Chapter 6: Macroeconomics: the Big Picture
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Q1) A nation whose value of imports exceeds its value of exports is said to have:
A) hyperinflation.
B) a trade deficit.
C) price stability.
D) a trade surplus.
Q2) The purpose of macroeconomic policy is to:
A) bring unemployment closer to the natural rate.
B) reduce the severity of recessions.
C) rein in excessively strong expansions.
D) bring unemployment closer to the natural rate,rein in excessively strong expansions,and reduce the severity of recessions.
Q3) Promotion of employment and growth in the economy as a whole is the focus of:
A) macroeconomics.
B) fiscal policy.
C) monetary policy.
D) microeconomics.
Q4) Expansions are periods when real GDP and employment are growing.
A)True
B)False
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Chapter 7: Gdp and the Cpi: Tracking the Macroeconomy
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Q1) If real GDP rises while nominal GDP falls,then prices on average have:
A) risen.
B) fallen.
C) stayed the same.
D) decreased and then been offset by an equal increase.
Q2) An example of an intermediate good is:
A) wages paid to an employee.
B) steel purchased by aircraft manufacturers.
C) vegetables purchased for your dinner.
D) electric bills for your house.
Q3) Suppose that,in year 1,an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each.The next year,the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each.The growth rate of nominal GDP from year 1 to year 2 is _____%.
A) 10
B) 7.8
C) 19.7
D) 8.8
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Chapter 8: Unemployment and Inflation
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Q1) Unemployment rates tend to:
A) be the same across geographic areas.
B) vary between age groups and ethnicities.
C) increase when the economy expands.
D) stay the same only when there is cyclical unemployment.
Q2) A high unemployment rate implies a high level of GDP.
A)True
B)False
Q3) (Figure: The Labour Market)Use Figure: The Labour Market.What will be the level of employment if firms decide to pay an efficiency wage of $16?
A) 80 000
B) 100 000
C) 110 000
D) 200 000
Q4) Recent declines in union membership are likely _____ the natural rate of unemployment.
A) to increase
B) to decrease
C) not to affect
D) to alter unpredictably
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Chapter 9: Long-Run Economic Growth
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Q1) Since the 1960s,nations like South Korea have been a part of the so-called East Asian economic miracle because:
A) high rates of human capital growth have offset slow savings rates.
B) of high rates of national savings that offset the slower rate of technological progress.
C) of high savings rates,greater quantities of physical capital per worker,and slower growth of human capital.
D) of the combination of rapid technological progress,high savings rates,and rapid improvement in human capital.
Q2) In 1798,the English economist Thomas Malthus predicted that:
A) countries with a large supply of natural resources would always enjoy economic growth.
B) the recently independent United States would rejoin the British empire out of economic necessity.
C) the French Revolution would improve the economies of most European countries.
D) rising population growth would cause productivity per capita to fall.
Q3) Increases in human capital will promote economic growth.
A)True
B)False
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Chapter 10: Savings, Investment Spending, and the Financial System
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Q1) Interest rates decreased during the 1980s because expectations of future inflation were lower.
A)True
B)False
Q2) Because bonds are more standardized than loans,transactions costs for bonds are typically lower than transactions costs for loans.
A)True
B)False
Q3) Which statement describes an advantage to the recipient of foreign investment?
A) Foreigners are content to receive lower profits and interest rates than are domestic investors.
B) Foreigners don't expect to receive profits and interest as often as do domestic investors.
C) Domestic firms with foreign investors are exempt from domestic income taxes on a portion of their net income.
D) Foreign companies often bring new technology to the recipient country,which increases productivity.
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Chapter 11: Income and Expenditure
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Q1) Two-thirds of total spending is usually attributed to:
A) consumption.
B) investment.
C) government spending.
D) net exports.
Q2) If the consumption function is C = $100 million + 0.8 * YD,then the marginal propensity to consume is $100 million.
A)True
B)False
Q3) (Figure: Planned Aggregate Expenditures Curve II)Use Figure: Planned Aggregate Expenditures Curve II.The equilibrium level of real GDP in the planned aggregate expenditure model shown in this figure is:
A) $800.
B) $1 000.
C) $2 000.
D) $4 000.
Q4) If the marginal propensity to consume is 0.9,the multiplier will be 0.1.
A)True
B)False
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Chapter 12: Aggregate Demand and Aggregate Supply
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Q1) Potential real GDP is $10 000 and the current level of real GDP is $9 000.The output gap is therefore _____%.
A) -90
B) -110
C) -10
D) 10
Q2) If actual GDP is less than potential output,then the economy is:
A) in an inflationary gap.
B) in a recessionary gap.
C) in a long-run equilibrium.
D) at full employment.
Q3) The long-run level of output is known as _____ output.
A) recognized
B) structural
C) potential
D) balanced budget
Q4) The higher the existing physical capital stock,the higher is aggregate demand.
A)True
B)False
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Chapter 13: Fiscal Policy
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Q1) The Canadian national debt as a percentage of GDP is _____ that of Greece.
A) slightly higher than
B) equivalent to
C) substantially higher than
D) lower than
Q2) In Japan during the 1990s,_____ policies were put into effect to _____.
