Course Introduction
Business Economics
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Business Economics explores the application of economic theory and methodology to business decision-making. The course covers key concepts such as supply and demand analysis, market structures, production and cost functions, pricing strategies, and the impact of government policies and regulations on businesses. Students gain an understanding of how businesses operate in various market environments, analyze economic trends, and use quantitative tools to solve real-world business problems. Emphasis is placed on practical approaches to maximizing efficiency, profitability, and competitiveness in both domestic and international markets.
Recommended Textbook
Principles of Macroeconomics 7th Canadian Edition by N. Mankiw
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17 Chapters
3576 Verified Questions
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Page 2
Chapter 1: Ten Principles of Economics
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Sample Questions
Q1) Which term refers to a single entity that has the ability to influence market prices?
A) competition
B) market power
C) efficiency
D) productivity
Answer: B
Q2) What is the definition of inflation?
A) a period of rising productivity in the economy
B) a period of rising income in the economy
C) an increase in the overall level of output in the economy
D) an increase in the overall level of prices in the economy
Answer: D
Q3) How are goods and services allocated in a market economy?
A) by government decisions
B) by giving each individual just enough for a decent standard of living
C) by the actions of all firms and consumers
D) by inherited rights and properties
Answer: C
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3
Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) What do economists at the Bank of Canada do?
A) analyze data on labour markets
B) help negotiate trade agreements
C) analyze macroeconomic developments
D) enforce competition laws
Answer: C
Q2) What did a survey that asked the opinion of academic,business,and government economists on ten propositions about economic policy find?
A) The respondents were almost equally divided on the propositions.
B) The respondents favoured the propositions by a slight margin.
C) The respondents disagreed with the propositions by a slight margin.
D) There was overwhelming endorsement of the propositions among the respondents.
Answer: D
Q3) An economy can produce at any point on or outside the production possibilities frontier,but it cannot produce at points inside the frontier.
A)True
B)False
Answer: False
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Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) Trade is based on absolute advantage.
A)True
B)False
Answer: False
Q2) Refer to Table 3-5.What is the opportunity cost of one airplane for Canada?
A) 1 / 4 car
B) 1 / 3 car
C) 3 cars
D) 4 cars
Answer: C
Q3) Refer to Table 3-1.What is the opportunity cost of 1 kg of meat for the rancher?
A) 4 hours of labour
B) 3 hours of labour
C) 4 / 3 kg of potatoes
D) 3 / 4 kg of potatoes
Answer: D
Q4) Differences in opportunity cost allow for gains from trade.
A)True
B)False
Answer: True
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Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) What is a table called that shows the relationship between the price of a good and the quantity demanded?
A) demand table
B) demand schedule
C) market table
D) quantity-demanded schedule
Q2) The quantity demanded of a product is the amount that buyers are willing and able to purchase at a particular price.
A)True
B)False
Q3) Refer to the Figure 4-5.Which of the four graphs represents the market for oranges after disease impacts much of the Florida orange harvest?
A) graph A
B) graph B
C) graph C
D) graph D
Q4) In a perfectly competitive market,buyers and sellers are price setters.
A)True
B)False
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Chapter 5: Measuring a Nations Income
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Sample Questions
Q1) Which of the following is counted in Canadian GDP?
A) goods and services produced by Canadian citizens working in the U.S.
B) American intermediate goods used in the production of Canadian final goods
C) Canadian final goods and services purchased by the American government
D) American final goods and services purchased by the Canadian government
Q2) Refer to the Table 5-4.What is the nominal GDP for 2014?
A) $900
B) $1000
C) $1100
D) $1250
Q3) Sean used to volunteer to shovel his elderly neighbour's walk,but now his neighbour pays a company to do it.How does this change affect GDP?
A) It decreases GDP by more than the price of the service.
B) It increases GDP by less than the price of the service..
C) It decreases GDP by the price of the service.
D) It increases GDP by the price of the service.
Q4) Macroeconomic statistics include the inflation rate,the unemployment rate,GDP,and retail sales.
A)True
B)False
Page 7
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Chapter 6: Measuring the Cost of Living
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Sample Questions
Q1) Suppose the quality of lawn mowers,which are part of the CPI basket,has improved,while their price has remained the same.If Statistics Canada wants to adjust the CPI so that the effect of better quality on the cost of living is accounted for,what should Statistics Canada do?
A) It should keep the CPI unchanged,because the price has not changed.
B) It should decrease the CPI,because better quality means lower maintenance costs.
C) It should increase the CPI,because higher quality means higher value.
D) It should keep the CPI unchanged,because lower maintenance costs are offset by higher value.
Q2) A German automobile company produces cars in Canada,some of which are exported to other nations.If the price of these cars increases,what happens to the GDP deflator and the CPI?
