roots of modern macroeconomics Mcqs
1. The persistence of a phenomenon such as unemployment, even then its causes have been removed is called ?
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A. negative entropy.

B. the fallacy of composition

C. hysteresis.

D. ceteris paribus

2. According to classical models, the level of employment is determined primarily by ?
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A. interest rates

B. the level of aggregate demand for goods and services.

C. prices and wages

D. the quantity of money

3. A group of modern economists who believe that institutional factors and confidence strongly influence business behaviour and that expanding demand will usually increase output rather than prices are the ?
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A. monetarists.

B. keynesians

C. new classical school

D. post-keynesians
4. The quantity theory of money implies that a given percentage change in the money supply will cause ?
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A. a larger percentage change in nominal GDP

B. a smaller percentage change in nominal

C. an equal percentage change in nominal DGP.

D. an equal percentage change in real GDP

5. A group of modern economists who believe that markets clear very rapidly and that expanding the money supply will always increase prices rather than employment are the ?
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A. Keynesians

B. monetarists

C. post-keynesians

D. new classical school
6. New classical theories were an attempt to explain ?
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A. the stagflation of the 1970s

B. how unemployment could have persisted for so long during the Great Depression

C. The increase in the growth rate of real output in the 1950s

D. Why policy changes that are perceived as permanent have more of an impact on a persons behaviour than policy changes that are viewed as temporary.

7. If the demand for money depends on the interest rate the velocity of circulation is ?
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A. not constant and the quantity theory of money does not hold.

B. not constant and the quantity theory of money does hold.

C. constant and the quantity theory of money does hold.

D. constant and the quantity theory of money does not hold.

8. It is difficult to determine if the velocity of money is constant over time because ?
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A. whether velocity is constant or not may depend on how the money supply is measure.

B. it is difficult to measure the value of nominal GDP over time

C. it is difficult to measure the demand for money over time

D. there has been very little fluctuation in the money supply over time.

9. Keynesian economics became popular because it was able to explain ?
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A. The prolonged existence of high unemployment during the Great depression

B. stagflation in the late 1970s

C. demand-pull inflation in the 1960s

D. low growth rates in the 1950s

10. According of Keynes, the level of employment is determined by ?
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A. the behaviour of trade unions.

B. the level of aggregate demand for goods and services

C. price and wages

D. the quantity of money

11. The nation that the government can establish the macroeconomic is known as ?
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A. monestarism

B. the classical model

C. microeconomics foundations of macroeconomics

D. fine tuning
12. The regarding the new classical macroeconomics is hoe realistic is the assumption ?
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A. that fiscal policy affects aggregate demand

B. of rational expectations.

C. that monetary policy affects aggregates demand

D. that markets do not clear quickly

13. The hypothesis that people know the true model of the economy and that they use this model to form their expectations of the future is the ?
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A. adaptive expectations hypothesis

B. Passive-expectations hypothesis

C. Rational-expectations hypothesis

D. lagged-expectations hypothesis.

14. Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are ?
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A. sticky prices

B. market prices

C. fixed prices

D. regulatory prices

15. According to the classical economists the economy ?
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A. requires fine tuning to reach full employment

B. can never deviate from full employment

C. will never be at full employment

D. is self-correcting.
16. Rapid increase in the price level during periods of recession of high unemployment are known as ?
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A. slump

B. stagnation

C. inflation

D. stagflation
17. The rational-expectation hypothesis suggests that the forecasts that people make concerning future inflation rates ?
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A. consistently overestimate the actual rate of inflation in the future.

B. are correct on average, but are subject to errors that are distributed randomly

C. are always correct

D. consistently underestimate the actual rate of inflation in the future

18. The economists who emphasised wage flexibility as a solution for unemployment were ?
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A. post-Keynesian.

B. classical economists.

C. new-Keynesian.

D. Keynesian.

19. The government increase government spending to try to reduce unemployment This is an example of ?
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A. automatic stablisers

B. fine tuning

C. monetary policy

D. laissez-faire.

20. People are said to have rational expectations if they ?
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A. merely guess at the inflation rate.

B. assume that this years inflation rate will be the same as last years inflation rate

C. Use all available information in forming their expectations.

D. assume that this years inflation rate will be equal to the average inflation rate over the past 10 years