Free Macroeconomics MCQs with Answers

• A. Intensify inflationary pressure at home
• B. Induce falling output per worker-hour for domestic workers
• C. Place constraints on the wages of domestic workers
• D. Increase profits of domestic import competing industries

Explanation: Foreign competition makes it harder for domestic firms to raise prices and wages, so it tends to restrain the wages of workers in…

• A. Automobiles
• B. Steel
• C. Radios and TVs
• D. Computer software

Explanation: Automobiles, steel, and radios and televisions have faced substantial import competition, while U.S.

• A. Exports should exceed imports
• B. imports should exceed exports
• C. Resources are more mobile internationally than are goods
• D. Resources are less mobile internationally than are goods

Explanation: Goods can cross borders more easily than most productive resources such as labour and capital, which remain relatively immobile…

• A. The introduction of new products
• B. Product design and quality
• C. Product price
• D. All of the above

Explanation: International competition pressures domestic firms to improve product variety, design, quality and price in order to retain consumers.

• A. Some nations prefer to produce one thing while others produce another
• B. Resources are not equally distributed to all trading nations
• C. Trade enhances opportunities to accumulate profits
• D. interest rates are not identical in all trading nations

Explanation: Countries possess different quantities and qualities of land, labour, capital and natural resources, so trade lets them obtain goods that…

• A. health and nutrition
• B. living standard
• C. infant mortality
• D. Purchasing Power Parity

Explanation: In the Human Development Index, longevity is represented mainly by life expectancy at birth, which measures the health dimension.

• A. infant mortality life expectancy and adult literacy rate
• B. crime rate clean environment and quality of housing
• C. air pollution rate, Water pollution rate and sanitation
• D. health education and environment

Explanation: The PQLI combines infant mortality, life expectancy at age one, and adult literacy.

• A. both exchange rates are measured s the domestic currency price of the US-dollar
• B. both exchange rates are not converted into international dollars
• C. both exchange rate are pegged
• D. both exchange rate are converted into Big Mac PPP formula

Explanation: The GDP price level compares the PPP exchange rate with the actual market exchange rate, with both expressed as domestic-currency units…

• A. current-year
• B. base-year
• C. fisher-ideal index
• D. Purchasing Power Parity (PPP)

Explanation: A Paasche index uses quantities from the current year as weights, whereas a Laspeyres index uses base-year quantities.

• A. Organization of Petroleum Exporting Country
• B. Organization of Pre-European Commission
• C. Oil Producing Economies Caucus
• D. Organization of Problematic Economies Committee

Explanation: OPEC stands for the Organization of the Petroleum Exporting Countries, a group coordinating petroleum policies among member countries.

• A. NIC, OPEC and G7
• B. Low income , middle income and high income
• C. Southeast Northeast and Southwest
• D. Asia, America and Europe

Explanation: The World Bank traditionally groups economies by income per person into low-income, middle-income, and high-income categories.

• A. Ethiopia
• B. Rwanda
• C. Somalia
• D. Singapore

Explanation: Ethiopia, Rwanda, and Somalia have been classified among low-income economies, whereas Singapore is a high-income economy.

• A. [(GDP2002 + GDP2001)/GDP2001]100
• B. [(GDP2002 - GDP2001) GDP2001]100
• C. [(GDP2002 - GDP2001)/GDP2001]100
• D. [(GDP2001 - GDP2002]100

Explanation: Growth is calculated as the change in GDP divided by the initial GDP, multiplied by 100: (GDP2002 − GDP2001) / GDP2001 × 100.

• A. 4%
• B. 1.11%
• C. 0.011%
• D. 11%

Explanation: Real growth is (364 − 360) / 360 × 100 = 1.11%. Because the figures are already at constant prices, this measures real rather than…

• A. 2000 - 890
• B. 200/890
• C. 200,000,000/890
• D. 200

Explanation: Per-capita GNP equals total GNP divided by population: €200,000,000 / 890, approximately €224,719 per person.

• A. [(GDPc - GDPp)/ DGPp]100
• B. [(GDPc - GDPp) DGPp]100
• C. GNPc - DGPp100)
• D. [GDPp - GDPc]100

Explanation: Growth compares the change in GDP with the previous year's GDP: (GDPc − GDPp) divided by GDPp, multiplied by 100.

• A. 1000
• B. 260
• C. 0.001
• D. 259740

Explanation: GDP per capita is total GDP divided by population: $260,000,000 ÷ 260,000 = $1,000. The population units cancel, leaving dollars per person.

• A. P = ΣPnqn/Σpoqn
• B. P = ΣPoqo/Σpnqn
• C. P = ΣPnqo/Σpoqo
• D. P = ΣPnqn/Σpoqo

Explanation: The Paasche price index uses current-year quantities as weights, so it divides the cost of the current basket at current prices by its…

• A. equality
• B. poverty
• C. employment
• D. human development

Explanation: Imposing rich-country labor standards and minimum wages in labor-abundant economies can raise labor costs above productivity and reduce…

• A. Most LDCs have less than 1/10 the per capita GNP of the U.S
• B. A greater share of GNP would have to be devoted to education to attain the same primary enrollment rates as in the U.S
• C. Setting up western labor standard and minimum wages in labor-abundant LDCs is sensible
• D. Most LDCs have a greater shortage of qualified teachers than the U.S does

Explanation: In labor-abundant LDCs, imposing Western minimum wages and labor standards is generally not considered sensible because it can reduce…