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 52 of 75
- A. that monetary policy affects aggregates demand
- B. that markets do not clear quickly
- C. that fiscal policy affects aggregate demand
- D. of rational expectations.
Explanation: New classical macroeconomics relies heavily on rational expectations, meaning people use available information when forecasting economic…
Correct answer: of rational expectations.- A. it is difficult to measure the value of nominal GDP over time
- B. there has been very little fluctuation in the money supply over time.
- C. it is difficult to measure the demand for money over time
- D. whether velocity is constant or not may depend on how the money supply is measure.
Explanation: Velocity is calculated as nominal GDP divided by the money supply, so conclusions about whether it is stable can change with the…
Correct answer: whether velocity is constant or not may depend on how the money supply is measure.1023. The quantity theory of money implies that a given percentage change in the money supply will cause ?
- A. an equal percentage change in nominal DGP.
- B. an equal percentage change in real GDP
- C. a larger percentage change in nominal GDP
- D. a smaller percentage change in nominal
Explanation: The quantity equation is MV = PY, so if velocity and real output are treated as fixed, a given percentage change in money produces the…
Correct answer: an equal percentage change in nominal DGP.- A. assume that this year's inflation rate will be the same as last year's inflation rate
- B. merely guess at the inflation rate.
- C. assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years
- D. Use all available information in forming their expectations.
Explanation: Rational expectations are formed by using all relevant available information, including current policies and economic conditions.
Correct answer: Use all available information in forming their expectations.- A. Rational-expectations hypothesis
- B. Passive-expectations hypothesis
- C. adaptive expectations hypothesis
- D. lagged-expectations hypothesis.
Explanation: The rational-expectations hypothesis says people use an economic model and all available information to forecast the future.
Correct answer: Rational-expectations hypothesis- A. fine tuning
- B. monestarism
- C. microeconomics foundations of macroeconomics
- D. the classical model
Explanation: Fine-tuning means using government fiscal and monetary policies to adjust aggregate demand and stabilise the macroeconomy.
Correct answer: fine tuning- A. the behaviour of trade unions.
- B. the quantity of money
- C. price and wages
- D. the level of aggregate demand for goods and services
Explanation: Keynes argued that firms employ workers according to expected sales, so employment is governed by effective aggregate demand for goods and…
Correct answer: the level of aggregate demand for goods and services- A. the level of aggregate demand for goods and services.
- B. prices and wages
- C. interest rates
- D. the quantity of money
Explanation: In the classical model, flexible prices and wages clear the labour market, so employment is determined primarily by price and wage…
Correct answer: prices and wages- A. new-Keynesian.
- B. post-Keynesian.
- C. classical economists.
- D. Keynesian.
Explanation: Classical economists viewed unemployment largely as a labour-market disequilibrium that could be reduced when wages became flexible.
Correct answer: classical economists.- A. monetarists.
- B. keynesians
- C. post-keynesians
- D. new classical school
Explanation: Post-Keynesians emphasise uncertainty, confidence, institutions and the role of effective demand in determining output and employment.
Correct answer: post-keynesians- A. Keynesians
- B. post-keynesians
- C. monetarists
- D. new classical school
Explanation: New classical economists assume rapidly clearing markets and rational expectations, so anticipated monetary expansion changes prices…
Correct answer: new classical school- A. how unemployment could have persisted for so long during the Great Depression
- B. The increase in the growth rate of real output in the 1950s
- C. the stagflation of the 1970s
- D. Why policy changes that are perceived as permanent have more of an impact on a person's behaviour than policy changes that are viewed as temporary.
Explanation: New classical theories developed partly in response to the stagflation of the 1970s, which challenged the stable inflation-unemployment…
Correct answer: the stagflation of the 1970s- A. not constant and the quantity theory of money does hold.
- B. constant and the quantity theory of money does hold.
- C. not constant and the quantity theory of money does not hold.
- D. constant and the quantity theory of money does not hold.
Explanation: When money demand varies with the interest rate, velocity also varies because velocity is linked to the public’s demand for money.
Correct answer: not constant and the quantity theory of money does not hold.- A. the fallacy of composition
- B. negative entropy.
- C. hysteresis.
- D. ceteris paribus
Explanation: Hysteresis is the persistence of an economic condition, such as unemployment, even after the original shock or cause has disappeared.
Correct answer: hysteresis.- A. consistently overestimate the actual rate of inflation in the future.
- B. are always correct
- C. consistently underestimate the actual rate of inflation in the future
- D. are correct on average, but are subject to errors that are distributed randomly
Explanation: Rational expectations do not imply perfect forecasts; people use available information, so their errors may occur but should not show a…
Correct answer: are correct on average, but are subject to errors that are distributed randomly1036. Rapid increase in the price level during periods of recession of high unemployment are known as ?
- A. slump
- B. inflation
- C. stagflation
- D. stagnation
Explanation: Stagflation combines stagnant economic conditions, often with high unemployment, and inflation, meaning a continuing rise in the general…
Correct answer: stagflation1037. The government increase government spending to try to reduce unemployment This is an example of ?
- A. laissez-faire.
- B. monetary policy
- C. fine tuning
- D. automatic stablisers
Explanation: Increasing government spending deliberately to reduce unemployment is discretionary fiscal policy, commonly called fine-tuning.
Correct answer: fine tuning- A. stagflation in the late 1970s
- B. demand-pull inflation in the 1960s
- C. low growth rates in the 1950s
- D. The prolonged existence of high unemployment during the Great depression
Explanation: Keynesian economics gained prominence because classical theory could not adequately explain the prolonged mass unemployment of the Great…
Correct answer: The prolonged existence of high unemployment during the Great depression- A. requires fine tuning to reach full employment
- B. can never deviate from full employment
- C. will never be at full employment
- D. is self-correcting.
Explanation: Classical economists believed flexible wages and prices would restore equality between aggregate demand and supply, making the economy…
Correct answer: is self-correcting.- A. market prices
- B. sticky prices
- C. fixed prices
- D. regulatory prices
Explanation: Sticky prices are prices that adjust slowly rather than immediately clearing the market when supply or demand changes.
Correct answer: sticky prices