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Focused topic practice

the national economy MCQs

Practise focused the national economy questions with marked answers for exam preparation and subject revision.

the national economy Mcqs
1. A linear consumption function with a positive slope less than one means that if income increases consumption will ?
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A. not change

B. increase

C. fall

D. fluctuate

2. The key issues of macroeconomics are ?
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A. All of the above

B. inflation

C. unemployment

D. economic growth

3. It has become conventional classify a recession as a period where national output falls for _________ or more?
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A. a year

B. two years

C. three years

D. six months
4. Real GDP is nominal GDP measured in constant ?
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A. interest rates

B. prices

C. exchange rates

D. taxes

5. If the government increases spending and raises taxes by just enough to finance this increase it will ?
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A. increase the MPC

B. reduce output

C. increase output

D. leave output unchanged

6. Nominal GNP measures income ?
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A. corrected for changes in interest rates

B. At current prices

C. At the present time

D. corrected for tax changes

7. Leakages from the circular flow are _________ and __________?
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A. investment, savings, government expenditure

B. consumption investment government expenditure

C. consumption taxes imports

D. savings, taxes net of subsidies imports
8. Macroeconomics is the branch of economics that deals with ?
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A. imperfectly competitive markets:

B. Only the long run adjustments to equilibrium in the economy

C. The functioning of individual industries and the behavior of individual decision-making units business firms and households

D. the economy as a whole
9. In a macroeconomic model without foreign trade or a government aggregate demand is the sum of ?
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A. personal saving and personal consumption

B. personal consumption and private investment

C. None of the above

D. personal saving and private investment

10. Total withdrawals from the circular flow of income include ?
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A. savings government expenditure and imports

B. consumption savings and taxes

C. savings taxes and imports

D. savings taxes and exports

11. Aggregate demand without a foreign sector is the sum of ?
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A. C + 1

B. I + G

C. C + 1 + G

D. C + G

12. The length of a business cycle would be measured from ?
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A. peak to trough

B. the slump to the expansion

C. peak to peak

D. trough to peak

13. The multiplier is calculated as___________?
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A. 1/MPC

B. 1(1-MPC)

C. a or b

D. 1/MPS

14. When investment is assumed to autonomous the slope of the AD schedule is determined by the ?
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A. marginal propensity to consume

B. disposable incomes

C. average propensity to consume

D. marginal propensity to invest

15. The diagram that shows the income received and payments made by each sector of the economy is the ?
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A. income-expenditures diagram

B. income-price diagram

C. circular flow diagram

D. aggregate demand-aggregate supply diagram

16. Macroeconomic theory that emphasized the theories of Keynes and de-emphasized the classical theory developed as the result of the failure of ?
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A. economic theory to explain the simultaneous increases in inflation and unemployment during the 1970s

B. The classical model to explain the prolonged existence of high unemployment during the Great Depression

C. fine tuning during the 1960s

D. the economy to grow at a rapid rate during the 1950s

17. Short-run equilibrium output means that aggregate demand __________ actual output?
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A. is less than

B. fluctuates around

C. is greater than

D. equals
18. In an Open economy leakage to imports ____________ the value of the multiplier ?
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A. None of the above

B. increase

C. reduce

D. do not change

19. Aggregate supply is the total amount ?
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A. of goods and services produced in an economy

B. produced by the government

C. of labor supplied by all households

D. of products produced by a given industry

20. For given government spending and taxation the government budget deficit will grow in _________ and decline in __________?
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A. recessions, booms

B. booms, booms

C. booms, recessions

D. recession, recession

21. In an economy measuring (1) total value added (2)total spending on final goods and (3)total factor earning gives the result that ?
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A. 3<2<1

B. any measure can be larger or smaller than any other

C. 3>2>1

D. 3=2=1
22. The underground economy consists of ?
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A. the water distribution system

B. part of the rail network

C. legal transactions

D. legal transactions not declared for tax and illegal activities
23. Starting from a balanced budget, for a given tax rate, an increasing in income will cause the government budget to ?
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A. remain unchanged

