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. low inequality
- B. maximum inequality
- C. 10/10 000% inequality
- D. 1% inequality
Explanation: The Gini index ranges from 0 to 1, where 0 represents complete equality and 1 represents the theoretical maximum inequality, with all…
Correct answer: maximum inequality- A. absolute poverty
- B. economic growth
- C. relative poverty
- D. standard of living
Explanation: Income-distribution indices compare how income is shared across people and therefore indicate relative deprivation or relative poverty.
Correct answer: relative poverty- A. Income inequality
- B. Absolute poverty
- C. sen's poverty index
- D. purchasing power poverty
Explanation: Absolute poverty means having income or consumption below the minimum needed for basic food, clothing, and shelter.
Correct answer: Absolute poverty- A. dollar
- B. mark
- C. franc
- D. euro
Explanation: The euro became the common currency for participating European Monetary Union countries in 1999 for accounting purposes and in 2002 as…
Correct answer: euro- A. made it harder for Americans of compete against the Germans in the British market
- B. made it easier for Americans to compete against the Germans in the British market
- C. made it harder for Americans to compete against the Japanese in the British market
- D. made it easier for Americans to compete against the Japanese in the British
Explanation: EU members trade with one another without internal tariffs, while American goods face the EU's common external tariff in Britain.
Correct answer: made it harder for Americans of compete against the Germans in the British market- A. customs union
- B. economic union
- C. common market
- D. free trade area
Explanation: The EU developed beyond a free-trade area and customs union by permitting the movement of goods, services, capital and labour among…
Correct answer: common market- A. adopted a common fiscal policy for member nations
- B. established a common system of agricultural price supports
- C. disbanded all tariffs between its member countries
- D. levied common tariffs on products imported from nonmembers
Explanation: The EU has a common agricultural policy, internal free trade and common external tariffs, but member states have not adopted one common…
Correct answer: adopted a common fiscal policy for member nations- A. amount the which the EU's support price exceeds the world price
- B. amount by which the world price exceeds the EU's support price
- C. support price of the EU
- D. world price
Explanation: The variable import levy closes the gap between the EU support price and the lower world price, so it equals the EU support price minus…
Correct answer: amount the which the EU's support price exceeds the world price- A. a country moves from autarky to free trade
- B. a movement to a customs union reduces the cost of trade through standardization
- C. economic integration results in a movement in product origin to a lower-cost member country
- D. economic integration results in a shift in product origin from a lower cost nonmember country to a member country having higher costs
Explanation: Trade creation occurs when integration shifts production or imports from a higher-cost domestic source to a lower-cost member country.
Correct answer: economic integration results in a movement in product origin to a lower-cost member country- A. trade creation
- B. trade diversion
- C. dynamic welfare effects
- D. comprehensive welfare effects
Explanation: Replacing a cheaper outside supplier with a more expensive member supplier because of the customs union's common external tariff is trade…
Correct answer: trade diversion- A. free-trade area
- B. customs union
- C. common market
- D. monetary union
Explanation: A free-trade area removes trade barriers among members while allowing each member to set its own tariffs against nonmembers.
Correct answer: free-trade area- A. free trade area
- B. customs union
- C. common market
- D. monetary union
Explanation: The United States uses a single currency and monetary authority across its states, so it represents a monetary union.
Correct answer: monetary union- A. free trade area
- B. customs union
- C. common market
- D. monetary union
Explanation: A free-trade area removes internal trade barriers but allows each member to retain its own tariffs against nonmembers.
Correct answer: free trade area- A. customs union
- B. free trade area
- C. reciprocal trade agreement
- D. monetary union
Explanation: The European Monetary Union uses a common currency and a coordinated monetary authority among participating members.
Correct answer: monetary union- A. variable levies
- B. export subsidies
- C. trigger prices
- D. countertrade
Explanation: The Common Agricultural Policy used export subsidies to dispose of surplus EU agricultural output in foreign markets.
Correct answer: export subsidies- A. free trade area
- B. customs union
- C. common market
- D. economic union
Explanation: A common market combines a customs union with the free movement of labor and capital among member countries.
Correct answer: common market- A. increase American farm exports to the EU
- B. decrease American farm exports to the EU
- C. lowered the price of American farm exports to the EU
- D. not affected the price of American farm exports to the EU
Explanation: EU agricultural protection under the Common Agricultural Policy restricts competing imports and gives domestic EU producers an advantage…
Correct answer: decrease American farm exports to the EU- A. Capital
- B. land
- C. skilled labor
- D. unskilled labor
Explanation: NAFTA increased competition from relatively labor-abundant Mexico, putting downward pressure on US wages for unskilled labor.
Correct answer: unskilled labor- A. highly competitive
- B. highly noncompetitive
- C. small in economic importance
- D. geographically distant
Explanation: Trade creation is more likely when member economies are highly competitive because integration replaces inefficient domestic production…
Correct answer: highly competitive- A. one country will always have 2 percent more real GDP/person than the other
- B. the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth
- C. the standard of living in the two countries will converge
- D. Next year the country growing at 4 percent will have twice the GDP/person as the country growing at 2 percent
Explanation: With compound growth, the country growing at 4 percent increases its output per person faster each year, so its standard of living…
Correct answer: the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth