$\text{Inflation Rate} = \frac{CPI_{current} - CPI_{previous}}{CPI_{previous}} \times 100$

Question 1

Which of the following best describes the tax multiplier in macroeconomics, and what is its formula?

Accepted Answer

It measures the change in aggregate demand resulting from a change in taxes; $	ext{Tax Multiplier} = -\frac{MPC}{1-MPC}$

Question 2

Which equation represents the most important macroeconomic relationship for calculating Real GDP?

Accepted Answer

$Y = C + I + G + (X - M)$

Question 3

Which of the following is NOT one of the four factors of production?

Accepted Answer

Technology

Question 4

Income distribution in the USA and other major countries is best described as:

Accepted Answer

Very skewed, with significant inequality

Question 5

Which of the following is an example of a microeconomic issue?

Accepted Answer

A firm's decision to increase the price of its product

Question 6

What does the price level in macroeconomics refer to?

Accepted Answer

The average of all prices of goods and services in an economy

Question 7

In macroeconomics, what does aggregation mean?

Accepted Answer

Summing up individual economic variables to analyze the economy as a whole

Question 8

Which formula is used to calculate the inflation rate?

Accepted Answer

$	ext{Inflation Rate} = \frac{CPI_{current} - CPI_{previous}}{CPI_{previous}} 	imes 100$

Question 9

Which of the following best defines the Consumer Price Index (CPI)?

Accepted Answer

A measure of the average change in prices paid by urban consumers for a market basket of consumer goods and services

Question 10

Which scenario best describes a recession?

Accepted Answer

A period of declining real GDP for two consecutive quarters

Question 11

If the income of consumers increases and the good is a normal good, what happens to the demand curve?

Accepted Answer

It shifts rightward

Question 12

A movement along a given demand curve is caused by:

Accepted Answer

A change in the price of the good itself

Question 13

Which of the following best explains why the aggregate demand (AD) curve is downward sloping?

Accepted Answer

As the price level rises, the purchasing power of money falls, leading to lower real spending

Question 14

Which of the following is a definition of the inflationary gap?

Accepted Answer

The amount by which actual GDP exceeds potential GDP

Question 15

Which of the following is considered part of the underground economy?

Accepted Answer

Unreported income from illegal or informal activities

Question 16

What is the main problem with double counting in GDP calculation?

Accepted Answer

It results from including intermediate goods along with final goods

Question 17

Which of the following is a substitute good for coffee?

Accepted Answer

Tea

Question 18

Which formula correctly calculates the money supply multiplier?

Accepted Answer

$	ext{Money Supply Multiplier} = \frac{1}{	ext{Required Reserve Ratio}}$

Question 19

Which of the following is a flaw in the simple money supply multiplier?

Accepted Answer

It assumes banks always lend out all excess reserves

Comprehensive Macroeconomics Study Guide: Core Concepts and Applications

Study Guide - Practice Questions