Macro Quetion (2)

Macroeconomics I
Recall different macroeconomic school of thought

Sure, here are 15 multiple choice questions based on the learning outcome and
cognitive level you provided:
1. Which macroeconomic school of thought emphasizes the importance of

aggregate demand in determining economic activity?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Answer: b. Keynesian
Explanation: Keynesian economics emphasizes the importance of government

intervention in stabilizing the economy, particularly through fiscal policy
measures to increase aggregate demand.
2. Which macroeconomic school of thought argues that government intervention

in the economy is generally harmful and that markets are efficient?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Answer: a. Classical
Explanation: Classical economics emphasizes the importance of markets and

argues that government intervention in the economy is generally harmful.
3. Which macroeconomic school of thought emphasizes the importance of money

supply in determining economic activity?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Answer: c. Monetarist
Explanation: Monetarist economics emphasizes the importance of the money

supply in determining economic activity, and argues that monetary policy can be
used to stabilize the economy.

rational expectations in determining economic outcomes?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Answer: d. New Classical
Explanation: New Classical economics emphasizes the importance of rational

expectations and argues that markets are efficient and self-correcting.
5. Which macroeconomic school of thought argues that inflation is primarily

caused by excessive growth in the money supply?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Answer: c. Monetarist
Explanation: Monetarist economics argues that inflation is primarily caused by

excessive growth in the money supply.
6. Which macroeconomic school of thought emphasizes the importance of supply-

side factors in determining economic growth?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Explanation: Classical economics emphasizes the importance of supply-side
factors, such as productivity and technology, in determining economic growth.
7. Which macroeconomic school of thought argues that government deficits can

be beneficial in stimulating economic growth?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Explanation: Keynesian economics argues that government deficits can be

beneficial in stimulating economic growth, particularly during periods of
economic downturn.

expectations and animal spirits in determining economic outcomes?
a. Classical
b. Keynesian
c. Monetarist
d. New Keynesian
Answer: d. New Keynesian

Explanation: New Keynesian economics emphasizes the importance of
expectations and animal spirits in determining economic outcomes, and argues
that government intervention in the economy can help to stabilize the economy.
9. Which macroeconomic school of thought argues that economic growth is

primarily driven by technological progress?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Explanation: New Classical economics argues that economic growth is primarily

driven by technological progress and that government intervention in the
economy is generally harmful.
10. Which macroeconomic school of thought emphasizes the importance of sticky

prices and wages in determining economic outcomes?
a. Classical
b. Keynesian
c. Monetarist
d. New Keynesian
Answer: d. New Keynesian

Explanation: New Keynesian economics emphasizes the importance of sticky
prices and wages in determining economic outcomes, and argues that
government intervention in the economy can help to stabilize the economy
during periods of economic downturn.
11. Which macroeconomic school of thought argues that business cycles are
primarily caused by fluctuations in aggregate demand?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Explanation: Keynesian economics argues that business cycles are primarily

caused by fluctuations in aggregate demand, and that government intervention in
the economy can help to stabilize the economy during periods of economic
downturn.

rational expectations and market efficiency in determining economic outcomes?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical

Explanation: New Classical economics emphasizes the importance of rational
expectations and market efficiency in determining economic outcomes, and
argues that government intervention in the economy is generally harmful.
13. Which macroeconomic school of thought argues that government

intervention in the economy can have unintended consequences and may lead to
inefficient outcomes?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Explanation: Classical economics argues that government intervention in the

economy can have unintended consequences and may lead to inefficient
outcomes.
14.Which macroeconomic school of thought argues that the economy will tend
towards full employment in the long run?
a. Classical
b. Keynesian
c. Monetarist
d. New Classical
Explanation: Classical economics argues that the economy will tend towards full
employment in the long run, and that government intervention in the economy is
generally harmful.

expectations and uncertainty in determining economic outcomes?
a. Classical
b. Keynesian
c. Monetarist
d. New Keynesian
Explanation: Keynesian economics emphasizes the importance of expectations

and uncertainty in determining economic outcomes, and argues that government
intervention in the economy can help to stabilize the economy during periods of
economic downturn.
Describe and calculate the concept of National Income Accounting.
Sure, here are 20 multiple choice questions for the course Macroeconomics I
based on the learning outcome of describing and calculating the concept of
National Income Accounting. The cognitive level for these questions is mostly at
the level of understanding and applying:
1. Which of the following is included in Gross Domestic Product (GDP)?

