EXAMPLE QUESTIONS
1) In the Phillips curve equation, which of the 6) An increase in the price of oil will likely cause
following will cause an increase in the current which of the following?
inflation rate? A) increase the sum "m + z" in the Phillips
A) an increase in the markup, m curve equation
B) an increase in the expected inflation rate B) increase the markup in the Phillips curve
C) a reduction in the unemployment rate equation
D) all of the above C) increase the natural rate of
unemployment
2) The original Phillips curve implied or assumed D) all of the above
that
A) the actual and expected rates of inflation 7) The Phillips curve shows that when the
would always be equal. unemployment rate is lower than the natural
B) the markup over labor costs was zero. rate,
C) the expected rate of inflation would be A) inflation is lower than expected.
zero. B) inflation is higher than expected.
D) all of the above C) policy rate is lower than expected.
D) policy rate is higher than expected.
3) Assume that expected inflation is based on the
following: πet = θπt-1. An increase in θ will 8) The Phillips curve shows that when the
cause unemployment rate is higher than the natural
A) a reduction in the natural rate of rate,
unemployment. A) inflation is higher than expected.
B) no change in the natural rate of B) policy rate is lower than expected.
unemployment. C) policy rate is higher than expected.
C) an increase in the natural rate of D) inflation is lower than expected.
unemployment.
D) inflation in period t to be more 9) Okun's law shows that when the
responsive to changes in unemployment unemployment rate is below the natural rate,
in period t. A) inflation is higher than expected.
B) output is below potential.
4) Which of the following will not cause an C) output is above potential.
increase in the natural rate of unemployment? D) inflation is lower than expected.
A) an increase in m
B) an increase in z 10) If the output is too high, to achieve the
C) a reduction in m medium run equilibrium, the central bank will
D) an increase in the expected inflation rate A) increase money supply.
B) increases policy rate.
5) If a country experiences persistently low C) increases inflation rate.
inflation, which of the following tends NOT to D) reduces policy rate.
occur?
A) the markup over labor costs will decrease 11) From 1970 to the mid-1990s, the relative price
B) wage indexation will become less of crude petroleum
important A) steadily increased.
C) nominal wages will be set for shorter B) remained more or less the same.
periods of time C) steadily decreased.
D) all of the above D) increased dramatically, then decreased
dramatically.
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12) The wage setting relation is 18) Suppose the economy is initially in the steady
A) downward sloping. state. A reduction in the depreciation rate (δ)
B) vertical. will cause
C) upward sloping. A) an increase in the growth rate in the long
D) horizontal. run.
B) a reduction in C/N.
13) A reduction in the saving rate will not affect C) an increase in K/N.
which of the following variables in the long D) all of the above
run?
A) capital per worker 19) In the production function Y = f(K, NA), for a
B) the amount of capital in the economy given state of technology, constant returns to
C) output per worker scale implies that output (Y) will increase by
D) the growth rate of output per worker 7% when
A) K or NA increase by 7%.
14) Which of the following is not a flow variable? B) K and N increase by 7%.
A) the money supply C) N and A increase by 7%.
B) saving D) N or A increase by 7%.
C) investment
D) output 20) Which of the following will cause an increase
in output per effective worker?
15) The capital-labor ratio will tend to decrease A) a reduction in the saving rate
over time when B) an increase in population growth
A) investment per worker exceeds C) an increase in the rate of technological
depreciation per worker. progress
B) output per worker exceeds capital per D) an increase in the saving rate
worker.
C) investment per worker is less than saving 21) Which of the following will cause an increase
per worker. in the steady-state growth rate of capital?
D) investment per worker equals saving per A) a temporary increase in technological
worker. progress
B) an increase in the population growth rate
16) Which of the following statements is always C) an increase in the saving rate
true? D) all of the above
A) Investment equals depreciation.
B) Investment equals the capital stock 22) Assume that an economy experiences both
minus depreciation. positive population growth and technological
C) The capital stock is equal to investment progress. In this economy, which of the
minus depreciation. following is constant when balanced growth is
D) Any change in the capital stock is equal achieved?
to investment minus depreciation. A) Y/NA B) NA
C) K/N D) K
17) When an economy is operating at the steady
state, we know that
A) steady state saving exceeds depreciation
each year by a constant amount.
B) steady state saving equals consumption.
C) steady state saving is equal to
depreciation per worker.
D) steady state saving is less than total
consumption.
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23) Which of the following best describes a
situation where research is considered
appropriable?
A) research that translates into many new
products
B) research that is well suited to its
commercial purpose
C) research that is easily copied by another
firm
D) all of the above
24) Suppose output per worker in a country has
grown at the same rate as technology over for
many years. This country's growth would be
described as
A) "effective" growth.
B) "diffuse" growth.
C) "appropriable" growth.
D) "balanced" growth.
25) Which of the following is always true after an
economy reaches a balanced growth
equilibrium?
A) population growth is zero
B) the growth rate of output equals the rate
of depreciation
C) the growth rate of capital is equal to the
growth rate of the effective work force
D) the growth rate of capital is equal to the
savings rate
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Answer Key
Testname: MACROEXAMPLE
1) D
2) C
3) B
4) D
5) B
6) D
7) B
8) D
9) C
10) B
11) D
12) A
13) D
14) D
15) C
16) D
17) C
18) C
19) B
20) D
21) B
22) A
23) D
24) D
25) C