Arizona State University (ASU) ECN 211 Macroeconomic Principles Exam 1 Practice

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• What is rational expectations?
• In production, what does diminishing marginal returns mean?
• Which item is included in GDP?
• Indexation refers to what concept in economics?
• Which statement describes inflation and deflation and how they are measured?
• If the marginal propensity to consume increases, what happens to the marginal propensity to save (MPS) in a simple framework?
• Efficiency is defined as:
• What determines the short-run aggregate supply curve?
• Leakages and injections in the circular flow?
• What is inflation targeting?
• Which statement best describes frictional unemployment and gives examples?
• Balance of payments accounts?
• If a country has 60 million people in the labor force and 3 million are unemployed, what is the unemployment rate?
• What is the Phillips curve?
• What is potential GDP?
• Which combination best reflects the idea from the material about fixed exchange rates?
• What does the demand curve represent?
• Under fixed rates, which policy acts as the primary stabilization tool?
• What are automatic stabilizers in fiscal policy?
• What is the multiplier?
• What is the GDP deflator, and how is it used?
• How do CPI and PCE price indexes differ?
• Marginal change refers to which?
• If the Production Possibility Frontier becomes steeper, what happens to the opportunity cost of producing the good on the x-axis?
• In a simple economy, the fiscal multiplier equals the reciprocal of one minus the marginal propensity to consume. Which formula correctly represents the multiplier?
• In the AD framework, what effect does a higher price level have on consumption?
• What statement correctly distinguishes a change in demand from a change in quantity demanded?
• Trade can make everyone better off. This is an example of:
• Which statement best describes Real Business Cycle theory's view on stabilization policy?
• What is the difference between the CPI and the GDP deflator?
• Which statement best describes the effect of sticky wages on the short-run relationship between prices and output?
• Which statement correctly describes the relationship among private saving, public saving, and national saving?
• Growth accounting decomposes growth into contributions from which components?
• What happens to money demand with higher income according to liquidity preference theory?
• Which of the following is the correct formula for after tax nominal interest rate?
• Which statement about nominal GDP is true?
• Under fixed exchange rates, which policy is described as the primary stabilization tool?
• What is the nominal interest rate?
• What is productivity and why is it essential for growth?
• What is the role of technology in growth?
• What are the components of the Cobb-Douglas production function Y = A K^alpha L^(1-alpha)?
• If demand increases, which statement is true?
• What is crowding out?
• Rational People when thinking at the margin are defined as:
• What is a budget deficit?
• In the Cobb-Douglas Y = A K^alpha L^(1-alpha), what does A represent?
• What is the GDP deflator used for?
• Non-market activities are not included in GDP because
• Which statement correctly distinguishes a movement along the curves from a shift of the curves?
• What is the real interest rate?
• Which option correctly describes a market?
• How is the inflation rate between two years calculated?
• Which formula defines the real interest rate?
• Under fixed exchange rates, which policy is typically emphasized for stabilization?
• In economic terms, a market is defined as:
• How does GDP relate to broader measures of welfare or well-being?
• Which expression defines the after tax real interest rate?
• What factors shift the short-run aggregate supply curve?
• Main channels through which monetary policy affects the economy?
• What does Okun's law describe?
• Real GDP is defined as...
• Tax incidence refers to what?
• What is the current account and the capital/financial account?
• What does the Fisher effect imply?
• In the circular-flow diagram, which activity best describes what firms do?
• Define demand-pull vs cost-push inflation.
• Which statement describes the long-run position of the Phillips curve?
• Rational people think at the margin means they consider:
• Prices rise when government prints too much money. This statement is generally:
• How does inflation affect purchasing power?
• If M and Y are constant and P increases, what happens to V in M V = P Y?
• Which statement best defines the equilibrium price?
• What does the GDP gap measure?
• An inferior good is defined as what?
• When computing real GDP using the expenditure approach with base-year prices, which components are evaluated at base-year prices?
• The natural rate of unemployment consists of which components?
• Which are examples of factors of production?
• Identify the three main types of unemployment.
• In the Mundell-Fleming model, what is the impact of high capital mobility on policy under fixed exchange rates?
• Society faces a short-run trade-off between inflation and unemployment. Which statement reflects this?
• How is the natural rate of unemployment defined?
• Indexation is defined as...
• The wealth effect suggests that as price levels rise, households' real wealth changes how?
• What is aggregate supply?
• According to the law of supply, which statement is true?
• Why are real wages considered a better measure of purchasing power than nominal wages?
• What is the difference between nominal and real interest rates?
• Which policy is most likely constrained to defend the fixed rate?