a. Intermediate goods
b. Used goods
c. Illegal goods and services
d. All of the above
Answer: None of the above (only final goods and services produced in a country's
borders are included in GDP)
2. Which of the following is not a component of GDP?

a. Consumption
b. Investment
c. Government spending
d. Exports
Answer: None of the above (all of these are components of GDP)
3. Which of the following would be included in Gross National Product (GNP)?

a. A French company's profits from its factory in the US
b. A US company's profits from its factory in France
c. A US citizen's income from working in France
d. None of the above
Answer: c. A US citizen's income from working in France (GNP measures the

income earned by a country's citizens, regardless of where they are located)
4. Which of the following is an example of an intermediate good?
a. A new car
b. Steel used to produce a car
c. Gasoline used to fuel the car
d. All of the above
Answer: b. Steel used to produce a car (intermediate goods are goods that are
used in the production of other goods)
5. Which of the following is not included in the calculation of GDP?

a. Sales tax
b. Wages paid to a construction worker
c. Rent paid by a tenant
d. Interest earned on a savings account
Answer: d. Interest earned on a savings account (GDP only includes the value of
final goods and services produced in a country's borders)
6. Which of the following is a measure of the total income earned by households

in an economy?
a. Gross Domestic Product (GDP)
b. Gross National Product (GNP)
c. Personal Income
d. Disposable Income
Answer: c. Personal Income (personal income measures the income earned by
households, including wages, rental income, and transfer payments)
7. Which of the following is a measure of the total income earned by individuals

and businesses in an economy?
c. National Income
Answer: c. National Income (national income measures the total income earned
by individuals and businesses in an economy, including wages, profits, and rental
income)
8. Which of the following is a measure of the total income earned by a country's

citizens, regardless of where they are located?
c. National Income
Answer: b. Gross National Product (GNP measures the total income earned by a
country's citizens, regardless of where they are located)
9. Which of the following is a measure of the total output produced in an

economy?
c. National Income
Answer: a. Gross Domestic Product (GDP measures the total output produced in
an economy, including the value of final goods and services produced)
10. Which of the following is a measure of the total income earned by households
after taxes and transfer payments?
c. Personal Income
Answer: d. Disposable Income (disposable income measures the income that

households have available to spend or save after paying taxes and receiving
transfer payments)
11. If a country's GDP is $10 trillion and its population is 250 million, what is its
per capita GDP?
a. $25,000
b. $40,000
c. $50,000
d. $60,000
Answer: c. $50,000 (per capita GDP is calculated by dividing GDP by the
population)
12. If a country's GDP is $10 trillion, its consumption is $7 trillion, its investment is
$2 trillion, and its government spending is $1 trillion, what is its net exports?
a. $1 trillion
b. $2 trillion
c. $3 trillion
d. $4 trillion
Answer: b. $2 trillion (net exports is calculated by subtracting imports from

exports)
13. Which of the following is not a measure of national income?

c. Personal Income
d. Corporate Profits
Answer: d. Corporate Profits (corporate profits are a measure of the income

earned by businesses, not the entire economy)
14. Whichof the following is not included in the calculation of Gross Domestic
Product (GDP)?
a. The value of all final goods and services produced in a country
b. Government transfers and subsidies
c. The value of goods and services produced by foreign-owned companies within a
country's borders
d. Investment in stocks and bonds
Answer: d. Investment in stocks and bonds (GDP only includes the value of final
goods and services produced in a country's borders)
15. If a country's GDP is $500 billion and its government spending is $100 billion,
what is its government expenditure ratio?
a. 0.02
b. 0.10
c. 0.20
d. 0.50
Answer: c. 0.20 (the government expenditure ratio is calculated by dividing

government spending by GDP)
16. Which of the following is a measure of the total value of a country's output,
adjusted for inflation?
a. Nominal GDP
b. Real GDP
c. GDP deflator
d. Consumer Price Index (CPI)
Answer: b. Real GDP (real GDP adjusts for changes in the price level, allowing for
comparisons of output over time)
17. Which of the following is a measure of the overall price level in an economy?
a. Nominal GDP
b. Real GDP
c. GDP deflator
Answer: d. Consumer Price Index (CPI measures the price level of a basket of
goods and services purchased by households)
18. Which of the following is a measure of the inflation rate in an economy?

