Econ 2101

Sample Questions Macro

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) A duopoly pricing strategy results in a/an ________ profitable outcome than cartel pricing.
A) indeterminate
B) less C) moreD) equally
2) Carla lost her job and immediately started looking for another job. As a result the:
A) unemployment rate increases.
B) labor force decreases.
C) labor force increases. D) unemployment rate remains constant.
3) An increase in the number of discouraged workers will cause the:
A) unemployment rate to increase and the labor force to increase.
B) unemployment rate to increase and the labor force to decrease.
C) unemployment rate to decrease and the labor force to increase.
D) unemployment rate to decrease and the labor force to decrease.

11) ______

12) ______

13) ______

4) When the economy slows down and real GDP falls, the type of unemployment that will be directly affected is the:
14) ______
A) natural rate of unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) frictional unemployment.
5) The sum of the frictional and structural unemployment rates is thought of as the:
A) cyclical rate of unemployment.
B) normal rate of unemployment.
C) natural rate of unemployment.
D) seasonal rate of unemployment.

15) ______

6) The cost of the basket of goods in Year 1 is $200 and the cost of the basket of goods in Year 2 is $225. If Year 1 is used as
the base year, the Year 2 price index is: 16) ______
A) 150. B) 112.5.

C) 80.

D) 66.67.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
7) Overstating the actual change in prices has a large impact on Social Security spending. 17) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
8) Jim's nominal wage increased by 1%, and the prices of goods that Jim buys increased by 4%. Jim's real wage has:
18) ______
A) decreased.
B) increased.
C) remained constant.
D) changed by 5%, but the direction of the change is ambiguous.
9) When the Fed randomly increases the money supply at a lower rate than what is expected by the public,:
______
A) investment goes down.
B) interest rates go up.
C) the public will immediately lower their inflation expectations.
D) the demand for money will accelerate.

19)

10) The theory of rational expectations suggests that the forecasts made using the rational expectations model:
______

20)

A) are correct on average.

B) consistently overestimate the actual rate of inflation in the future.
C) are always correct.
D) consistently underestimate the actual rate of inflation in the future.
11) The Phillips curve shows the ________ relationship between inflation and ________.
A) inverse; unemployment
B) negative; interest rates
C) positive; real GDP D) positive; interest rates
12) The velocity of money is calculated as the ratio of:
A) real GDP to the money supply.
B) nominal GDP to the overall price level.
C) nominal GDP to the money supply.
D) the overall price level to the money supply.

21) ______

22) ______

33) Hyperinflation causes inefficiency in the economy because:

A) people spend none of their time hunting for bargains.
B) people spend a lot of their time hunting for bargains.
C) people spend a lot of their time hunting for jobs.
D) people spend all their time working.

23) ______

14) If the government has large budget deficits that cannot be financed by borrowing, the government:
A) collects more taxes, causing inflation and hyperinflation.
B) prints more money, causing inflation and hyperinflation.
C) collects less taxes, causing inflation and hyperinflation.
D) prints less money, causing inflation and hyperinflation.

24) ______

15) If an automobile maker producing a certain kind of car suddenly experiences a decrease in the demand for the car. In
the short run, if prices are sticky 25) ______
A) the demand for steel goes down but the price of steel stays the same.
B) the demand for steel goes down and the price of steel goes down by a lot.
C) the demand for steel goes up but the steel prices remain the same.
D) the demand for steel goes up and the price of steel goes up by a lot.

Answer Key

1) B
2) A
3) D
4) C
5) C
6) B
7) A
8) A
9) B
0) A
11) A
12) C
13) B
14) B
15) A