MACROECONOMICS

1. A supply curve slopes upward because: a. an increase in input prices increases supply b. the quantity supplied of most goods and services increases over time c. an increase in price gives producers an incentive to supply a larger quantity d. as more is produced, total cost of production falls

2. The aggregate demand curve, when plotted against price:

a. slopes upwards because all governments subsidize the export of goods and services b. slopes downward because of the income effect and the substitution effect, just as with

individual products c. slopes downward because of the real balances effect, the interest-rate effect, and the foreign

purchases effect d. slopes upwards because of government purchases of goods and services equals gross private

domestic investment

3. Business investment will: a. decrease in response to the introduction of new technologies that make possible advanced

consumer products, thus reducing aggregate demand b. increase in response to new technologies that will help cut the costs of production of existing

products, thus raising aggregate demand c. increase in response to higher excess capacity, thus raising aggregate demand d. increase in response to higher business taxes, as firms will have to work "smarter" to earn a

decent profit, thus raising aggregate demand

4. According to Keynes, what causes the lack of consumption which fuels recessions? a. too much investment b. flexible prices c. too much saving d. intended inventories

5. What is the simple Keynesian multiplier when mpc=.8?

a. 2 b. .2 c. 5 d. 8

6. Which one of the following is true?

a. MPC=MPS-1 b. MPC-MPS=1 c. MPC+MPS=1 d. MPC=1/MPS

7. Economics is the study of: a. production methods b. how households decide who performs which tasks c. the interaction of business and government d. how society manages its scarce resources

8. Often LDCs experience real growth but become poorer. Which one of the following best

explains why? a. rGDP growth exceeded population growth b. nominal GDP grew faster than price level c. price level grew faster than nominal GDP d. population growth exceeded rGDP growth

9. Trade among nations is ultimately based on:

a. technical advantage b. strategic advantage c. absolute advantage d. comparative advantage

10. What is the current currency exchange system known as?

a. The current currency exchange system is known as a fixed currency exchange system. b. The current currency exchange system is known as the Bretton Woods currency exchange

system. c. The current currency exchange system is known as a float or flexible currency exchange

system. d. The current currency exchange system is known as the gold standard.

Macroeconomics Answer Key

1. C 2. C 3. B 4. C 5. C 6. C 7. D 8. D 9. D 10. C

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