a. Nominal GDP
b. Real GDP
c. GDP deflator
Answer: d. Consumer Price Index (CPI is used to calculate the inflation rate, which
measures the percentage change in the price level over time)
19. Which of the following is not a component of national income?

a. Wages and salaries
b. Rental income
c. Corporate profits
d. Interest payments on government debt
Answer: d. Interest payments on government debt (national income includes the
total income earned by individuals and businesses in an economy, but does not
include interest payments on government debt)
20. If a country's GDP is $1 trillion and its exports are $200 billion, what is its
export ratio?
a. 0.02
b. 0.10
c. 0.20
d. 0.50
Answer: c. 0.20 (the export ratio is calculated by dividing exports by GDP)
Explain basic closed economy IS-LM model
Sure, here are 20 multiple-choice questions based on the learning outcome

"Explain basic closed economy IS-LM model" along with answers and
explanations:
1. The IS-LM model is used to analyze the equilibrium in which two markets?
A) Labor and capital
B) Goods and services
C) Foreign exchange and commodities
D) Stocks and bonds
Answer: B) Goods and services

Explanation: The IS-LM model analyzes the equilibrium in the goods and services
market and the money market.
2. In the IS-LM model, what does the IS curve represent?

A) Interest rate and saving equilibrium
B) Investment and saving equilibrium
C) Inflation and supply equilibrium
D) Income and spending equilibrium
Answer: D) Income and spending equilibrium
Explanation: The IS curve represents the equilibrium in the goods and services
market, where income and spending are equal.
3. What does the LM curve represent in the IS-LM model?

A) Interest rate and saving equilibrium
B) Investment and saving equilibrium
C) Inflation and supply equilibrium
D) Money supply and demand equilibrium
Answer: D) Money supply and demand equilibrium
Explanation: The LM curve represents the equilibrium in the money market,

where the supply of money equals the demand for money.
4. What is the slope of the IS curve in the IS-LM model?
A) Positive
B) Negative
C) Zero
D) Undefined
Answer: B) Negative
Explanation: The slope of the IS curve is negative, indicating an inverse

relationship between the interest rate and income.
5. What is the slope of the LM curve in the IS-LM model?

A) Positive
B) Negative
C) Zero
D) Undefined
Answer: A) Positive
Explanation: The slope of the LM curve is positive, indicating a direct relationship

between the interest rate and the money supply.
6. In the IS-LM model, an increase in government spending shifts which curve?

A) IS curve
B) LM curve
C) Both curves
D) Neither curve
Answer: A) IS curve
Explanation: An increase in government spending increases the level of income

and shifts the IS curve to the right.
7. In the IS-LM model, a decrease in the money supply shifts which curve?
A) IS curve
B) LM curve
C) Both curves
D) Neither curve
Answer: B) LM curve
Explanation: A decrease in the money supply increases the interest rate and shifts
the LM curve to the left.
8. In the IS-LM model, what happens to the equilibrium interest rate when the
money supply increases?
A) It increases
B) It decreases
C) It remains unchanged
D) It is indeterminate
Answer: C) It remains unchanged
Explanation: An increase in the money supply leads to a decrease in the

equilibrium interest rate, but this is offset by an increase in income, which
increases the demand for money and raises the interest rate back to its original
level.
9. In the IS-LM model, what happens to the equilibrium interest rate when the
government increases taxes?
A) It increases
B) It decreases
Answer: A) It increases
Explanation: An increase in taxes reduces disposable income and decreases

spending, leading to a decrease in income and a decrease in the demand for
money. This lowers the equilibrium interest rate.
10. In the IS-LM model, what happens to the equilibrium level of income when
the money supply increases?
A) It increases
B) It decreases
Explanation: An increase in the money supply leads to a decrease in the interest

