mcq covering every topic Flashcards
Which of the following is NOT a primary goal of macroeconomic policy?
a) Achieving full employment
b) Stabilizing prices
c) Promoting economic growth
d) Maximizing individual consumer satisfaction
d) Maximizing individual consumer satisfaction
Which of the following best describes the study of macroeconomics?
a) Analysis of individual markets and decision-making
b) Study of large-scale economic factors affecting the economy as a whole
c) Focus on the behavior of firms and consumers
d) Examination of specific sectors within the economy
b) Study of large-scale economic factors affecting the economy as a whole
Gross Domestic Product (GDP) is a:
a) Stock concept, measured at a point in time
b) Flow concept, measuring economic activity over a period
c) Measurement of a country’s total wealth
d) Measure of only the value of exported goods and services
b) Flow concept, measuring economic activity over a period
hich of the following components is included in the calculation of GDP?
a) Transfer payments
b) Investment
c) Underground economy
d) Used goods sales
b) Investment
The difference between GDP and GNP is:
a) GDP includes income from abroad, while GNP does not
b) GNP includes income from abroad, while GDP does not
c) GDP measures production by residents, while GNP measures production within a country
d) There is no difference between GDP and GNP
b) GNP includes income from abroad, while GDP does not
Monetarist economics primarily focuses on:
a) The role of aggregate demand in influencing economic output
b) The impact of government spending on economic growth
c) The role of money supply in influencing economic activity
d) The need for deregulation and tax cuts to boost supply
c) The role of money supply in influencing economic activity
Which school of thought emphasizes minimal government intervention and self-regulating markets?
a) Keynesian Economics
b) Classical Economics
c) Monetarist Economics
d) Supply-Side Economics
b) Classical Economics
Supply-Side Economics advocates for:
a) Increasing aggregate demand through government spending
b) Boosting economic growth by increasing aggregate supply
c) Controlling inflation through monetary policy
d) Using price controls to manage inflation
b) Boosting economic growth by increasing aggregate supply
In the Keynesian Aggregate Expenditure (AE) Model, equilibrium output occurs when:
a) Investment equals savings
b) Aggregate Expenditure equals income (Y = AE)
c) Government spending equals taxation
d) Aggregate Demand equals Aggregate Supply
b) Aggregate Expenditure equals income (Y = AE)
The Keynesian multiplier effect is associated with:
a) The relationship between interest rates and investment
b) The change in output resulting from a change in autonomous spending
c) The impact of money supply changes on inflation
d) The effect of supply-side policies on economic growth
b) The change in output resulting from a change in autonomous spending
The IS curve represents:
a) Equilibrium in the money market
b) Equilibrium in the goods market
c) The relationship between money supply and interest rates
d) The equilibrium between aggregate demand and aggregate supply
b) Equilibrium in the goods market
A contractionary monetary policy in the IS/LM model will:
a) Shift the IS curve to the right, increasing output
b) Shift the LM curve to the left, raising interest rates and reducing output
c) Shift the LM curve to the right, reducing interest rates and increasing output
d) Shift the IS curve to the left, reducing investment and output
b) Shift the LM curve to the left, raising interest rates and reducing output
In the IS/LM model, fiscal policy affects the:
a) LM curve
b) BP curve
c) IS curve
d) Aggregate Supply curve
c) IS curve
The “Impossible Trinity” or policy trilemma in the Mundell-Fleming model states that a country cannot simultaneously have:
a) High inflation, low unemployment, and high growth
b) Fixed exchange rate, independent monetary policy, and perfect capital mobility
c) Free trade, high tariffs, and high exchange rates
d) Flexible exchange rate, low interest rates, and high GDP
b) Fixed exchange rate, independent monetary policy, and perfect capital mobility
In the Mundell-Fleming model with a fixed exchange rate and perfect capital mobility, monetary policy is:
a) Effective in controlling inflation
b) Effective in influencing output
c) Ineffective because the BP curve is horizontal
d) Effective only when paired with fiscal policy
c) Ineffective because the BP curve is horizontal
The Aggregate Demand (AD) curve is negatively sloped because:
a) Higher prices lead to higher real wealth
b) Higher interest rates reduce consumption and investment
c) Higher prices increase the demand for exports
d) Lower prices increase the supply of goods and services
