Macroeconomics Study Guide: Comprehensive Q&A with Explanations
Macroeconomics Study Guide: Comprehensive Q&A
1. As part of the aggregates of an economy open to foreign trade and with a public deficit, it can be affirmed that:
a) If there is a trade surplus, there will be a private sector surplus.
Consider an open economy where goods are exported for a value of 100 and imported goods are worth 50. In accounting terms of aggregate quantities:
b) If the public sector is in deficit, private savings must be greater than private investment.
2. The deflation refers to:
a) Reduction of the general price level.
3. When the nominal GDP decreases for a period of time, we know with certainty that:
b) Either the real GDP or the deflator, or both, decreased.
4. Suppose a company spends €200 million on intermediate assets and €400 million on wages. There are no other costs to consider. Suppose the total sales amounted to €700 million, what is the value added of the company?
e) €500 million.
5. What price from among the following are included in both the GDP deflator and the consumer price index?
d) Prices for goods purchased by households.
6. In Y = CO + C1 (YT) + I + G, which of the following variables is endogenous in the goods market?
c) Savings.
7. In the income-expenditure model defined by: Y = Co + C1(YT) + I + G, indicate the correct answer in relation to the adjustment process of the economy when current income is less than the equilibrium income.
d) Excess demand will reduce inventory and increase production.
8. In the income-expenditure model defined by: Y = CO + C1 (YT) + I + G, which of the alternatives tend to reduce the multiplier?
b) Increased marginal propensity to save.
9. Assume two closed economies (A and B) where the marginal propensities to save are S(A) = 0.2 and S(B) = 0.4. If the governments of both countries decide to increase public expenditure at the same rate:
a) The multiplier of country A will increase to double that of country B.
10. In the income-expenditure model defined by the equation Y = Co + C1 ( YT) + I + G, starting from the equilibrium multiplier value, there is an increase in public spending. In the process of adjustment to the new equilibrium:
c) The initial demand expansion will be supported by consumption growth.
11. Suppose a model described by the following condition of goods market equilibrium: Y = Co + C1 (YT) + I + G. From an equilibrium point, there is a reduction in taxes. In the new equilibrium:
c) The multiplier, savings, and government deficit will have increased.
12. Assume an economy described by the income-expenditure model. If the government decides to increase government spending and taxes at the same rate:
b) Production and the multiplier will increase, and the deficit will remain unchanged.
13. In the commodity market model, compare the effects of increased public spending and increased investment of independent amounts. Mark the incorrect statement:
a) The increase in savings is higher if autonomous investment increases.
14. If we compare an income-expenditure model with lump-sum taxes and another with taxes proportional to the level of income, an exogenous increase in the level of investment will produce identical results in both models:
b) An increase in both private and total savings, which will be greater in the model with lump-sum taxes.
15. The assumption is that we are talking about closed economies when:
e) None of the above.
16. Assume an economy described by the income-expenditure model. If the government decides to increase taxes and public spending at the same rate:
b) Production and the multiplier will increase, and the public deficit will remain unchanged.
17. In the income-expenditure model, which of the following is an exogenous variable?
e) None of the above.
18. Suppose in the income-expenditure model, the consumption function is C = 500 + 0.8Yd. Calculate the multiplier:
e) 5.0.
19. Consider the following information:
C = 1000 + 0.75Yd
I = 850
G = 2500
T = 1000
Calculate the equilibrium GDP:
d) 14,400.
20. With the data from the previous question, the multiplier of this economy is:
c) 4.0.
21. With the data from question 19, assume that public spending permanently decreases by 200 units. By how much will GDP drop?
c) 800.
22. With the same data as in question 19, calculate the saving function:
b) -1000 + 0.25Yd.
23. A marginal increase in the propensity to consume will result in:
b) The total expenditure line becoming steeper, and any change in autonomous consumption having a greater effect on GDP.
24. Suppose that the confidence index of companies decreases, and this causes a reduction in investment. According to the income-expenditure model, our conclusion will be:
a) Consumption will be reduced as the economy adjusts to the lower level of investment.
25. Suppose the marginal propensity to consume is 0.6. Given this information, which of the following changes would cause the greatest reduction in GDP?
b) A decline in public spending of 300 units.
26. Consider only the money market and suppose that the central bank decides to conduct an open market operation to sell bonds. As a result:
b) It reduces the monetary base and money supply and increases the interest rate.
27. Which of these variables is a stock variable?
c) Money stock.
28. Which of these shifts the money demand curve to the left?
c) Loss of income.
