QCM : Fundamentals of Macroeconomic Policy — 18 questions

Questions et réponses du QCM

1. What best describes a market in economics?

A system where only firms exchange products with the state
A legal framework that fixes all prices in advance
A place where buyers and sellers exchange goods or services at a given price
A physical location reserved for foreign currency trading only

A place where buyers and sellers exchange goods or services at a given price

Explication

A market is defined as the place where buyers and sellers carry out exchanges at a given price, and it can be physical or remote. The other options describe narrower or incorrect ideas of a market.

2. Which statement correctly describes market price?

The value of goods expressed in money
The rate at which labor is exchanged for wages
The amount buyers are willing to purchase at a given price
The quantity of a good that sellers want to offer

The value of goods expressed in money

Explication

Market price is the money value of goods. The other choices refer to supply, demand, or the labor market rather than price itself.

3. What is an economic circuit?

A representation of interactions among households, firms, public administrations, and the rest of the world
A statistical index used to measure inflation
A legal mechanism that fixes competition rules
A summary of only financial transactions between banks

A representation of interactions among households, firms, public administrations, and the rest of the world

Explication

An economic circuit represents how the main economic agents interact through production, income distribution, and financing. It is broader than financial flows alone.

4. In the expanded circuit, which items belong to uses rather than resources?

Consumption, investment, stock change, and net acquisitions of valuables
Production, imports, and financial transfers
Consumption, investment, stock change, and exports
Production and imports

Consumption, investment, stock change, and net acquisitions of valuables

Explication

The source lists uses as consumption, investment, stock change, net acquisitions of valuables, and exports. Resources are production and imports.

5. What is one important limitation of GDP as a measure of economic performance?

It counts only purchases made by households
It includes unpaid domestic work and volunteering
It ignores undeclared, unpaid, illegal, and environmental losses
It measures well-being directly and completely

It ignores undeclared, unpaid, illegal, and environmental losses

Explication

GDP is a partial measure because it excludes unpaid work, hidden or illegal activity, environmental damage, and qualitative dimensions. That is why it does not capture well-being fully.

6. Which item is included in national accounts aggregates but not in GDP's broader blind spots?

Volunteer work in households
Resident trade with non-residents
Leisure and freedom
Environmental depletion

Resident trade with non-residents

Explication

National accounts aggregates can track components such as trade with non-residents, final consumption, investment, and saving. Volunteer work and leisure are specifically among the GDP exclusions or blind spots.

7. Which view matches the liberal idea of state regulation?

Markets adjust themselves through supply and demand without state intervention
Competition should be replaced by administrative planning
The state should actively manage demand to fight unemployment and inflation
The state should control every price and wage directly

Markets adjust themselves through supply and demand without state intervention

Explication

The liberal view is that prices and activity adjust automatically through market forces, with the state limiting itself to core sovereign functions. The Keynesian view is the one that supports active intervention.

8. What is the Keynesian role of the state in market regulation?

To intervene when markets fail to correct dysfunctions such as inflation and unemployment
To stay limited to army, police, and justice
To let prices be fixed permanently by banks
To eliminate all private competition

To intervene when markets fail to correct dysfunctions such as inflation and unemployment

Explication

In the Keynesian view, the state intervenes to correct market failures and stabilize activity. The liberal 'etat-gendarme' role is the one restricted to sovereign functions.

9. What does the inflation rate measure?

The speed at which the general price level changes over time
The difference between exports and imports
The decline in household income over time
The share of unemployed workers in the labor force

The speed at which the general price level changes over time

Explication

Inflation rate measures how fast the general level of prices changes over time. It is the standard indicator used for price stability objectives.

10. Why can a currency appreciation reduce imported inflation?

Because it raises wages faster than prices
Because it increases the cost of all domestic goods
Because it makes imported goods cheaper in domestic currency terms
Because it eliminates foreign trade completely

Because it makes imported goods cheaper in domestic currency terms

Explication

An appreciation can lower imported inflation by making imports cheaper, which eases upward pressure on prices. The opposite effect is associated with depreciation or devaluation.