b) Higher interest rates reduce consumption and investment
The short-run Aggregate Supply (AS) curve is upward sloping because:
a) In the short run, prices and wages are flexible
b) In the long run, wages are fixed
c) As prices rise, firms are willing to produce more due to sticky wages
d) Higher aggregate demand always leads to higher prices
c) As prices rise, firms are willing to produce more due to sticky wages
Supply-side policies in the AD/AS model are designed to:
a) Shift the AD curve to the right
b) Shift the AS curve to the right
c) Increase government spending and taxation
d) Control inflation through monetary policy
b) Shift the AS curve to the right
Leakages, such as savings, imports, and taxes, in the multiplier process:
a) Increase the size of the multiplier
b) Decrease the size of the multiplier
c) Have no impact on the multiplier
d) Only affect long-run economic growth
b) Decrease the size of the multiplier
In the AD/AS model, long-run equilibrium occurs when:
a) Aggregate Demand equals Aggregate Supply at the natural level of output
b) The IS curve intersects the LM curve
c) The economy is at full employment
d) Prices are flexible and output is at its potential level
a) Aggregate Demand equals Aggregate Supply at the natural level of output
The fiscal multiplier effect implies that:
a) A decrease in taxes will always lead to higher inflation
b) Government spending has no impact on total output
c) A change in autonomous spending will have a multiplied effect on national income
d) The marginal propensity to consume (MPC) has no effect on the multiplier
c) A change in autonomous spending will have a multiplied effect on national income
In the circular flow model, an increase in government spending, with no changes in taxes or savings, would:
a) Decrease economic activity
b) Increase economic activity
c) Have no impact on economic activity
d) Only increase imports
b) Increase economic activity
If the economy is operating above potential output, the likely short-run impact is:
a) Increased unemployment
b) Lower inflation
c) A recession
d) Increased inflationary pressures
d) Increased inflationary pressures
Which of the following is NOT a leakage in the circular flow of income?
a) Savings
b) Investments
c) Taxes
d) Imports
b) Investments
Automatic stabilizers in the economy include:
a) Discretionary fiscal policy changes
b) Central bank interest rate adjustments
c) Progressive income taxes and unemployment benefits
d) Fixed exchange rates and tariffs
c) Progressive income taxes and unemployment benefits
The COVID-19 pandemic primarily caused:
a) A demand-side shock only
b) A supply-side shock only
c) Both demand-side and supply-side shocks
d) No significant economic impact
c) Both demand-side and supply-side shocks
The monetary transmission mechanism refers to:
a) The process by which fiscal policy affects aggregate demand
b) How changes in the money supply influence output and prices
c) The impact of government spending on inflation
d) The adjustment of exchange rates in response to interest rate changes
b) How changes in the money supply influence output and prices
In response to an economic downturn caused by a pandemic, an expansionary fiscal policy would likely include:
a) Decreasing government spending
b) Increasing taxes
c) Cutting interest rates
d) Increasing government spending and reducing taxes
d) Increasing government spending and reducing taxes
A stock concept is best described by which of the following?
a) National income over a year
b) Government spending in a quarter
c) The total national debt at a specific point in time
d) The flow of goods and services in an economy
c) The total national debt at a specific point in time
Which of the following statements about the IS/LM model is TRUE?
a) The IS curve represents equilibrium in the money market
b) The LM curve slopes downward because of the inverse relationship between interest rates and income
c) The IS/LM model is used to analyze fiscal and monetary policies
d) A shift in the IS curve does not affect the equilibrium output
c) The IS/LM model is used to analyze fiscal and monetary policies
In the Keynesian Aggregate Expenditure (AE) Model, equilibrium output occurs when:
a) Aggregate Supply equals income
b) Aggregate Expenditure equals income
c) Government spending equals taxation
d) Investment equals savings
b) Aggregate Expenditure equals income
The Keynesian multiplier effect is associated with:
a) The change in interest rates due to fiscal policy
b) The change in output resulting from a change in autonomous spending
c) The relationship between aggregate supply and aggregate demand
d) The impact of taxes on consumer spending
b) The change in output resulting from a change in autonomous spending
Which of the following would increase the Keynesian multiplier?
