2026 FALL 1 BADM 7200E FOR FAIK KORAY (ONLINE) / EXAM #3 QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2026 Q&A | INSTANT DOWNLOAD PDF.
Core Domains
National Income Accounting and GDP Measurement
Unemployment, Inflation, and the Phillips Curve
Aggregate Demand and Aggregate Supply Models
IS-LM and IS-LM-BP Frameworks
Fiscal Policy and Government Budgets
Monetary Policy and Central Banking
Economic Growth and the Solow Model
International Trade and Exchange Rates
Business Cycles and Stabilization Policy
Introduction
This comprehensive examination assesses advanced graduate-level mastery of macroeconomic
theory and policy analysis for BADM 7200E. It evaluates competency in national income
accounting, unemployment and inflation dynamics, aggregate demand and supply modeling, IS-
LM-BP frameworks, fiscal and monetary policy transmission, economic growth theory, and
international macroeconomic linkages. Questions emphasize quantitative reasoning, graphical
analysis, and policy evaluation within open and closed economy contexts. Multiple-choice and
scenario-based items require application of theoretical models to real-world economic decision-
making. Successful performance demonstrates readiness for strategic corporate analysis and
macroeconomic forecasting in a global business environment.
Section One: Questions 1–150
1. Suppose that the nominal GDP of an economy increases from 10 trillion dollars to 12
trillion dollars, while the GDP deflator increases from 100 to 110 over the same period. What
is the approximate growth rate of real GDP?
A. 10.0%
B. 8.2%
C. 20.0%
D. 9.1%
,🟢 B. 8.2%
🔴 RATIONALE: Real GDP is calculated by dividing nominal GDP by the GDP deflator and
multiplying by 100. Initial real GDP = .00 = 10 trillion. Final real GDP = .10 = 10.909
trillion. Growth rate = (10.909 − 10) / 10 = 8.29%, which rounds to approximately 8.2%. Option
A is simply the nominal growth rate, Option C misinterprets the combined changes, and Option
D represents the inflation rate.
2. In a closed economy described by the standard neoclassical model, if the production
function exhibits constant returns to scale and capital experiences diminishing marginal
returns, an increase in the saving rate will result in which of the following steady-state
outcomes?
A. A permanent increase in the steady-state rate of growth of output per worker
B. A permanent increase in the steady-state growth rate of total output
C. An increase in the steady-state level of output per worker and capital per worker
D. No change in the steady-state level of capital per worker because depreciation offsets new
investment
🟢 C. An increase in the steady-state level of output per worker and capital per worker
🔴 RATIONALE: In the Solow growth model, a higher saving rate increases steady-state capital
per worker and therefore steady-state output per worker. However, the long-run growth rate
remains determined by technological progress. Options A and B confuse level effects with
growth effects, and Option D incorrectly assumes complete crowding out by depreciation.
3. Which of the following best defines the natural rate of unemployment?
A. The unemployment rate when the economy is at its peak of the business cycle
B. The unemployment rate that prevails when the economy is at potential output, consisting of
frictional and structural unemployment
C. The unemployment rate that includes cyclical unemployment during a recession
D. The unemployment rate that is zero when the economy is at full employment
🟢 B. The unemployment rate that prevails when the economy is at potential output,
consisting of frictional and structural unemployment
,🔴 RATIONALE: The natural rate of unemployment is the rate that exists when the economy is
at potential GDP, consisting of frictional and structural unemployment. Cyclical unemployment
is zero at this point. Options A and C confuse the natural rate with cyclical fluctuations, and
Option D is impossible because frictional unemployment always exists.
4. In the IS-LM model for a closed economy, an expansionary monetary policy will cause
which of the following short-run effects?
A. A decrease in output and an increase in the interest rate
B. An increase in output and a decrease in the interest rate
C. An increase in output and an increase in the interest rate
D. No change in output and a decrease in the interest rate
🟢 B. An increase in output and a decrease in the interest rate
🔴 RATIONALE: Expansionary monetary policy shifts the LM curve to the right, lowering the
equilibrium interest rate and increasing equilibrium output. Option A describes contractionary
monetary policy. Option C describes expansionary fiscal policy. Option D ignores the output
effect.
