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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1,499 questions · page 28 of 75
- A. labor
- B. physical capital/worker
- C. human capital/worker
- D. natural resources/worker
Explanation: With technology fixed, adding labor alone does not necessarily raise productivity, which is output per worker.
Correct answer: labor- A. it no longer needs any human capital
- B. capital becomes more productive due to the "catch-up- effect"
- C. none of these answers
- D. it may be harder for it to grow quickly because of the diminishing returns to capital
Explanation: As a country accumulates capital, diminishing returns mean that each additional unit of capital produces a smaller gain in output.
Correct answer: it may be harder for it to grow quickly because of the diminishing returns to capital- A. They save and invest an unusually high percentage of their GDP
- B. They have always been wealthy and will continue to be wealthy, which is known as the "snowball effect"
- C. They are imperialists and have collected wealth from previous victories in war
- D. They have enormous natural resources.
Explanation: Many East Asian economies achieved rapid growth by maintaining high saving and investment rates, which expanded their capital stock and…
Correct answer: They save and invest an unusually high percentage of their GDP- A. encourage foreigners to investment in your country
- B. encourage saving and investment
- C. nationalize major industries
- D. encourage research and development
- E. Promote free trade
Explanation: Nationalizing major industries can weaken competition, incentives and efficiency, so it is not generally a recommended growth policy.
Correct answer: nationalize major industries- A. Megabank buys a new computer
- B. Naila pays her university tuition fees.
- C. OGDC leases a new oil field
- D. Indus Motors buys a new drill press
Explanation: Education creates benefits beyond the student, such as a more skilled workforce and knowledge spillovers, so tuition-funded education can…
Correct answer: Naila pays her university tuition fees.- A. None of these answers
- B. There has been an increase in foreign portfolio investment in the UK
- C. Once the plant starts producing cars UK GDP will rise less than UK GNP
- D. once the plant starts producing cars UK GDP will rise more than UK GNP
Explanation: A Toyota plant in England adds to UK production, so UK GDP rises. The profits belong to a Japanese-owned company and are not counted as UK…
Correct answer: once the plant starts producing cars UK GDP will rise more than UK GNP- A. Toyota builds a new plant in the north of England
- B. EDF of France buys shares in Scottish & Southern Energy of the UK, and Scottish & Southern Energy uses the Proceeds to build a new hydro-electric power station in Scotland
- C. Deutsche Bank of Germany buys some new software from UK Supplier
- D. JCB builds a new plant near Manchester
Explanation: Foreign portfolio investment is the purchase of foreign shares or securities without directly establishing or controlling a business.
Correct answer: EDF of France buys shares in Scottish & Southern Energy of the UK, and Scottish & Southern Energy uses the Proceeds to build a new hydro-electric power station in Scotland- A. A farmer sends his child to agricultural college and the child returns to work on the farm
- B. A farmer hires another day laborer
- C. A farmer buys another tractor
- D. A farmer discovers that it is better to plant in the spring rather than in the fall
Explanation: Technological knowledge means learning a better method of production, not merely adding labour or capital.
Correct answer: A farmer discovers that it is better to plant in the spring rather than in the fall- A. none of these answers
- B. an ever-increasing population is constrained only by the food supply resulting in chronic faminies
- C. technological progress will continuously generate improvement in productivity and living standards.
- D. labor is the only true factor of production
Explanation: Malthus argued that population tends to grow faster than the food supply, so limited food eventually produces checks such as famine.
Correct answer: an ever-increasing population is constrained only by the food supply resulting in chronic faminies- A. a renewable natural resource
- B. physical capital
- C. technology
- D. a non-renewable natural resource
Explanation: Copper exists in finite underground deposits and cannot be replenished on a human time scale.
Correct answer: a non-renewable natural resource- A. a reduction in current investment
- B. a reduction in current consumption
- C. a reduction in taxes
- D. a reduction in current saving
Explanation: Economic growth requires current resources to be devoted to investment rather than present consumption.
Correct answer: a reduction in current consumption- A. it is doomed to being relatively poor forever
- B. none of these answers
- C. an increase in capital will likely have little impact on output
- D. it has the potential to grow relatively quickly due to the "catch-up-effect"
- E. It must be a small nation.
Explanation: A country with low GDP per person may grow rapidly through the catch-up effect, because it can adopt existing technologies and gain large…
Correct answer: it has the potential to grow relatively quickly due to the "catch-up-effect"- A. real GDP per person
- B. nominal GDP per person.
- C. Real GDP
- D. The growth rate of nominal GDP per person
Explanation: Real GDP per person measures the goods and services available per head after removing the effect of price changes.
Correct answer: real GDP per person554. If consumption when young and when old are both normal goods, an increase in the interest rate ?
- A. will always increase the quantity of saving
- B. will always decrease the quantity of saving
- C. will increase the quantity of saving if the substitution effect outweighs the income effect
- D. will increase the quantity of saving if the income effect outweighs the substitution effect
Explanation: A higher interest rate makes future consumption relatively cheaper than current consumption, encouraging saving through the substitution…
Correct answer: will increase the quantity of saving if the substitution effect outweighs the income effect- A. but falls short of authorization
- B. with immediate implementation
- C. of the central bank
- D. of implementation through foreign aid
Explanation: An indicative plan sets targets and communicates the government’s expectations without legally authorizing every economic action.
Correct answer: but falls short of authorization556. Worker-managed socialism helped contribute to ________ 's rapid economic growth from 1959 to 1979?
- A. Yugoslavia
- B. Chile
- C. Vietnam
- D. Japan
Explanation: Yugoslavia used a distinctive worker-managed socialist system, in which enterprises were managed by workers’ councils.
Correct answer: Yugoslavia- A. the inputs to each industry from other industries and sectors
- B. development planning and the required information on national income growth
- C. the planned public capital divided by feasible actual industrial projects public capital
- D. how the output of each industry is distributed within the sectors of the economy
Explanation: In an input-output table, columns represent the inputs required by each industry from other industries and sectors.
Correct answer: the inputs to each industry from other industries and sectors- A. monetary policy, fiscal policy
- B. elections; economics policies
- C. economic policies; political policies
- D. tax collection, tax implementation
Explanation: The distinction concerns political business cycles: parliamentary governments may time elections around economic conditions, while…
Correct answer: elections; economics policies- A. governments depend primarily on their colonial masters
- B. excessive controls are used in the private sector
- C. the brain drains cost government substantially
- D. monopolies dominate in the agricultural sector
Explanation: Planning can fail when the public-sector program is incomplete and excessive controls discourage or distort private-sector activity.
Correct answer: excessive controls are used in the private sector- A. indicative plan
- B. central bank policies
- C. central planning
- D. instrument variables
Explanation: Monetary, fiscal, exchange-rate, tariff, tax, subsidy, and investment measures are policy instruments used to achieve economic goals.
Correct answer: instrument variables