Applied Macroeconomics
Exam Bank
Course Introduction
Applied Macroeconomics examines the principles and models that govern the behavior of entire economies, focusing on real-world policy applications and contemporary economic issues. The course explores topics such as economic growth, inflation, unemployment, fiscal and monetary policy, and the impact of global economic events. Emphasis is placed on analyzing data, interpreting macroeconomic indicators, and using theoretical frameworks to evaluate economic policies and their effects on national and international levels. Through case studies and empirical analysis, students develop the skills to apply macroeconomic concepts to policymaking, financial markets, and business strategy.
Recommended Textbook
Macroeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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15 Chapters
2051 Verified Questions
2051 Flashcards
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Chapter 1: What Is Economics
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212 Flashcards
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Sample Questions
Q1) Figure 1A.3.4 illustrates two variables, x and y, which are
A)negatively related, with slope becoming closer to 0 as x increases from 2 to 16.
B)negatively related, with slope becoming farther from 0 as x increases from 2 to 16.
C)positively related, with slope becoming closer to 0 as x increases from 2 to 16.
D)positively related, with slope becoming farther from 0 as x increases from 2 to 16.
E)positively related, with the slope unchanging as x increases from 2 to 16.
Answer: A
Q2) Consider graph (b)of Figure 1A.1.5. Which one of the following statements is true?
A)x and y are negatively related.
B)x and y are unrelated.
C)x and y are positively related.
D)x and y move in opposite directions.
E)both A and D are correct.
Answer: E
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3
Chapter 2: The Economic Problem
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Sample Questions
Q1) Refer to Table 2.1.1. The opportunity cost of increasing the production of Y from 16 to 36 units is
A)4 units of X.
B)8 units of X.
C)12 units of X.
D)16 units of X.
E)20 units of Y.
Answer: B
Q2) A medical clinic has 10 workers. Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day. The production possibilities frontier of this firm would show
A)increasing opportunity cost.
B)decreasing opportunity cost.
C)constant opportunity cost.
D)zero opportunity cost.
E)infinite opportunity cost.
Answer: C
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Page 4
Chapter 3: Demand and Supply
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Sample Questions
Q1) If A and B are substitutes in production and the price of A falls, the supply of B
A)increases, and the price of B rises.
B)increases, and the price of B falls.
C)decreases, and the price of B falls.
D)decreases, and the price of B rises.
E)does not change.
Answer: B
Q2) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. This would be represented as a
A)movement up along the demand curve.
B)rightward shift of the demand curve.
C)leftward shift of the demand curve.
D)rightward shift of the supply curve.
E)leftward shift of the supply curve.
Answer: D
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Page 5
Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) Refer to Fact 20.1.1. Peter's net investment in 2014 is
A)$2,000.
B)$3,800.
C)$1,800.
D)$7,800.
E)$1,500.
Q2) Refer to Figure 20.3.2. In the figure, a recession begins at point ________ and an expansion begins at point ________.
A)A; B
B)B; C
C)B; A
D)D; C
E)C; D
Q3) Why is the Human Development Index thought to be a better measure of economic well-being than real GDP per person?
A)It includes a measure of resource depletion.
B)It ignores health, which is hard to measure.
C)It includes leisure time and household production.
D)It includes health and education measures, as well as real GDP per person.
E)It includes only health and education measures, ignoring real GDP per person.
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Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) If prices at Wendy's rise, more consumers buy their meals at McDonald's and fewer consumers buy their meals at Wendy's. This is an example of
A)consumers' action to boycott Wendy's.
B)outlet substitution.
C)commodity substitution.
D)new good bias.
E)quality change bias.
Q2) All of the following are possible sources of bias in using the Consumer Price Index to measure inflation except
A)the introduction of new goods.
B)an improvement in the quality of goods.
C)commodity substitution.
D)an increase in the cost of living.
E)rising prices.
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Chapter 22: Economic Growth
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Sample Questions
Q1) Labour productivity is
A)real GDP per hour of labour times the hours of work.
B)real GDP per hour of labour times the population.
C)the quantity of real GDP produced by an hour of labour.
D)the rate of change in real GDP per hour of labour.
E)shown as a movement along the production function.
Q2) An increase in labour hours will lead to
A)an upward shift of the aggregate production function.
B)a movement along the aggregate production function.
C)both a movement along and an upward shift of the aggregate production function.
D)neither a movement along nor a shift of the aggregate production function.
E)a downward shift of the aggregate production function.
Q3) Growth eventually stops in neoclassical growth theory when
A)technology stops advancing.
B)saving increases.
C)discoveries are replicated.
D)the return on capital increases.
E)population growth lowers the real wage rate.
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Chapter 23: Finance, Saving, and Investment
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141 Flashcards
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Sample Questions
Q1) When the real interest rate increases,
A)the supply of loanable funds curve shifts rightward.
B)the supply of loanable funds curve shifts leftward.
C)there is a movement up along the supply of loanable funds curve.
D)there is a movement down along the supply of loanable funds curve.
E)the demand for loanable funds curve shifts leftward.
Q2) Consider Table 23.3.7. If the government's budget becomes a deficit of $1.0 trillion, what is the quantity of private saving?
A)$8.0 trillion
B)$7.5 trillion
C)$8.5 trillion
D)$7.0 trillion
E)$6.5 trillion
Q3) If a bank's net worth is negative, then the bank is A)liquid.
B)insolvent.
C)illiquid.
D)solvent.
E)none of the above
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Page 9
Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) Whenever desired reserves exceed actual reserves, the bank
A)can make new loans.
B)will call in loans.
C)will go out of business.
D)is in a profit-making position.
E)has excess reserves.
Q2) Refer to Figure 24.5.2. Which one of the following best describes the response to a rise in the market price of bonds?
