EC 3200
Principles of Macroeconomics
MIDTERM EXAM
Q&S
©2024/2025
,1. Which of the following components is not included in the
calculation of Gross Domestic Product (GDP)?
- A) Consumer Spending
- B) Business Investments
- C) Net Exports
- D) Transfer Payments
- Answer: D) Transfer Payments
Rationale: Transfer payments like pensions or unemployment
benefits are not part of GDP as they do not involve the purchase of
goods or services.
2. What is the primary goal of contractionary monetary policy?
- A) Increase inflation
- B) Decrease inflation
- C) Reduce unemployment
- D) Encourage borrowing
- Answer: B) Decrease inflation
Rationale: Contractionary monetary policy is aimed at reducing
money supply to control high inflation.
©2024/2025
, 3. In the context of the IS-LM model, an increase in government
expenditure will likely lead to which of the following?
- A) A leftward shift in the IS curve
- B) A leftward shift in the LM curve
- C) A rightward shift in the IS curve
- D) A rightward shift in the LM curve
- Answer: C) A rightward shift in the IS curve
Rationale: Increased government expenditure raises aggregate
demand, shifting the IS curve to the right.
4. The Phillips Curve demonstrates the relationship between
which two macroeconomic variables?
- A) Inflation and GDP
- B) Inflation and unemployment
- C) Interest rates and investment
- D) Exchange rates and trade balance
- Answer: B) Inflation and unemployment
Rationale: The Phillips Curve shows an inverse relationship
between inflation and unemployment in the short run.
5. What is the primary determinant of long-term economic
growth in a country according to neoclassical growth theory?
©2024/2025
Principles of Macroeconomics
MIDTERM EXAM
Q&S
©2024/2025
,1. Which of the following components is not included in the
calculation of Gross Domestic Product (GDP)?
- A) Consumer Spending
- B) Business Investments
- C) Net Exports
- D) Transfer Payments
- Answer: D) Transfer Payments
Rationale: Transfer payments like pensions or unemployment
benefits are not part of GDP as they do not involve the purchase of
goods or services.
2. What is the primary goal of contractionary monetary policy?
- A) Increase inflation
- B) Decrease inflation
- C) Reduce unemployment
- D) Encourage borrowing
- Answer: B) Decrease inflation
Rationale: Contractionary monetary policy is aimed at reducing
money supply to control high inflation.
©2024/2025
, 3. In the context of the IS-LM model, an increase in government
expenditure will likely lead to which of the following?
- A) A leftward shift in the IS curve
- B) A leftward shift in the LM curve
- C) A rightward shift in the IS curve
- D) A rightward shift in the LM curve
- Answer: C) A rightward shift in the IS curve
Rationale: Increased government expenditure raises aggregate
demand, shifting the IS curve to the right.
4. The Phillips Curve demonstrates the relationship between
which two macroeconomic variables?
- A) Inflation and GDP
- B) Inflation and unemployment
- C) Interest rates and investment
- D) Exchange rates and trade balance
- Answer: B) Inflation and unemployment
Rationale: The Phillips Curve shows an inverse relationship
between inflation and unemployment in the short run.
5. What is the primary determinant of long-term economic
growth in a country according to neoclassical growth theory?
©2024/2025
