Canadian Economy Study Guide
Questions
Course Introduction
This course examines the structure, performance, and key features of the Canadian economy. Students will explore topics such as economic growth, resource management, trade relations, fiscal and monetary policy, and regional economic disparities. The course also analyzes Canadas relationship with global markets, the role of government intervention, and current challenges facing the economy, such as technological change and demographic shifts. Through contemporary case studies and economic data, students gain a comprehensive understanding of the factors that shape economic outcomes in Canada.
Recommended Textbook
Macroeconomics 5th Canadian Edition by N
Gregory Mankiw
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14 Chapters
1476 Verified Questions
1476 Flashcards
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Page 2
Chapter 1: The Science of Macroeconomics
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) Using a market-clearing model to analyze the demand for haircuts is ______ because the price of a haircut usually changes ______.
A) realistic; frequently
B) realistic; infrequently
C) unrealistic; frequently
D) unrealistic; infrequently
Answer: D
Q2) How does the distinction between flexible and sticky prices affect the study of macroeconomics?
A) The study of flexible prices is confined to microeconomics,while macroeconomics focuses on sticky prices.
B) Macroeconomists use flexible prices to explain inflation and sticky prices to explain unemployment.
C) Flexible prices are typically assumed in the study of the long run,while sticky prices are assumed in the study of the short run.
D) Endogenous variables are measured using flexible prices,while exogenous variables are measured using sticky prices.
Answer: C
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Chapter 2: The Data of Macroeconomics
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116 Flashcards
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Sample Questions
Q1) Assume that the market basket of goods and services purchased in 2004 by the average family in Canada costs $14,000 in 2004 prices,whereas the same basket costs $21,000 in 2009 prices.However,the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices,whereas this same basket would have cost $15,000 in 2004 prices.Given this data,a Laspeyres index of 2009 prices would be:
A) 1.05.
B) approximately 1.07.
C) approximately 1.33.
D) 1.50.
Answer: D
Q2) According to the usual seasonal pattern of the Canadian economy,GDP is highest in the quarter of the year that includes:
A) January,February,and March.
B) April,May,and June.
C) July,August,and September.
D) October,November,and December.
Answer: D
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Chapter 5: The Open Economy
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124 Flashcards
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Sample Questions
Q1) In the basic model of a small open economy,if consumers shift their preferences toward foreign cars,then net exports:
A) fall and the real exchange rate falls.
B) fall but the real exchange rate remains unchanged.
C) remain unchanged but the real exchange rate falls.
D) and the real exchange rate remain unchanged.
Q2) (Exhibit: Policies Influence Real Exchange Rate)Which of the graphs illustrates the impact on the real exchange rate of protectionist trade policies in the basic version of the small open economy model?
A) (A)
B) (B)
C) (C)
D) (D)
Q3) In a small open economy,if the world interest rate falls,then domestic investment will _____ and the real exchange rate will _____,holding all else constant.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
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Page 5
Chapter 6: Unemployment
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112 Flashcards
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Sample Questions
Q1) Suppose that over the course of a year 100 people are unemployed for four weeks each (the short-term unemployed),while 10 people are unemployed for 52 weeks each (the long-term unemployed).Approximately what percentage of the total weeks of unemployment were attributable to the long-term unemployed?
A) 9 percent
B) 10 percent
C) 43.5 percent
D) 56.5 percent
Q2) If the number of employed workers equals 20 million and the number of unemployed workers equals 2 million,the unemployment rate equals ______ percent (rounded to the nearest percent).
A) 0
B) 9
C) 10
D) 20
Q3) If the rate of job separation is 0.02 per month and the rate of job finding is 0.10 per month,what is the natural rate of unemployment?
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Chapter 7: Economic Growth I
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Sample Questions
Q1) In an economy with no population growth and no technological change,steady-state consumption is at its greatest possible level when the marginal product of:
A) labour equals the marginal product of capital.
B) labour equals the depreciation rate.
C) capital equals the depreciation rate.