A) contractionary tax;counter inflation
B) contractionary spending;counter inflation
C) expansionary tax;counter inflation
D) expansionary spending;prop up aggregate demand
Q3) If the marginal propensity to consume is 0.8 and government purchases of goods and services decrease by $30 billion,real GDP will decrease by $24 billion.
A)True
B)False
Q4) Which type of payment is NOT a government transfer payment?
A) salaries paid to federal ministers of parliament
B) Old Age Security
C) Medicare
D) Guaranteed Income Supplement
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Chapter 14: Money, Banking, and the Federal Reserve System
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Q1) If monetary aggregates were ranked from most liquid to least liquid,the order would be:
A) M1+,M2,M2+,and M3.
B) stocks and bonds,M2,and M1+.
C) M2,private equity investments,and M1+.
D) gold,M1+,M2,and M3.
Q2) The guarantee by the CDIC to reimburse bank customers up to $100 000 per deposit in the event of bank problems is called:
A) fractional reserve banking.
B) reserve requirements.
C) bank rate.
D) deposit insurance.
Q3) Which example of bank regulations is NOT designed to prevent bank runs?
A) reserve requirements
B) deposit insurance
C) the overnight rate
D) capital requirements
Q4) A dixie was the first gold coin issued by the Canadian Mint.
A)True
B)False
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Chapter 15: Monetary Policy
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Questions
Q1) (Figure: The Money Supply and Aggregate Demand)Refer to Figure: The Money Supply and Aggregate Demand.Panel (b)illustrates what happens when the Bank of Canada decides to _____ the money supply and _____ interest rates.
A) decrease;lower
B) increase;raise
C) increase;lower
D) decrease;raise
Q2) If long-term interest rates are 8% and short-term rates are 3%,the market expects:
A) short-term rates to fall.
B) short-term rates to rise.
C) short-term rates to remain the same.
D) there is no relationship between long-term and short-term rates.
Q3) If the federal government places a $5 tax on each ATM transaction,there will likely be a:
A) movement up a stationary money demand curve.
B) movement down a stationary money demand curve.
C) shift to the left of the money demand curve.
D) shift to the right of the money demand curve.
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Chapter 16: Inflation, Disinflation, and Deflation
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Q1) Core inflation excludes the price of:
A) new cars.
B) luxury items,such as fur coats.
C) houses.
D) energy and food.
Q2) Inflation does NOT reduce purchasing power if:
A) prices of essential products,such as food and gasoline,don't increase too much.
B) nominal wages rise at the same rate as prices.
C) it remains under 10% per year.
D) the Bank of Canada increases the money supply enough to offset it.
Q3) In the long run,an increase in the money supply:
A) will increase real GDP and the price level.
B) causes people to hold onto large sums of money.
C) results in no change in real GDP.
D) encourages people to save more money.
Q4) In the long run,there is a negative relationship between the inflation rate and the unemployment rate.
A)True
B)False
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Chapter 17: Macroeconomics: Events and Ideas
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Q1) Nearly all economists agree that expansionary fiscal policy can _____ aggregate
A) increase;supply
B) decrease;supply
C) increase;demand
D) decrease;demand
Q2) If the overnight rate is only 1%,the economy is dangerously close to:
A) an inflationary spiral.
B) a liquidity trap.
C) very high unemployment.
D) another recession.
Q3) Proponents of the theory of rational expectations contend that:
A) people make rational forecasts using all existing information.
B) business cycles are generally caused by shifts in aggregate demand.
C) full employment is rarely achieved.
D) stickiness of prices is the primary cause of inflation.
Q4) The Keynesian school of thought is that expansionary monetary policy has very little or no effect on output.
A)True
B)False
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Chapter 18: International Macroeconomics
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Q1) A fixed exchange rate:
I.leaves monetary policy available for domestic stabilization. II.is less expensive to maintain than a floating exchange rate.
A) I only
B) II only
C) I and II
D) neither I nor II
Q2) (Figure: Change in Demand for Canadian Dollars)Refer to Figure: Change in the Demand for Canadian Dollars.A movement from E<sub>2</sub> to E<sub>1</sub> in this foreign exchange market would cause Canadians to purchase _____ goods and services from Europe.
A) the same amount of
B) less
C) more
D) The answer cannot be determined from the information provided.
Q3) If the government wants to increase the value of its currency in foreign exchange markets,it can use expansionary monetary policy.
A)True
B)False
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Chapter 19: Graphs in Economics
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Q1) (Figure: Unemployment Rate over Time)Look at the figure Unemployment Rate over Time.In the time-series graph,as we move from the beginning of 2001 to the beginning of 2003,we see that the unemployment rate has _____ from approximately _____ to approximately _____.
A) decreased;5%;4%
B) increased;5.3%;7.3%
C) decreased;7.7%;5.5%
D) increased;4%;6%
Q2) Your boss asks you to graph company profits for the past 10 years.The BEST way to show this information is with a(n):
A) scatter diagram.
B) pie chart.
C) time-series graph.
D) independent graph.
Q3) In a time-series graph,large changes can be made to appear insignificant by:
A) changing the scale of the axes.
B) labeling more intervals.
C) defining the dependent variable.
D) defining the independent variable.
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