ECO 3203 - Practice Questions Chap 1-2

Dr. Maria Luisa Corton ECO 3203 Summer 2026 07-05-2026 Sun

Macroeconomics is the study of the:

A) activities of individual units of the economy.

B) decision making by households and firms.

C) economy as a whole.

D) interaction of firms and households in the marketplace.

C) economy as a whole.

The labor-force participation rate is the percentage of the:

A) adult population that is employed.

B) Employed and unemployed out of the total working age population.

C) labor force that is employed.

D) labor force that is unemployed.

B) Employed and unemployed out of the total working age population.

Endogenous variables are:

A) fixed at the moment they enter the model.

B) determined within the model.

C) the inputs of the model.

D) from outside the model

B) determined within the model.

In a simple model of the supply and demand for pizza, the endogenous variables are:

A) the price of pizza and the price of cheese.

B) aggregate income and the quantity of pizza sold.

C) aggregate income and the price of cheese.

D) the price of pizza and the quantity of pizza sold.

D) the price of pizza and the quantity of pizza sold.

Market-clearing models assume that prices are ____and are best applied to understand the economy in the _____run.:

A) Flexible; short.

B) Sticky; short.

C) Flexible; long

D) Sticky; long.

C) Flexible; long

When studying the short-run behavior of the economy an assumption of ____is more plausible, in contrast to studying the long-run equilibrium behavior of an economy, when an assumption of ___is more plausible.

A) inflation; unemployment

B) unemployment; inflation

C) flexible prices; sticky prices

D) sticky prices; flexible prices

D) sticky prices; flexible prices

Which of the following is the best example of a sticky price?

A) the price of a barrel of oil

B) the price of the U.S. dollar in terms of euros

C) the price of a share of stock

D) the price of a soda in a vending machine

D) the price of a soda in a vending machine

Assume that total output consists of 4 apples and 6 oranges and that apples cost $1 each and oranges cost $0.50 each. In this case, the value of nominal GDP is:

A) ten pieces of fruit.

B) $7

C) $8

D) $10

B) $7

Macroeconomic models:

A) assume all wages and prices are sticky.

B) assume all wages and prices are flexible.

C) make different assumptions to explain different aspects of the macroeconomy.

D) focus primarily on the optimizing behavior of households and firms.

C) make different assumptions to explain different aspects of the macroeconomy.

When a firm sells a product out of inventory, investment expenditures ______ and consumption expenditures ______.

A) increase; decrease

B) decrease; increase

C) decrease; remain unchanged

D) remain unchanged; increase

B) decrease; increase

Nominal GDP measures the value of goods and services in ______ prices, while real GDP measures the value of goods and services in ______ prices.

A) foreign; domestic

B) domestic; foreign

C) current; constant

D) constant; current

C) current; constant

The national income accounts identity, for an open economy, is:

A) Y = C + I + G – NX.

B) Y = C + I + G + NX.

C) Y = C + I + G.

D) Y = C + I – G.

B) Y = C + I + G + NX.

The total income of everyone in the economy adjusted for the level of prices is called:

A) a recession.

B) an inflation.

C) real GDP.

D) a business fluctuation.

C) real GDP.

The difference between the GDP deflator and the CPI is that____

A) GDP deflator includes goods purchased by customers, firms and government.

B) CPI only includes prices of goods purchased by consumers.

C) GDP deflator excludes prices of imported consumer goods

D) All the answers are correct

D) All the answers are correct

If nominal GDP in 2009 equals $14 trillion and real GDP equals $11 trillion, what is the value of the GDP deflator?

A) 0.79

B) 1.03

C) 1.27

D) 1.30

C) 1.27

If 7 million workers are unemployed, 143 million workers are employed, and the adult population (above 16 years of age) equals 200 million, then the unemployment rate equals approximately ______ percent.

A) 3.5

B) 4.7

C) 4.9

D) 7

B) 4.7