Canadian Economy Practice Questions
Course Introduction
This course offers an in-depth examination of the Canadian economy, focusing on its unique structures, historical development, and contemporary challenges. Topics include the evolution of key industries, regional disparities, the role of natural resources, trade policies, and the impact of globalization. Students will explore fiscal and monetary policy, labor markets, and current policy issues such as economic inequality and sustainability. Through analysis of real-world data and case studies, the course provides a comprehensive understanding of Canadas economic landscape within both domestic and international contexts.
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) Choose the correct statement.
A)Canada produces more services than goods.
B)Canada produces more goods than services.
C)Canada produces an equal quantity of goods and services.
D)China's production of services is a greater percentage of its total production than Canada's.
E)Canada's production of manufacturing is a greater percentage of its total production than China's.
Answer: A
Q2) Refer to Table 1A.2.3. What type of relationship exists between w and u?
A)positive
B)negative
C)direct
D)No consistent relationship exists.
E)first a positive relationship, then a negative one
Answer: B
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Chapter 2: The Economic Problem
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Sample Questions
Q1) The concept of opportunity cost
A)cannot be explained by using a production possibilities frontier.
B)explains that goods are swapped for other goods.
C)implies that when a person is more efficient in the production of one good, he should produce that good and exchange it for some good that he is relatively less efficient at producing.
D)implies that a double coincidence of wants must be present for exchange to take place.
E)implies that because productive resources are scarce, we must give up some of one good to acquire more of another.
Answer: E
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) Some sales managers are talking shop. Which of the following quotations refers to a movement along the demand curve?
A)"Since our competitors raised their prices, our sales have doubled."
B)"It has been an unusually mild winter; our sales of wool scarves are down from last year."
C)"We decided to cut our prices, and the increase in our sales has been remarkable."
D)"The Green movement has sparked an increase in our sales of biodegradable products."
E)"More firms are producing biodegradable products."
Answer: C
Q2) When the demand for good A increases,
A)the equilibrium price and equilibrium quantity will increase.
B)the equilibrium price will rise, but the equilibrium quantity will decrease.
C)the equilibrium price and equilibrium quantity will decrease.
D)the equilibrium price will decrease, but the equilibrium quantity will increase.
E)a surplus will result.
Answer: A
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Chapter 4: Elasticity
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Sample Questions
Q1) A good has a price elasticity of demand equal to 2. If new imports lower its price from $1.20 to $0.80, the percentage change in quantity demanded will be
A)an increase of 80 percent.
B)a decrease of 80 percent.
C)a decrease of 40 percent.
D)an increase of 2 percent.
E)an increase of 40 percent.
Q2) When the price elasticity of demand is ________, demand for the good is inelastic.
A)equal to infinity
B)greater than 1
C)equal to 1
D)between 1 and zero
E)equal to zero
Q3) For which one of the following is demand likely to be most inelastic?
A)diamonds
B)insulin for a diabetic
C)potatoes
D)gasoline
E)books
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Page 6
Chapter 5: Efficiency and Equity
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Sample Questions
Q1) Markets may not achieve an efficient allocation of resources when there are A)public goods.
B)external benefits.
C)monopolies.
D)subsidies.
E)all of the above
Q2) Refer to Figure 5.3.2. If the level of output is 100 units, the deadweight loss is area A)BCF.
B)ACG.
C)DCE.
D)ACH.
E)HCG.
Q3) Majority rule allocates resources in the way that A)politicians choose.
B)a majority of voters choose.
C)democracies choose.
D)all voters choose.
E)the military chooses.
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Chapter 6: Governments Actions in Markets
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Sample Questions
Q1) Daisy and Donald live in a community with rent ceilings. Both are looking for an apartment to rent. Daisy has a job paying $10 per hour and Donald has a job paying $8 per hour. Both value an apartment equally. What is the most likely outcome?
A)Daisy will spend more time than Donald searching for an apartment.
B)Donald will spend more time than Daisy searching for an apartment.
C)Both of them will spend the same amount of time searching for an apartment.
D)Daisy will find the apartment.
E)Donald will find the apartment.
