Macroeconomics Exam Questions With Verified Solutions

Macroeconomics Exam Questions With Verified Solutions 1) Over a long period of time, perhaps many years, changes in real GDP come primarily from A) leftward shifts of the AD curve. B) upward shifts of the AE curve. C) upward shifts of the AS curve. D) continuous increases in potential GDP. E) rightward shifts of the AD curve. - answerD 2) In the long run, changes in average material living standards are best shown by A) population growth. B) improvements in monetary policy. C) growth in real per capita GDP. D) improvements in fiscal policy. E) growth in real GDP. - answerC 3) The compounding of economic growth rates means that A) a large increase in investment today has little effect on national income over the long run. B) small changes in sustained growth rates can have a significant impact on national income over several decades. C) a 2 percent annual growth rate of GDP will double national income in 27 years. D) consumers should not save, given the low real returns that compounding produces. E) a 10 percent annual rate of return will double an investment in less than 6 years. - answerB 4) If per capita GDP in a richer country grows at a faster annual rate than in a poorer country, A) the gap between their standards of living will close over time as long as the rate of population growth is higher in the poorer country. B) the gap between their standards of living will widen over time. C) the difference in their living standards will not change over time. D) whether the gap in living standards widens or closes over time depends on the absolute size of the relative growth rates. E) the gap between their standards of living will close over time. - answerB 5) If GDP in a richer country grows at the same annual rate as in a poorer country, the A) gap between their standards of living will widen over time. B) difference in their living standards will not change over time. C) gap between their standards of living will close over time as long as the rate of population growth is lower in the poorer country. D) gap between their standards of living will close over time as long as the rate of population growth is lower in the richer country. E) gap between their standards of living will close over time. - answerC 6) A common measure of a country's level of productivity is A) the average efficiency of capital. B) per capita GDP. C) the capital- output ratio. D) output per capita. E) output per unit of labour input. - answerE 7) A common measure of a country's rate of economic growth is A) the level of output per capita. B) the level of real gross domestic product. C) the change in output per capita. D) the capital- output ratio. E) the marginal efficiency of capital. - answerC 8) Over the long term, by far the most potent force for raising average material living standards is A) increasing the money supply. B) reducing inefficiencies. C) economic growth. D) appropriate fiscal policies. E) redistributing income. - answerC 9) If real income grows at approximately 2 percent per year, the number of years it will take for real income to double is approximately A) 5. B) 12. C) 24. D) 36. E) 72. - answerD 10) If real income grows at approximately 4 percent per year, the number of years it will take for real income to double is approximately A) 5. B) 12. C) 18. D) 36. E) 72. - answerC 11) Of the variables listed below, the best measure of a nation's average material standard of living is A) percent change in nominal GDP. B) per capita nominal GDP. C) per capita real GDP. D) nominal GDP. E) real GDP. - answerC 12) Which of the following is the best example of the acquisition of human capital? A) A worker communicates more quickly and accurately with suppliers because of upgrades to communications software. B) A government- sponsored program increases the amount of investment available per worker. C) A worker receives new machinery enabling him/her to do the amount of work that was formerly done by two workers. D) A computer chip manufacturer introduces a faster processor for micro- computing. E) A worker takes a training course that increases his/her productivity. - answerE 13) The four fundamental determinants of economic growth include all of the following EXCEPT: A) growth in financial capital B) technological improvement C) growth in human capital D) growth in the labour force E) growth in physical capital Answer: A 14) The theory of economic growth concentrates on the ________ over the long run, not on ________. A) factor utilization rates; growth of real GDP B) factor utilization rates; growth of the supplies of factors C) growth of real GDP; growth of potential GDP D) growth of investment in capital goods; short- run fluctuations of investment E) growth of potential output; fluctuations of output around potential - answerE