Question 1

An economy is at equilibrium output when
A)Y = C + I + G + NX
B)Y = AD + C + G + NX
C)Y = AD + C + I + G + NX
D)Y = AD + C + I + G

Accepted Answer

C

Question 2

CENTRAL BANK use contractionary monetary policy
A)to increase govt expenditure
B)to reduce inflation
C)all of the above
D)none of the above

Accepted Answer

Contractionary monetary policy is used by central banks to reduce inflation. This involves increasing interest rates to decrease borrowing and spending, which in turn reduces the inflation rate.

Question 3

Which one of the following is the objective of fiscal policy?
A)achieve full employment.
B)stabilize the price level.
C)maintain equilibrium in the Balance of Payments.
D)all of the above

Accepted Answer

The objective of fiscal policy is to achieve full employment, stabilize the price level, and maintain equilibrium in the Balance of Payments, making all of the options correct.

Question 4

Contractionary Fiscal Policy includes:
A)slow economic growth
B)stamp out inflation
C)all of the above
D)none of the above

Accepted Answer

Contractionary fiscal policy is designed to slow economic growth in order to combat inflation, so both A and B are correct outcomes or goals of such a policy.

Question 5

under fisher's quantity theory of money,M denoted
A)medium
B)the total quantity of legal tender money
C)measurement tool
D)money

Accepted Answer

The total quantity of legal tender money is denoted by M in Fisher's quantity theory of money.

Question 6

who is the head of the MONETARY POLICY committee?
A)RBI, governor
B)RBI, deputy governor
C)Prime Minister
D)President

Accepted Answer

The head of the Monetary Policy Committee in India is the Governor of the Reserve Bank of India (RBI).

Question 7

The phenomenon of sticky wages usually leads to unemployment during a recession.
A)higher
B)lower
C)stabalize
D)none of the above

Accepted Answer

Sticky wages refer to the resistance of wages to decrease even when the economic conditions warrant a reduction. During a recession, when demand for goods and services falls, employers may need to reduce costs. However, if wages do not adjust downward due to their sticky nature, employers may instead reduce the number of employees, leading to higher unemployment.

Question 8

If inflation is 6% and you receive a 1% raise in your nominal wage, by how much did your real wage change?
A)-5%
B)1%
C)-6%
D)6%

Accepted Answer

Your real wage, which is your wage adjusted for inflation, effectively decreased by 5%. This is because if inflation is 6%, it means the general price level of goods and services has increased by 6%. If your nominal wage (the wage not adjusted for inflation) only increases by 1%, your purchasing power decreases. The real wage change is calculated as the nominal wage increase minus the inflation rate, which in this case is 1% - 6% = -5%.

Question 9

If inflation is 1% and you receive a 1% raise in your nominal wage, by how much did your real wage change?
A)0%
B)1%
C)2%
D)3%

Accepted Answer

Your real wage did not change because the increase in your nominal wage exactly offsets the inflation rate, leaving your purchasing power unchanged.

Question 10

The quantity theory of money is expressed by the identity equation:
A)M*Y=P+Y
B)M*V=P*Y
C)M+V=P
D)none of the above

Accepted Answer

The quantity theory of money is expressed by the equation M*V = P*Y, where M is the money supply, V is the velocity of money, P is the price level, and Y is the real output. This equation states that the product of the money supply and its velocity is equal to the product of the price level and real output.

Question 11

In the quantity theory of money, P and Y represent the price and quantity of:
A)all finished goods and services in an economy.
B)all finished goods sold in an economy.
C)all finished goods and services sold in an economy.
D)none of the above

Accepted Answer

In the quantity theory of money, P represents the price level, and Y represents the real output or quantity of all finished goods and services sold in an economy. This theory is often used to explain the relationship between the money supply and the price level within an economy.

Question 12

Which of the following is not a component of Aggregate Demand?
A)Saving
B)Investment
C)Consumption
D)Net Exports

Accepted Answer

Saving is not a component of Aggregate Demand. Aggregate Demand consists of Investment, Consumption, and Net Exports, along with Government Spending (not listed here). Saving is actually a leakage from the circular flow of income and not a direct component of Aggregate Demand.

