1. The main goal of macroeconomic is to:

A. analyse current macroeconomic data.

B. predict how the macroeconomy will perform in the future.

C. make general statements about how the economy works.

D. develop new data that can be used to understand better the operation of the economy.

2. Equilibrium in the economy means:

A. unemployment is zero.

B. prices are not changing over time.

C. quantities demanded and supplied are equal in all markets.

D. tax revenues equal government spending, so the government has no budget deficit.

3. When aggregate economic activity is increasing, the economy is said to be in:

A. a peak.

B. a contraction.

C. an expansion.

D. a turning point.

4. The high point in the business cycle is referred to as the

A. turning point

B. peak

C. boom

D. trough

5. The three approaches to measuring economic activity are the

A. cost, income, and expenditure approaches

B. product, income, and expenditure approaches

C. consumer, business, and government approaches

D. private, public, and international approaches

6. The product approach to calculating GDP

A. adds together the market values of final goods and services produced by domestic and foreign-owned factors of production within the nation in some time period

B. includes the market value of goods and services produced by households for their own consumption but excludes the value of the underground economy

C. is superior to the income approach because, unlike the income approach, it gives us the real value of output

D. adds together the market values of final goods, intermediate goods, and goods added to inventories

7. The equation total production = total income = total expenditure is called

A. the goodsmarket equilibrium condition

B. the total identity

C. the fundamental identity of national income accounting

D. Say's Law

8. The fundamental identity of national income accounting is

A. total production = total income - total expenditure

B. total production = total income + total expenditure

C. total production = total income = total expenditure

D. total production = total income/total expenditure

9. Intermediate goods are

A. capital goods, which are used up in the production of other goods but were produced in earlier periods

B. final goods that remain in inventories

C. goods that are used up in the production of other goods in the same period that they were produced

D. either capital goods or inventories

10. Capital goods are

A. a type of intermediate good

B. final goods, because they are not used up during a given year

C. produced in the same year as the related final good, whereas intermediate goods are produced in different years

D. produced in one year, whereas final goods are produced over a period of more than one year

11. If nominal GDP for 2015 is $6400 billion and real GDP for 2010 is $6720 billion (in 2015 dollars), then the growth rate of real GDP is

A. 0%

B. 0.5%

C. 5%

D. 50%

12. Nominal GDP in 1970 was $1035.6 billion, and in 1980 it was $2784.2 billion. The GDP price index was 30.6 for 1970 and 60.4 for 1980, where 1992 was the base year. Calculate the percent change in real GDP in the decade from 1970 to 1980. Round off to the nearest percentage point.

A. 36%

B. 97%

C. 136%

D. 169%

13. If C = $250, I = $50, G = $60, NX = -$20, and NFP = $5, how much is GNP?

A. $365

B. $335

C. $340

D. $345

14. If government spending is $900 billion while government revenue is $600 billion, the government is said to have a:

A. $300 billion budget deficit.

B. $600 billion budget deficit.

C. $300 billion budget surplus.

D. $1,500 billion budget deficit.

15. If a country's merchandise exports EXCEED its merchandise imports it has a:

A. trade deficit.

B. trade surplus.

C. current account deficit.

D. current account surplus.

16. Because of diminishing marginal productivity

A. the labor supply curve is not vertical

B. nominal wages are sticky in a downward direction

C. the labor demand curve is negatively sloped

D. households save only a small share of their income

17. The desire to have a relatively even pattern of consumption over time is known as

A. excess sensitivity

B. the substitution effect

C. the consumption-smoothing motive

D. forced saving

18. When a person gets an increase in current income, what is likely to happen to consumption and saving?

A. Consumption increases and saving increases

B. Consumption increases and saving decreases

C. Consumption decreases and saving increases

D. Consumption decreases and saving decreases

19. When a person receives an increase in wealth, what is likely to happen to consumption and saving?

A. Consumption increases and saving increases

B. Consumption increases and saving decreases

C. Consumption decreases and saving increases

D. Consumption decreases and saving decreases

20. An increase in the personal income tax rate on interest income will

A. increase desired saving because the expected real after-tax interest rate rises

Answer 2 (Incorrect)

C. decrease desired saving because the expected real after-tax interest rate falls

D. increase desired saving because the expected real after-tax interest rate falls

21. If the government cuts taxes today, issuing debt today and repaying the debt plus interest next year, a rational taxpayer will

A. spend the full amount of the tax cut today and reduce consumption next year

B. increase consumption today, before taxes go up next year

C. increase saving today, leaving consumption unchanged

D. leave a smaller gross bequest to her or his heirs

22. A country is said to be experiencing inflation when:

A. total output is rising over time.

B. total output is falling over time.

C. prices of most goods and services are rising over time.

D. prices of most goods and services are falling over time.

23. A country is said to be experiencing deflation when:

A. total output is rising over time.

B. total output is falling over time.

C. prices of most goods and services are rising over time.

D. prices of most goods and services are falling over time.

24. When a cost-push inflation starts:

A. the price level rises and real GDP decreases.

B. the price level falls and the money wages rises.

C. real GDP rises faster than the quantity of money.

D. the short-run aggregate supply curve shifts rightward.