Q2) 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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Sample Questions
Q1) In Figure 7.2.2, international trade ________ total surplus in Canada by ________.
A)decreases; $2.56 billion
B)increases; $4.8 billion
C)decreases; $3.6 billion
D)decreases; $1.92 billion
E)increases; $1.92 billion
Q2) Refer to Fact 7.3.1. 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
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9
Chapter 8: Utility and Demand
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Sample Questions
Q1) What is marginal utility?
A)the change in total utility divided by the price of a good B)the maximum amount of satisfaction from consuming a good C)the total satisfaction received from consuming as much of the good that is available for consumption
D)the additional satisfaction received from consuming one more unit of a good E)the change in the price of a good divided by the change in total utility
Q2) Bounded self-interest
A)is limited by the computing power of the human brain.
B)prevents us from making a decision that we know, at the time of implementing the decision, we will later regret.
C)is the tendency for people to value something more highly simply because they own it.
D)results in sometimes suppressing our own interests to help others.
E)is the tendency for people to value something more highly simply because a friend owns it.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Guy has an income (Y)of $50 with which he can purchase DVDs (D)at $10 each and haircuts (H)at $20 each. Which one of the following represents Guy's budget line?
A)Y = 10QD - 20QH
B)50 = QD + QH
C)Y = 50 + QD + QH
D)20Y = QD + 10QH
E)50 = 10QD + 20QH
Q2) Which of the following is not relevant when calculating the budget line?
A)the price of good X
B)income
C)the price of good Y
D)preferences
E)the relative price of good X in terms of good Y
Q3) Refer to Figure 9.3.4. Which graphs show the case where good Y is a normal good?
A)(a)and (b)
B)(c)and (d)
C)(a)and (c)
D)(b)and (d)
E)none of the graphs
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Page 11
Chapter 10: Organizing Production
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Sample Questions
Q1) The difference in the market value of a new van owned by a firm and the market value of the same van one year later is
A)economic depreciation.
B)physical depreciation.
C)economic deterioration.
D)physical deterioration.
E)conventional depreciation.
Q2) Mr. Brown opens his restaurant as a sole proprietorship. After a year of disastrous reviews, he has gone deeply into debt. His liability is
A)zero; he has already lost all his money.
B)the amount of his original investment.
C)limited only by his entire wealth.
D)limited to assets owned by the restaurant.
E)depends upon how much money he has in his savings account.
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Chapter 11: Output and Costs
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Sample Questions
Q1) Refer to Figure 11.2.2 which shows Tania's average product curve and marginal product curve. The point of maximum average product is point A)B.
B)C.
C)D.
D)E.
E)F.
Q2) If ATC is rising then MC must be A)rising.
B)falling.
C)equal to ATC.
D)above ATC.
E)both A and D
Q3) Marginal cost is the amount that
A)total cost increases when one more labourer is hired.
B)fixed cost increases when one more labourer is hired.
C)variable cost increases when one more labourer is hired.
D)total cost increases when one more unit of output is produced.
E)fixed cost increases when one more unit of output is produced.
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Page 13
Chapter 12: Perfect Competition
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Sample Questions
Q1) In which one of the following situations will a perfectly competitive firm make an economic profit?
A)MR > AVC
B)MR > ATC
C)ATC > MC
D)ATC > MR
E)MC > AVC
Q2) If firms exit an market, the
A)market supply curve shifts leftward.
B)price of the good falls.
C)economic profit of the remaining firms decrease.
D)total market output increases.
E)economic profit of the remaining firms stay the same.
Q3) Refer to Figure 12.4.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run,
A)firms that remain in the market will expand production.
B)market demand will increase.
C)firms will adopt labour-saving technology.
D)industry output will remain constant.
E)firms will enter the market.
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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. What is the lowest price charged for tickets?
A)$0
B)$1.00
C)$3.50
D)$3.00
E)$2.00
Q2) The output of a (not perfect)price-discriminating monopoly is
A)less than a single-price monopoly.
B)more than a single-price monopoly but less than a perfectly competitive industry.
C)the same amount as a perfectly competitive industry.
D)more than a perfectly competitive industry.
