CEE

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. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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