rate, which stimulates investment and increases the level of income.
11. In the IS-LM model, what happens to the equilibrium level of income when
the government increases taxes?
A) It increases
B) It decreases
Answer: B) It decreases

spending, leading to a decrease in income.
12. In the IS-LM model, what happens to the equilibrium interest rate when there
is an increase in investment demand?
A) It increases
B) It decreases
Explanation: An increase in investment demand increases the demand for money,

leading to an increase in the equilibrium interest rate.
13. In the IS-LM model, what happens when the central bank increases the money
supply?
A) The IS curve shifts to the right
B) The LM curve shifts to the right
C) Both curves shift to the right
D) Neither curve shifts
Answer: B) The LM curve shifts to the right

rate, shifting the LM curve to the right14. In the IS-LM model, what happens when
there is an increase in the price level?
A) The IS curve shifts to the right
B) The LM curve shifts to the right
C) Both curves shift to the right
D) Neither curve shifts
Answer: D) Neither curve shifts

Explanation: An increase in the price level does not directly affect the IS or LM
curve, but it does reduce the real value of money balances, leading to an increase
in the demand for money and a higher equilibrium interest rate.
15. In the IS-LM model, what is the effect of a decrease in the interest rate on
investment and consumption?
A) Both increase
B) Both decrease
C) Investment increases, consumption decreases
D) Consumption increases, investment decreases
Answer: A) Both increase
Explanation: A decrease in the interest rate stimulates investment by reducing the

cost of borrowing, and also increases consumption by making borrowing cheaper
and increasing the present value of future income.
16. In the IS-LM model, what is the effect of an increase in the interest rate on net
exports?
A) Net exports increase
B) Net exports decrease
C) Net exports remain unchanged
Answer: B) Net exports decrease

Explanation: An increase in the interest rate leads to an appreciation of the
domestic currency, making exports more expensive and imports cheaper, leading
to a decrease in net exports.
17. In the IS-LM model, what is the effect of an increase in government spending
on the trade balance?
A) The trade balance improves
B) The trade balance worsens
C) The trade balance remains unchanged
Answer: B) The trade balance worsens
Explanation: An increase in government spending leads to an increase in income

and a higher demand for imports, leading to a deterioration in the trade balance.
18. In the IS-LM model, what is the effect of an increase in the money supply on
the trade balance?
Answer: B) The trade balance worsens

rate and an increase in investment and consumption, which leads to an increase
in imports and a deterioration in the trade balance.
19. In the IS-LM model, what is the effect of an increase in taxes on the trade
balance?
Answer: A) The trade balance improves

spending, leading to a decrease in imports and an improvement in the trade
balance.
20. In the IS-LM model, what is the effect of an increase in the price level on the
real interest rate?
A) It increases
B) It decreases
Explanation: An increase in the price level reduces the real value of money
balances, leading to an increase in the demand for money and a higher
equilibrium interest rate.
Explain small open economy IS-LM model
Sure, here are 20 multiple choice questions for the course Macroeconomics I,
based on the learning outcome "Explain small open economy IS-LM model" at the
cognitive level of understanding:
1. What is the small open economy IS-LM model?

A) A model that explains the behavior of a large economy in response to changes
in interest rates.
B) A model that explains the behavior of a small economy that is open to
international trade in response to changes in interest rates.
C) A model that explains the behavior of a small economy that is closed to
international trade in response to changes in interest rates.
D) A model that explains the behavior of a large economy in response to changes
in output.
Answer: B
Explanation: The small open economy IS-LM model is a macroeconomic model

that explains the behavior of a small economy that is open to international trade
in response to changes in interest rates.
2. In the small open economy IS-LM model, what does the IS curve represent?
A) The relationship between interest rates and investment.
B) The relationship between output and interest rates.
C) The relationship between exports and output.
D) The relationship between imports and output.
Answer: B
Explanation: The IS curve in the small open economy IS-LM model represents the
relationship between output and interest rates.
3. In the small open economy IS-LM model, what does the LM curve represent?
A) The relationship between interest rates and investment.
B) The relationship between output and interest rates.
C) The relationship between money supply and interest rates.
D) The relationship between money demand and interest rates.
Answer: C
Explanation: The LM curve in the small open economy IS-LM model represents
the relationship between money supply and interest rates.
4. What happens to the IS curve in the small open economy IS-LM model when
there is an increase in government spending?
A) It shifts to the left.
B) It shifts to the right.
C) It becomes steeper.
D) It becomes flatter.
Answer: B
Explanation: An increase in government spending shifts the IS curve to the right in