a) Increase in the marginal propensity to save
b) Increase in the marginal propensity to consume
c) Increase in taxes
d) Increase in imports
b) Increase in the marginal propensity to consume
A contractionary monetary policy in the IS/LM model will:
a) Shift the IS curve to the right
b) Shift the LM curve to the left
c) Increase both output and interest rates
d) Shift the IS curve to the left
b) Shift the LM curve to the left
In the IS/LM model, an increase in government spending will typically:
a) Shift the LM curve to the right
b) Shift the IS curve to the right
c) Decrease interest rates
d) Decrease output
b) Shift the IS curve to the right
The “Impossible Trinity” in the Mundell-Fleming model refers to the inability to simultaneously achieve:
a) High interest rates, low inflation, and full employment
b) Fixed exchange rate, independent monetary policy, and perfect capital mobility
c) Balanced budget, low unemployment, and stable exchange rates
d) High growth, low unemployment, and balanced trade
b) Fixed exchange rate, independent monetary policy, and perfect capital mobility
In a small open economy with a fixed exchange rate and perfect capital mobility, monetary policy is:
a) Very effective
b) Ineffective
c) More effective than fiscal policy
d) Only effective in the short run
b) Ineffective
Under a flexible exchange rate regime, an expansionary monetary policy would likely lead to:
a) A decrease in net exports
b) An increase in interest rates
c) An appreciation of the currency
d) A depreciation of the currency
d) A depreciation of the currency
The Aggregate Demand (AD) curve is downward sloping primarily because:
a) Higher interest rates increase savings
b) Lower prices increase the real wealth of consumers
c) Higher prices lead to increased production costs
d) Lower prices decrease the supply of money
b) Lower prices increase the real wealth of consumers
In the short run, the Aggregate Supply (AS) curve is typically:
a) Vertical
b) Horizontal
c) Upward sloping
d) Downward sloping
c) Upward sloping
A rightward shift in the Aggregate Supply (AS) curve could be caused by:
a) An increase in production costs
b) An improvement in technology
c) A decrease in labor productivity
d) A decrease in government spending
b) An improvement in technology
The multiplier effect refers to:
a) The increase in GDP due to an increase in money supply
b) The proportionate increase in output resulting from an increase in autonomous spending
c) The impact of tax cuts on government revenue
d) The effect of trade policies on exchange rates
b) The proportionate increase in output resulting from an increase in autonomous spending
Which of the following is NOT a leakage in the multiplier process?
a) Savings
b) Imports
c) Taxes
d) Government spending
d) Government spending
In the AD/AS model, long-run equilibrium occurs when:
a) Aggregate Demand equals Aggregate Supply at the natural level of output
b) Aggregate Demand exceeds Aggregate Supply
c) Aggregate Supply exceeds Aggregate Demand
d) The economy is experiencing hyperinflation
a) Aggregate Demand equals Aggregate Supply at the natural level of output
If the economy is operating above its potential output, the likely short-run impact is:
a) Decreased interest rates
b) Increased inflationary pressures
c) Decreased unemployment
d) Increased aggregate demand
b) Increased inflationary pressures
Which of the following policies would be most effective in reducing an inflationary gap?
a) Decreasing government spending
b) Decreasing interest rates
c) Increasing transfer payments
d) Increasing public sector wages
a) Decreasing government spending
In the circular flow model, an increase in government spending, with no changes in taxes or savings, would:
a) Increase economic activity
b) Decrease economic activity
c) Have no impact on economic activity
d) Only affect the savings rate
a) Increase economic activity
Which of the following is NOT considered a leakage in the circular flow of income?
a) Savings
b) Exports
c) Taxes
d) Government Spending
d) Government Spending
In the circular flow model, which of the following represents an injection into the economy?
a) Taxes
b) Imports
c) Savings
d) Investment
d) Investment
