Q: The coefficient of variation for an investment is calculated as:

$$\frac{\text{Standard deviation}}{\text{Mean return}}$$

Question 1

Which of the following best describes the concept of 'crowding out' in macroeconomics?

Accepted Answer

When government borrowing increases interest rates, reducing private investment.

Question 2

Suppose the Federal Reserve engages in quantitative easing. Which of the following is the most likely immediate effect?

Accepted Answer

An increase in the money supply, leading to lower long-term interest rates.

Question 3

A liquidity trap occurs when:

Accepted Answer

Monetary policy becomes ineffective because nominal interest rates are at or near zero.

Question 4

Which of the following best explains demand-pull inflation?

Accepted Answer

A rightward shift in aggregate demand increases the price level.

Question 5

A bond differs from a stock in that:

Accepted Answer

A bond represents a loan to the issuer, while a stock represents ownership in a company.

Question 6

If a stock has a price-earnings (P/E) ratio of 20 and expected earnings per share of $5, what is the stock price?

Accepted Answer

$100

Question 7

Which investment type is generally considered to have the lowest risk?

Accepted Answer

Government bonds

Question 8

The coefficient of variation for an investment is calculated as:

Accepted Answer

$$\frac{	ext{Standard deviation}}{	ext{Mean return}}$$

Question 9

Which of the following is a key benefit of diversification in investment portfolios?

Accepted Answer

It reduces the overall risk by spreading investments across different assets.

Question 10

During the Great Recession, the bursting of the housing bubble primarily affected U.S. households by:

Accepted Answer

Reducing the main asset value for 90% of households, leading to a decline in wealth.

Question 11

According to the life-cycle theory of consumption, individuals are most likely to dissave during which period?

Accepted Answer

Retirement, when income falls below consumption needs.

Question 12

If a government policy increases only current income but not permanent income, what is the likely effect on consumption according to the permanent income hypothesis?

Accepted Answer

A small, temporary increase in consumption.

Question 13

Which of the following best describes the income effect of a wage increase?

Accepted Answer

Workers may choose to work fewer hours because they can maintain the same income with less work.

Question 14

The Preston Curve illustrates the relationship between:

Accepted Answer

Life expectancy and per capita GDP.

Question 15

If a country's GDP increases from $$1,000 billion to 1$$,050 billion in one year, what is the percent GDP growth?

Accepted Answer

$$\frac{1{,}050 - 1{,}000}{1{,}000} 	imes 100 = 5\%$$

Question 16

Which of the following is an example of capital deepening?

Accepted Answer

Increasing the amount of machinery available per worker.

Question 17

Total factor productivity (TFP) refers to:

Accepted Answer

Productivity growth not explained by increases in labor or capital inputs.

Question 18

Which of the following best describes a 'bubble' in asset markets?

Accepted Answer

A rapid, unsustainable rise in asset prices that eventually bursts.

Question 19

If a mutual fund is passively managed, it most likely:

Accepted Answer

Tracks a market index and has lower fees than actively managed funds.

Question 20

Which of the following is a real-world example of a leftward shift in aggregate supply?

Accepted Answer

An oil price shock causing stagflation in the 1970s.

Macroeconomics Study Notes: Inflation, Financial Markets, Consumption, and Economic Growth

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