11. What is the unemployment objective in the economic policy 'magic square'?

Expanding the foreign exchange reserves
Raising the budget deficit
Increasing the general price level
Reducing the unemployment rate

Reducing the unemployment rate

Explication

The employment objective aims to lower unemployment by reducing the unemployment rate. The other options relate to inflation, external balance, or fiscal policy rather than the labor-market goal.

12. In the Keynesian mechanism, which sequence best explains how unemployment falls?

Lower wages lead directly to higher unemployment and lower demand
Higher taxes lead to less spending, lower production, and more jobs
A stronger currency leads to cheaper exports, more imports, and more jobs
Lower interest rates lead to more investment, higher production, and more jobs

Lower interest rates lead to more investment, higher production, and more jobs

Explication

The course links low interest rates to higher investment, which raises production and stimulates job creation. The other choices do not match the Keynesian transmission mechanism described.

13. What does appreciation of the domestic currency do to the competitiveness of domestic products?

It makes domestic products relatively more expensive abroad and reduces competitiveness
It automatically increases inflation through higher wages
It makes domestic products cheaper abroad and improves competitiveness
It has no effect on external competitiveness

It makes domestic products relatively more expensive abroad and reduces competitiveness

Explication

When the domestic currency appreciates, foreign currency becomes cheaper and domestic products become relatively more expensive, which weakens competitiveness. The opposite effect occurs with depreciation.

14. What is the role of net claims on non-residents in relation to money supply and bank liquidity?

They measure household saving directly and reduce money creation
They are a labor-market indicator that raises employment directly
They are a counterpart of money supply, so an increase can create money and improve liquidity
They are a fiscal balance that automatically lowers public debt

They are a counterpart of money supply, so an increase can create money and improve liquidity

Explication

Net claims on non-residents are presented as a counterpart of the money supply, so an increase leads to monetary creation by banks and improves liquidity. The other answers confuse this concept with fiscal or labor-market variables.

15. Which instrument is identified as a short-term monetary market tool in the course?

A minimum wage increase
Export subsidies for firms
Interbank rates set between banks
Public spending on infrastructure

Interbank rates set between banks

Explication

The course states that in the money market, short-term interbank rates are set between banks. The other choices belong to fiscal, labor, or trade policy rather than monetary market instruments.

16. What is the main effect of an increase in net claims on non-residents on banks' financial conditions?

It reduces liquidity and forces rates to rise
It has no effect on credit conditions
It improves bank liquidity and can lower interest rates
It automatically increases unemployment

It improves bank liquidity and can lower interest rates

Explication

An increase in net claims on non-residents improves bank liquidity with BAM, which can lower interest rates. Lower rates can then stimulate consumption and investment.

17. Which action is part of state intervention aimed at strengthening national competitiveness?

Replacing all foreign trade with self-consumption
Encouraging scientific research and training
Leaving prices fully to market forces
Reducing all public involvement in exports

Encouraging scientific research and training

Explication

The course says competitiveness can be improved by encouraging scientific research and training to raise productivity. The other options contradict the active role of public intervention described in this topic.

18. What is one stated goal of export promotion policy under state intervention?

Increasing exports by targeting priority markets and activities
Fixing exchange rates permanently at a high level
Eliminating all free-trade agreements
Lowering household consumption to reduce imports

Increasing exports by targeting priority markets and activities

Explication

Export promotion aims to increase exports by focusing on priority markets and activities that can generate stronger foreign demand. The other options do not reflect the policy measures listed in the source.

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Mémorisez les réponses avec 18 flashcards sur Fundamentals of Macroeconomic Policy.

Market — definition?

A place for exchange between buyers and sellers.

Offer — role?

Quantity sellers are willing to sell at a price.

Demand — role?

Quantity buyers are willing to buy at a price.

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