Free Macroeconomics MCQs with Answers

• A. enough to supply only a small nonagricultural population
• B. of zero
• C. large enough of feed five other families
• D. large enough to feed 25 other families

Explanation: Low-income agricultural families usually produce only a modest surplus after meeting their own subsistence needs, so it can support only a…

• A. $145
• B. $40,000
• C. $25
• D. $100

Explanation: Per-capita income rose from $120 ($120,000 ÷ 1,000) to about $145 ($160,000 ÷ 1,100), an increase of roughly $25.

• A. Germany
• B. United Kingdom
• C. Canada
• D. Mexico

Explanation: Germany, the United Kingdom and Canada are classified as high-income economies, whereas Mexico is generally classified as an…

• A. Uses no mechanical power
• B. May be enterprises with less than 10 workers
• C. Production is capital intensive
• D. Uses family workers

Explanation: Informal-sector enterprises generally use simple, labor-intensive methods, family workers and few employees, often fewer than 10.

• A. the modern sector increases its output share relative to the traditional sector
• B. agricultural sector uses modern equipment
• C. agricultural sector hires labor economically
• D. modern manufacturing sector is labor intensive

Explanation: In Lewis's dual-economy model, development depends on expansion of the modern sector, which absorbs surplus labor from the traditional…

• A. less than 10% of the labor force is in agriculture
• B. the average agriculture family produces surplus large enough only to supply small non-agriculture population
• C. One-third of the labor force produce food
• D. share of labor force is about 30%

Explanation: Low-income countries commonly have a large agricultural population, but agricultural productivity is low, so each farm family produces…

• A. dual family
• B. institutional family
• C. extended family
• D. two-tier family tree

Explanation: An extended family includes two or more related nuclear families, such as parents, children and other generations living together or…

• A. government programs direct resources away from investment goods to consumer goods.
• B. tariffs and quotas prevent dollars from leaving the country
• C. the rate of growth of real GNP is greater than the rate of growth of population
• D. the level of consumption expenditures rises relative to the level of saving

Explanation: Real GNP per capita rises when total real GNP grows faster than the population, because output is increasing faster than the number of…

• A. deficient infrastructures
• B. low life expectancies
• C. low savings
• D. a per capital GNP of more than $900

Explanation: Low-income economies are associated with weak infrastructure, low life expectancy and low saving rates, while their per-capita GNP is…

• A. causes development
• B. is positively related to development
• C. id inversely related to development
• D. inhibits development

Explanation: Industrialization is strongly and positively associated with development because manufacturing expands productivity, employment, income…

• A. income earned through foreign exchange
• B. the number of dollars earned in industry
• C. income earned within a country's boundaries
• D. goods received from the nation's residents

Explanation: GDP measures the market value of final goods and services produced within a country's geographical boundaries, regardless of whether the…

• A. government programs direct resources away from investment goods to consumer goods.
• B. tariffs and quotas prevent countries from trading and thus prevent dollars from leaving each country
• C. the rate of growth in real GNP is greater than the rate of growth in the population
• D. the level of consumption expenditures rises relative to the level of savings

Explanation: Real GNP per capita increases when real GNP grows faster than the population, because the total output is then being divided among…

• A. a temperate climate
• B. natural resources
• C. an adequate capital bases
• D. technological advance

Explanation: A temperate climate may help some economies but is not a necessary condition for development, as shown by successful economies in tropical…

• A. approximated investment minus actual investment
• B. inflow of investment from abroad
• C. sum of previous gross investment minus depreciation
• D. difference between GDP and capital consumption

Explanation: Capital stock is accumulated gross investment less the depreciation of existing capital, giving the economy's net stock of productive…

• A. convex
• B. inverted U shaped
• C. L-shaped
• D. S-Shaped

Explanation: The Kuznets hypothesis proposes that inequality first rises during early development and later falls as an economy becomes more advanced…

• A. increase expenditure on public education
• B. eliminate civil war
• C. All of these answers would increase growth
• D. increase restrictions on the importing of American tractors and electronics

Explanation: Restricting imports of tractors and electronics reduces access to capital goods and technology, making production less efficient and…

• A. how hard we work:
• B. our supply of capital because everything of value is produced by machinery
• C. our productivity because our income is equal to what we produce
• D. our supply of natural resources because they limit production

Explanation: Standards of living depend most directly on productivity, because higher output per worker supports higher incomes and consumption.

• A. Productivity growth has been steady over the last 50 years
• B. Productivity has been growing more slowly every decade since world War II
• C. Productivity grew quickly in the 1950s and 1960s more slowly from the early 1970s through 1995 and then quickly again
• D. Productivity grew slowly from the 1950s through the 1970s and then began to accelerate probably due to advances in computer technology

Explanation: US productivity rose rapidly in the 1950s and 1960s, slowed from the early 1970s to the mid-1990s, and accelerated again during the…

• A. There is no evidence, yet that rapid population growth stretches natural resources to the point that it limits growth in productivity
• B. All of these answers
• C. Rapid population growth may dilute the capital stock lowering productivity
• D. Rapid population growth may promote technological progress increasing productivity.

Explanation: Rapid population growth can dilute capital per worker, while it may also encourage innovation and put pressure on resources.

• A. doubling all of the inputs more than doubles output due to the catch-up effect
• B. doubling all of the inputs has absolutely no impact on output because output is constant
• C. doubling all of the inputs less than doubles output due to diminishing returns
• D. doubling all of the input's doubles output

Explanation: Constant returns to scale means output changes in the same proportion as all inputs.