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 53 of 75
- A. special economic zones
- B. liberalized trade monopoly zones
- C. Economic Union zones
- D. Communist free trade areas
Explanation: China established special economic zones beginning in 1979 to attract foreign investment through relaxed regulations, duty-free imports…
Correct answer: special economic zones- A. contractionary monetary and fiscal policies
- B. currency devaluation
- C. long-run institutional and structural economic change
- D. short term-adjustment with a human face
Explanation: ECLA structuralists argued that underdevelopment arose from deep structural and institutional weaknesses, not merely short-term monetary…
Correct answer: long-run institutional and structural economic change- A. U.S
- B. OECD
- C. IMF
- D. OPEC
Explanation: The International Monetary Fund lends to countries facing persistent balance-of-payments difficulties and serves as an international…
Correct answer: IMF- A. Gosplan
- B. Gosagroprom
- C. nomenklatura system
- D. Parastatals
Explanation: The nomenklatura system was the Communist Party's system for controlling appointments and promotions to important state and enterprise…
Correct answer: nomenklatura system- A. Transitional Monetary Fund
- B. World Bank
- C. European Bank for Reconstruction and Development
- D. OECD
Explanation: The European Bank for Reconstruction and Development was created to finance the transition toward market economies in Eastern Europe and…
Correct answer: European Bank for Reconstruction and Development- A. agricultural bank only
- B. urban credit cooperatives
- C. mono bank system
- D. housing savings banks
Explanation: Before 1978, China’s banking system was dominated by a single state-owned bank that performed central-bank and commercial-bank functions.
Correct answer: mono bank system- A. Japan and Korea
- B. Brazil and Argentina
- C. Algeria and Yugoslavia
- D. Singapore and Malaysia
Explanation: Algeria and Yugoslavia are examples of countries that failed to correct persistent external imbalances, making them vulnerable to economic…
Correct answer: Algeria and Yugoslavia- A. switching spending from domestic to foreign sources
- B. devaluing local currencies
- C. increase trade restrictions by imposing quota
- D. increase government spending
Explanation: Expenditure switching means shifting demand from foreign goods toward domestically produced goods.
Correct answer: devaluing local currencies- A. full employment and price stability
- B. exports minus imports
- C. monetary policy offsetting fiscal policy
- D. exports equal to imports
Explanation: Internal balance combines full employment with price stability, so an economy uses its resources fully without substantial inflation.
Correct answer: full employment and price stability- A. Shifts the supply of loanable funds to the left and increase the real interest rate
- B. Shift the supply of loanable funds to the right and reduces the real interest rate.
- C. Shifts the demand for loanable funds to the right and increases the real interest rate.
- D. Shifts the demand for loanable funds to the left and reduces the real interest rate
Explanation: A budget surplus raises public saving and therefore national saving, shifting the supply of loanable funds to the right.
Correct answer: Shift the supply of loanable funds to the right and reduces the real interest rate.- A. Real interest rates rise and investment falls
- B. Real interest rates rise and investment rises
- C. Real interest rates fall and investment rises
- D. Real interest rates fall and investment falls
Explanation: Lower saving at every real interest rate shifts the supply of loanable funds left, raising the equilibrium interest rate.
Correct answer: Real interest rates rise and investment falls- A. an increase in public saving
- B. a decrease in private saving
- C. None of these answers
- D. a decrease in public savings
Explanation: A budget deficit occurs when government spending exceeds revenue, so public saving, which is revenue minus spending, decreases.
Correct answer: a decrease in public savings- A. raise the real interest rate and decrease the quantity of loanable funds demanded for investment
- B. lower the real interest rate and increase the quantity of loaable funds demanded for investment
- C. raise the real interest rate and increase the quantity of loandable funds demanded for investment
- D. lower the real interest rate and decrease the quantity of loanable funds demanded for investment
Explanation: A larger deficit reduces public saving and shifts the supply of loanable funds left, pushing up the real interest rate.
Correct answer: raise the real interest rate and decrease the quantity of loanable funds demanded for investment- A. Lower taxes on the returns to saving, provide investment tax credits and lower the deficit
- B. Increase tax on the returns to saving Provide investment tax credits and increase the deficit
- C. Increase tax on the returns to saving Provide investment tax credits and lower the deficit
- D. Lower taxes on the returns to saving Provide investment tax credits and increase the deficit
Explanation: Lower taxes on saving increase the incentive to save, investment tax credits encourage capital formation, and a lower deficit raises…
Correct answer: Lower taxes on the returns to saving, provide investment tax credits and lower the deficit1055. Investment is ?
- A. The purchase of goods and services
- B. The purchase of capital equipment and structures
- C. When we place our saving in the bank
- D. The purchase of stocks and bonds
Explanation: In macroeconomics, investment means spending on newly produced capital goods such as machinery, equipment and structures.
Correct answer: The purchase of capital equipment and structures- A. Saving is unchanged
- B. There is an increased in saving and the economy should grow more quickly
- C. There is a decrease in saving and the economy should grow more slowly
- D. There is not enough information to determine what will happen to saving
Explanation: National saving equals income minus private consumption and government purchases.
Correct answer: Saving is unchanged- A. none of these answers
- B. investment + consumption expenditures
- C. private saving + public saving
- D. GDP government purchases
Explanation: National saving has two components: private saving by households and firms, plus public saving, which is tax revenue minus government…
Correct answer: private saving + public saving- A. Probability of default
- B. Price-earnings ratio
- C. dividend
- D. tax treatment
Explanation: Credit risk is the risk that a borrower will fail to make promised interest or principal payments, so it is measured by the probability of…
Correct answer: Probability of default- A. the real interest rate should fall
- B. the real interest rate should rise
- C. the impact on the real interest rate is indeterminate
- D. the real interest rate should not change
Explanation: An investment tax credit increases the demand for loanable funds, tending to raise the real interest rate, while a lower tax on saving…
Correct answer: the impact on the real interest rate is indeterminate- A. intermediation
- B. equity finance
- C. crowding out
- D. the investment fund effect
Explanation: Crowding out occurs when a larger budget deficit reduces national saving, raises borrowing pressure and interest rates, and thereby lowers…
Correct answer: crowding out