Canadian Economy Exam Practice
Tests
Course Introduction
This course provides an in-depth overview of the Canadian economy, exploring its historical development, current structure, and key policy issues. Topics include the role of natural resources, trade relationships, the labor market, regional disparities, and the impact of government policies on economic growth. Students will examine Canadas economic relationships with the United States and other global partners, analyze current trends such as technological change and globalization, and assess challenges facing the Canadian economy in the context of sustainable development and social equity.
Recommended Textbook Economics Canada in the Global Environment 9th Edition by Robin Bade
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31 Chapters
4049 Verified Questions
4049 Flashcards
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Page 2
Chapter 1: What Is Economics
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Sample Questions
Q1) The determination of prices in individual markets is primarily a concern of A)positive economics.
B)negative economics.
C)macroeconomics.
D)microeconomics.
E)descriptive economics.
Answer: D
Q2) The relationship between two variables that move in opposite directions is shown graphically by a line that is
A)positively sloped.
B)relatively steep.
C)relatively flat.
D)negatively sloped.
E)curved.
Answer: D
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Chapter 2: The Economic Problem
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Sample Questions
Q1) Which of the following describes comparative advantage?
A)Firm A can produce a good at a cost of $3 a unit, and Firm B can produce the same good at a cost of $4 a unit.
B)Jane can type 50 words per minute, and Joe can type 60 words per minute.
C)Firm A can produce 4 boxes of cereal in a day, and Firm B can produce 5 boxes of cereal in a day.
D)To produce a basket of wheat, Farmer John must give up growing 2 baskets of corn, whereas Farmer Ben must give up 3 baskets of corn to produce a basket of wheat.
E)Bill can read one book in a week, but it takes Jeannie 10 days to read the same book.
Answer: D
Q2) To describe preferences, economists use the concept of A)opportunity cost.
B)scarcity.
C)marginal benefit.
D)marginal cost.
E)price.
Answer: C
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Page 4
Chapter 3: Demand and Supply
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Sample Questions
Q1) Which one of the following events shifts the demand curve for grape jelly to the right?
A)an increase in income if grape jelly is a normal good
B)a decrease in the price of strawberry preserves, a substitute for grape jelly
C)a decrease in the price of grape jelly
D)an increase in the price of peanut butter, a complement of grape jelly
E)a decrease in the population
Answer: A
Q2) The price of a good will fall if
A)demand for the good increases.
B)supply of the good decreases.
C)supply of the good increases.
D)demand for the good remains constant.
E)supply of the good remains constant.
Answer: C
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Chapter 4: Elasticity
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Sample Questions
Q1) The price of gasoline rises by 25 percent and remains fixed at the new higher level. Choose the correct statement.
A)The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price.
B)The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price.
C)Initially after the price change, the price elasticity of demand will be less elastic than it will be a few years after the price change.
D)The price elasticity of demand for gasoline will decrease in the future.
E)Initially after the price change, the price elasticity of demand will be more elastic than it will be a few years after the price change.
Q2) Demand will be more elastic the
A)higher the income level.
B)lower the income level.
C)longer the passage of time after a price increase.
D)fewer substitutes are available.
E)smaller the fraction of income spent on the good.
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Chapter 5: Efficiency and Equity
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Sample Questions
Q1) An oil painting has a marginal cost of $1,000. The painting was bought for $1,500. How much producer surplus did the painter obtain?
A)$1,500
B)$1,000
C)$500
D)zero
E)cannot be determined from the information given
Q2) In 2012, a severe drought led to an increase in the price of corn. Farmer Lyle was not affected by the drought. Comparing 2012 to the previous year in which there was no drought, Farmer Lyle's
A)consumer surplus increased.
B)producer surplus increased.
C)producer surplus increased and his consumer surplus increased.
D)consumer surplus decreased and his producer surplus increased.
E)supply of corn became perfectly elastic.
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Chapter 6: Governments Actions in Markets
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Sample Questions
Q1) Suppose the demand for CDs is elastic, but not perfectly elastic, and the supply is inelastic, but not perfectly inelastic. A tax on CDs is paid
A)equally by buyers and sellers.
B)mostly by sellers.
C)mostly by buyers.
D)by neither buyers nor sellers.
E)totally by sellers.
Q2) Refer to Table 6.2.2. What is the equilibrium wage rate in an unregulated market?
