1. Which of the following is listed as a primary goal of macroeconomic policy?
A)Economic depression B)Price instability
C)Equitable distribution of income D)Managing exchange rates
2. According to the Classical school of thought, one of the following is even about primary effect of an
increase in the money supply ?
A) A decrease in unemployment B)An increase in real output (GNP)
C)A rise in the price level (inflation) D)A lower interest rate
3. The Keynesian school of economics argues that a change in Aggregate Demand has its greatest short-
run impact on:
A) Prices level B)The exchange rate C)Real input and employment D)The interest rate
4. Which policy instrument is primarily concerned with managing the money supply and interest rates?
A)Fiscal Policy B)Monetary Policy C) Income Policy D)Trade Policy
5. The Neo-Keynesian synthesis suggests that the economy behaves differently in the short run versus
the long run. How?
A)Classical in the short run, Keynesian in the long run
B)Keynesian in the short run, Classical in the long run
C)Always Keynesian D)Always Classical
6. A key belief of Monetarists, as mentioned in the text, is that:
A)Fiscal policy is the most effective tool for stabilizing the economy.
B)Inflation is always a monetary phenomenon.
C)Wages and prices adjust quickly to clear markets.
D)Government should actively manage aggregate demand.
7. The concept that "the quantity of money affects only nominal variables and has no influence on real
variables" is known as:
A) Rational Expectations B)The Phillips Curve C)Classical Dichotomy D)Crowding Out
8. Which school of thought is most closely associated with the advocacy of a "laissez-faire" or free-
market system, with no role for government macroeconomic policy?
A)Keynesian B)Monetarist C)Neo-Keynesian D)Classical
9. According to the document, which framework is NOT listed as a method of macroeconomic analysis?
A )Aggregate Demand/Aggregate Supply B)Keynesian Model C)Phillips Curve D)Classical Model
10. The Neo-Keynesian synthesis combines which two ideas?
A)Rational expectations with sticky prices and wages
B)Market clearing with involuntary unemployment
C)Fiscal policy with the quantity theory of money
D)Laissez-faire with government interventio
11. Which of the following is a leakage from the circular flow of income?
A) Investment B) Government spending C) Savings D) Exports
12. Which of the following is an injection into the circular flow?
A) Taxes B) Imports C) Government expenditure D) Savings
13. The equilibrium level of national income occurs when:
A) Leakages = Injections B) Savings > Investment
C) Imports > Exports D) Government spending = Taxes
14. If marginal propensity to consume (MPC) = 0.75, the multiplier is:
A) 2 B) 4 C) 3 D) 5
15. When planned investment is greater than savings:
A) Income falls B) Income rises C) Economy is in equilibrium D) Imports increase
16. If consumption = 200 + 0.8Y, then at Y = 1000, consumption is:
A) 800 B) 1000 C) 1200 D) 200
17. An increase in government spending shifts:
A) Aggregate supply to the left B) Aggregate demand to the right
C) Aggregate demand to the left D) Aggregate supply to the right
88. Which of the following reduces the value of the multiplier?
A) High MPC B) Low MPS C) High imports D) High investment
19. If MPC = 0.6, then MPS = ?
A) 0.2 B) 0.4 C) 0.6 D) 0.8
20. A rise in taxation will:
A) Increase disposable income B) Decrease disposable income
C) Leave disposable income unchanged D) Increase investment
21. GDP excludes:
A) Consumption B) Investment C) Exports D) Transfer payments
22. GNP = GDP + …
A) Depreciation B) Net factor income from abroad
C) Transfer payments D) Taxes
23. Which of the following measures inflation?
A) GDP deflator B) GNP C) Disposable income D) Saving rate
24. Real GDP is measured at:
A) Current prices B) Constant prices
C) Market prices D) Factor cost
25. Disposable income is equal to:
A) Personal income – personal taxes
B) National income – depreciation
C) GDP – imports D) GNP – indirect taxes
26. The informal economy includes:
A) Household production not sold in markets
B) Government spending C) Recorded services D) Exports
27. If Nominal GDP = 200 and Real GDP = 160, GDP deflator is:
A) 100 B) 110 C) 120 bD) 125
28. The lowest point of a business cycle is called:
A) Recession B) Peak C) Recovery D) Trough
29. Cost-push inflation occurs due to:
A) Increase in demand B) Increase in costs of production
C) Decrease in money supply D) Increase in imports
30. Which method is not used to measure GDP?
A) Expenditure approach B) Income approach
C) Value-added approach D) Comparative advantage approach
31. Net exports (NX) =
A) Exports + Imports B) Exports – Imports
C) Imports – Exports D) Saving – Investment
32. If S > I in an open economy:
A) Trade deficit B) Net lender position
C) Imports exceed exports D) Exports equal imports
33. Under floating exchange rates, fiscal expansion usually leads to:
A) Currency depreciation B) Currency appreciation
C) No effect D) Inflation only
34. The real exchange rate measures:
A) Nominal value of currencies B) Relative prices of goods between countries
C) Money supply growth D) Interest rates
35. Under fixed exchange rates, which policy is more effective?
A) Fiscal policy B) Monetary policybC) Both equally D) Neither
Work-out Questions
1. If C = 200, I = 150, G = 100, X = 80, M = 60, calculate GDP.
2. Nominal GDP = 1000, Real GDP = 800. Find GDP deflator.
3. A country’s Personal income = 500, Taxes = 120. Find disposable income.
4. Real GDP growth = 6%, Population growth = 2%. Find per capita growth.