Macroeconomics Test

For each of the following questions, select the choice that BEST corresponds with the answer. You will receive 10 points for each correct answer; 5 points will be deducted for each incorrect answer. Points will be neither awarded or taken away if you do not attempt to answer a question.
1. The money supply in the United States is controlled by

Congress (in particular, the Senate Committee on Banking and Finance)
the commercial banking industry
the U.S. Treasury Department
the Federal Reserve
the New York Stock Exchange
 

2. Which of the following would expand aggregate demand according to Keynesians (demand-side economists), but stimulate aggregate supply according to supply-siders?

Increasing government purchases of goods and services
Increasing transfer payments
Decreasing the money supply
Increasing the general level of interest rates
Decreasing personal and corporate tax rates
 

3. If a nation's depreciation exceeds its gross investment, we can say that

net investment is positive
net investment is zero
the nation's stock of capital is growing
the nation's stock of capital is declining
the nation's GDP will rise
 

4. Fiscal policy refers to the control of

interest rates by the Federal Reserve System
business policies to increase competition
the government budget to influence total spending
government spending in order to balance the budget
the growth of the money supply
 

5. Which of the following is a contractionary economic policy?

The selling of securities by the Federal Reserve
Reductions in corporate and personal income taxes
Increases in the size of the federal budget deficit
Reductions in interest rates
Increased rate of growth of the money supply
 

6. The market value of all final goods and services produced in the economy in a given year is the

Net National Product
National Income
Personal Income
Gross Domestic Product
Producer Price Index
 

7. Which of the following would be the most likely to cause cost-push inflation?

A reduction in federal income tax rates
A decrease in the general level of interest rates
An increase in world oil prices
Wage concessions by large labor unions
An increase in the growth of the money supply
 

8. An economy is experiencing low rates of unemployment with high inflation. An appropriate mix of government policies might be to

increase taxes; decrease government spending; increase interest rates
decrease taxes; increase government spending; decrease interest rates
decrease taxes; decrease government spending; decrease interest rates
increase taxes; decrease government spending; decrease interest rates
decrease taxes; increase government spending; increase interest rates
 

9. The discount rate is the interest rate at which

the Federal Reserve lends to commercial banks
commercial banks lend to each other
the public lends to the federal government
the Federal Reserve lends to the U.S. Treasury
commercial banks lend to the public
 

10. Which of the following is an example of structural unemployment?

A computer programmer who quits his job to move to a warmer climate
A construction worker who loses his job in the winter
An autoworker who loses her job during a recession
A steelworker who is replaced by a robot
A toymaker who worked for a company that closed because consumers did not buy its toys
 

11. If the rate of growth in an economy is 2 percent, inflation is 3 percent, and the nominal rate of interest is 10 percent, what is the real rate of interest?

5 percent
7 percent
8 percent
12 percent
13 percent
 

12. Which of these events would likely reduce consumer spending?

A reduction in personal income tax rates
A general expectation that the rate of inflation will soon begin to rise
A general decrease in interest rates
A decrease in stock prices
A reduction in the rate of unemployment
 

13. According to Keynesian theory, which combination of policies below is consistent (that is, the policies would tend to reinforce instead of offset each other)?

Decrease taxes; increase government spending; increase the money supply
Decrease taxes; decrease government spending; increase the money supply
Decrease taxes; increase government spending; decrease the money supply
Increase taxes; increase government spending; increase the money supply
Increase taxes; decrease government spending; increase the money supply
 

14. Which of the following would lead to a decrease in aggregate demand?

An increase in government spending
A decrease in labor productivity
An increase in personal income taxes
An increase in society's total wealth
Technological advancements
 

15. Which of the following would cause the unemployment rate to increase?

I. A man who quits his job to spend more time with his children
II. A woman who has not looked for a job in two years and begins looking again
III. A woman who quits her job and begins looking for a new job in another city

I only
II only
III only
I and II only
II and III only
 

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