A)$5.00 per hour
B)$5.50 per hour
C)$6.00 per hour
D)$6.50 per hour
E)$7.50 per hour
Q3) Refer to Figure 6.3.2. The amount of the tax per unit is A)zero.
B)$0.50.
C)$1.00.
D)$1.50.
E)$2.00.
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Chapter 7: Global Markets in Action
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138 Flashcards
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Sample Questions
Q1) In Figure 7.2.1, international trade ________ producer surplus in Canada by
A)increases; $320 million
B)decreases; $192 million
C)increases; $192 million
D)decreases; $320 million
E)decreases; $256 million
Q2) Offshore outsourcing occurs when a firm in Canada
A)moves its corporate headquarters to another country.
B)buys finished goods, components, or services from other firms in other countries.
C)buys finished goods, components, or services from other firms in Canada.
D)hires Canadian labour and produces in Canada.
E)hires foreign workers who work in Canada.
Q3) Tariffs
A)generate revenue for consumers.
B)generate revenue for the government.
C)encourage domestic consumers to buy more imports.
D)encourage domestic producers to produce less.
E)lower prices for consumers.
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Page 9
Chapter 8: Utility and Demand
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Sample Questions
Q1) Refer to Table 8.2.3. To attain consumer equilibrium, the first $4 of income is used to purchase
A)2 units of good X.
B)3 units of good X.
C)4 units of good Y.
D)an amount of X and Y that cannot be determined from the table.
E)2 units of good Y and 1 unit of X.
Q2) Refer to Table 8.1.1. The value of C is
A)0.
B)13.
C)17.
D)50.
E)3.
Q3) The value of a good relates to
A)total utility, while price relates to consumer surplus.
B)consumer surplus, while price relates to total utility.
C)marginal utility, while price relates to consumer surplus.
D)marginal utility, while price relates to total utility.
E)total utility, while price relates to marginal utility.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Refer to Figure 9.2.4. Rashid buys only books and albums. The figure shows his preferences. Rashid's indifference curves ________ display diminishing marginal rate of substitution because ________.
A)do; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books
B)do not; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books
C)do not; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books
D)do; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books
E)do; the price of an album decreases as Rashid increases the quantity he buys
Q2) Which of the graphs in Figure 9.2.1 shows perfect substitutes?
A)(a)
B)(b)
C)(c)
D)(d)
E)(c)and (d)
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Chapter 10: Organizing Production
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Sample Questions
Q1) In a partnership, each partner is legally liable for
A)all the debts of the partnership.
B)the fraction of the debts corresponding to the fraction of ownership.
C)50 percent of the debt.
D)all debts of the partnership limited by the personal wealth of the partner.
E)an amount of debt limited to the amount of the partner's investment in the partnership.
Q2) A firm with a single owner who has unlimited liability is A)a corporation.
B)a sole proprietorship.
C)a limited partnership.
D)an unlimited partnership.
E)a cooperative.
Q3) In Table 10.2.2, which method of making a medical hologram is technologically efficient?
A)1 only
B)2 only
C)3 only
D)all of the above
E)1 and 3 only
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Chapter 11: Output and Costs
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Sample Questions
Q1) Marginal cost
A)is constantly increasing, but as output increases it increases by smaller and smaller amounts.
B)decreases at low outputs until it reaches its minimum value, then remains constant.
C)decreases at low outputs and increases at high outputs.
D)increases at low outputs until it reaches its maximum value, then remains constant.
E)is constantly decreasing, but as output increases it decreases by smaller and smaller amounts.
Q2) The law of diminishing marginal returns refers to the tendency for the ________ to eventually decrease as more labour is employed, everything else remaining the same.
A)average total cost
B)marginal cost
C)total product
D)marginal product of labour
E)average product of labour
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13
Chapter 12: Perfect Competition
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Sample Questions
Q1) Refer to Figure 12.3.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry, The firm is
A)making an economic profit.
B)incurring an economic loss.
C)breaking even.
D)not maximizing economic profit.
E)going to close down temporarily.
Q2) Refer to Table 12.2.4. The market is perfectly competitive and there are 1,000 firms that produce paper. The top table sets out the market demand schedule for paper. Each producer of paper has the costs shown in the bottom table when it uses its least-cost plant size.
The market price is ________ a box and the market output is ________ boxes. The output produced by each firm is ________ boxes. Each firm ________.
