Free Macroeconomics MCQs with Answers

• A. Currency exchange
• B. Currency value
• C. Currency value
• D. Exchange rate

Explanation: An exchange rate expresses the value of one currency in terms of another currency, gold, or an international accounting unit such as the…

• A. Advance deduction of the interest in purchasing, selling or lending a commercial paper
• B. State (central) Bank's interest rate on loans to its member banks
• C. Both of them
• D. None of them

Explanation: The discount rate can refer to the rate applied when commercial paper is discounted and, in monetary policy, to the central bank's lending…

• A. Decreasing business activity
• B. Falling prices
• C. Unemployment
• D. All of these

Explanation: A depression is a severe and prolonged contraction in economic activity, typically involving falling prices, declining business activity…

• A. Economic Cycle
• B. Business Cycle
• C. Complete Cycle
• D. Cycle Business

Explanation: The business cycle is the recurring pattern of recession, recovery, expansion or growth, and decline in overall economic activity.

• A. Balance of payment
• B. Balance sheet
• C. Terms of trade
• D. Balance of trade

Explanation: The balance of trade is the difference between the value of a country’s exports and imports of goods over a specified period.

• A. Breton Wood method
• B. Free market exchange rate
• C. Atlas method of exchange rate
• D. Open market exchange rate

Explanation: The World Bank’s Atlas method converts national income into a common dollar measure by using an exchange-rate average adjusted for…

• A. adjusting for changes over time
• B. adjusting for data collection errors
• C. adjusting for population changes
• D. adjusting or changes in prices

Explanation: A nominal value is converted into a real value by removing the effect of price changes, usually through a price index.

• A. about the same point in time over different places
• B. about different points in time over the same variable
• C. about different variables over different places
• D. about different points in time over different places

Explanation: Time-series data track the same variable at different points in time, such as Pakistan’s inflation rate over several years.

• A. individual building blocks in the economy
• B. the relationship between different sectors on the economy
• C. household purchase decisions
• D. the economy as a whole

Explanation: Macroeconomics examines economy-wide outcomes such as national income, unemployment, inflation, and economic growth.

• A. there is excess demand in the labour market
• B. there are some people who will not work at the going wage rate.
• C. people are not willing to work at the going wage rate.
• D. at the going wage rate, there are people who want to work but cannot find work.

Explanation: Unemployment exists when people who are willing and able to work at the prevailing wage cannot find jobs.

• A. a decrease in the overall price level.
• B. an increase in the overall price level.
• C. an increase in the overall level of economic activity.
• D. a decrease in the overall level of economics activity

Explanation: Inflation is a sustained rise in the general or overall price level, which reduces the purchasing power of money.

• A. 20%
• B. 2%
• C. 12%
• D. 16%

Explanation: The increase is Rs2,000, found by subtracting Rs10,000 from Rs12,000; dividing Rs2,000 by the original Rs10,000 gives 0.20, or 20%.

• A. construct price lists
• B. compare shop prices
• C. measure changes in the cost of living
• D. None of the above

Explanation: The retail price index tracks the average change in prices of goods and services bought by households, so it is used to measure changes in…

• A. the business cycle has been eliminated
• B. an increase in inflation temporarily increases unemployment.
• C. inflation and unemployment are unrelated in the short run.
• D. a decrease in inflation temporarily increases unemployment.
• E. none of these

Explanation: The short-run Phillips curve describes an inverse relationship between inflation and unemployment: reducing inflation can temporarily…

• A. the countries of Western Europe have set high minimum wage rates.
• B. Unions in Western Europe keep the wage high
• C. none of these answers.
• D. The countries of Western Europe have protected their industries from foreign corporation
• E. Workers in the united states are highly productive

Explanation: None of the listed explanations correctly identifies the main reason for Western Europe’s high living standards, which is generally high…

• A. increase the scarcity of resources.
• B. makes a country more equitable.
• C. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything to home.
• D. None of these

Explanation: Foreign trade enables countries to specialize according to comparative advantage and obtain goods more cheaply than if each tried to…

• A. a period of declining prices.
• B. a period of declining unemployment
• C. a period during which aggregate output declines.
• D. a period of very rapidly declining prices.

Explanation: A recession is a significant decline in overall economic activity, commonly reflected in falling real aggregate output.

• A. gross national product.
• B. national demand.
• C. economy-wide demand
• D. aggregate demand

Explanation: Aggregate demand is the total planned demand for final goods and services in an economy at different price levels.

• A. descriptive economics
• B. normative economics
• C. macroeconomics.
• D. microeconomics

Explanation: Inflation is a sustained rise in the general price level, so its causes and effects are studied as economy-wide macroeconomic issues.

• A. the behavior of the electronics industry
• B. the behavior of firms
• C. economics aggregates
• D. the activities of individual units

Explanation: Macroeconomics studies aggregates such as national income, total output, employment and the general price level.