29. Suppose a one-year bond promises to pay €1000 at year-end, and its price in the market today is €950. Given this information, we can deduce that the interest rate of the bond is:
a) 5.3%.
30. Assuming that the reserve requirement for banks is 0.2 and the currency-deposit ratio is 0, what is the money multiplier?
d) 5.0.
31. If the central bank implements an expansionary monetary policy, we should expect:
c) Bond prices to increase and the interest rate to decrease.
32. An increase in income will tend to have the following effects:
a) An increase in the interest rate.
33. In the IS-LM model, when the interest rate drops, we move from one point to another on the IS curve by:
b) Increasing investment, creating excess demand in the goods market, and increasing income, consumption, and investment.
34. Which of the following statements is true when you move down the LM curve?
d) At the initial level of income, there is an excess supply of money in the market.
35. In the context of the IS-LM model, assume that the government decides to increase public spending. In the new equilibrium:
d) Private savings (S – I) will have increased, and the level of investment is undetermined.
36. In the IS-LM model, the central bank increases the money supply. In the new equilibrium:
d) Savings, consumption, and income will have increased.
37. In the IS-LM model, the central bank raises the reserve requirement for banks. In the new equilibrium:
a) Income, consumption, and investment will have decreased.
38. In the context of the IS-LM model, assume that everyone decides to save a larger proportion of their income. In the new equilibrium:
d) The levels of savings and investment are indeterminate.
39. In the IS-LM model, point to the common outcome of both an expansionary monetary policy and an expansionary fiscal policy:
a) Increased level of consumption.
40. In the IS-LM model, the government seeks to reduce the public deficit while maintaining the level of production constant. To achieve this, it must:
d) Increase taxes and buy bonds on the open market.
41. In the IS-LM model, starting from an equilibrium situation, there is an increase in public spending financed by selling bonds on the open market. As a result:
c) The interest rate will increase, and the level of income is undetermined.
42. In the IS-LM model, a tax increase accompanied by a rise in the reserve requirement will necessarily result in:
a) Reductions in consumption and the public deficit.
43. In an economy described by the IS-LM model, the currency-deposit ratio decreases. If the government’s fiscal policy aims at maintaining the level of income constant, the new equilibrium will necessarily involve fiscal policy that:
b) Increases investment and reduces the public deficit.
44. Which of the following statements is consistent with a given IS curve?
a) The interest rate reduces, and this leads to increased investment spending.
45. Assuming the IS-LM curves are in equilibrium, which of the following statements is true?
e) All are equal.
46. If there is a reduction in consumer confidence:
c) The IS curve shifts to the left.
47. There is an increase in lump-sum taxes (per capita):
a) The IS curve shifts to the left, and the economy moves along the LM curve.
48. Suppose that money demand is not very sensitive to variations in the interest rate. We can expect that:
d) The LM curve should be relatively steep.
49. A decrease in the money supply would cause:
d) All of the above.
50. Suppose there is a fiscal contraction. The certain outcome will be a decrease in:
a) Consumption, GDP, and the interest rate.
51. Suppose that spending on investment depends on income but does not depend on the interest rate. If the money supply decreases, the outcome will be:
d) A decline in investment.
52. Assume that the European Central Bank buys bonds and, at the same time, there is a tax cut. This policy mix leads to:
d) An increase in GDP.
53. If there is perfect competition in the goods market, then ‘i’ in the pricing equation p = (1 + i)w is:
c) 0.
54. An increase in unemployment benefits, together with the approval of antitrust legislation that affects the markup companies charge to fix prices, will cause the labor market to experience:
b) An increase in real wages, leaving the natural rate of unemployment undetermined.
55. Suppose the total population is 400 million, of which 200 million are employed and 16 million are unemployed and seeking work. The unemployment rate will be:
c) 7.4%.
56. Using the data in question 55, calculate the labor force participation rate:
d) 54%.
57. Using the data in question 55, calculate the”not employe” rate:
c) 50%.
58. The natural rate of unemployment is:
e) None of the above.
59. When the unemployment rate is low, we should expect that:
d) The probability of losing a job is low.
60. Suppose that the current unemployment rate increases. As a result, it will produce:
d) An upward shift of the wage-setting curve (WS).
61. In a closed economy, the aggregate demand curve is downward sloping with respect to prices because:
d) Increasing prices reduce real money balances (M/P). The shortage of money raises interest rates, which discourages investment demand.
62. Which of the following is false regarding the aggregate supply (AS) curve?
d) The lower the sensitivity of money wages to changes in employment levels, the greater the slope of the AS curve.