A) The GDP deflator and the CPI will both increase.
B) The GDP deflator will increase,but the CPI will be unchanged.
C) The GDP deflator will be unchanged,but the CPI will increase.
D) The GDP deflator and the CPI will both be unchanged.
Q3) Which is likely to have the larger effect on the CPI,a 2 percent increase in food or a 3 percent increase in diamond rings? Explain.
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Chapter 7: Production and Growth
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Sample Questions
Q1) What is generally an opportunity cost of investment in human capital?
A) future job security
B) forgone wages at present
C) increased earning potential
D) the cost of tuition during the years of school
Q2) Technological innovations,by increasing productivity in manufacturing,have brought about some expected,as well as some unexpected,changes.A notable change is the disappearance of some occupations; another is,paradoxically,that people now do more unskilled work for themselves than they used to do a decade ago.
a)Name a few occupations that have disappeared,or may disappear in the near future,as they are being replaced by machines.
b)Name a few occupations that have disappeared or may disappear as a side effect of the general increase in productivity.
c)How would economic growth force many people to do more housework by themselves?
Q3) How do inward-oriented policies affect a nation's growth?
Q4) What might the African governments do to foster higher economic growth?
Q5) What is the difference between human capital and technology?
Q6) Compare and contrast the population theories of Malthus and Kremer.
Page 9
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Chapter 8: Saving, investment, and the Financial System
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Sample Questions
Q1) The country of Nemedia does not trade with any other country.Its GDP is $20 billion.Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments.Consumption equals $13 billion,and investment equals $2 billion.What is the value of the goods and services purchased by the government of Nemedia?
A) $3 billion
B) $5 billion
C) $17 billion
D) $19 billion
Q2) Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 3500,consumption is equal to 6500,and government expenditures are equal to 2000.What is private saving?
A) 0
B) 500
C) 1000
D) 1500
Q3) To make the financial markets safer,the Canadian government proposes tightening the rules for making a loan.Such rules require higher borrower creditworthiness and shorter pay-back periods.Analyze this proposal in a supply and demand for loanable funds model.
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Chapter 9: Unemployment and Its Natural Rate
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Sample Questions
Q1) Over half of the unemployed are recent entrants into the labour force.
A)True
B)False
Q2) What is most likely to cause frictional unemployment?
A) workers leaving the labour force
B) an economy in recession
C) an increase in population
D) changes in the composition of demand among industries or regions
Q3) In Canada,about what fraction of the time do spells of unemployment end with the person leaving the labour force?
A) 1 / 5 of the time
B) 1 / 4 of the time
C) 1 / 3 of the time
D) 1 / 2 of the time
Q4) What does cyclical unemployment refer to?
A) the relation between the probability of unemployment and a worker's years of experience
B) how often a worker is likely to be unemployed during her lifetime
C) year-to-year fluctuations of unemployment around its natural rate
D) long-term trends in unemployment
11
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Chapter 10: The Monetary System
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Sample Questions
Q1) What does the calculated amount of currency per person in Canada suggest?
A) People tend to hold too much currency.
B) Most payments are made in cash.
C) People do not trust banks.
D) There is a significant illegal activity.
Q2) What is current Canadian currency?
A) fiat money with intrinsic value
B) fiat money with no intrinsic value
C) commodity money with intrinsic value
D) commodity money with no intrinsic value
Q3) What is a generally accepted medium of exchange?
A) a plane ticket
B) federal government bonds
C) diamonds
D) currency
Q4) If the Bank of Canada decreases reserve requirements,the money supply will increase.
A)True
B)False
Q5) What is the difference between money and wealth?
Page 12
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Chapter 11: Money Growth and Inflation
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Sample Questions
Q1) Which statement best describes the inflation tax?
A) It is an income tax.
B) It is a sales tax.
C) It is the revenue created when the government prints money.
D) It is the revenue created when inflation is low.
Q2) What does the evidence from hyperinflations indicate with respect to the quantity theory of money?
A) Evidence shows that money growth and inflation moved together,which supports the quantity theory.
B) Evidence shows that money growth and inflation moved together,which does not support the quantity theory.
C) Evidence shows that money growth and inflation did not move closely with each other,which supports the quantity theory.
D) Evidence shows that money growth and inflation did not move closely with each other,which does not support the quantity theory.
Q3) Inflation distorts relative prices.What does this mean,and why does it impose a cost on society?
Q4) List and define any two of the costs of high inflation.
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Page 13
Chapter 12: Open-Economy Macroeconomics: Basic Concepts
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Sample Questions
Q1) Canada sells machinery to a South African company,which pays Canada with South African currency (the rand).What happens to Canadian net capital outflow from this transaction?