D) capital equals zero.
Q2) To determine whether an economy is operating at its Golden Rule level of capital stock,a policymaker must determine the steady-state saving rate that produces the:
A) largest MPK.
B) smallest depreciation rate.
C) largest consumption per worker.
D) largest output per worker.
Q3) In the Solow growth model,with a given production function,depreciation rate,saving rate,and no technological change,higher rates of population growth produce:
A) higher steady-state ratios of capital per worker.
B) higher steady-state growth rates of output per worker.
C) higher steady-state growth rates of total output.
D) higher steady-state levels of output per worker.
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Page 7
Chapter 8: Economic Growth II
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Sample Questions
Q1) Which of the following changes would bring the Canadian capital stock,currently below the Golden Rule level,closer to the steady-state,consumption-maximizing level?
A) increasing the population growth rate
B) increasing the rate of capital depreciation
C) increasing the rate of technological progress
D) increasing the saving rate
Q2) If the labour force is growing at a 3 percent rate and the efficiency of a unit of labour is growing at a 2 percent rate,then the number of effective workers is growing at a rate of:
A) 2 percent.
B) 3 percent.
C) 5 percent.
D) 6 percent.
Q3) The Solow model predicts that two economies will converge if the economies start with the same:
A) capital stocks.
B) populations.
C) steady states.
D) production functions.
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Page 8
Chapter 9: Introduction to Economic Fluctuations
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) A supply shock does not occur when:
A) a drought destroys crops.
B) unions push wages up.
C) the Bank of Canada increases the money supply.
D) an oil cartel increases world oil prices.
Q2) If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level,then in response to an exogenous increase in the price of oil:
A) both Central Bank A and Central Bank B should increase the quantity of money.
B) Central Bank A should increase the quantity of money whereas Central Bank B should keep it stable.
C) Central Bank A should keep the quantity of money stable whereas Central Bank B should increase it.
D) both Central Bank A and Central Bank B should keep the quantity of money stable.
Q3) A central bank reduces the money supply in an economy initially in long-run
equilibrium.a.What will happen to output and prices in the short run?
b.What will happen to unemployment in the short run?
c.What will happen to output and prices in the long run?
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Chapter 10: Aggregate Demand I
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Sample Questions
Q1) If money demand does not depend on the interest rate,then the LM curve is ______ and ______ policy has no effect on output.
A) horizontal; fiscal
B) vertical; fiscal
C) horizontal; monetary
D) vertical; monetary
Q2) Along an IS curve all of the following are always true except:
A) planned expenditures equal actual expenditures.
B) planned expenditures equal income.
C) the demand for real balances equals the supply of real balances.
D) demand and supply of loanable funds are equal.
Q3) If money demand does not depend on income,then the ______ curve is ______.
A) IS; vertical
B) IS; horizontal
C) LM; vertical
D) LM; horizontal
Q4) Explain why a decrease in planned investment,which is a change in the goods market,will upset the equilibrium in the money market.
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Chapter 13: Aggregate Supply and the Short-Run
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Sample Questions
Q1) Consider two economies: one operates according to the sticky-wage model and one operates under the sticky-price model.Aggregate demand unexpectedly falls in both countries,leading to a recession and an unexpected decline in price level and the demand for output.a.Use a graph of the labour market in each country to illustrate the impact of the recession on the level of employment and the real wage.b.In which country is the real wage procyclical? In which country is the real wage counter-cyclical?
Q2) An economy is initially in equilibrium at the natural level.The central bank increases the money supply.Graphically illustrate and explain short-run monetary nonneutrality and long-run monetary neutrality using the AD-AS model.
Q3) If the short-run aggregate supply curve is steep,the Phillips curve will be:
A) flat.
B) steep.
C) backward-bending.
D) unrelated to the slope of the short-run aggregate supply curve.
Q4) Use the aggregate demand-aggregate supply model to graphically illustrate the difference between demand-pull and cost-push inflation.Explain your graph in words.