E)less than a single-price monopoly but more than a perfectly competitive industry.
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Chapter 14: Monopolistic Competition
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Sample Questions
Q1) Firms in monopolistic competition in the short run always
A)set price above marginal cost.
B)make an economic profit.
C)set price equal to marginal cost.
D)produce at the minimum average total cost.
E)break even.
Q2) For a monopolistically competitive firm to be making an economic profit,
A)the production period must be the short run.
B)the production period must be the long run.
C)rival firms must not exist.
D)its rivals must also be making an economic profit.
E)barriers to entry must exist.
Q3) Advertising costs in monopolistic competition increase a firm's
A)total fixed cost.
B)marginal cost.
C)total variable cost.
D)average variable cost.
E)marginal revenue.
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Chapter 15: Oligopoly
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Sample Questions
Q1) Which of the following quotes shows a contestable market in the widget industry?
A)"I am producing extra widgets, even though it costs me short-run profits, to stop Wally's Widgets from expanding into my market."
B)"I am producing more widgets than Wally and I agreed to in our talk last week."
C)"If only Wally and I could agree on a higher price, we could make more profits."
D)"I have been spending extra on research and development of my new two-way widget."
E)None of the above
Q2) In a prisoners' dilemma game, which of the following strategies gives the best outcome for both prisoners?
A)Both players deny.
B)Both players confess.
C)One player confesses and the other player denies.
D)Both players hire good lawyers.
E)None of the above
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Chapter 16: Externalities
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Sample Questions
Q1) Smoking tobacco creates a ________ externality.
A)negative consumption
B)negative production
C)positive consumption
D)positive production
E)marginal
Q2) Three ways governments can encourage production of goods with external benefits are
A)private subsidies, pollution permits, and intellectual property rights.
B)private subsidies, pollution permits, and vouchers.
C)intellectual property rights, pollution permits, and vouchers.
D)taxes, emission charges, and pollution permits.
E)private subsidies, vouchers, and intellectual property rights.
Q3) Which one of the following is a means of coping with a negative externality?
A)emission subsidies
B)patents
C)vouchers
D)Pigovian taxes
E)copyrights
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Page 18
Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) Rational ignorance suggests that
A)all voters are ignorant.
B)all voters will be ignorant on issues that are not of special interest to them.
C)all voters will pursue information about each issue before voting.
D)low voter turnout is due to a lack of understanding of the importance of the political platforms.
E)it is easier to aim at the median voter because it is a less costly strategy for the politicians.
Q2) Free riding can occur if a good is
A)excludable and rival.
B)excludable and nonrival.
C)a private good.
D)nonexcludable and rival.
E)nonexcludable and nonrival.
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Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) Coal in an Alberta coal mine is ________ natural resource. Algonquin Park is ________ natural resource.
A)a nonrenewable; a nonrenewable
B)a renewable; a renewable
C)a nonrenewable; a renewable
D)a renewable; a nonrenewable
E)a nonrenewable; not a
Q2) Suppose the interest rate is 5 percent per year. What is the present value of the $210 that will be received two years from today?
A)$210
B)$190.48
C)$231.53
D)$200
E)$42
Q3) When the price of a firm's output increases,
A)the supply of labour increases.
B)the firm hires less labour.
C)the marginal product of labour increases.
D)the firm's demand for labour curve shifts leftward.
E)the value of marginal product of labour increases.
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Chapter 19: Economic Inequality
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Sample Questions
Q1) Which point in Figure 19.1.2 indicates that the richest 20 percent of families earn 40 percent of the income?
A)a
B)b
C)c
D)d
E)the origin
Q2) Refer to Figure 19.3.6. This is the market for a group of workers. If point A represents the equilibrium for workers with higher human capital, which point represents the equilibrium for the workers with less human capital?
A)D
B)B
C)I
D)C
E)H
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Page 21
Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) Net domestic income at market prices equals GDP (income approach)minus A)taxes.
B)corporate profits.
C)subsidies.
D)consumption expenditure.
E)depreciation.
Q2) Refer to Table 20.2.3. Consider the economy represented in the table. Total income, in millions of dollars, is
A)$800,000.
