Macro Economic Concepts Quiz

If the MPC is 0.8, what is the value of the simple spending multiplier?

• 4

• 5 (correct)

• 6

• 8

• 10

An increase in government spending will have a larger impact when:

• MPC is low

• MPS is high

• MPC is high (correct)

• Savings are constant

• Taxes increase

What does a higher marginal propensity to save (MPS) imply about the multiplier?

• It becomes larger

• It remains constant

• It becomes smaller (correct)

• It turns negative

• It equals one

Which of the following causes the multiplier effect to weaken?

• Increase in consumer spending

• Higher MPC

• Higher imports and taxes (correct)

• Investment surge

• Decrease in saving rate

A country with a low MPC will experience what effect from fiscal stimulus?

• Strong multiplier

• Minimal multiplier effect (correct)

• Rising exports

• Rapid inflation

• Currency depreciation

What major transformation led to sustained economic growth in the 18th century?

• Feudalism

• Agricultural Revolution

• Industrial Revolution (correct)

• Cold War

• Mercantilism

Which factor most contributed to economic divergence between countries after 1800?

• Colonial borders

• Different access to technology (correct)

• Cultural similarities

• Trade restrictions

• Population growth

Why was the post-WWII era known for rapid global growth?

• War spending continued

• Economic reconstruction and new institutions (correct)

• Agricultural collapse

• Oil price hikes

• Isolationist policies

The Great Depression (1930s) showed that:

• Markets always self-correct

• Unemployment is impossible

• Government intervention can be necessary (correct)

• Trade causes recessions

• Inflation cures unemployment

What was a key outcome of the Bretton Woods Agreement?

• Return to gold standard

• Creation of a global bank

• Establishment of IMF and World Bank (correct)

• Deindustrialization

• Fixed oil prices