A)$7.00; 250,000; 250; incurs an economic loss of $1,000 a week
B)$8.40; 350,000; 350; makes zero economic profit
C)$7.65; 300,000; 300; incurs an economic loss of $834 a week
D)$8.40; 350,000; 350; incurs an economic loss of $581 a week
E)$7.65; 350,000; 300; makes zero economic profit
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Chapter 13: Monopoly
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Sample Questions
Q1) Refer to Figure 13.4.2. Assume this monopolist practises perfect price discrimination. How many tickets are sold?
A)20 tickets
B)60 tickets
C)40 tickets
D)100 tickets
E)80 tickets
Q2) Firms that can price discriminate between customers do so to
A)increase consumer surplus.
B)increase employment.
C)increase economic profit.
D)decrease the quantity they produce.
E)increase producer surplus and deadweight loss.
Q3) Consider the cost and revenue curves in Figure 13.3.3. Which area indicates the deadweight loss from a single-price monopoly?
A)EACF
B)ACD
C)ABD
D)BCD
E)EADCF
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Chapter 14: Monopolistic Competition
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Sample Questions
Q1) In monopolistic competition
A)firms practice product differentiation.
B)the goods produced by each firm are identical.
C)firms do not have any control over the price of their products.
D)there are barriers to entry.
E)a small number of firms compete.
Q2) Mrs. Smith's bakery shop is a firm in monopolistic competition. The firm's marginal revenue curve
A)is upward sloping.
B)is downward sloping and above the demand curve.
C)is a horizontal line.
D)is the same as the demand curve.
E)is downward sloping and lies below the demand curve.
Q3) Selling costs
A)are variable costs that increase total cost.
B)always increase demand for a firm's product.
C)always decrease demand by increasing competition.
D)always provide consumers with valuable services.
E)include marketing expenditures on advertising and packaging.
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Page 16
Chapter 15: Oligopoly
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Sample Questions
Q1) All games share four common features. They are
A)costs, prices, profit, and strategies.
B)revenues, elasticity, profit, and payoffs.
C)rules, strategies, profit, and outcome.
D)patents, copyrights, barriers to entry, and rules.
E)rules, strategies, payoffs, and outcome.
Q2) If a duopoly collusive agreement is made that maximizes joint profit,
A)each of the duopolists has no incentive to cheat on the agreement.
B)each duopolist has the incentive to cheat on the duopoly agreement by lowering the price.
C)each duopolist has the incentive to cheat on the agreement by increasing the price to make monopoly profit.
D)there is no concern over the entrance of potential rivals, since they cannot decrease the duopolists' profit.
E)the dominant strategy is to collude.
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Chapter 16: Externalities
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Sample Questions
Q1) The Coase theorem will apply only when
A)an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality.
B)transactions cost are low.
C)the market is perfectly competitive.
D)the courts can be used to determine the amount of compensation that must be made to the damaged party.
E)the amount of compensation that must be made to the damaged party is small.
Q2) Refer to Table 16.3.1. The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer. If production is left to the private market, the market price is A)$70 a unit.
B)$60 a unit.
C)$50 a unit.
D)$40 a unit.
E)$30 a unit.
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Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) Refer to Figure 17.2.1. Curve MBA is Andrew's marginal benefit curve for a private good and curve MBB is Betty's marginal benefit curve for the same private good. If Andrew and Betty are the only two consumers in the economy, which point would be on the economy's marginal social benefit curve?
A)price of $20, quantity of 3 units
B)price of $20, quantity of 4 units
C)price of $10, quantity of 4 units
D)price of $30, quantity of 0 units
E)price of $60, quantity of 1 units
Q2) For a private good, the economy's marginal social benefit curve is the ________ sum of the individual marginal benefit curves and for a public good, the economy's marginal social benefit curve is the ________ sum of the individual marginal benefit curves.
A)vertical; vertical
B)vertical; horizontal
C)horizontal; vertical
D)horizontal; horizontal
E)horizontal and vertical; vertical and horizontal
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Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) A firm's value of marginal product of labour curve is also its
A)marginal cost curve of labour.
B)demand curve for labour.
C)supply curve of labour.
D)supply curve of output.
E)marginal product curve.
Q2) Refer to Fact 18.4.1. The price of bulk water in Arizona and southern California will ________. Water is a ________ natural resource.
A)fall; renewable
B)rise; nonrenewable
C)rise; renewable
D)fall; nonrenewable
E)not change; nonrenewable
Q3) What will be the value in one year of $25 invested today at an annual interest rate of 5 percent?