B)$850,000.
C)$1,350,000.
D)$1,050,000.
E)$1,100,000.
Q3) Refer to Table 20.2.2. Gross domestic product equals
A)$3,050.
B)$3,150.
C)$3,400.
D)$5,600.
E)$5,050.
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Page 22
Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) When the unemployment rate is less than the natural unemployment rate, real GDP is ________ than potential GDP and the output gap is ________.
A)greater; positive
B)smaller; positive
C)greater; negative
D)smaller; negative
E)greater; equal to zero
Q2) Counting involuntary part-time workers as unemployed would
A)not change the actual unemployment rate.
B)lower the measured unemployment rate.
C)raise the natural unemployment rate.
D)raise the full employment rate.
E)raise the measured unemployment rate.
Q3) If the working-age population increases, then
A)the size of the labour force will increase.
B)the number of people employed will increase.
C)the unemployment rate will increase.
D)the labour force participation rate will increase.
E)the total number of people aged 15 years and above will increase.
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Page 23
Chapter 22: Economic Growth
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Sample Questions
Q1) Which theory of economic growth argues that growth does not automatically slow down?
A)classical growth theory
B)neoclassical growth theory
C)new growth theory
D)all of the theories
E)none of the theories
Q2) 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.
Q3) Factors that influence labour productivity include
A)the inflation rate, the real wage rate, and the exchange rate.
B)the labour demand curve.
C)physical capital, the real wage rate, and technology.
D)the demand for labour, the real wage rate, and technology.
E)physical capital, human capital, and technology.
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Chapter 23: Finance, Saving, and Investment
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Sample Questions
Q1) The supply of loanable funds is the relationship between the quantity of loanable funds supplied and ________, other things remaining the same.
A)real GDP
B)the price level
C)the real interest rate
D)the inflation rate
E)the nominal interest rate
Q2) Refer to Table 23.2.1. Private saving is
A)-$15 million.
B)$40 million.
C)$25 million.
D)$20 million.
E)$80 million.
Q3) A rise in the real interest rate
A)shifts the demand for loanable funds curve rightward.
B)shifts the demand for loanable funds curve leftward.
C)creates a movement up along the demand for loanable funds curve.
D)creates a movement down along the demand for loanable funds curve.
E)increases the inflation rate.
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Page 25
Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) Choose the statement that is incorrect.
A)Fractional-reserve banking is a system in which banks keep a fraction of their depositors' funds as a cash reserve and lend the rest.
B)Fractional-reserve banking was invented by gold prospectors in the Canadian Yukon during the gold rush.
C)100 percent reserve banking is a system in which banks keep the full amount of their depositors' funds as a cash reserve.
D)The requirement to hold 100 percent reserves lowers bank profits.
E)The Austrian School of economists say that fractional-reserve banking violates property rights because the bank has no legal right to lend a deposit to someone else.
Q2) If you can find someone to swap what you have for what you want, then
A)money is necessary for the exchange to work.
B)specialization is impossible in the society in which you live.
C)there exists a double coincidence of wants.
D)there exists a double system of money.
E)there exists a monetary exchange system.
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26
Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) Refer to Table 25.4.1. If Mengia's official settlement balance was in balance every year, for which year or years can you say for sure there was a current account surplus?
A)year 4 only
B)year 2 only
C)years 2 and 3
D)years 1 and 2
E)years 3 and 4
Q2) Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.01 U.S, and 1 Canadian dollar buys 6.63 South African rand. How many U.S. dollars will one rand buy?
A)$6.56
B)$1.01
C)$0.17
D)$0.15
E)$6.63
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Chapter 26: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) If real GDP is greater than potential GDP, we would expect
A)the money wage rate to fall.
B)the money wage rate to rise.
C)potential GDP to increase.
D)potential GDP to decrease.
E)the expected future inflation rate to decrease.
Q2) Which of the following news quotes best describes a Keynesian view of a recession?
A)"Rapid computerization is creating obsolete workers and higher unemployment."
B)"The unexpectedly tight fiscal policy is raising spending and lowering unemployment."