Question 13

An example of a government expenditure is
A)a social security payment to an elderly person.
B)employing a public school teacher.
C)an unemployment insurance check.
D)All of the above

Accepted Answer

The answer of An example of a government expenditure is
A)a...

Question 14

Which of the following items is an investment?
A)purchase of a mutual fund.
B)purchase of a U.S. government bond.
C)purchase of a new farm tractor.
D)purchase of a stock.

Accepted Answer

The purchase of a new farm tractor is considered an investment because it is a capital expenditure that will be used to produce goods or services, contributing to economic growth. The other options are financial investments, not capital investments.

Question 15

Which factor would shift the Aggregate Demand curve to the right?
A)a fall in interest rates which increases investment
B)an increase in real incomes due to a rise in GDP.
C)an increase in real wages.
D)an appreciation of the dollar.

Accepted Answer

A fall in interest rates makes borrowing cheaper, encouraging investment and consumption, which increases aggregate demand, shifting the curve to the right.

Question 16

When using AD/AS analysis to illustrate changes within an economy, which of the following would NOT need to be considered when looking at changes to economic growth?
A)Increased labour productivity
B)More efficient use of the capital stock
C)Developing a more efficient capital and finance sector
D)Increased availability of social capital

Accepted Answer

Increased availability of social capital does not directly relate to the Aggregate Demand/Aggregate Supply (AD/AS) model's typical considerations for economic growth. The AD/AS model primarily focuses on factors that directly affect the economy's productive capacity (like labor productivity and capital efficiency) and overall demand and supply conditions. Social capital, while important for various aspects of economic and social development, does not directly influence the economic growth mechanisms depicted in the AD/AS analysis.

Question 17

Which of the following is a major influence on AS?
A)The quality of the factors available
B)Consumption
C)Government spending
D)The advice of government

Accepted Answer

The quality of the factors available (such as labor, capital, and technology) significantly influences Aggregate Supply (AS) by affecting the production capacity and efficiency of an economy.

Question 18

The Phillips curve implied that there was a trade- off available to governments between:
A)The price level and unemployment
B)The price level and employment
C)Out put and employment
D)Inflation and unemploymen t

Accepted Answer

The Phillips curve suggests a trade-off between inflation and unemployment, implying that lower unemployment comes with higher inflation and vice versa.

Question 19

A belief that expectations were exogenous could lead one to the view that judgements about the future were likely to be based on:
A)The best available information
B)Past experience
C)all of the above
D)none of the above

Accepted Answer

The answer of A belief that expectations were exogenous could...

Question 20

Which of these is NOT a monetary policy tool?
A)open market operations
B)balanced accounts
C)reserve requirements
D)discount rates

Accepted Answer

Balanced accounts are not a monetary policy tool. Monetary policy tools include open market operations, reserve requirements, and discount rates, which central banks use to control the money supply and influence interest rates. Balanced accounts relate to fiscal policy or accounting practices, not monetary policy.

Quiz 1: Macroeconomic Concepts and Policies

An economy is at equilibrium output when

CENTRAL BANK use contractionary monetary policy

Which one of the following is the objective of fiscal policy?

Contractionary Fiscal Policy includes:

under fisher's quantity theory of money,M denoted

who is the head of the MONETARY POLICY committee?

The phenomenon of sticky wages usually leads to unemployment during a recession.

If inflation is 6% and you receive a 1% raise in your nominal wage, by how much did your real wage change?

If inflation is 1% and you receive a 1% raise in your nominal wage, by how much did your real wage change?

The quantity theory of money is expressed by the identity equation:

In the quantity theory of money, P and Y represent the price and quantity of:

Which of the following is not a component of Aggregate Demand?

An example of a government expenditure is

Which of the following items is an investment?

Which factor would shift the Aggregate Demand curve to the right?

When using AD/AS analysis to illustrate changes within an economy, which of the following would NOT need to be considered when looking at changes to economic growth?

Which of the following is a major influence on AS?

The Phillips curve implied that there was a trade- off available to governments between:

A belief that expectations were exogenous could lead one to the view that judgements about the future were likely to be based on:

Which of these is NOT a monetary policy tool?