Canadian Macroeconomic Policy
Exam Questions
Course Introduction
This course explores the formulation, implementation, and impact of macroeconomic policies in the Canadian context. Students examine the roles of monetary policy, fiscal policy, and exchange rate management within Canadas open economy, focusing on current challenges and policy debates. The course covers the objectives and tools of the Bank of Canada and the federal government, analyzing how their strategies affect inflation, unemployment, economic growth, and financial stability. Emphasis is placed on evaluating real-world case studies and the interplay between domestic policy decisions and global economic trends.
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 Flashcards
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Sample Questions
Q1) In a simple graphical model of the supply and demand for pizza with the price of pizza measured vertically and the quantity of pizza measured horizontally:
A) the supply curve slopes upward and to the right.
B) the demand curve slopes upward and to the right.
C) the supply curve slopes downward and to the right.
D) at the equilibrium price,the supply of pizza exceeds the demand for pizza.
Answer: A
Q2) Assume that the equation for demand for bread at a small bakery is Q<sup>d</sup> = 60 - 10P<sub>b</sub> + 3Y,where Q<sup>d</sup> is the quantity of bread demanded in loaves and Y is the average income in the town in thousands of dollars.
a.If the average income in the town is 10,state the equation for Q<sup>d</sup> in terms of P<sub>b</sub>.
b.Draw a graph of the demand curve with Q<sup>d</sup> on the horizontal axis and P<sub>b</sub> on the vertical axis.Label the curve DD.
Answer: a.Q<sub>d</sub> = 90 10P<sub>b</sub>
b. 11ecba22_f821_c604_9548_45ef5d5589ab_TB4794_11
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Chapter 2: The Data of Macroeconomics
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116 Flashcards
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Sample Questions
Q1) The labour-force participation rate is the percentage of the:
A) adult population that is employed.
B) adult population that is in the labour force.
C) labour force that is employed.
D) labour force that is unemployed.
Answer: B
Q2) The labour force equals the:
A) adult population.
B) number of employed individuals.
C) number of unemployed individuals.
D) number of employed and unemployed individuals.
Answer: D
Q3) If the number employed increases while the number unemployed does not change,the unemployment rate:
A) will increase.
B) will decrease.
C) will not change.
D) may either increase or decrease.
Answer: B
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Page 4
Chapter 5: The Open Economy
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124 Flashcards
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Sample Questions
Q1) If net capital outflow is positive,then:
A) exports must be positive.
B) exports must be negative.
C) the trade balance must be positive.
D) the trade balance must be negative.
Q2) If the real exchange rate of a country decreases,then net exports will:
A) be positive.
B) be negative.
C) increase.
D) decrease.
Q3) If the number of dollars per yen rises,this is called a(n):
A) appreciation of the dollar.
B) appreciation of the yen.
C) increase in the terms of trade.
D) decrease in the terms of trade.
Q4) Tax breaks for capitalists "trickle down" to labourers in:
A) closed economies but not necessarily in small open economies.
B) small open economies but not necessarily in closed economies.
C) both closed and small open economies.
D) neither closed nor small open economies.
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Chapter 6: Unemployment
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Sample Questions
Q1) In Canada,about ______ of any increase in the unemployment rate is due to longer unemployment spells (longer duration)and about _________ of any increase in the unemployment rate is due to more people becoming unemployed (higher incidence).
A) two-thirds; one-third
B) one-third; two-thirds
C) one-fifth; four-fifths
D) four-fifths; one-fifth
Q2) Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to:
A) reduce labour turnover.
B) improve the quality of the firm's labour force.
C) increase worker effort.
D) reduce the firm's wage bill.
Q3) Economists call the changes in the composition of demand among industries and regions:
A) insider-outsider conflicts.
B) sectoral shifts.
C) moral hazard.
D) adverse selection.
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Page 6
Chapter 7: Economic Growth I
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114 Flashcards
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Sample Questions
Q1) When an economy begins above the Golden Rule,reaching the Golden Rule:
A) produces lower consumption at all times in the future.
B) produces higher consumption at all times in the future.
C) requires initially reducing consumption to increase consumption in the future.
D) requires initially increasing consumption to decrease consumption in the future.
Q2) According to the Kremerian model,large populations improve living standards because:
A) crowded conditions put more pressure on people to work hard.
B) there are more people who can make discoveries and contribute to innovation.
C) more people have the opportunity for leisure and recreation.
D) most people prefer to live with many other people.
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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94 Flashcards
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Sample Questions
Q1) The efficiency of labour:
A) is the marginal product of labour.
B) is the rate of growth of the labour force.
C) includes the knowledge,health,and skills of labour.
D) equals output per worker.
Q2) In the Solow growth model,the steady-state growth rate of output per effective worker is ______,and the steady-state growth rate of output per worker is ______.
A) the sum of the rate of technological progress plus the rate of population growth; zero
B) zero; the rate of technological progress
C) zero; zero
D) the rate of technological progress; the rate of population growth
Q3) Economic research shows that ______ in explaining international differences in living standards.
A) physical capital is more important than is human capital
B) human capital is at least as important as is physical capital
C) human capital is much more important than is physical capital
D) infrastructure is the most important factor
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Chapter 9: Introduction to Economic Fluctuations
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106 Flashcards
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Sample Questions
Q1) Suppose you are an economist working for the Bank of Canada when droughts in the Prairies and floods in Ontario substantially reduce food production in Canada.Use the aggregate demand-aggregate supply model to illustrate graphically your policy recommendation to accommodate this adverse supply shock,assuming that your top priority is maintaining full employment in the economy.Be sure to label:
i.the axes
ii.the curves
iii.the initial equilibrium values
iv.the direction the curves shift
v.the terminal equilibrium values.State in words what happens to prices and output as a combined result of the supply shock and the recommended Bank of Canada accommodation.
