Economincs MCQs with answer (macroeconomics)
BUSINESS ECONOMICS
PRACTICE
MACROECONOMICS MULTIPLE CHOICE QUESTIONS
Nore: I tried my best to make these question error free, however if you find any mistake please inform me. thanks.
1. Expansionary monetary
policy
(a) tends to lead to an
appreciation of a nation's currency.
(b) usually has no effect on a
currency's exchange value.
(c) tends to lead to a
depreciation of the currencies of other nations.
(d) tends to lead to a
depreciation of a nation's currency.
2. If the number of people
classified as unemployed is 20,000 and the number of people classified as
employed is 230,000, what is the unemployment rate?
(a) 8%
(b) 8.7%
(c) 9.2%
(d) 11.5%
3. It is often true that as the
economy begins to recover from a recession the unemployment rate rises. Which
of the following statements would be the best explanation for this?
(a) The unemployment rate would
rise because as the economy initially recovers from a recession the demand for
goods and services falls, so the demand for workers falls.
(b) As the economy begins to
recover from a recession, workers who were previously discouraged about their
chances of finding a job begin to look for work again.
(c) The unemployment rate seems
to rise as the economy begins to recover from a recession because of errors in
the way the data are collected.
(d) As the economy initially
recovers from a recession, firms do not immediately increase the number of
workers they hire. Firms wait to hire more individuals until they are convinced
that the recovery is strong.
4. If an individual who cannot
find a job because his or her job skills have become obsolete this is an
example of
(a) frictional
unemployment.
(b) structural
unemployment.
(c) cyclical unemployment.
(d) seasonal unemployment.
5. The natural rate of
unemployment is generally thought of as the
(a) ratio of the frictional
unemployment rate to the cyclical unemployment rate.
(b) sum of structural
unemployment and cyclical unemployment.
(c) sum of frictional
unemployment and cyclical unemployment.
(d) sum of frictional
unemployment and structural unemployment.
6. Firms react to unplanned
increases in inventories by
(a) reducing output.
(b) increasing output.
(c) increasing planned
investment.
(d) increasing
consumption.
7. The ratio of the change in
the equilibrium level of income to a change in some autonomous increase in
spending is the
(a) elasticity
coefficient.
(b) multiplier.
(c) automatic stabilizer.
(d) marginal propensity of the
autonomous variable.
8. Banks can create money
(a) only by illegally printing additional
dollar bills.
(b) by paying interest to their
depositors.
(c) by making loans that result
in additional deposits.
(d) by offering financial
services, such as stick market brokerage.
9. A bank has excess reserves
to lend but is unable to find anyone to borrow the money. This will __________
the size of the money multiplier.
(a) reduce
(b) increase
(c) have no effect on
(d) double
10. Which of the following
represents an action by the Bank of Canada that is designed to decrease the
money supply?
(a) an increase in federal tax
rates
(b) selling government
securities in the open market
(c) a decrease in the Bank
rate
(d) a transfer of government
funds from the Bank of Canada to private banks
11. If the interest rate falls,
then
(a) bond prices will remain the
same
(b) bond prices will rise
(c) bond prices will fall
12. If the quantity of money
demanded is less than the quantity of money supplied, then the interest rate
will
(a) either increase or
decrease, depending on the amount of excess demand.
(b) increase.
(c) decrease.
(d) not change.
13. Which of the following
events will definitely lead to an increase in the equilibrium interest
rate?
(a) a decrease in the level of
output (real GDP)
(b) the purchase of government
securities by the Bank of Canada
(c) an increase in the level of
output (real GDP) and an increase in the money supply
(d) the sale of government
securities by the Bank of Canada
14. If the Bank of Canada
reduces the money supply to reduce inflation, a flexible exchange rate will aid
the Bank of Canada in fighting inflation because
(a) as the money supply is decreased,
the interest rate will increase, and the exchange rate will rise, causing
Canadian exports to fall and Canadian imports to rise.
(b) as the money supply is
decreased, the interest rate will increase, and the exchange rate will rise,
causing Canadian exports to rise and Canadian imports to fall.
(c) as the money supply is
decreased, the interest rate will increase, and the exchange rate will fall,
causing Canadian exports to fall and Canadian imports to rise.
(d) as the money supply is
decreased, the interest rate will increase, and the exchange rate will fall,
causing Canadian exports to rise and
Canadian imports to fall.
15. When economists refer to
"tight" monetary policy, they mean that the Bank of Canada is taking
actions that will
(a) increase the demand for
money.
(b) decrease the demand for
money
(c) expand the supply of
money
(d) contract the supply of
money
16. An increase in total
production (real GDP) causes the demand for money to ___________ and the
interest rate to _________.
(a) increase; increase
(b) increase; decrease
(c) decrease; decrease
(d) decrease; increase
17. Which of the following
actions is an example of expansionary fiscal policy?
(a) a decrease in welfare
payments
(b) a purchase of government
securities in the open market
(c) a decrease in the Bank
rate
(d) a decrease in the corporate
profits tax rates
18. The main cause of cyclical
unemployment is that
(a) firms engage in race,
gender and sex discrimination in their hiring practices.
(b) some individuals do not
have marketable job skills.
(c) the level of overall
economic activity fluctuates.
(d) workers often voluntarily
quit a job to look for a better job.
19. The aggregate demand (AE)
curve would shift down if
(a) government spending were
increased.
(b) taxes were increased.
(c) the money supply were
increased.
(d) the interest rate
decreased.
20. As the economy nears full
capacity, the short-run aggregate supply curve
(a) becomes flatter.
(b) becomes steeper.
(c) shifts to the right.
(d) shifts to the left.
21. If the economy is operating
at potential GDP, an increase in the money supply will lead to
(a) stagflation.
(b) structural inflation.
(c) demand-side inflation.
(d) supply-side inflation.
22. The sale of government
securities by the Bank of Canada is predicted to
a. decrease reserves of the
chartered banks, and eventually lead to an expansion of the money supply.
b. decrease reserves of the
chartered banks, and eventually cause a contraction of the money supply.
c. increase reserves of the
chartered banks, and eventually cause a contraction of the money supply.
d. increase reserves of the
chartered banks, and eventually cause an expansion of the money supply. e. none
of the above.
23. To lower interest rates,
the Bank of Canada could
a. buy securities.
b. decrease the chartered
banks' reserves.
c. decrease the money
supply.
d. raise the treasury bill
rate.
e. raise the reserve
requirement.
24. Suppose a Canadian firm
imports $1,000 worth of bananas and sells them for $2,000. The effect on GDP
would be
a. to decrease the value of GDP
by $3,000.
b. to increase the value of GDP
by $3,000.
c. to increase the value of GDP
by $2,000.
d. to increase the value of GDP
by $1,000.
e. no effect on GDP since the
bananas were produced outside Canada.
25. An increase in the MPS will cause, other factors
remaining constant:
(a) a parallel
shift up in the AE-function and a parallel shift up in the L-function;
(b) a rotational
shift up in the AE-function and a rotational shift up in the L-function;
(c) a parallel
shift down in the AE-function and a rotational shift up in the L-function;
(d) a rotational
shift down in the AE-function and a rotational shift up in the L-function;
(e) a rotational shift down
in the AS-function and a rotational shift up in the L-function.
ANSERS TO QUESTIONS:
1. d
2. a
3. b
4. b
5. d
6. a
7. b
8. c
9. a
10. b
11. b
12. c
13. d
14. a
15. d
16. a
17. d
18. c
19. b
20. b
21. c
22. b
23. a
24. d
25. d
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