A) It increases because Canada acquires foreign assets.
B) It decreases because Canada acquires foreign assets.
C) It increases because Canada sells capital goods.
D) It decreases because Canada sells capital goods.
Q2) Which statement best defines the nominal exchange rate?
A) It is the nominal interest rate in one country divided by the nominal interest rate in the other country.
B) It is the rate at which a person can trade the currency of one country for the currency of another.
C) It is the price of a good in one country divided by the price of the same good in another.
D) It is the number of goods a person can trade for a similar good in another country.
Q3) A country with no imports necessarily has zero net exports.
A)True
B)False
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Chapter 13: A Macroeconomic Theory of the Small Open Economy
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Sample Questions
Q1) According to the theory of purchasing-power parity,what is the shape of the demand curve for foreign-currency exchange?
A) downward sloping
B) upward sloping
C) horizontal
D) vertical
Q2) What does a lower real interest rate decrease the quantity of?
A) loanable funds demanded
B) loanable funds supplied
C) domestic investment
D) net capital outflow
Q3) In an open economy,what does net capital outflow equal?
A) imports
B) net exports
C) exports
D) net imports
Q4) If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.
A)True
B)False
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Chapter 14: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Which of the following shifts both the short-run and the long-run aggregate supply right?
A) an increase in the natural rate of unemployment
B) an increase in the expected price level
C) an increase in the capital stock
D) an increase in money supply
Q2) How does real GDP change over time?
A) It moves in the same direction as unemployment.
B) It moves in the same direction as inflation.
C) It has a long-term upward trend.
D) It is approximately constant because it is measured in constant dollars.
Q3) In which situation would the long-run aggregate-supply curve shift left?
A) if the capital stock increases
B) if there is a hurricane
C) if the government removes some environmental regulations that limit production methods
D) if trade barriers are removed
Q4) A change in the money supply changes only nominal variables in the long run.
A)True
B)False
Page 16
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Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
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Sample Questions
Q1) Which of the following factors mostly determines the lag problem associated with monetary policy?
A) the fact that business firms make investment plans far in advance
B) the political system of checks and balances that slows down the process of determining monetary policy
C) the time it takes for changes in government spending to affect the interest rate
D) growth in the money supply is too slow
Q2) Explain why the interest rate is the opportunity cost of holding currency.What is the benefit of holding currency?
Q3) What is an effect of an increase in government purchases?
A) It decreases interest rates.
B) It results in a decrease in the government deficit.
C) It crowds out investment spending by business.
D) It decreases money demand.
Q4) Which of the following shifts money demand to the left?
A) an increase in the price level
B) a decrease in the price level
C) an increase in the interest rate
D) a decrease in the interest rate
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Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
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Sample Questions
Q1) According to the Friedman-Phelps analysis,in the long run,actual inflation equals expected inflation,and unemployment is at its natural rate.
A)True
B)False
Q2) Refer to the Figure 16-4.If the economy is at point h and the Bank of Canada pursues a contractionary monetary policy,then the economy will move to which point in the short and long run?
A) point d in the short run and point c in the long run
B) point b in the short run and point c in the long run
C) point c in the long-run and point a in the long run
D) point m in the short run and point c in the long run
Q3) In which situation will the economy move to a point on the Phillips curve where unemployment is higher?
A) if the inflation rate increases
B) if the government increases its expenditures
C) if the Bank of Canada decreases the money supply
D) if expected inflation increases
Q4) Discuss the factors determining the slope of the short-run Phillips curve.Is the linear shape appropriate? Why,or why not?
Page 18
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Chapter 17: Five Debates Over Macroeconomic Policy
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Sample Questions
Q1) Assume that the substitution effect is large relative to the income effect.If a tax reform is designed to increase saving,what does it do to the interest rate and spending on capital goods?
A) It increases the interest rate and decreases spending on capital goods.
B) It increases the interest rate and increases spending on capital goods.
C) It decreases the interest rate and increases spending on capital goods.
D) It decreases the interest rate and decreases spending on capital goods.
Q2) In practice,the problems created by time inconsistency and the political business cycle appear to be quite serious.
A)True
B)False
Q3) In which situation is a program to reduce inflation likely to have the highest costs?
A) if the sacrifice ratio is high and the reduction is unexpected
B) if the sacrifice ratio is high and the reduction is expected
C) if the sacrifice ratio is low and the reduction is unexpected
D) if the sacrifice ratio is low and the reduction is expected
Q4) Explain why policy lags could make stabilization policies counterproductive.
Q5) Explain the main argument in favour of economic stabilization.
Q6) Explain how it is possible for the government debt to grow forever.
Page 19
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