A)A movement from A to B
B)A movement from A to C
C)A movement from A to F
D)A movement from A to E
E)A movement from C to A
Q3) According to the quantity theory of money, an increase in the quantity of money will increase the price level
A)but have no effect on real GDP or the velocity of circulation.
B)and increase real GDP and the velocity of circulation.
C)and increase real GDP but decrease the velocity of circulation.
D)and decrease real GDP and increase the velocity of circulation.
E)but have no effect on real GDP and will decrease the velocity of circulation.
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Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) Suppose initially Canada has all its international payments accounts in balance (no surplus or deficit). Then Canadian firms increase the amount they export to Japan, and the Japanese finance the increase by borrowing from Canada. In Canada, everything else remaining the same, there will now be a
A)current and financial account surplus and capital account surplus.
B)current and financial account surplus and capital account deficit.
C)current and financial account deficit and capital account surplus.
D)current and financial account deficit and capital account deficit.
E)current and financial account deficit and capital account balance.
Q2) Suppose initially Canada has all its international payments accounts in balance (no surplus or deficit). Then Canadian firms increase the amount they import from Japan, financing that increase by borrowing from Japan. Everything else remaining the same, there will now be a current and financial account
A)surplus and a capital account surplus.
B)surplus and a capital account deficit.
C)deficit and a capital account surplus.
D)deficit and a capital account deficit.
E)surplus and a capital account balance.
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Chapter 26: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) Which of the following does not change short-run aggregate supply?
A)a change in the money wage rate
B)technological change
C)a change in the full-employment quantity of labour
D)an increase in the quantity of capital
E)a change in expected future profits
Q2) Refer to Figure 26.3.1. As Econoworld automatically adjusts to long-run equilibrium, the
A)SAS curve shifts rightward.
B)AD curve shifts rightward.
C)SAS curve shifts leftward.
D)AD curve shifts leftward.
E)LAS curve shifts leftward.
Q3) Everything else remaining the same, an increase in the expected inflation rate
A)shifts the aggregate demand curve rightward.
B)shifts the aggregate demand curve leftward.
C)shifts the short-run aggregate supply curve leftward.
D)shifts the long-run aggregate supply curve rightward.
E)creates a movement up along the aggregate demand curve.
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Page 12
Chapter 27: Expenditure Multipliers
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Sample Questions
Q1) In Figure 27.2.3, the marginal propensity to import is
A)0.
B)0.1.
C)0.25.
D)0.3.
E)0.6.
Q2) When firms plan to restock their inventories, equilibrium expenditure ________ and real GDP ________.
A)increases; decreases B)decreases; increases C)decreases; decreases D)increases; increases E)decreases; does not change
Q3) Suppose real GDP increases by $1 billion and, as a result, consumption increases by $500 million. This change in consumption is A)unplanned.
B)induced.
C)autonomous.
D)too little.
E)planned.
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Chapter 28: The Business Cycle, Inflation, and Deflation
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Sample Questions
Q1) If the natural unemployment rate rises
A)the long-run Phillips curve shifts rightward and the short-run Phillips curve does not change.
B)the long-run Phillips curve shifts leftward and the short-run Phillips curve does not change.
C)the short-run Phillips curve shifts rightward and the long-run Phillips curve does not change.
D)the short-run and long-run Phillips curves both shift leftward.
E)the short-run and long-run Phillips curves both shift rightward.
Q2) Cost-push inflation can result from an initial
A)decrease in personal income taxes.
B)increase in personal income taxes.
C)increase in government expenditure.
D)increase in the money wage rate.
E)increase in transfer payments.
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14
Chapter 29: Fiscal Policy
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Sample Questions
Q1) Choose the correct statement.
A)Tax cuts increase aggregate supply and aggregate demand.
B)Tax cuts strengthen the incentive to work and to invest.
C)The tax multiplier becomes smaller as time passes.
D)According to Barro and Uhlig, tax cuts are a less powerful way to stimulate real GDP than spending increases.
E)Both A and B are correct.
Q2) During a recession, revenues
A)and government outlays decrease.
B)decrease and government outlays increase.
C)increase and government outlays decrease.
D)and government outlays increase.
E)remain constant and government outlays increase.
Q3) If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is
A)$10 billion.
B)$40 billion.
C)$60 billion.
D)$50 billion
E)$20 billion.
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Chapter 30: Monetary Policy
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Sample Questions
Q1) The objective of the Bank of Canada's monetary policy is
A)to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3 percent a year, and long-term real GDP growth above 4 percent a year.
B)to control the quantity of money and interest rates to avoid inflation and when possible prevent excessive swings in real GDP growth and unemployment.
C)to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3 percent a year, and long-term interest rates below 4 percent a year.
D)to keep the labour force participation rate above 80 percent, the inflation rate below 2 percent a year, and the exchange rate fluctuating by less than 3 percent a year.
E)to keep the overnight loans rate below 2 percent a year and the unemployment rate at its natural rate.
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Chapter 31: International Trade Policy
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Sample Questions
Q1) Refer to Table 31.1.2. The table shows a country's demand and supply schedules. Suppose the world price is $4 a unit. The country
A)imports 20 units.
B)exports 20 units.
C)imports 10 units.
D)exports 10 units.
E)imports 30 units.
Q2) Rent seeking is one reason why countries choose to A)export and import the same goods.
B)work for freer trade.
C)follow the theory of comparative advantage.
D)hire foreign labour.
E)restrict trade.
Q3) Consider a market that sells some of its goods as exports. Who does NOT benefit?
A)domestic consumers
B)domestic producers
C)workers in the industry
D)foreign consumers
E)All of the above benefit.
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Page 17