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 54 of 75
- A. a reduction in the budget deficit
- B. an increase in the budget deficit
- C. an investment tax credit
- D. None of the above
Explanation: Reducing the budget deficit raises national saving and shifts the supply of loanable funds right, increasing investment.
Correct answer: a reduction in the budget deficit- A. The supply of loanable funds in the Pakistan loanable funds market to shift to the right and the real interest rate to fall.
- B. The demand for loanable funds in the Pakistan loanable funds market to shift to the right and the real interest rate to rise
- C. The demand for loandable funds in the Pakistan loanable funds market to shift to the right and the real interest rate to fall
- D. The supply of loandable funds in the Pakistan loanable funds market to shift to the right and the real interest rate to rise
Explanation: Greater thrift means households save more, increasing the supply of loanable funds.
Correct answer: The supply of loanable funds in the Pakistan loanable funds market to shift to the right and the real interest rate to fall.1063. Which of the following financial market securities would probably pay the highest interest rate ?
- A. A bond issued by a startup company
- B. A government bond issued by the government of France.
- C. A bond issued by a blue-chip company
- D. An investment funds with portfolio of corporate bonds issued by blue chip companies
Explanation: A startup normally has greater default risk than a government or established blue-chip borrower, so its bond must offer the highest…
Correct answer: A bond issued by a startup company- A. buyers and sellers
- B. husbands and wives.
- C. borrowers and lenders.
- D. labor unions and firms
Explanation: A financial intermediary, such as a bank or mutual fund, channels funds from lenders or savers to borrowers.
Correct answer: borrowers and lenders.- A. Shift aggregate supply to the right
- B. Shift aggregate supply to the left
- C. Shift aggregate demand to the right
- D. shift aggregate demand to the left
Explanation: Better employee training raises labour productivity, allowing firms to produce more at each price level.
Correct answer: Shift aggregate supply to the right- A. consumption falls
- B. investment falls
- C. Exports fall
- D. imports fall
Explanation: Aggregate demand equals consumption plus investment plus government spending plus exports minus imports.
Correct answer: imports fall- A. increase price but not output
- B. increase output but not price
- C. increase output and price
- D. decrease output and price
Explanation: With totally inelastic aggregate supply, output is fixed regardless of aggregate demand.
Correct answer: increase price but not output- A. shift aggregate supply to the right
- B. shift aggregate supply to the left
- C. shift aggregate demand to the right
- D. shift aggregate demand to the left
Explanation: Imports are a leakage from aggregate expenditure, so higher import spending reduces net exports and shifts aggregate demand to the left.
Correct answer: shift aggregate demand to the left- A. the charities economy
- B. the demand side of the economy
- C. the underground economy
- D. the supply side of the country
Explanation: Reaganomics emphasized reducing taxes and regulation to strengthen production, investment, and employment incentives.
Correct answer: the supply side of the country- A. reduce poverty
- B. reduce unemployment
- C. weaken the power of trade unions
- D. help small businesses
Explanation: New classical reasoning emphasizes work incentives: generous welfare benefits can reduce the cost of remaining unemployed or out of work…
Correct answer: reduce unemployment- A. aggregate supply will increase will increase aggregate demand will decrease and the price level will decrease
- B. aggregate supply will increase will increase aggregate output will increase and the price level will decrease
- C. aggregate supply will increase will increase aggregate output will increase and the price level will increase
- D. both aggregate supply and demand will increase will increase and the price level will increase
Explanation: Lower taxes can strengthen incentives to work and invest, shifting aggregate supply to the right.
Correct answer: aggregate supply will increase will increase aggregate output will increase and the price level will decrease- A. Progressive and thus bear down on the wealthy
- B. regressive and thus bear down on the poor
- C. proportional and thus bear down on all consumers in the same manner
- D. deflationary and thus result in reductions in the price of imports
Explanation: Import tariffs generally impose a relatively heavier burden on lower-income households because poorer households spend a larger share of…
Correct answer: regressive and thus bear down on the poor- A. economic downturn and recession generally result in greater protectionism
- B. because domestic consumers outnumber domestic producer's policy markers usually enact Free-trade policies to satisfy the consumer majority:
- C. When domestic exporting companies are organized, policy tends to favor freer trade
- D. Policy tends to favor freer trade in countries whose imports are inputs into critical industries
Explanation: The claim in option b is the exception because consumers are often less organized politically than protected producers, so producer groups…
Correct answer: because domestic consumers outnumber domestic producer's policy markers usually enact Free-trade policies to satisfy the consumer majority:- A. be less than 12 percent and can be negative
- B. be less than 12 percent but must be greater than zero
- C. equal 6 percent
- D. exceed 30 percent
Explanation: When the tariff on inputs is higher than the tariff on the finished product, protection of domestic value added falls and may become…
Correct answer: be less than 12 percent and can be negative- A. specific tariff
- B. ad valorem tariff
- C. compound tariff
- D. effective tariff
Explanation: A compound tariff combines a specific charge per unit, Rs25 per pen, with an ad valorem charge based on value, 12 percent.
Correct answer: compound tariff- A. 5 percent
- B. 10 percent
- C. 15 percent
- D. 20 percent
Explanation: The equivalent ad valorem rate is the specific tariff divided by the world price: $50 ÷ $500 = 0.10, or 10 percent.
Correct answer: 10 percent- A. only on imports
- B. only on exports
- C. on both imports and exports
- D. on imports exports and nontraded goods
Explanation: Tariffs are taxes imposed on goods entering a country, so they are generally import tariffs.
Correct answer: only on imports- A. Prices to rise and output to rise
- B. Price to fall and output to remain unchanged
- C. Prices to fall and output to fall
- D. prices to rise and output to remain unchanged
Explanation: In the long run, output is fixed at its natural rate because prices and wages adjust, so an increase in money supply raises the price…
Correct answer: prices to rise and output to remain unchanged- A. Shift aggregate demand to the left
- B. Shift short run aggregate supply to the left
- C. shift aggregate demand to the right
- D. shift short-run aggregate supply to the right
Explanation: A recession means output is below its natural rate, so policymakers can increase output by shifting aggregate demand to the right through…
Correct answer: shift aggregate demand to the right- A. rising prices and rising output
- B. rising prices and falling output
- C. falling prices and falling output
- D. falling prices and rising output
Explanation: Stagflation combines economic stagnation with inflation, meaning output falls or stagnates while the price level rises.
Correct answer: rising prices and falling output