Free Macroeconomics MCQs with Answers

• A. Realism
• B. Globalism
• C. Pluralism
• D. Idealism

Explanation: Pluralism treats states as only one set of important actors and also considers groups, organizations and institutions.

• A. to warn the Japanese to steer clear of the Caribbean in exchange for U.S non-intervention in Afghanistan
• B. to warn European powers to keep away from the Western Hemisphere in return for U.S nonintervention in Europe
• C. to conquer the Soviet regime and attach Siberia to the United States
• D. to let the world, know who the superpower is

Explanation: The Monroe Doctrine warned European powers against further intervention or colonization in the Western Hemisphere, while the United States…

• A. is a recent addition to international relations?
• B. has a long history predating the creation of the nation state?
• C. and diplomats have been quite radically altered in recent years
• D. has little to do with the failure to solve basic problems among nations

Explanation: Diplomacy is not a recent development; it existed long before the modern nation-state.

• A. great discretion in making policy decisions
• B. limited roles as messengers
• C. charge of summit conferences
• D. starring roles as celebrities

Explanation: Modern leaders and communication technologies often reduce diplomats’ independent policy-making authority, leaving them mainly to…

• A. general
• B. administrative
• C. crisis
• D. all of the above

Explanation: Foreign-policy decisions can be broad general decisions, routine administrative decisions, or urgent crisis decisions.

• A. it takes a long time to pay off debts
• B. budget deficits are funded with borrowed money
• C. the U.S government never borrows money from foreign governments
• D. none of the above

Explanation: A budget deficit occurs when government spending exceeds revenue, so the gap is financed through borrowing.

• A. establishing minimum reserve requirements of member banks
• B. the discount rate it charges member banks
• C. buying and selling government securities
• D. all of the above

Explanation: The Federal Reserve influences money creation through reserve requirements, the discount rate, and open-market purchases or sales of…

• A. decreasing taxes on consumers
• B. increasing spending
• C. decreasing taxes on firms
• D. none of the above

Explanation: Excessive aggregate demand is reduced by contractionary fiscal policy, such as higher taxes or lower government spending.

• A. steel workers
• B. routine services
• C. personal services
• D. All but A

Explanation: Future employment growth is expected mainly in routine and personal services, while traditional steel employment is expected to decline…

• A. Productivity has increased in the decade of the 1990
• B. Blue-collar workers have suffered layoffs
• C. Downsizing has created a new style of employment
• D. All of the above are true

Explanation: The 1990s saw productivity gains, significant layoffs among many blue-collar workers, and downsizing that produced more flexible…

• A. the supply side of the market
• B. the demand side of the market
• C. both sides of the market
• D. the global market

Explanation: Fiscal policy changes government spending and taxation, while monetary policy changes interest rates and the money supply.

• A. business cycles are caused by insufficient supply
• B. a decline in aggregate supply is responsible for economic downturns
• C. an increase in aggregate supply causes output and employment to decline
• D. none of the above

Explanation: Supply-side explanations attribute economic downturns to adverse changes in aggregate supply, which reduce output and employment.

• A. Karl Marx
• B. Adam Smith
• C. John Maynard Keynes
• D. Milton Friedman

Explanation: John Maynard Keynes argued that during deficient demand and unemployment, government spending could stimulate economic activity through…

• A. earn more money
• B. increase productivity
• C. increase absenteeism
• D. decrease productivity

Explanation: Higher productivity means producing more goods and services with the same resources, which raises real output and per-capita GNP or GDP.

• A. resulted from the greed of the robber barons
• B. resulted from insufficient demand
• C. was the worst case of massive unemployment
• D. only B and C

Explanation: The Great Depression combined a severe collapse in aggregate demand with exceptionally high mass unemployment.

• A. pent-up demand
• B. aggregate demand
• C. elastic demand
• D. excess demand

Explanation: Aggregate demand is the total planned spending on final goods and services by households, firms, government and the foreign sector during…

• A. product market demand is problematic
• B. resource market demand is problematic
• C. the distribution of income becomes more inequitable
• D. all of the above

Explanation: Unstable prices make decisions in both product and resource markets more difficult and can redistribute income unfairly between borrowers…

• A. "market basket of goods
• B. the consumer price index
• C. 165 social indicators
• D. the externalities index

Explanation: The 165 social indicators were intended to describe social well-being and the desirable mix of goods and services more broadly than a…

• A. dissaving's
• B. withdrawals
• C. incremental
• D. injections

Explanation: Withdrawals, also called leakages, are income flows that leave the spending stream, such as saving, taxation and imports.

• A. incidentals
• B. withdrawals
• C. injections
• D. B and C only

Explanation: The circular flow is interrupted by withdrawals, such as saving and imports, and strengthened by injections, such as investment and…