the small open economy IS-LM model.
5. What happens to the LM curve in the small open economy IS-LM model when
there is an increase in the money supply?
A) It shifts to the left.
B) It shifts to the right.
C) It becomes steeper.
D) It becomes flatter.
Answer: B
Explanation: An increase in the money supply shifts the LM curve to the right in
the small open economy IS-LM model.
6. What is the equilibrium in the small open economy IS-LM model?

A) The point where the IS and LM curves intersect.
B) The point where the IS curve intersects the horizontal axis.
C) The point where the LM curve intersects the horizontal axis.
D) The point where the IS and LM curves intersect the vertical axis.
Answer: A
Explanation: The equilibrium in the small open economy IS-LM model is the point
where the IS and LM curves intersect.
7. What is the effect of an increase in government spending on the equilibrium in

the small open economy IS-LM model?
A) It increases output and interest rates.
B) It decreases output and interest rates.
C) It increases output and decreases interest rates.
D) It decreases output and increases interest rates.
Answer: A
Explanation: An increase in government spending increases output and interest

rates in the small open economy IS-LM model.
8. What is the effect of an increase in the money supply on the equilibrium in the
small open economy IS-LM model?
Answer: C
Explanation: An increase in the money supply increases output and decreases
interest rates in the small open economy IS-LM model.
9. What is the effect of an increase in the world interest rate on the equilibrium in
Answer: B
Explanation: An increase in the world interest rate decreases output and interest
10. What is the effect of an increase in exports on the equilibrium in the small
open economy IS-LM model?
Answer: C
Explanation: An increase in exports increases output and decreases interest rates

in the small open economy IS-LM model.
11. What is the effect of an increase in imports on the equilibrium in the small
open economy IS-LM model?
B) It decreasesoutput and interest rates.
Answer: D
Explanation: An increase in imports decreases output and increases interest rates

in the small open economy IS-LM model.
12. What is the difference between a small open economy and a closed economy?
A) A small open economy is more susceptible to external shocks because it is
open to international trade, while a closed economy is not.
B) A small open economy is less susceptible to external shocks because it is open
to international trade, while a closed economy is not.
C) A small open economy is characterized by a fixed exchange rate, while a closed
economy is not.
D) A small open economy is characterized by a flexible exchange rate, while a
closed economy is not.
Answer: A
Explanation: A small open economy is more susceptible to external shocks
because it is open to international trade, while a closed economy is not.
13. What is the difference between the IS-LM model and the AD-AS model?
A) The IS-LM model focuses on the short run, while the AD-AS model focuses on
the long run.
B) The IS-LM model focuses on the labor market, while the AD-AS model focuses
on the goods market.
C) The IS-LM model focuses on the relationship between output and interest
rates, while the AD-AS model focuses on the relationship between output and
prices.
D) The IS-LM model focuses on the relationship between exports and imports,
while the AD-AS model focuses on the relationship between investment and
consumption.
Answer: C
Explanation: The IS-LM model focuses on the relationship between output and
interest rates, while the AD-AS model focuses on the relationship between output
and prices.
14. What is the difference between the closed economy IS-LM model and the
small open economy IS-LM model?
A) The closed economy IS-LM model assumes that the economy is not open to
international trade, while the small open economy IS-LM model assumes that the
economy is open to international trade.
B) The closed economy IS-LM model focuses on the relationship between output
and interest rates, while the small open economy IS-LM model focuses on the
relationship between output and prices.
C) The closed economy IS-LM model assumes a fixed exchange rate, while the
small open economy IS-LM model assumes a flexible exchange rate.
D) The closed economy IS-LM model assumes that the government can control
the money supply, while the small open economy IS-LM model assumes that the
money supply is determined by the international market.
Answer: A
Explanation: The closed economy IS-LM model assumes that the economy is not
open to international trade, while the small open economy IS-LM model assumes
that the economy is open to international trade.
15. In the small open economy IS-LM model, what is the effect of a decrease in
government spending?
Answer: B
Explanation: A decrease in government spending decreases output and interest

