assets declines and consumption increases. B) producers can get more for what they produce, and they increase production. C) the purchasing power of consumers' assets declines and consumption decreases. D) the purchasing power of consumers' assets increases and consumption increases.C) the purchasing power of consumers' assets declines and consumption decreases.15) When the general price level rises, A) consumption falls as a result of the real wealth effect. B) consumption increases as a result of the multiplier effect. C) investment rises as a result of the real wealth effect. D) investment rises as a result of the multiplier effect.A) consumption falls as a result of the real wealth effect.16) The aggregate demand curve would shift to the left if A) government spending were increased. B) net taxes were increased. C) the money supply were increased. D) the cost of energy were to decrease.B) net taxes were increased.17) A decrease in net taxes at a given price level leads to A) no change in aggregate demand. B) an increase in aggregate demand. C) a decrease in aggregate demand D) a decrease in aggregate supply.B) an increase in aggregate demand.18) Aggregate demand increases if A) the government increases spending. B) the Fed sells government bonds. C) the government increases taxes. D) the Fed raises the discount rate.A) the government increases spending.19) Aggregate demand increases if A) the government decreases spending. B) the Fed sells government bonds. C) the government decreases taxes. D) the Fed increases the required reserve ratio.C) the government decreases taxes.20) Refer to Figure 12.1. An aggregate demand shift from AD2 to AD0 can be caused by A) a decrease in the price level. B) an increase in the price level. C) a decrease in taxes. D) a decrease in money supply.C) a decrease in taxes.21) Refer to Figure 12.1. An aggregate demand shift from AD1 to AD0 can be caused by A) a decrease in government spending. B) an increase in money supply. C) a decrease in the price level. D) an increase in the price level.A) a decrease in government spending.22) Fiscal policy affects the goods market through A) changes in money supply. B) changes in taxes and money supply. C) changes in government spending and money supply. D) changes in taxes and government spending.D) changes in taxes and government spending.23) Which of the following is an example of an expansionary fiscal policy? A) the Fed selling government securities in the open market B) the federal government increasing the marginal tax rate on incomes above $200,000 C) the federal government increasing the amount of money spent on public health programs D) the federal government reducing pollution standards to allow firms to produce more outputC) the federal government increasing the amount of money spent on public health programs24) The objective of a contractionary fiscal policy is to A) reduce unemployment. B) increase growth in output. C) reduce inflation. D) increase stagflation.C) reduce inflation.25) The objective of an expansionary fiscal policy is to A) reduce unemployment. B) reduce inflation. C) reduce growth in output. D) reduce growth in international trade.A) reduce unemployment.26) If a decrease in net taxes in the United States resulted in a very large increase in aggregate output and a very small increase in the price level, then the U.S. economy must have been. A) on the very steep part of the short-run aggregate supply curve. B) on the very flat part of the short-run aggregate supply curve. C) on the very steep part of the short-run aggregate demand curve. D) on the very flat part of the short-run aggregate demand curve.B) on the very flat part of the short-run aggregate supply curve.27) Economic policies are ineffective concerning quantities of output directly when A) the aggregate supply curve is flat. B) the aggregate demand is flat. C) the aggregate supply is vertical. D) the economy is not producing at capacity.C) the aggregate supply is vertical.28) Which of the following would shift the aggregate demand curve to the left? A) an increase in the money supply B) an increase in government spending C) an increase in taxes D) an increase in exportsC) an increase in taxes29) The functioning of the labor market primarily affects the shape of the A) aggregate demand curve. B) money demand curve. C) aggregate supply curve. D) planned investment curve.C) aggregate supply curve.30) The type of unemployment that arises during recessions is known as A) the natural rate of unemployment. B) cyclical unemployment. C) structural unemployment. D) frictional unemployment.B) cyclical unemployment.31) The type of unemployment that is most likely to arise as a result of technological changes is A) cyclical unemployment. B) seasonal unemployment. C) frictional unemployment. D) structural unemployment.D) structural unemployment.32) If a country has a population of 400 million, 160 million people employed and 40 million people looking for work, then its unemployment rate is A) 10%. B) 20%. C) 25%. D) 40%.B) 20%.33) Refer to Figure 13.1. At wage rate $15, there is a ________ of labor equal to ________ million people. A) surplus; 150 B) shortage; 150 C) shortage; 120 D) surplus; 120D) surplus; 12034) Refer to Figure 13.1. At wage rate $6, there is a ________ of labor equal to ________ million people. A) shortage; 180 B) shortage; 60 C) surplus; 180 D) surplus; 60B) shortage; 6035) Intel Corporation, a major manufacturer of microchips, saw the demand for its product drop by 25%. Even though the demand for its product decreased, Intel did not cut the wages of its nonunionized workers. This is an example of A) employment-at-will. B) an implicit or social contract not to cut wages. C) an explicit contract not to cut wages. D) a relative-wage contract.B) an implicit or social contract not to cut wages.36) Frito Lay experienced a 20% drop in its sales. Even though the demand for its product decreased, Frito Lay did not cut the wages of its nonunionized workers. This is an example of A) an explicit contract not to cut wages. B) employment-at-will. C) poor management. D) an implicit or social contract not to cut wages.D) an implicit or social contract not to cut wages.37) Refer to Figure 13.6. Which panel represents the short-run Phillips curve? A) A (left to right downward slope) B) B (left ro right upward slope C) C (Vertical) D) D (Horizontal)A) A (left to right downward slope)38) Refer to Figure 13.7. The unemployment rate at U1 A) is greater than the natural rate. B) is lower than the natural rate. C) equals the natural rate. D) equals zero.C) equals the natural rate.39) Refer to Figure 13.7. If the natural unemployment rate equals 6%, the unemployment rate at U2 could be A) 4%. B) 5%. C) 6%. D) 7%.D) 7%.40) Refer to Figure 13.7. If the economy is at Point A, an increase in money supply will move the economy to Point ________ in the short run. A) E B) B C) C D) DC) C41) A firm issues bonds to A) borrow money. B) earn a return. C) lend money. D) influence monetary policy.A) borrow money42) A firm might issue stock to A) finance a capital project. B) decrease the number of owners. C) to increase its debt. D) employ more people.A) finance a capital project.43) A bond is A) a share of ownership in a company. B) a document that formally promises to repay a loan. C) a promise to pay a dividend. D) a non-contingent payment.B) a document that formally promises to repay a loan.44) Firms can finance capital spending by doing all of the following except A) selling stock in the company. B) issuing bonds. C) borrowing from a bank. D) paying dividends.D) paying dividends.45) Among the factors that determine the price of a share of stock in a firm is A) expected dividends. B) the number of workers the firm has. C) the number of years the firm has existed. D) the time to maturity of a bond.A) expected dividends.46) A capital gain is A) when you can sell an asset for more than you paid for it. B) when you increase the plant and equipment you own. C) when your dividends rise. D) when your coupon payment rises.A) when you can sell an asset for more than you paid for it.47) The Standard and Poor's 500 index is A) an index of a basket of consumer good purchased by the typical consumer. B) an index based on the stock prices of 30 actively traded large companies. C) an index based on the 500 largest firms traded in the three biggest stock markets. D) an index of 5,000 companies traded on the national association of securities dealers automatic quotation system.C) an index based on the 500 largest firms traded in the three biggest stock markets.48) If interest rates are positive, one dollar today is worth A) more than a dollar a year from now. B) less than a dollar a year from now. C) the same as a dollar a year from now. D) nothing.A) more than a dollar a year from now.49) A boom in the stock market affects the economy because A) firms invest more as demand grows. B) consumers consume more as stock prices increase. C) wealth of consumers grows as stock prices increase. D) all of the aboveD) all of the above50) If the government spending multiplier were 3.5, a $2 billion decrease in government spending would lower GDP by A) $70 billion after one year. B) $2 billion after two years. C) $1.5 billion after one year. D) $7 billion after one year.D) $7 billion after one year.51) If the Fed buys U.S. Treasury bills and bonds to finance deficits, this means that the government is financing the deficit by A) lowering inflation. B) raising interest rates. C) selling capital. D) printing money.D) printing money.52) If the U.S. Treasury is forced to sell bills and bonds to the U.S. public to finance deficits, this may ________ the price of bonds and ________ the interest rates on the bonds. A) drive down; drive down B) drive down; drive up C) drive up; drive down D) drive up; drive upB) drive down; drive up53) The way the U.S. government borrows money to finance deficits is by A) selling shares of stock in the government. B) the U.S. Treasury selling bills and bonds. C) purchasing foreign assets. D) lowering interest rates.B) the U.S. Treasury selling bills and bonds.54) An example of automatic stabilizers is A) government spending falling in a recession. B) taxes falling in a recession. C) deficit targeting. D) all of the aboveB) taxes falling in a recession.55) An example of automatic stabilizers is A) government spending falling during an expansion. B) government spending falling during a recession. C) taxes falling in an expansion. D) deficit targeting.A) government spending falling during an expansion.