C)"The anti-inflationary policy of the Bank of Canada is increasing spending."
D)"The cuts in government spending have helped lower consumer spending and created unemployment."
E)"Businesses are very worried about future sales and have lowered their purchases of capital equipment."
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Chapter 27: Expenditure Multipliers
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Sample Questions
Q1) In Table 27.1.3, at which of the following values of disposable income is there positive saving?
A)zero
B)$100
C)$200
D)all values over $300
E)all values under $300
Q2) Everything else remaining the same, if aggregate demand changes, the amount by which the AD curve shifts depends on
A)the change in aggregate supply.
B)the change in autonomous expenditure and the multiplier.
C)changes in induced expenditure.
D)the change in the price level.
E)potential GDP.
Q3) Refer to Figure 27.1.1. Consumption and disposable income are equal
A)at all points along the consumption function.
B)when saving equals $40 billion and disposable income equals $540 billion.
C)when disposable income is $500 billion.
D)when disposable income is $600 billion.
E)when disposable income is greater than or equal to $500 billion.
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Chapter 28: The Business Cycle, Inflation, and Deflation
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Sample Questions
Q1) The economy's natural unemployment rate is 4 percent. Table 28.4.2 gives some points on the economy's short-run Phillips curve. If the expected inflation rate rises to 8 percent a year,
A)the long-run Phillips curve shifts leftward.
B)the short-run Phillips curve shifts upward.
C)the short-run Phillips curve shifts downward.
D)Both A and B are correct.
E)Both A and C are correct.
Q2) According to ________, the business cycle is the result of aggregate demand growing at a fluctuating rate.
A)the Keynesian cycle theory only
B)only the Keynesian and monetarist cycle theories
C)the Keynesian, monetarist, and real business cycle theories
D)the Keynesian, monetarist, and new classical cycle theories
E)real business cycle theory
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Chapter 29: Fiscal Policy
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Sample Questions
Q1) Which one of the following happens automatically if the economy goes into a recession?
A)Government outlays increase and revenues do not change.
B)Revenues decrease and government outlays do not change.
C)The government budget deficit increases or the government budget surplus decreases.
D)The government budget deficit decreases.
E)Both government outlays and revenues increase, and the deficit stays the same.
Q2) Fiscal policy is
A)the use of the federal budget to achieve macroeconomic objectives.
B)any policy by the Bank of Canada.
C)budgeting policy by aggregate households.
D)any attempt by the federal government or Bank of Canada to control inflation.
E)effective only when the federal government has a budget surplus.
Q3) Consider all the effects of fiscal policy. A cut in the income tax
A)shifts the AD curve rightward but does not shift either the LAS or SAS curve.
B)shifts the AD, SAS, and LAS curves rightward.
C)shifts the SAS curve rightward but does not shift either the AD or LAS curve.
D)shifts both the SAS and LAS curves rightward but does not shift the AD curve.
E)shifts the LAS curve rightward but does not shift either the AD or SAS curve.
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Chapter 30: Monetary Policy
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Q1) Choose the statement that is incorrect.
A)The Bank of Canada's strategy of inflation rate targeting that keeps the inflation rate low and stable makes the maximum possible contribution towards achieving full employment and sustained economic growth.
B)The Bank of Canada's strategy of inflation rate targeting has resulted in an inflation rate that is 0.3 percent per year below the core CPI inflation rate since 2000.
C)The last time the Bank of Canada created a recession was at the beginning of the 1990s when it was faced with the threat of ongoing double-digit inflation.
D)The Bank of Canada's monetary policy is sensitive to the state of employment while maintaining its focus on achieving its inflation target.
E)The inflation-control target uses the Consumer Price Index as the measure of inflation.
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Chapter 31: Macro Only: International Trade Policy
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Q1) Table 31.1.1 shows Glazeland's doughnut market before international trade. Glazeland opens up to international trade. If the world price is $0.60, then Glazeland will produce ________ doughnuts and will ________ doughnuts.
A)2 million; import 3 million
B)4 million; import 1 million
C)4 million; export 1 million
D)5 million; import 3 million
E)5 million; export 3 million
Q2) 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
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