Macroeconomics 11th Edition by N. Gregory
Mankiw – Test Bank with Comprehensive Exam
Questions and Answers
1. Macroeconomics is primarily concerned with the study
of:
A) Individual household decisions
B) Firm profit maximization
C) Economy-wide phenomena
D) Market demand for a single product
Answer: C
Rationale: Macroeconomics analyzes aggregates such as
GDP, inflation, unemployment, and government policies
affecting the entire economy, not just individual units.
2. GDP is best defined as:
A) The total value of all final goods and services
produced within a country in a given period
B) The total value of all goods and services produced by
1
,domestic firms anywhere in the world
C) The total income earned by all citizens
D) The total spending by government only
Answer: A
Rationale: Gross Domestic Product measures production
inside a country's borders, counting only final goods to
avoid double counting intermediate goods.
3. Which of the following is included in GDP?
A) The sale of a used car
B) The purchase of 100 shares of Apple stock
C) The value of babysitting services provided by a
teenager to her own family, unreported
D) A new car produced but not sold by year end
Answer: D
Rationale: GDP includes production within the time period.
Unsold new goods add to inventory investment, which is
part of GDP.
2
,4. Nominal GDP uses ______ prices, while real GDP uses
______ prices.
A) Base year; current year
B) Current year; base year
C) Constant; current
D) Inflation-adjusted; market
Answer: B
Rationale: Nominal GDP values output at current-year
prices; real GDP values output at constant base-year
prices to isolate quantity changes.
5. The GDP deflator is calculated as:
A) (Nominal GDP / Real GDP) × 100
B) (Real GDP / Nominal GDP) × 100
C) (CPI / GDP) × 100
D) (GDP / Population) × 100
Answer: A
Rationale: The GDP deflator measures the price level
3
, relative to the base year; a value greater than 100
indicates inflation since the base year.
Part 2: Classical Theory – The Economy in the Long Run
(Ch 3–7)
6. According to the classical dichotomy, in the long run:
A) Monetary policy affects real variables
B) Nominal variables are determined by real factors
C) Real and nominal variables are independent
D) Inflation is always zero
Answer: C
Rationale: The classical dichotomy states that real
variables (output, employment) and nominal variables
(prices, money supply) are separate in the long run.
7. The quantity equation MV = PY implies that if velocity
is stable and money supply doubles:
A) Real output doubles in the long run
B) The price level doubles in the long run
4
Mankiw – Test Bank with Comprehensive Exam
Questions and Answers
1. Macroeconomics is primarily concerned with the study
of:
A) Individual household decisions
B) Firm profit maximization
C) Economy-wide phenomena
D) Market demand for a single product
Answer: C
Rationale: Macroeconomics analyzes aggregates such as
GDP, inflation, unemployment, and government policies
affecting the entire economy, not just individual units.
2. GDP is best defined as:
A) The total value of all final goods and services
produced within a country in a given period
B) The total value of all goods and services produced by
1
,domestic firms anywhere in the world
C) The total income earned by all citizens
D) The total spending by government only
Answer: A
Rationale: Gross Domestic Product measures production
inside a country's borders, counting only final goods to
avoid double counting intermediate goods.
3. Which of the following is included in GDP?
A) The sale of a used car
B) The purchase of 100 shares of Apple stock
C) The value of babysitting services provided by a
teenager to her own family, unreported
D) A new car produced but not sold by year end
Answer: D
Rationale: GDP includes production within the time period.
Unsold new goods add to inventory investment, which is
part of GDP.
2
,4. Nominal GDP uses ______ prices, while real GDP uses
______ prices.
A) Base year; current year
B) Current year; base year
C) Constant; current
D) Inflation-adjusted; market
Answer: B
Rationale: Nominal GDP values output at current-year
prices; real GDP values output at constant base-year
prices to isolate quantity changes.
5. The GDP deflator is calculated as:
A) (Nominal GDP / Real GDP) × 100
B) (Real GDP / Nominal GDP) × 100
C) (CPI / GDP) × 100
D) (GDP / Population) × 100
Answer: A
Rationale: The GDP deflator measures the price level
3
, relative to the base year; a value greater than 100
indicates inflation since the base year.
Part 2: Classical Theory – The Economy in the Long Run
(Ch 3–7)
6. According to the classical dichotomy, in the long run:
A) Monetary policy affects real variables
B) Nominal variables are determined by real factors
C) Real and nominal variables are independent
D) Inflation is always zero
Answer: C
Rationale: The classical dichotomy states that real
variables (output, employment) and nominal variables
(prices, money supply) are separate in the long run.
7. The quantity equation MV = PY implies that if velocity
is stable and money supply doubles:
A) Real output doubles in the long run
B) The price level doubles in the long run
4