A)$25
B)$26.25
C)$27.50
D)$30
E)$23.81
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Chapter 19: Economic Inequality
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Sample Questions
Q1) Refer to Figure 19.1.2. What is curve A called?
A)market distribution line
B)line of equality
C)fairness line
D)low-income cut-off line
E)after-tax income
Q2) Refer to Figure 19.3.5. This figure shows the labour supply curves and the value of marginal product curves for high-skilled and low-skilled workers. If there is an increase in the supply of high-skilled workers and the supply of high-skilled workers is now equal to the supply of low-skilled workers, then
A)wages paid to high-skilled workers would fall to $4 an hour.
B)wages paid to high-skilled workers would fall to $5 an hour.
C)wages paid to high-skilled workers would fall to $6 an hour.
D)there would be no change in the wages of high-skilled workers, because high-skilled workers always earn more than low-skilled workers.
E)there would be no change in the wages of high-skilled workers, because their value of marginal product is unchanged.
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Page 21
Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) Suppose the economy of Econoworld produces only two goods, kayaks and birdseed. In one year 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each. The value of nominal GDP for this year is
A)$20,000.
B)$300.
C)$20,300.
D)$23,000.
E)20 kayaks plus 10 bags of birdseed.
Q2) Which one of the following is false?
A)Y = C + I + G + M - X
B)Y - C - I - G - X + M = 0
C)X - M = Y - C - I - G
D)Y + M = C + I + G + X
E)Y = C + I + G + X - M
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22
Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) Structural unemployment arises in part because
A)there are not enough jobs available.
B)of technological change.
C)people become discouraged when they cannot find jobs.
D)people will not quit their present jobs until they can find suitable employment elsewhere.
E)of unrealistic wage expectations.
Q2) Consider Fact 21.2.1. The 5 million workers who cannot find jobs because of mismatching in the labour market are counted as part of the economy's ________ unemployment because ________.
A)cyclical; the economy is rebounding from a recession
B)cyclical; there is a mismatch between their skills and the skills required for the available jobs
C)structural; there is a mismatch between their skills and the skills required for the available jobs
D)structural; the economy is rebounding from a recession
E)frictional; finding jobs after a recession is a normal part of the labour market
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23
Chapter 22: Economic Growth
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Sample Questions
Q1) If the money wage rate is $10.00 an hour and the price level is 60, the real wage rate is
A)$16.67 an hour.
B)$18.75 an hour.
C)$10.00 an hour.
D)$12.50 an hour.
E)$6.00 an hour.
Q2) When labour productivity decreases, the
A)demand for labour curve shifts leftward and the real wage rate falls.
B)supply of labour curve shifts rightward and the real wage rate fall.
C)supply of labour curve shifts leftward and the real wage rate rises.
D)demand for labour decreases and the supply of labour decreases, and the real wage rate rises, falls, or remains unchanged.
E)demand for labour decreases and the supply of labour increases, and the real wage rate falls.
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Chapter 23: Finance, Saving, and Investment
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Sample Questions
Q1) Technological progress that increases expected profit shifts the demand for loanable funds curve
A)leftward and decreases the real interest rate.
B)rightward and increases the real interest rate.
C)rightward and decreases the real interest rate.
D)leftward and increases the real interest rate.
E)rightward and the supply of loanable funds curve leftward.
Q2) At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital at the end of year was
A)1 machine.
B)2 machines.
C)3 machines.
D)6 machines.
E)8 machines.
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25
Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) Money is
A)equivalent to barter.
B)currency plus credit cards plus debit cards.
C)the same as gold.
D)a means of payment.
E)currency plus coins.
Q2) Which of the following is a function of money?
A)a medium of exchange
B)a measure of liquidity
C)a means of pooling risk
D)a store of exchange
E)a means of reducing transactions costs
Q3) Which one of the following would not be considered a depository institution?
A)The Bank of Canada.
B)a credit union
C)a caisse populaire
D)a trust and mortgage loan company
E)The Bank of Montreal
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26
Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) All of the following statements are true except
A)China's exchange rate policy increases exports in the long run.
B)China's exchange rate policy is mainly an attempt to control inflation.
C)China's exchange rate policy results in a yuan that has a lower foreign exchange rate against the U.S. dollar than it would otherwise have.
D)China's exchange rate policy does not impact the real exchange rate in the long run.
E)All of the above are true.
Q2) For a given real exchange rate, a change in the quantity of money
A)brings a change in the price level and a change in the exchange rate.
B)brings a change in the price level with no change in the exchange rate.