63. Regarding the aggregate supply curve, point to the incorrect statement:
d) The higher the nominal wage response to changes in the unemployment rate, the lower the price response to changes in production.
64. A model described by the aggregate supply-aggregate demand (AS-AD) framework is in a state of equilibrium with unemployment. In the initial situation:
c) During the automatic adjustment process, real money balances (M/P) increase, and the expected price level and money wages decrease.
65. In the AS-AD model, starting from an initial situation of equilibrium in the medium term, there is an increase in public spending. Which of the following statements is correct?
a) In the new equilibrium in the medium term, investment has declined by the same amount that government spending has increased.
66. Consider the AS-AD model. From a balanced position over the medium term, there is a purchase of bonds on the open market by the central bank. Which of the following statements is correct?
b) In the new short-term equilibrium, prices, the amount of money in real terms, and investment have increased.
67. Regarding the aggregate supply curve, point to the incorrect statement:
d) The higher the nominal wage response to changes in the unemployment rate, the lower the price response to changes in production.
68. In the AS-AD model, indicate, among the following effects, which is common to any expansionary demand policy, whether fiscal or monetary:
c) Real consumption (C/P) increases.
69. In the AS-AD model, starting from an initial situation of equilibrium in the medium term, there is an improvement in business expectations, increasing autonomous investment. Thus:
c) In the short term, income, the interest rate, and investment increase.
70. In the AS-AD model, starting from an initial situation of equilibrium in the medium term, the government reduces the duration and amount of unemployment insurance. Indicate which of the following is correct:
a) In the new equilibrium in the medium term, employment has increased, real wages have remained constant, and the interest rate has declined.
71. In the AS-AD model, starting from a balanced position in the medium term, a reduction in the levels of income, consumption, investment, the amount of money in real terms, and real wages is observed in the short term. The perturbation most likely responsible for these results is:
d) An increase in the gross profit margin.
72. In the AS-AD model, starting from an initial situation of equilibrium in the medium term, the economic authorities want to increase the level of private investment. Given this objective:
c) A reduction in the reserve ratio can increase the level of investment in the short term but not in the medium term.
73. In the AS-AD model, starting from an initial situation of equilibrium with short-term overemployment, if you want to redirect the economy to full employment without increasing the price level, which of the following is correct?
d) An increase in taxes.
74. In the aggregate supply curve, what causes a decline in GDP?
b) A reduction in the current price level.
75. The aggregate supply curve will shift if:
d) All of the above.
76. In the aggregate demand curve, reducing the price level causes an increase in GDP due to the effect on the:
a) Interest rate.
77. Which of the following changes in aggregate demand will shift the curve to the left?
c) An increase in taxes.
78. Monetary expansion will result in the short term in:
d) An increase in the nominal wage.
79. Suppose the economy is operating at its natural level of output. Now suppose we introduce a tax cut. The expected outcome in the medium term will be:
e) None of the above.
80. Suppose the economy is operating at its natural level of output. Which of the following changes will not cause a change in the composition of GDP over the medium term?
b) An increase in the money supply.
81. Suppose the economy is operating at its natural level of output. Now suppose that individuals choose to reduce their desire to save. We can deduce with certainty that in the medium term:
b) Investment will decrease.
82. The aggregate demand curve is downward sloping in the general case due to which of the following explanations?
c) An increase in the aggregate price level will lead to a higher interest rate and a decline in GDP.
83. According to the”alternative view” an economy operating within the production possibility frontier:
d) Can be efficient if we consider together the production and the satisfaction of needs.
84. According to the”alternative view” property:
c) Ensures the exercise of responsibility.
85. The priority of the right to use means:
c) That there are inherent limitations to property.
86. According to the”alternative visio”:
c) The element of ‘creativity’ is inherent in work.
87. According to the”alternative visio”:
c) The salary is meant to supply the needs of people.
88. According to the”alternative view” the determinants of wages must be:
b) Productivity, the situation of the company, the common good, and the needs of people.
89. According to the”alternative view” the proper sequence for the concepts of ownership, capital, and labor is:
a) Ownership, labor, capital.
90. According to the alternative view, the relationship between capital and labor is one of:
c) Anteriority (labor precedes capital), superiority (work is more important than capital), and dependence (labor depends on capital).
91. The word capitalism:
a) Can only refer to a market economy.
92. According to the alternative view:
c) The company is a unit of cooperation that makes possible the production of goods and services.
ods and services.