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Page 11
Chapter 15: Stabilization Policy
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Sample Questions
Q1) The lag between the time that economic stimulus is needed and the time that a tax cut is passed by Parliament is an example of a:
A) fiscal inside lag.
B) fiscal outside lag.
C) monetary inside lag.
D) monetary outside lag.
Q2) Policy is conducted by discretion if policymakers:
A) announce in advance how policy will respond to various situations and commit themselves to following through on this announcement.
B) are free to size up the situation case by case and choose whatever policy seems appropriate at the time.
C) announce and maintain a constant growth rate of the money supply.
D) announce and achieve a balanced government budget.
Q3) Unlike a monetarist policy rule,an inflation target has the advantage of:
A) eliminating the need to announce the policy target.
B) providing a real target rather than a nominal one.
C) allowing the central bank unlimited discretion.
D) insulating the economy from changes in money velocity.
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Chapter 16: Government Debt and Budget Deficits
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) Measuring the size of government debt is complicated by all of the following factors except:
A) inflation.
B) uncounted liabilities.
C) capital assets of the government.
D) failure of government statisticians to disclose figures on capital expenditures and credit programs.
Q2) In Canada,a rule precluding budget deficits is currently in force for:
A) the federal government.
B) no provincial governments.
C) all provincial governments.
D) some provincial governments.
Q3) The possibility of capital flight is likely to be greater at higher levels of government debt because there is a greater:
A) temptation to default on the debt.
B) likelihood that the government will begin issuing indexed bonds.
C) probability that a balanced budget will be adopted by the government.
D) potential for tax smoothing policies to be eliminated.
Q4) Explain how tax cuts can affect both aggregate demand and aggregate supply.
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Chapter 18: Investment
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) The inventories of a company that manufactures snow blowers increase in the summer and decline in the winter.This example is most consistent with which of the following explanations for holding inventories?
A) production smoothing
B) inventories as factors of production
C) stock-out avoidance
D) work in progress
Q2) The investment demand function would shift for all of the following reasons except:
A) an improvement in technology raises the marginal product of capital.
B) an increase in population raises the demand for housing.
C) an increase in government spending raises the real interest rate.
D) the investment tax credit is reinstated.
Q3) Net investment is the:
A) business fixed investment minus inventory investment.
B) change in the stock of capital.
C) gross investment minus the rate of inflation.
D) gross investment plus the replacement of depreciated capital.
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14
Chapter 19: Money Supply and Money Demand
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) The most frequently used tool of monetary policy is:
A) open-market operations.
B) changes in the overnight lending rate.
C) changes in reserve requirements.
D) changes in the money multiplier.
Q2) If you hear in the news that the Bank of Canada conducted open-market purchases of government bonds,then you should expect ______ to increase.
A) reserve requirements
B) the overnight lending rate
C) the money supply
D) the reserve-deposit ratio
Q3) If the proceeds of all loans are deposited somewhere in the banking system and if rr denotes the reserve-deposit ratio,then the total money supply is:
A) reserves divided by rr.
B) 1/rr.
C) reserves times rr.
D) reserves divided by (1 - rr).
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Chapter 20: The Financial System
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Financial markets allow households to _____ provide resources for investment,while financial intermediaries allow households to _____ provide resources for investment.
A) directly; indirectly
B) indirectly; directly
C) productively; unproductively
D) unproductively; productively
Q2) To the extent that risky mortgage-backed securities that were sold to buyers who were not fully aware of the risks contributed to the financial crisis of 2008-2009 in the United States,blame for this action lies with:
A) homebuyers.
B) mortgage brokers.
C) investment banks.
D) the Federal Reserve.
Q3) The principal purpose of a central bank acting as a lender of last resort is to:
A) prevent the failure of insolvent financial institutions.
B) maintain the liquidity of the financial system.
C) provide adequate funds to finance the government's spending.
D) keep interest rates as low as possible.
Q4) How do deposit insurance and the "too big to fail" policy increase moral hazard?
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