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Macroeconomics Trivia Quiz

Test your knowledge of macroeconomic concepts by trying out this quiz!

A multiple-choice quiz by wiseye. Estimated time: 6 mins.

Author
wiseye

Time
6 mins

Type
Multiple Choice

Quiz #
162,193

Updated
Dec 03 21

# Qns
10

Difficulty
Very Difficult

Avg Score
4 / 10

Plays
1783

One at a Time - Single Page - Timed Game

Question 1 of 10

1. According to Okun's Law, a 1% increase of unemployment rate results in a loss of GDP of how many percentage points? Hint

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Question 2 of 10

2. What is the alternative name for Consumer Price Index (CPI)? Hint

Paasche Index

Mundell Index

Keynes Index

Laspeyres Index

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Question 3 of 10

3. What exactly is the Fisher Effect? Hint

A one for one relation between inflation and the nominal interest rate

A one for one relation between the nominal interest rate and real interest rate

A one for one relation between inflation and the real interest rate

A one for one relation between inflation and unemployment rate

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Question 4 of 10

4. If an economy uses a floating exchange rate system then what will happen to GDP if the government decided to use expansionary fiscal policy? (Assuming capital mobility is perfect) Hint

Increases

Nobody knows

Decreases

No change

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Question 5 of 10

5. What theory explains why deflation may actually lead to an increase in GDP? Hint

Solow Effect

Rational Expectations

Pigou Effect

Adaptive Expectations

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Question 6 of 10

6. Who introduced the concept of 'Permanent Income Hypothesis'? Hint

Irving Fisher

Adam Smith

Milton Friedman

Franco Modigliani

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Question 7 of 10

7. The higher the independence of the central bank from government intervention, the higher the inflation.

True

False

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Question 8 of 10

8. The 'Quantity Equation' can be expressed as MV=PY, from this what is the other form of expression for real money balances? Hint

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Question 9 of 10

9. Ad valorem tariffs are a fixed charge on per unit of good imported from overseas.

True

False

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Question 10 of 10

10. In what year was the WTO (World Trade Organisation) created? Hint

1992

1993

1995

1994

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Quiz Answer Key and Fun Facts

1. According to Okun's Law, a 1% increase of unemployment rate results in a loss of GDP of how many percentage points?

Answer: 2

Okun's Law is named after Arthur Okun who discovered that unemployment rate and GDP are negatively correlated.

2. What is the alternative name for Consumer Price Index (CPI)?

Answer: Laspeyres Index

CPI or Lapeyres Index uses fixed weights on price of various goods. CPI measures the price of the commodities that is bought by domestic consumers. Thus, CPI indexes vary between countries because different countries have different consumer needs, tastes and priorities, and thus form different 'national shopping baskets'.

3. What exactly is the Fisher Effect?

Answer: A one for one relation between inflation and the nominal interest rate

Thus a 1% increase in inflation rate results in a 1% increase in nominal interest rate.

4. If an economy uses a floating exchange rate system then what will happen to GDP if the government decided to use expansionary fiscal policy? (Assuming capital mobility is perfect)

Answer: No change

Since expansionary fiscal policy causes the exchange rate to appreciate, this means imports will increase which results in a fall in GDP. This offsets the increase in GDP caused by the expansionary fiscal policy.

5. What theory explains why deflation may actually lead to an increase in GDP?

Answer: Pigou Effect

According to Pigou Effect, a fall in prices leads to increase in real money balances causing consumer to spend more, when we spend more other people earn more, this never-ending cycle will eventually leads to an increase in GDP.

6. Who introduced the concept of 'Permanent Income Hypothesis'?

Answer: Milton Friedman

He believes that transitory income and permanent income forms our present income. Transitory income represents the proportion of income which is not considered to be permanent and may change in the foreseeable future.

7. The higher the independence of the central bank from government intervention, the higher the inflation.

Answer: False

Countries like Switzerland and Canada has lower inflation due to a greater independence of their central bank.

8. The 'Quantity Equation' can be expressed as MV=PY, from this what is the other form of expression for real money balances?

Answer: kY

By rearranging MV=PY, real money balances (M/P) becomes (M/P)=kY where k=(1/V)

9. Ad valorem tariffs are a fixed charge on per unit of good imported from overseas.

Answer: False

Ad Valorem tariffs are charged as a proportion of the value of imported goods.

10. In what year was the WTO (World Trade Organisation) created?

Answer: 1995

Before WTO, GATT (General Agreement on Tariffs and Trade) was the official agreement of free trade between countries but it's not an organisation.

Source: Author wiseye

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