AS Level Economics chapter 4: The Macroeconomy MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

90 exam-style questions on The Macroeconomy, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.

90 questions · 6 topics · 10 per test

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What chapter 4 covers

Ten The Macroeconomy questions with answers

Try each one, then open the answer. These ten stay the same; the test draws new ones every time.

1. Why is the short-run aggregate supply (SRAS) curve usually drawn sloping upwards?

  1. A
    a higher price level reduces the real value of wealth, so households spend less
  2. B
    in the short run all resources are fully employed
  3. C
    higher prices reduce firms' profits, so they produce less
  4. D
    with money wages fixed in the short run, higher prices make more output profitable
Show answer

Answer: D. In the short run some costs, especially money wages, do not change, so a higher price level raises the profit on extra output and firms supply more. The fall in real wealth as prices rise helps explain the slope of AD, not SRAS.

2. An increase in AD raises the general price level. How is the response of firms shown on the SRAS curve?

  1. A
    as a shift of the SRAS curve to the right
  2. B
    as a movement up along the SRAS curve
  3. C
    as a shift of the SRAS curve to the left
  4. D
    as a movement down along the SRAS curve
Show answer

Answer: B. The SRAS curve already shows how much firms supply at each price level, so a higher price level caused by a change in AD is a movement along it. SRAS shifts only when something other than the price level changes, such as costs.

3. A circular flow model of a closed economy includes households, firms and the government. What must be added to make it a model of an open economy?

  1. A
    flows of taxation and government spending
  2. B
    flows of saving and investment through banks and other financial institutions
  3. C
    flows of factor services from households to firms
  4. D
    flows of exports and imports with the rest of the world
Show answer

Answer: D. An open economy trades with other countries, so exports (an injection) and imports (a leakage) link it with the international economy. Government and financial flows are already present in the closed-economy model.

4. Households decide to save a larger share of their incomes. If injections do not change, what is the most likely effect?

  1. A
    injections rise, so national income rises
  2. B
    national income is unchanged, since saving is still part of income
  3. C
    banks must lend all the extra saving, so national income rises
  4. D
    spending on domestic output falls, so national income falls
Show answer

Answer: D. Saving is a leakage. With injections unchanged, more saving means less is spent on domestic output, so firms cut production and national income falls. Saving adds to spending only if it is borrowed and spent on investment, and the question rules that out.

5. Injections exceed leakages in an economy. How is a new equilibrium reached?

  1. A
    national income falls, reducing injections until they equal leakages
  2. B
    income rises, so saving, taxes and imports rise until leakages equal injections
  3. C
    the government cuts its spending until injections equal leakages
  4. D
    national income is unchanged while the general price level falls to restore equilibrium
Show answer

Answer: B. Spending on domestic output exceeds output, so firms expand and national income rises. As incomes rise, households save more, pay more tax and buy more imports, until total leakages have risen to equal injections.

6. Which change would shift the AD curve to the right?

  1. A
    a rise in business confidence about future sales
  2. B
    a fall in the general price level
  3. C
    an increase in the productivity of labour in most industries
  4. D
    an appreciation of the country's currency
Show answer

Answer: A. Greater business confidence raises planned investment at every price level, shifting AD to the right. A fall in the price level is a movement along AD, higher productivity shifts AS, and an appreciation reduces net exports, shifting AD to the left.

7. A bank pays interest of 6% a year on savings when the rate of inflation is 9%. What is the approximate real rate of interest?

  1. A
    −3%
  2. B
    3%
  3. C
    6%
  4. D
    15%
Show answer

Answer: A. The real interest rate is roughly the nominal rate minus the rate of inflation: 6% − 9% = −3%. Savers can buy less with their savings plus interest at the end of the year than they could with the savings at the start.

8. When GDP is measured by the income method, which item is left out?

  1. A
    salaries paid to nurses working in state hospitals
  2. B
    profits earned by a mobile phone company
  3. C
    unemployment benefit paid by the government
  4. D
    rent received by the owners of office buildings
Show answer

Answer: C. Unemployment benefit is a transfer payment: nothing is produced in return, so counting it would overstate output. Salaries, profits and rent are payments to factors of production for current output.

9. Which change is most likely to increase consumer spending in an economy?

  1. A
    a rise in the interest rates charged on loans
  2. B
    a rise in household wealth as house prices increase
  3. C
    a rise in the rates of income tax
  4. D
    a fall in consumer confidence about future jobs
Show answer

Answer: B. Households that feel wealthier tend to spend more of their income. Higher interest rates, higher income tax and falling confidence all tend to reduce consumption.

10. In an economy, the number employed rises from 20.0 million to 20.5 million and the number unemployed falls from 2.5 million to 2.3 million. What is the new unemployment rate, to one decimal place?

  1. A
    10.1%
  2. B
    10.2%
  3. C
    11.1%
  4. D
    11.2%
Show answer

Answer: A. The new labour force is 20.5 + 2.3 = 22.8 million, so the rate is 2.3 ÷ 22.8 × 100 = 10.1% (down from 2.5 ÷ 22.5 = 11.1%). 10.2% divides by the old labour force, and 11.2% divides by the number employed.

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The Macroeconomy: questions students ask

How many The Macroeconomy MCQs are there?

90, each with the answer and a short explanation, across 6 topics: National income statistics, Introduction to the circular flow of income, Aggregate Demand and Aggregate Supply analysis, Economic growth, Unemployment, Price stability. Every chapter test draws ten of them, so you can take it many times.

Is the AS Level Economics chapter 4 test free?

Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.

How is the chapter test marked?

The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.

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