16. In the small open economy IS-LM model, what is the effect of a decrease in
the money supply?
Answer: D
Explanation: A decrease in the money supply decreases output and increases

interest rates in the small open economy IS-LM model.
17. What is the effect of an increase in the world price level on the equilibrium in
Answer: B
Explanation: An increase in the world price level decreases output and interest
18. What is the effect of a decrease in the world interest rate on the equilibrium
in the small open economy IS-LM model?
Answer: A
Explanation: A decrease in the world interest rate increases output and interest
19. What is the effect of an increase in the domestic interest rate on the
equilibrium in the small open economy IS-LM model?
Answer: D
Explanation: An increase in the domestic interest rate decreases output and

increases interest rates in the
understand aggregate supply

Sure! Here are 15 multiple choice questions for the course Macroeconomics I
based on the learning outcome of understanding aggregate supply:
1. Which of the following is a component of aggregate supply?

a. Consumption
b. Investment
c. Government expenditures
d. Production costs
Answer: d. Production costs
2. Which of the following would cause a shift in the short-run aggregate supply
curve?
a. An increase in government spending
b. A decrease in the price level
c. An increase in productivity
d. A decrease in taxes
Answer: c. An increase in productivity
3. Which of the following is a determinant of long-run aggregate supply?

a. Changes in government policies
b. Changes in technology
c. Changes in consumer preferences
d. Changes in the price level
Answer: b. Changes in technology
4. In the short run, an increase in the price level will lead to:
a. An increase in aggregate supply
b. A decrease in aggregate supply
c. No change in aggregate supply
d. An increase in aggregate demand
Answer: b. A decrease in aggregate supply
5. Which of the following is a factor that can influence the slope of the short-run
aggregate supply curve?
a. Availability of labor
b. Availability of capital
c. Availability of natural resources
d. All of the above
Answer: d. All of the above
6. Which of the following is a factor that can shift the long-run aggregate supply
curve?
a. Changes in labor force participation rates
b. Changes in government regulations
c. Changes in the price level
d. Changes in consumer preferences
Answer: b. Changes in government regulations
7. Which of the following is a characteristic of the long-run aggregate supply

curve?
a. It is vertical
b. It is upward sloping
c. It is downward sloping
d. It is horizontal
Answer: a. It is vertical
8. Which of the following is a factor that can cause movements along the short-
run aggregate supply curve?
a. Changes in technology
b. Changes in the labor force
d. Changes in government spending
Answer: c. Changes in the price level
9. Which of the following is a factor that can shift the short-run aggregate supply
curve?
a. Changes in the price level
b. Changes in productivity
c. Changes in the labor force
Answer: b. Changes in productivity
10. Which of the following is a factor that can cause a shift in both the short-run
and long-run aggregate supply curves?
b. Changes in the price level
c. Changes in government spending
d. Changes in aggregate demand
Answer: a. Changes in technology
11. The short-run aggregate supply curve is upward sloping because:

a. Firms are able to adjust their prices quickly in response to changes in demand
b. Firms are unable to adjust their prices quickly in response to changes in
demand
c. Firms are able to adjust their production levels quickly in response to changes
in demand
d. Firms are unable to adjust their production levels quickly in response to
changes in demand
Answer: b. Firms are unable to adjust their prices quickly in response to changes
in demand
12. Which of the following is a factor that can cause a shift in the long-run
aggregate supply curve but not the short-run aggregate supply curve?
Answer: b. Changes in the labor force
13. In the long run, changes in the price level will result in:
a. A movement along the long-run aggregate supply curve
b. A shift in the long-run aggregate supply curve
c. A movement along the short-run aggregate supply curve
d. A shift in the short-run aggregate supply curve
Answer: a. A movement along the long-run aggregate supply curve
14. The slope of the short-run aggregate supply curve is steeper when:
a. Workers are highly unionized
b. Firms have a high degree of market power
c. Prices are very flexible
d. Prices are very sticky
Answer: d. Prices are very sticky
15. Which of the following is a factor that can cause a shift in the short-run
aggregate supply curve but not the long-run aggregate supply curve?
Answer: c. Changes in the price level
Explanation: Understanding aggregate supply is crucial in macroeconomics