5. According to the quantity theory of money, if the money supply grows at 6% per year, real
GDP grows at 3% per year, and velocity is constant, what is the inflation rate?
A. 9%
B. 3%
C. 6%
D. 2%
🟢 B. 3%
🔴 RATIONALE: The quantity equation in growth form is: %ΔM + %ΔV = %ΔP + %ΔY. With
%ΔV = 0, %ΔM = 6%, and %ΔY = 3%, inflation (%ΔP) = 6% − 3% = 3%. Options A and C
misapply the equation, and Option D is incorrect.
6. Which of the following is included in GDP?
A. The value of intermediate goods sold to other firms
B. The value of final goods and services produced within a country's borders
, C. The value of used goods sold in the current year
D. The value of financial assets traded on the stock exchange
🟢 B. The value of final goods and services produced within a country's borders
🔴 RATIONALE: GDP measures the market value of all final goods and services produced
within a country's geographic borders during a given period. Intermediate goods are excluded
to avoid double counting. Used goods and financial assets are not current production.
7. In the Solow growth model with technological progress, the steady-state growth rate of
output per effective worker is:
A. Equal to the rate of technological progress
B. Equal to the population growth rate
C. Zero
D. Equal to the saving rate
🟢 C. Zero
🔴 RATIONALE: In the Solow model with labor-augmenting technological progress, output per
effective worker is constant in the steady state. Output per actual worker grows at the rate of
technological progress, and total output grows at the rate of technological progress plus
population growth.
8. A country's central bank increases the reserve requirement ratio. This policy action is:
A. Expansionary monetary policy
B. Contractionary monetary policy
C. Expansionary fiscal policy
D. Contractionary fiscal policy
🟢 B. Contractionary monetary policy
🔴 RATIONALE: Increasing the reserve requirement ratio reduces the money multiplier and the
money supply, making it a contractionary monetary policy tool. Fiscal policy involves
government spending and taxation.
9. Which of the following would cause a leftward shift of the aggregate demand curve?
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2026 Q&A | INSTANT DOWNLOAD PDF.
Core Domains
National Income Accounting and GDP Measurement
Unemployment, Inflation, and the Phillips Curve
Aggregate Demand and Aggregate Supply Models
IS-LM and IS-LM-BP Frameworks
Fiscal Policy and Government Budgets
Monetary Policy and Central Banking
Economic Growth and the Solow Model
International Trade and Exchange Rates
Business Cycles and Stabilization Policy
Introduction
This comprehensive examination assesses advanced graduate-level mastery of macroeconomic
theory and policy analysis for BADM 7200E. It evaluates competency in national income
accounting, unemployment and inflation dynamics, aggregate demand and supply modeling, IS-
LM-BP frameworks, fiscal and monetary policy transmission, economic growth theory, and
international macroeconomic linkages. Questions emphasize quantitative reasoning, graphical
analysis, and policy evaluation within open and closed economy contexts. Multiple-choice and
scenario-based items require application of theoretical models to real-world economic decision-
making. Successful performance demonstrates readiness for strategic corporate analysis and
macroeconomic forecasting in a global business environment.
Section One: Questions 1–150
1. Suppose that the nominal GDP of an economy increases from 10 trillion dollars to 12
trillion dollars, while the GDP deflator increases from 100 to 110 over the same period. What
is the approximate growth rate of real GDP?
A. 10.0%
B. 8.2%
C. 20.0%
D. 9.1%
,🟢 B. 8.2%
🔴 RATIONALE: Real GDP is calculated by dividing nominal GDP by the GDP deflator and
multiplying by 100. Initial real GDP = .00 = 10 trillion. Final real GDP = .10 = 10.909
trillion. Growth rate = (10.909 − 10) / 10 = 8.29%, which rounds to approximately 8.2%. Option
A is simply the nominal growth rate, Option C misinterprets the combined changes, and Option
D represents the inflation rate.