• GDP measures value of production within a country’s borders. True or False?
• Which statement best describes firms in the circular-flow diagram?
• Which statement best describes the effect of fixed exchange rates on monetary policy and stabilization?
• Which policy becomes the primary stabilization tool when exchange rates are fixed?
• Equilibrium is best described as what?
• A supply curve is defined as...
• In inflation expectations, how do adaptive and rational approaches differ?
• What does monetary policy use to affect aggregate demand?
• Monetary policy in a fixed exchange rate regime is typically used for what purpose?
• What does monetary neutrality imply in the long run?
• What does a Production Possibility Frontier (PPF) illustrate?
• In a Mundell-Fleming framework with high capital mobility, which policy is most effective under fixed exchange rates?
• In the short run, which statement best captures the Phillips curve relationship between unemployment and inflation?
• Which statement about the short-run aggregate supply curve is true?
• Demand concept is described as:
• How does technological progress affect growth?
• Equality describes which concept?
• What is the difference between the nominal exchange rate and the real exchange rate?
• In the basic spending multiplier framework, an autonomous change in spending affects GDP by what relationship?
• A normal good is defined as what?
• If total factor productivity rises, which term accounts for the output increase in growth accounting?
• What is the classical dichotomy?
• How do you calculate the inflation rate from a CPI index?
• Which price index is more affected by changes in the prices of imported goods?
• Which statement correctly expresses the after tax real interest rate?
• What are IS and LM in the IS-LM framework?
• Which tool is part of monetary policy?
• What is the natural rate unemployment?
• How is the CPI itself calculated?
• Menu costs refer to what?
• What is the difference between a movement along the AD/AS curves and a shift of the curves?
• Government can sometimes improve market outcomes. Which option states this idea?
• Which index is used to calculate the inflation rate from CPI?
• Which statement best captures how incentives influence behavior?
• Which statement best describes automatic stabilizers vs discretionary policy?
• What is exchange rate and how does it affect net exports?
• What does NX stand for in GDP?
• In the velocity identity M V = P Y, which variable represents the price level?
• Which concept describes the idea that people face tradeoffs when making choices?
• What is real business cycle theory?
• Which expression is equivalent to V in the velocity identity?
• In macroeconomics, scarcity is best defined as what?
• What is the implication of sticky prices for short-run macro outcomes?
• Which statement about expansionary policy best describes its effect on unemployment in the short run?
• Real GDP growth is best described as the change in output measured using base-year prices, thus reflecting changes in what?
• An increase in supply is shown by which movement?
• How is the unemployment rate defined?
• Which statement correctly describes the difference between nominal GDP and real GDP?
• Introduction of New Goods concept in price indices means...
• Which tools does fiscal policy use to influence the economy?
• Which of the following is a real variable?
• Which statement is true about stabilization under fixed exchange rates?
• Which factors shift the short-run AS curve?
• Which formula gives the after tax nominal rate?
• Substitution bias occurs when...
• Which statement best defines a price floor?
• What is the difference between a budget deficit and national debt?
• What is the labor force participation rate?
• What determines the position of the long-run aggregate supply curve?
• Real GDP per capita is useful because it accounts for inflation and population, allowing comparisons of living standards over time and across countries.
• What is the crowding-out effect?
• Which statement best describes the law of supply and demand?
• A decrease in supply is shown by which movement?
• What is the crowding out effect on government deficits in the long run?
• A country's standard of living depends on its ability to produce goods and services. The best determinant is:
• In the circular-flow diagram, which statement is true about households?
• A decrease in demand causes which of the following?
• What is the natural rate of unemployment?
• Which statement best describes nominal wages versus real wages?
• If a country runs a current account deficit, what typically happens in the capital/financial account?
• Under fixed exchange rates, which policy is typically the primary stabilization tool?
• The Consumer Price Index is a measure of the overall price level of the entire economy. True or False?
• State the quantity theory of money equation.
• Which statement best describes how the GDP deflator differs from the CPI?
• What are automatic stabilizers?
• Which statement best describes stabilization strategy under fixed exchange rates?
• What is the Mundell-Fleming model?
• Complements are defined as goods where...
• Which statement best describes the GDP deflator's role in GDP calculations?
• In macroeconomics, what do MPC and MPS stand for, and how are they related in a simple closed economy?
• National Saving is defined as the sum of which two components?
• GDP deflator is defined as...
• Why can CPI overstate inflation relative to the true cost of living?
• What is the typical long-run effect of a temporary increase in the money supply on real GDP and the price level?
• What happens to the effectiveness of monetary policy under fixed exchange rates?