because it helps explain the relationship between the overall level of prices in an
economy and the total amount of goods and services that are produced.
Aggregate supply is the total amount of goods and services that are produced in
an economy at a given price level, and itis influenced by various factors such as
production costs, productivity, availability of resources, and government policies.
The short-run aggregate supply curve is upward sloping because firms are unable
to adjust their prices quickly in response to changes in demand, while the long-
run aggregate supply curve is vertical because prices and wages are flexible in the
long run. Movements along the aggregate supply curves are caused by changes in
the price level, while shifts in the aggregate supply curves are caused by factors
such as changes in technology, labor force, and government policies.

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Macroeconomics I

Recall different macroeconomic school of thought

1. Which macroeconomic school of thought emphasizes the importance of

Explanation: Keynesian economics emphasizes the importance of government

2. Which macroeconomic school of thought argues that government intervention

Explanation: Classical economics emphasizes the importance of markets and

3. Which macroeconomic school of thought emphasizes the importance of money

Explanation: Monetarist economics emphasizes the importance of the money

4. Which macroeconomic school of thought emphasizes the importance of

Explanation: New Classical economics emphasizes the importance of rational

5. Which macroeconomic school of thought argues that inflation is primarily

Explanation: Monetarist economics argues that inflation is primarily caused by

6. Which macroeconomic school of thought emphasizes the importance of supply-

7. Which macroeconomic school of thought argues that government deficits can

Explanation: Keynesian economics argues that government deficits can be

8. Which macroeconomic school of thought emphasizes the importance of

Answer: d. New Keynesian

9. Which macroeconomic school of thought argues that economic growth is

Answer: d. New Classical

Explanation: New Classical economics argues that economic growth is primarily

10. Which macroeconomic school of thought emphasizes the importance of sticky

Answer: d. New Keynesian

Explanation: Keynesian economics argues that business cycles are primarily

12. Which macroeconomic school of thought emphasizes the importance of

Answer: d. New Classical

13. Which macroeconomic school of thought argues that government

Explanation: Classical economics argues that government intervention in the

15. Which macroeconomic school of thought emphasizes the importance of

Explanation: Keynesian economics emphasizes the importance of expectations

Describe and calculate the concept of National Income Accounting.

1. Which of the following is included in Gross Domestic Product (GDP)?

2. Which of the following is not a component of GDP?

Answer: None of the above (all of these are components of GDP)

3. Which of the following would be included in Gross National Product (GNP)?

Answer: c. A US citizen's income from working in France (GNP measures the

5. Which of the following is not included in the calculation of GDP?

6. Which of the following is a measure of the total income earned by households

7. Which of the following is a measure of the total income earned by individuals

8. Which of the following is a measure of the total income earned by a country's

9. Which of the following is a measure of the total output produced in an

Answer: d. Disposable Income (disposable income measures the income that

Answer: b. $2 trillion (net exports is calculated by subtracting imports from

13. Which of the following is not a measure of national income?

Answer: d. Corporate Profits (corporate profits are a measure of the income

Answer: c. 0.20 (the government expenditure ratio is calculated by dividing

18. Which of the following is a measure of the inflation rate in an economy?

19. Which of the following is not a component of national income?

Explain basic closed economy IS-LM model

Sure, here are 20 multiple-choice questions based on the learning outcome

Answer: B) Goods and services

2. In the IS-LM model, what does the IS curve represent?

Answer: D) Income and spending equilibrium

3. What does the LM curve represent in the IS-LM model?

Answer: D) Money supply and demand equilibrium

Explanation: The LM curve represents the equilibrium in the money market,

Explanation: The slope of the IS curve is negative, indicating an inverse

5. What is the slope of the LM curve in the IS-LM model?

Explanation: The slope of the LM curve is positive, indicating a direct relationship

6. In the IS-LM model, an increase in government spending shifts which curve?