2. In a closed economy described by the standard neoclassical model, if the production
function exhibits constant returns to scale and capital experiences diminishing marginal
returns, an increase in the saving rate will result in which of the following steady-state
outcomes?
A. A permanent increase in the steady-state rate of growth of output per worker
B. A permanent increase in the steady-state growth rate of total output
C. An increase in the steady-state level of output per worker and capital per worker
D. No change in the steady-state level of capital per worker because depreciation offsets new
investment
🟢 C. An increase in the steady-state level of output per worker and capital per worker
🔴 RATIONALE: In the Solow growth model, a higher saving rate increases steady-state capital
per worker and therefore steady-state output per worker. However, the long-run growth rate
remains determined by technological progress. Options A and B confuse level effects with
growth effects, and Option D incorrectly assumes complete crowding out by depreciation.
3. Which of the following best defines the natural rate of unemployment?
A. The unemployment rate when the economy is at its peak of the business cycle
B. The unemployment rate that prevails when the economy is at potential output, consisting of
frictional and structural unemployment
C. The unemployment rate that includes cyclical unemployment during a recession
D. The unemployment rate that is zero when the economy is at full employment
🟢 B. The unemployment rate that prevails when the economy is at potential output,
consisting of frictional and structural unemployment
,🔴 RATIONALE: The natural rate of unemployment is the rate that exists when the economy is
at potential GDP, consisting of frictional and structural unemployment. Cyclical unemployment
is zero at this point. Options A and C confuse the natural rate with cyclical fluctuations, and
Option D is impossible because frictional unemployment always exists.
4. In the IS-LM model for a closed economy, an expansionary monetary policy will cause
which of the following short-run effects?
A. A decrease in output and an increase in the interest rate
B. An increase in output and a decrease in the interest rate
C. An increase in output and an increase in the interest rate
D. No change in output and a decrease in the interest rate
🟢 B. An increase in output and a decrease in the interest rate
🔴 RATIONALE: Expansionary monetary policy shifts the LM curve to the right, lowering the
equilibrium interest rate and increasing equilibrium output. Option A describes contractionary
monetary policy. Option C describes expansionary fiscal policy. Option D ignores the output
effect.
5. According to the quantity theory of money, if the money supply grows at 6% per year, real
GDP grows at 3% per year, and velocity is constant, what is the inflation rate?
A. 9%
B. 3%
C. 6%
D. 2%
🟢 B. 3%
🔴 RATIONALE: The quantity equation in growth form is: %ΔM + %ΔV = %ΔP + %ΔY. With
%ΔV = 0, %ΔM = 6%, and %ΔY = 3%, inflation (%ΔP) = 6% − 3% = 3%. Options A and C
misapply the equation, and Option D is incorrect.
6. Which of the following is included in GDP?
A. The value of intermediate goods sold to other firms
B. The value of final goods and services produced within a country's borders
, C. The value of used goods sold in the current year
D. The value of financial assets traded on the stock exchange
🟢 B. The value of final goods and services produced within a country's borders
🔴 RATIONALE: GDP measures the market value of all final goods and services produced
within a country's geographic borders during a given period. Intermediate goods are excluded
to avoid double counting. Used goods and financial assets are not current production.
7. In the Solow growth model with technological progress, the steady-state growth rate of
output per effective worker is:
A. Equal to the rate of technological progress
B. Equal to the population growth rate
C. Zero
D. Equal to the saving rate
🟢 C. Zero
🔴 RATIONALE: In the Solow model with labor-augmenting technological progress, output per
effective worker is constant in the steady state. Output per actual worker grows at the rate of
technological progress, and total output grows at the rate of technological progress plus
population growth.
8. A country's central bank increases the reserve requirement ratio. This policy action is:
A. Expansionary monetary policy
B. Contractionary monetary policy
C. Expansionary fiscal policy
D. Contractionary fiscal policy
🟢 B. Contractionary monetary policy
🔴 RATIONALE: Increasing the reserve requirement ratio reduces the money multiplier and the
money supply, making it a contractionary monetary policy tool. Fiscal policy involves
government spending and taxation.
9. Which of the following would cause a leftward shift of the aggregate demand curve?