• How is the GDP deflator calculated?
• Which component is recorded in the current account of the balance of payments?
• Substitutes are goods in which...
• Which statement correctly contrasts the short-run and long-run Phillips curves?
• What is the role of a central bank in macro policy?
• Which statement reflects the law of demand?
• What does the liquidity preference theory say about money demand?
• Which statement correctly describes the demand curve?
• What is national debt?
• In the money velocity identity M V = P Y, what does V represent?
• If an economy experiences a technological improvement in capital production, what happens to its production possibilities frontier?
• Which statement correctly describes the real interest rate?
• Which description best matches Sam Peltzman?
• Difference between planned investment and actual investment?
• If nominal GDP increases while real GDP remains unchanged, what happened to prices?
• What is the difference between a positive and a negative demand shock?
• Which statement best captures the relationship between monetary policy and the fixed exchange rate?
• Which factors shift the AD curve?
• What factors cause the aggregate demand curve to shift?
• If actual GDP is above potential GDP, the GDP gap is?
• Which of the following best describes the Consumer Price Index (CPI)?
• Which statement best describes the long-run behavior of unemployment according to the classical view?
• Public saving equals taxes minus Government spending. True or False?
• GDP includes only the market value of final goods and services produced within a country’s borders. True or False?
• What is the difference between cost-push and demand-pull inflation?
• Which statement about the long-run aggregate supply curve is true?
• The demand schedule is best described as:
• In economics, the true cost of getting something is defined as:
• If MPC = 0.8, what is the fiscal multiplier?
• Which statement best captures the Keynesian short-run view on unemployment?
• What does GDP exclude?
• Discretionary fiscal policy requires:
• Quantity supplied is defined as the...
• In the circular-flow diagram, what is a primary role of households?
• In the provided material, which term is described as 'one who manages a household'?
• What does the GDP deflator measure?
• Under fixed exchange rate regimes, monetary policy is often constrained by the need to defend the peg. Which objective is most directly affected by this constraint?
• Which tools do central banks use to influence the money supply?
• What is the effect of currency appreciation on net exports?
• If the Production Possibility Frontier becomes steeper, what happens to the opportunity cost of producing the good on the x-axis?
• What is balance of payments?
• Which statement describes a movement along the demand curve?
• What is the typical role of markets in an economy?
• Which are the four components of GDP in the expenditure approach?
• How is the unemployment rate calculated?
• What is expansionary monetary policy?
• If CPI in year 1 is 100 and CPI in year 2 is 110, what is the inflation rate?
• Substitution bias in the CPI is caused by...
• Which statement best describes the relationship between real GDP growth and inflation?
• What is the money multiplier and how does it relate to banking?
• Which statement best describes the long-run aggregate supply (LRAS) curve and what determines its position?
• What does the production possibilities frontier illustrate about economic growth?
• What are the components of the money supply M0, M1, and M2?
• Which of the following equals national saving?
• Real GDP per capita formula?
• Which statement correctly differentiates nominal GDP from real GDP?
• What can cause the production possibilities frontier to shift outward?
• Which statement best describes cyclical unemployment?
• What does the classical dichotomy imply about the effect of money on real variables in the long run?
• According to the identity M V = P Y, if M increases and Y stays fixed while V remains constant, what happens to P?
• Which expression represents the nominal interest rate in terms of the real rate and inflation?
• Which equation correctly expresses the real interest rate in terms of the nominal rate and inflation?
• What are the major monetary aggregates?
• What causes structural unemployment?
• Private saving equals Income minus Taxes minus Consumption. True or False?
• Growth accounting: which is not a direct component?
• What is aggregate demand?
• In the IS-LM framework, what happens to equilibrium output and interest rates if fiscal expansion shifts the IS curve to the right while the money supply is fixed?
• Which statement describes cyclically adjusted unemployment and the natural rate?
• In the basic circular flow diagram of a simple economy, which two sectors are primarily depicted as exchanging resources and money?
• At the natural rate of unemployment, cyclical unemployment is:
• A Canadian citizen working in the United States does not contribute to the US GDP. True or False?
• The GDP deflator is calculated as Nominal GDP divided by Real GDP, then multiplied by 100. True or False?
• GDP deflator measures what?
• State Okun's law in simple terms.
• Which statement compares the GDP deflator to the consumer price index (CPI)?
• If the economy is in a recession under fixed exchange rates, which policy would be most appropriate according to the principle described?
• Which statement best defines a price ceiling?
• What characterizes sticky wages in relation to SRAS?
• GDP measures what?
• How do interest rates affect investment?