Macroeconomics Practice Questions With Answers
Twelve macroeconomics practice questions with answers and explanations from the course deck: GDP, inflation, AD/AS, banking, fiscal policy and exchange rates.
This set has 12 questions from Encodr's free macroeconomics course, one from each of 12 different units, starting at GDP and running through banking, monetary policy, fiscal policy and exchange rates. Each is a real card from the deck, quoted as it appears there, with the card's own explanation.
How to use it: answer before you look. Say the answer aloud or write it down, then check. The testing effect is why attempting an answer teaches more than reading it.
Several of these are calculation questions, like the real GDP and inflation items near the top. The inflation and real value calculator lets you check your working, and real vs nominal and how to adjust for inflation walks through the formulas.
The questions
1. Unit 6, The Macroeconomic Perspective
Nominal GDP is 30,000 (billions of dollars) and the GDP deflator is 125 with the base year at 100. What is real GDP in billions of base-year dollars?
- A. 37,500
- B. 240
- C. 24,000
- D. 6,000
Answer: C. 24,000
Why: Real GDP = 30,000 / 1.25 = 24,000.
2. Unit 7, Economic Growth
In growth accounting, which factor is credited with the unexplained residual of growth?
Answer: Technology
Why: After measuring the contributions of physical and human capital, what remains is attributed to technology.
3. Unit 8, Unemployment
How is the unemployment rate calculated?
Answer: Unemployed divided by the labor force, times 100
Why: The denominator is the labor force, not the whole adult population.
4. Unit 9, Inflation
A price index rises from 110 to 115. What is the inflation rate, to 1 decimal place?
- A. 5.0%
- B. 4.3%
- C. 15.0%
- D. 4.5%
Answer: D. 4.5%
Why: Inflation = (115 - 110) / 110 x 100 = 4.5%.
5. Unit 11, Aggregate Demand and Aggregate Supply
True or false: The AD curve slopes down for the same reason as a single good's demand curve: buyers switch to substitutes.
Answer: False
Why: AD slopes down through the wealth, interest rate and foreign price effects.
6. Unit 12, The Keynesian Perspective
What is a recessionary gap?
Answer: Equilibrium output below potential GDP
Why: Demand is too weak to employ all factors of production, so actual output falls short of what the economy could produce.
7. Unit 13, The Neoclassical Perspective
True or false: Neoclassical economists see a permanent inflation-for-jobs tradeoff.
Answer: False
Why: They see none; the long-run Phillips curve is vertical.
8. Unit 14, Money and Banking
A regulator raises the required reserve ratio from 10 percent to 20 percent. What happens to the banking system's capacity to create money from a given deposit?
- A. It rises because banks now hold more money in reserve
- B. It is unchanged because deposits are unchanged
- C. It shrinks, since less of each deposit is lendable
- D. It doubles because the ratio doubled
Answer: C. It shrinks, since less of each deposit is lendable
Why: The multiplier falls from 10 to 5 and each deposit supports less lending.
9. Unit 15, Monetary Policy and Bank Regulation
Which pair of tools protects against bank runs?
- A. Deposit insurance and a lender of last resort
- B. Higher reserve ratios and lower deposit rates
- C. Stock market investing and higher loan rates
- D. Price ceilings and mandatory bank holidays
Answer: A. Deposit insurance and a lender of last resort
Why: Deposit insurance removes depositors' reason to panic, and a lender of last resort supplies emergency cash to solvent banks.
10. Unit 16, Exchange Rates and International Capital Flows
Other things equal, what happens to a country's currency when its interest rates rise relative to other countries?
Answer: It appreciates
Why: Foreign investors demand more of it and domestic investors supply less.
11. Unit 17, Government Budgets and Fiscal Policy
A country runs a deficit every year for decades, yet its debt-to-GDP ratio falls. What must be true?
- A. GDP grew faster than the debt did
- B. Interest payments on the debt were eliminated
- C. Each year's deficit was repaid the following year
- D. GDP shrank while the debt grew slowly
Answer: A. GDP grew faster than the debt did
Why: The ratio is debt divided by GDP, so if the denominator grows faster than the numerator, the ratio falls.
12. Unit 18, The Impacts of Government Borrowing
True or false: If the government budget deficit rises while private saving and the trade balance stay the same, private investment must fall.
Answer: True
Why: The identity always balances. With saving and net foreign inflows fixed, extra government demand for funds can only be met by less investment.
Reading your result
Do not just count your total. Note which units your misses came from, and whether each was a wrong fact, a wrong formula or a misread setup. A cluster in one unit means that unit needs a proper pass through its note cards. Scattered misses on setup usually mean you are answering too fast. Redo the missed ones after a gap of a few days, not straight away, and see how many you can now explain rather than merely recognize.
Where to go next
The full course has 21 units, and the first five, covering scarcity, demand and supply, and elasticity, are shared with microeconomics. What's in Principles of Macroeconomics maps every unit, and how to study for macroeconomics covers the order and pace. If question 5 or 6 felt shaky, aggregate demand and aggregate supply explained is the place to go. To plan your review, try the study schedule generator.
Encodr turns this into a habit: study anything in a feed, and it schedules the rest.
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