CLEP Macroeconomics chapter practice4 questions

01 Understanding the CLEP Macroeconomics Exam

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

Economic reasoning separates claims that evidence can test from claims that rest on a value standard. Which of the following statements is normative?

“Ought” ranks one policy goal above another, and no measurement settles a ranking. A predicts an effect on aggregate demand, C describes what a higher price level does to purchasing power, and B and E state definitions of a stock and of who counts as unemployed. Evidence can check all four.
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D. A central bank ought to weigh price stability above employment.

“Ought” ranks one policy goal above another, and no measurement settles a ranking. A predicts an effect on aggregate demand, C describes what a higher price level does to purchasing power, and B and E state definitions of a stock and of who counts as unemployed. Evidence can check all four.

Question 2

Question 2 of 4

An item states that household wealth falls while every other determinant of consumption is held fixed. That instruction is an application of

Freezing every other determinant is what lets a single change be traced to a single effect, and that instruction has a name. A and E name other models, one about trade patterns and one about the flow of payments between sectors. D concerns the value of the next unit, and C is the error of assuming what holds for one household holds for all of them.
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B. ceteris paribus

Freezing every other determinant is what lets a single change be traced to a single effect, and that instruction has a name. A and E name other models, one about trade patterns and one about the flow of payments between sectors. D concerns the value of the next unit, and C is the error of assuming what holds for one household holds for all of them.

Question 3

Question 3 of 4

Which of the following macroeconomic quantities is a flow measured over an interval rather than a stock measured at a moment?

Purchases accumulate over the year, so the unit is dollars per year, and that is what makes the quantity a flow. Each of the other four is read off on a stated date: B on the retirement date, C at month end, D at the close of business, E on June 30. A quantity with a date attached and no interval is a stock.
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A. Federal purchases of goods and services during a fiscal year

Purchases accumulate over the year, so the unit is dollars per year, and that is what makes the quantity a flow. Each of the other four is read off on a stated date: B on the retirement date, C at month end, D at the close of business, E on June 30. A quantity with a date attached and no interval is a stock.

Question 4

Question 4 of 4

An open-market purchase raises real output in the short run. The first link in that transmission chain is

The central bank pays for the securities by crediting reserve balances, so reserves and the money supply expand first; interest rates and spending respond afterward. A substitutes a fiscal tool for a central-bank operation. B and D jump to long-run capacity variables the purchase does not touch, and C shifts supply rather than demand, in the direction that would cut output.
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E. an increase in reserves and the money supply

The central bank pays for the securities by crediting reserve balances, so reserves and the money supply expand first; interest rates and spending respond afterward. A substitutes a fiscal tool for a central-bank operation. B and D jump to long-run capacity variables the purchase does not touch, and C shifts supply rather than demand, in the direction that would cut output.

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