C)brings a change in the exchange rate with no change in the price level.
D)has no effect on the exchange rate or the price level.
E)has an unknown effect on the price level and the exchange rate.
Q3) Choose the statement that is incorrect.
A)The world's largest net borrower is the United States.
B)Canada is a net borrower.
C)China is a net lender.
D)Saudi Arabia is a net lender.
E)Japan is a net borrower.
Page 27
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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 aggregate demand?
A)an increase in expected future income
B)a change in fiscal policy
C)a change in monetary policy
D)an advance in technology
E)a rise in the exchange rate
Q2) Refer to Figure 26.3.2. Consider statements (1)and (2)and select the correct answer. (1) The actual unemployment rate exceeds the natural unemployment rate in the short run.
(2) SAS automatically shifts rightward as the economy adjusts to long-run equilibrium.
A)(1)is true; (2)is false.
B)(2)is true; (1)is false.
C)(1)and (2)are false.
D)(1)and (2)are true.
E)(1)is false; (2)is true if the LAS curve shifts rightward at the same time.
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Chapter 27: Expenditure Multipliers
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Sample Questions
Q1) If there is an unplanned decrease in inventories, aggregate planned expenditure is
A)greater than real GDP, and firms increase production.
B)greater than real GDP, and firms decrease production.
C)less than real GDP, and firms increase production.
D)less than real GDP, and firms decrease production.
E)greater than real GDP, and firms increase investment.
Q2) Refer to Table 27.3.1. The equilibrium level of real GDP is
A)$525 billion.
B)$550 billion.
C)$450 billion.
D)$500 billion.
E)$600 billion.
Q3) Table 27.2.1 gives the aggregate expenditure schedule. Equilibrium expenditure is equal to
A)$4 trillion.
B)$3 trillion.
C)$5 trillion.
D)zero.
E)$2 trillion.
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Chapter 28: The Business Cycle, Inflation, and Deflation
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Sample Questions
Q1) Which of the following are business cycle theories that regard fluctuations in aggregate demand as the factor that creates business cycles?
I. Keynesian cycle theory
II. real business cycle theory
III. monetarist cycle theory
A)I only
B)I and II
C)I and III
D)I, II and III
E)II and III
Q2) A cost-price inflation spiral results if the policy response to stagflation is to keep
A)decreasing aggregate demand.
B)decreasing short-run aggregate supply.
C)increasing aggregate demand.
D)increasing short-run aggregate supply.
E)doing nothing.
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Chapter 29: Fiscal Policy
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Sample Questions
Q1) Suppose the government starts with a debt of $0. Then in year 1, there is a deficit of $100 billion, in year 2 there is a deficit of $60 billion, in year 3 there is a surplus of $40 billion, and in year 4 there is a deficit of $20 billion. What is government debt at the end of year 4?
A)$20 billion
B)$140 billion
C)$180 billion
D)somewhat greater than $220 billion, depending on the interest rate
E)somewhat greater than $140 billion, depending on the interest rate
Q2) Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. Discretionary fiscal policy would be shown as a movement
A)from right to left along the revenues curve.
B)from left to right along the revenues curve.
C)from right to left along the outlays curve.
D)from left to right along the outlays curve.
E)none of the above
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Chapter 30: Monetary Policy
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Q1) If the Bank of Canada wants to stimulate the economy to limit the effects of a recessionary gap, then it ________ the overnight loans rate to ________ the real interest rate and ________ investment.
A)lowers; lower; increase B)lowers; raise; increase C)raises; raise; decrease D)lowers; lower; decrease E)lowers; raise; decrease
Q2) Which of the following central banks does not follow an inflation rate targeting strategy?
A)The Federal Reserve (the central bank of the United States)
B)The Bank of Canada
C)The Reserve Bank of Australia
D)The Bank of England
E)The European Central Bank (the central bank of the Eurozone)
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Chapter 31: Macro Only: International Trade Policy
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Q1) Refer to Fact 31.3.1. With the removal of the tariffs, the quantity of Canadian imports from Mexico ________ and the quantity of Canadian exports to Mexico ________. A)increases; decreases B)decreases; decreases C)decreases; increases D)increases; does not change E)increases; increases
Q2) The gains from free trade are enjoyed by a ________ number of people and the costs of free trade are imposed on a ________ number of people.
A)small; large
B)large; small C)small; small
D)large; large
E)We can't determine the relative number of people who benefit and lose from free trade.
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