B. move into deficit

C. move into surplus

D. None of the above above

24. When we refer to the hidden economy we mean unrecorded income owing to ?
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A. the lags between statistical collection and publication

B. poor statistics

C. tax evasion

D. smuggling

25. Real GNP is a crude measure of national welfare because it excludes ?
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A. consumption

B. exports

C. work in the home

D. investment

26. The index used most often to measure inflation is the?
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A. consumer price index

B. wholesale price index (WPI)

C. GDP deflator

D. Producer price index (PPI)

27. Equilibrium in the circular flow of income occurs when ?
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A. There is a Bank Holiday

B. None of these

C. Injections withdrawals

D. Injections = withdrawals
28. If desired spending in the economy exceeds income we would expect ?
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A. households to save more

B. the MPC to change

C. firms to produce more

D. firms to produce less

29. Total injection are made up of?
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A. savings + government expenditure + exports

B. investment + tax + exports

C. investment + government expenditure + imports

D. investment + government expenditure + exports
30. Purchasing power parity exchange rates are used to ?
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A. convert nominal GDP to real GDP

B. pay wages b multinational companies

C. compare living standards of different countries

D. estimate the costs of economic growth

31. In the circular flow we would expect leakages to ___________ injections?
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A. be greater than

B. be less or greater than

C. equal

D. be less than

32. According to the classical economists, the only gainers from growth would be ?
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A. politicians

B. landlords

C. peasants

D. The army

33. An index of prices of all domestically produced goods in the economy is the ?
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A. wholesale price index (WPI)

B. Producer price index (PPI)

C. GDP deflator

D. Consumer price index (CPI)

34. Injection into the circular flow are ______ and __________?
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A. investment government expenditure exports

B. investment exports transfer payments

C. consumption investment exports

D. taxes exports, transfer payments

35. If a result of households wish to save more there is a change in equilibrium income and no change in equilibrium saving this is an example of ?
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A. market failure

B. the paradox of thrift

C. market imperfection

D. the law of diminishing returns

36. In the economy when a steel producer sells steel to car producer it is regarded as ?
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A. an intermediate good

B. a leakage

C. an injection

D. a final good

37. Indicate below what is NOT a main macroeconomic goal ?
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A. Reducing inflation

B. Reducing unemployment

C. Increasing North Sea oil production

D. Achieving a sustainable rate of economic growth

38. The total multiplier for the economy will reflect ?
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A. MPC and MPZ

B. MPT and MPZ

C. MPC and MPT

D. MPC, MPT and MPZ
39. Higher export demand __________ output and a higher MPZ __________ output?
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A. increase, reduces

B. increases, increases

C. reduces, increase

D. reduces, reduces

40. Aggregate demand includes only ?
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A. sumer expenditure and investment

B. consumer expenditure government expenditure and investment

C. consumer expenditure investment government expenditure and exports less imports

D. consumer debt investment debt and government debt

41. Real GNP measures income ?
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A. including tax evasion

B. including externalities

C. including non-market activities

D. adjusted for inflation
42. Two of the major factors contributing to growth are ?
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A. resources and a good climate

B. money and luck

C. money and efficiency

D. resources and efficiency
43. The percentage of the labor force that is unemployed is the ?
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A. unemployment population ratio

B. employment rate

C. unemployment rate

D. labor force rate

44. The multiplier tells us how much __________ changes after a shift in ____________?
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A. savings investment

B. consumption income

C. investment output

D. output aggregate demand
45. If the MPC is 0.5 the multiplier is ?
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A. 0.2

B. 2-Jan

C. 20

D. 2
46. Aggregate demand in an economy trading internationally with a government sector can be written as ?
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A. AD = C + I + G + X + Z

B. AD = C + I + G

C. AD = C + I

D. AD = C + I + G + X Z
47. when the level of income _________ there will be a tendency for the trade balance to improve as imports?
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A. falls, fall

B. increase, increase

C. falls, increase

D. increase, fall