Free Macroeconomics MCQs with Answers

• A. Japan
• B. South Korea
• C. Taiwan
• D. Singapore

Explanation: The classic NIC group includes South Korea, Taiwan, Singapore and Hong Kong, not Japan.

• A. disparity reduction rate, human resource development rate and the composite index
• B. longevity, education and living standard
• C. minimum schooling, adult literacy and tertiary educational attainment
• D. human resource training development and R&D

Explanation: HDI combines three broad dimensions: a long and healthy life measured through longevity, knowledge measured through education, and a…

• A. Purchasing Power Parity
• B. Physical Quality of Life Index
• C. Human Development Index
• D. The Laspeyres index

Explanation: The Physical Quality of Life Index combines infant mortality, life expectancy and literacy as non-income measures of welfare.

• A. is defined as the annual number of deaths of infant under 1 year old per 1,000 live births
• B. reflects the availability of primary education the rights of employments and social security
• C. is life expectancy up to age 3
• D. reflects the availability of hospitals and childcare facilities and the parents wealth

Explanation: Infant mortality is the number of deaths of children below one year of age per 1,000 live births in a year.

• A. GNP is understated for developed countries, since a number of items included in their national incomes are intermediate goods
• B. The economic contribution of a housewife is a peasant family may not be measured is GNP is poor country
• C. GNP in understated for developing countries since many of their labor intensive good have no impact on exchange rate since they are not traded
• D. GNP is overstated for for countries where the price of foreign exchange is less than market clearing price

Explanation: National income accounting is designed to exclude intermediate goods, so their inclusion does not understate developed countries' GNP.

• A. P = ∑Poqo/∑poqo
• B. P = ∑Poqo/∑pnqn
• C. P = ∑Pnqo/∑poqo
• D. P = ∑Poqn/∑poqo

Explanation: The Laspeyres index holds the base-year quantities constant while comparing current-year prices with base-year prices: ΣPnqo divided by…

• A. less than $900, $900-$9000 and more than $9000
• B. less than $5000, $5000-$15000 and more than $15000
• C. less than $100, $100-$1000 and more than $1000
• D. less than $5000, $5000-$150000 and more than $150000

Explanation: This older World Bank classification uses per-capita GNP below $900 for low-income countries, $900 to $9,000 for middle-income countries…

• A. the United Kingdom
• B. Singapore
• C. Japan
• D. Hungary

Explanation: The United Kingdom, Singapore, and Japan are high-income economies. Hungary is generally classified as upper-middle-income, making it the…

• A. The boundary between rich and poor countries has become clearer in 1990s
• B. The fastest growing countries must be the ones with the highest per capita GNP
• C. A few poor countries like South Korea and Malaysia in the 1950s grew much more rapidly than some higher-income countries like Uruguay and New Zealand
• D. Today all high and Upper-middle income countries are Western.

Explanation: South Korea and Malaysia experienced rapid growth despite being relatively poor in the 1950s, while higher-income Uruguay and New Zealand…

• A. 276,000
• B. 1576,086
• C. 0.276
• D. 3.623

Explanation: Population equals total GDP divided by GDP per capita: $435,000,000 ÷ $1,576.087, which is approximately 276,000 people.

• A. 6500
• B. 130
• C. 0.0065
• D. 650

Explanation: GDP per capita is total GDP divided by population: $130,000,000 ÷ 20,000 = $6,500.

• A. economic growth
• B. economic growth plus changes in (c) output distribution and economic structure
• C. improvement in the well-being of the urban population
• D. sustainable increase in Gross National Product

Explanation: Economic development is broader than economic growth: it combines rising output with changes in income distribution and the structure of…

• A. 5%
• B. 0.901%
• C. 0.090%
• D. 0.991%

Explanation: Real growth is calculated as the percentage increase in constant-price GNP: (560 − 555) ÷ 555 × 100 = 0.901%.

• A. 9700 (1978 / 2005)
• B. 300 / 360
• C. 300 000 000 / 9700
• D. 32.333

Explanation: Per-capita GNP equals total GNP divided by population: $300,000,000 ÷ 9,700 = approximately $30,928. Option c gives this calculation.

• A. reduce
• B. increase
• C. do not change
• D. None of the above

Explanation: Imports are a leakage from the domestic spending stream, so they reduce the amount of each income round that generates further spending…

• A. MPC and MPT
• B. MPT and MPZ
• C. MPC and MPZ
• D. MPC, MPT and MPZ

Explanation: In an economy with taxation and imports, the total multiplier reflects leakages through saving, taxes and imports alongside consumption…

• A. booms, booms
• B. recession, recession
• C. booms, recessions
• D. recessions, booms

Explanation: A recession raises the deficit through lower tax receipts and higher transfer payments, while a boom improves the budget balance through…

• A. leave output unchanged
• B. increase output
• C. reduce output
• D. increase the MPC

Explanation: The balanced-budget multiplier is one: an equal increase in government spending and taxes raises output by the amount of the spending…

• A. market imperfection
• B. the law of diminishing returns
• C. the paradox of thrift
• D. market failure

Explanation: The paradox of thrift occurs when everyone tries to save more, reducing consumption and equilibrium income while leaving total equilibrium…

• A. marginal propensity to invest
• B. disposable incomes
• C. marginal propensity to consume
• D. average propensity to consume

Explanation: With autonomous investment, investment does not change with income, so changes in aggregate demand arise through consumption.