Free Macroeconomics MCQs with Answers
1,499 Macroeconomics MCQs from Economics, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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- A. lower unemployment rate will tend to lower the inflation rate
- B. lower unemployment rate will tend to raise the inflation rate
- C. raise inflation rate will tend to raise the unemployment rate
- D. lower inflation rate will tend to raise the unemployment rate
Explanation: The original short-run Phillips curve was interpreted as an inverse relationship: expansionary policies could reduce unemployment but…
Correct answer: lower unemployment rate will tend to raise the inflation rate- A. the price level and the unemployment rate
- B. the inflation rate and the unemployment rate
- C. the level of aggregate output and the price level
- D. the inflation rate and the level of aggregate demand
Explanation: The Phillips curve plots inflation, usually the rate of change in prices, against unemployment.
Correct answer: the inflation rate and the unemployment rate- A. New classical economists
- B. Keynesian.
- C. Marxists
- D. Monetarists
Explanation: Keynesian analysis recognizes cost-push inflation, in which rising wages, raw-material prices, or other production costs push firms to…
Correct answer: Keynesian.- A. only in the short run, and not without inflation
- B. only in the long run and not without inflation
- C. only is the short run and only if the price level is constant
- D. only in the long run and only if the price level is constant
Explanation: Unemployment can fall below its natural rate temporarily when unexpected inflation reduces real wages and increases employment, but…
Correct answer: only in the short run, and not without inflation- A. frictional unemployment and seasonal unemployment
- B. frictional unemployment and cyclical unemployment
- C. frictional unemployment and structural unemployment
- D. cyclical unemployment and structural unemployment
Explanation: The natural rate includes unemployment that remains even when the economy is operating normally: frictional unemployment from job search…
Correct answer: frictional unemployment and structural unemployment- A. neither monetary nor fiscal policy will have an effect on output and employment
- B. monetary but not fiscal policy will have an effect on output and employment
- C. Fiscal, but not monetary policy will have an effect on output and employment
- D. both monetary and fiscal policy will have an effect on output and employment
Explanation: In the classical model, flexible wages and prices restore full employment, so changes in monetary or fiscal policy mainly affect prices…
Correct answer: neither monetary nor fiscal policy will have an effect on output and employment- A. quickly
- B. slowly
- C. very infrequently
- D. instantly
Explanation: The classical view assumes wages are flexible, so wage adjustments occur quickly enough to eliminate excess demand or supply in the labour…
Correct answer: quickly- A. None of these answers
- B. Disagree because they have different scientific judgments
- C. really don't disagree at all. It just appears that they disagree
- D. disagree because they have different values
Explanation: Their claims concern the size and duration of the effect of government spending, which are matters of empirical economic analysis.
Correct answer: Disagree because they have different scientific judgments- A. Large government deficits cause an economy to grow more slowly
- B. People work harder if the wage is higher
- C. The unemployment rate should be lower
- D. Printing too much money causes inflation
Explanation: The word “should” makes the statement a value-based recommendation rather than a testable description.
Correct answer: The unemployment rate should be lower- A. really don't disagree at all It just appears that they disagree.
- B. disagree because they have different values.
- C. none of these answers.
- D. disagree because they have different scientific judgments.Science
Explanation: The economists are ranking social problems according to different beliefs about what matters most.
Correct answer: disagree because they have different values.- A. decreasing autonomy of the nation-state involves
- B. the increasing international integration of markets for goods services and capital
- C. changes of a traditional culture of a country to a western culture
- D. giving aid to poor countries to improve their economy politics and social status
Explanation: Rodrik uses globalization to mean the growing integration of national markets, especially for goods, services, and capital.
Correct answer: the increasing international integration of markets for goods services and capital492. The U.S real food aid, as well as food reserves dropped from the 1960s to the 1980s partly because ?
- A. the transportation and storage cost increased tremendously
- B. proponents of basic-needs attainment opposed food-aid
- C. U.S farm interests wanted to reduce surplus grain stocks
- D. agricultural production suffered excessively due to weather changes
Explanation: U.S. farm interests often favored reducing surplus grain stocks and limiting the costs of holding them, which helped reduce food reserves…
Correct answer: U.S farm interests wanted to reduce surplus grain stocks- A. the brain drains from LDCs to DCs
- B. the price role of political and credit-market risk in many LDCs
- C. the law of increasing returns that implies that the marginal productivity of capital is higher in LDCs
- D. the fat that the DC capital market is perfectly competitive
Explanation: Reinhart and Rogoff highlight political and credit-market risks in developing countries, which can make investment there appear less safe…
Correct answer: the price role of political and credit-market risk in many LDCs494. Bilateral aid ?
- A. is technical aid given by IMF
- B. is given directly by one country to another
- C. is aid with repayment in inconvertible currency
- D. is a loan at bankers' standards
Explanation: Bilateral aid is transferred directly from one donor country to one recipient country.
Correct answer: is given directly by one country to another- A. and the dangers of free capital movements for LDCs with poorly developed financial institutions
- B. and the dangers of a trade deficit
- C. and the external openness of income growth among the poorest 40 percent of LDCs
- D. and MNC domination and its effects on income distribution
Explanation: Bhagwati separates the gains from free trade from the risks of unrestricted international capital flows, particularly where developing…
Correct answer: and the dangers of free capital movements for LDCs with poorly developed financial institutions- A. investors are directly involved in managing the operations
- B. as in direct investment investors export goods and services abroad
- C. investors transfer the technology to local investors
- D. investors have no control over operations
Explanation: Portfolio investment involves buying financial assets without taking managerial control of the enterprise.
Correct answer: investors have no control over operations- A. technical assistance to stock market and financial market problems
- B. loans for post-World War II reconstruction
- C. short-term credit for international balance of payments deficits
- D. bonds denominated in U.S dollars as a loan to LDCs
Explanation: The IMF primarily supports countries facing short-term balance-of-payments difficulties by providing conditional financial assistance.
Correct answer: short-term credit for international balance of payments deficits- A. the capital accounts
- B. the international balance of payments statements
- C. the long-term current account
- D. the trade accounts
Explanation: The balance of payments is the annual record of a country's economic transactions with the rest of the world, including trade, services…
Correct answer: the international balance of payments statements- A. own domestic savings and by inflows of capital from abroad
- B. stock market and fiscal policy
- C. savings from abroad and financial outflow
- D. savings and financial liberalization
Explanation: Investment can be financed by domestic saving plus foreign saving, represented here by capital inflows from abroad.
Correct answer: own domestic savings and by inflows of capital from abroad- A. A country's trade policy has no impact on the size of its trade balance
- B. None of these answers
- C. A restrictive import quota decreases a country's net exports
- D. A restrictive imports quota increases a country's net exports
Explanation: In the standard open-economy model, the trade balance equals national saving minus domestic investment, so trade policy does not…
Correct answer: A country's trade policy has no impact on the size of its trade balance