Q2) The assumption of constant velocity in the quantity equation is the equivalent of the assumption of a constant:
A) short-run aggregate supply curve.
B) long-run aggregate supply curve.
C) price level in the short run.
D) demand for real balances per unit of output.
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9
Chapter 10: Aggregate Demand I
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Sample Questions
Q1) A given increase in taxes shifts the IS curve more to the left the:
A) larger the marginal propensity to consume.
B) smaller the marginal propensity to consume.
C) larger the government spending.
D) smaller the government spending.
Q2) The IS-LM model is generally used:
A) only in the short run.
B) only in the long run.
C) both in the short run and the long run.
D) in determining the price level.
Q3) The equilibrium condition in the Keynesian-cross analysis in a closed economy is:
A) income equals consumption plus investment plus government spending.
B) planned expenditure equals consumption plus planned investment plus government spending.
C) actual expenditure equals planned expenditure.
D) actual saving equals actual investment.
Q4) Explain why an increase in the money supply,which is a change in the money market,will upset the equilibrium in the goods market.
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10
Chapter 13: Aggregate Supply and the Short-Run
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Sample Questions
Q1) The imperfect-information model assumes that producers find it difficult to distinguish between changes in:
A) real wages and nominal wages.
B) the overall level of prices and relative prices.
C) the overall level of prices and the expected level of prices.
D) cost-push inflation and demand-pull inflation.
Q2) The higher the average rate of inflation,the more frequently firms must adjust their prices,which implies that a high rate of inflation:
A) has no effect on the slope of the short-run aggregate supply curve.
B) should make the short-run aggregate supply curve flatter.
C) makes the short-run aggregate supply curve steeper.
D) causes prices to be sticky.
Q3) According to the natural-rate hypothesis,fluctuations in aggregate demand affect output in:
A) both the short run and the long run.
B) only in the short run.
C) only in the long run.
D) in neither the short run nor the long run.
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11
Chapter 15: Stabilization Policy
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Sample Questions
Q1) If citizens vote on the basis of both low inflation and low unemployment at the time of the election,then presidents might,in order to ensure their re-election:
A) spur inflation soon after their elections,and then cause a recession.
B) stimulate the economy throughout their terms.
C) cause a recession soon after their elections,and then stimulate the economy.
D) run a tight monetary and fiscal policy throughout their terms.
Q2) Countries with greater central-bank independence can achieve lower rates of inflation:
A) at the cost of higher levels of unemployment.
B) at the cost of slower growth rates of real GDP.
C) at the cost of greater volatility of real GDP.
D) with no apparent real economic costs.
Q3) The manipulation of the economy to win elections is called:
A) discretionary monetary policy.
B) discretionary fiscal policy.
C) the political business cycle.
D) an automatic stabilizer.
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Chapter 16: Government Debt and Budget Deficits
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Sample Questions
Q1) Assume that a government has a balanced budget when the economy is at full employment.If the economy then enters a recession,with no change in tax or spending laws,then the budget of the government is most likely to:
A) remain balanced.
B) be in deficit.
C) be in surplus.
D) be in either deficit or surplus,depending on the severity of the recession.
Q2) Historically (that is,before 1975),the primary cause of increases in government debt is:
A) printing too much money.
B) cutting taxes.
C) increasing interest rates.
D) financing wars.
Q3) A deficit adjusted for inflation should include only government spending to pay _____ interest payments.
A) real
B) nominal
C) foreign
D) domestic
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Page 13
Chapter 18: Investment
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103 Flashcards
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Sample Questions
Q1) The demand for housing is brought into equilibrium with the existing stock of housing by changes in the:
A) real interest rate.
B) nominal interest rate.
C) relative price of housing.
D) overall price level.
Q2) The profit rate of a firm that rents capital is equal to:
A) the marginal product of capital minus the cost of capital.
B) the cost of capital minus the marginal product of capital.
C) zero.
D) a negative number,if it is adding to its capital stock.
Q3) The corporate tax system affects investment spending.I: More generous depreciation allowances lower the rental cost of capital.II: More generous depreciation allowances increase the effectiveness of a corporate tax rate cut as a mechanism for stimulating investment spending.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
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Page 14
Chapter 19: Money Supply and Money Demand
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102 Flashcards
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Sample Questions
Q1) Assets of chartered banks include:
A) money market mutual funds.
B) currency in the hands of the public.
C) loans to customers.
D) deposits of bank customers.
Q2) In a 100-percent banking system,chartered banks:
A) can increase the money supply.
B) can decrease the money supply.
C) can either increase or decrease the money supply.
D) cannot affect the money supply.
Q3) The preferences of households determine the:
A) reserve-deposit ratio.
B) currency-deposit ratio.
C) size of the monetary base.
D) loan-deposit ratio.
Q4) In Canada,chartered bank reserves consist of:
A) currency and the deposits of bank customers.
B) vault cash and deposits at the Bank of Canada.
C) gold deposits at the Bank of Canada.
D) the money supply.
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Chapter 20: The Financial System
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108 Flashcards
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Sample Questions
Q1) What is the difference between systematic and idiosyncratic risk? Which type of risk can be almost eliminated through diversification?
Q2) Equity financing is obtaining funds for a business by:
A) borrowing.
B) issuing ownership shares.
C) seigniorage.
D) government subsidy.
Q3) Risk aversion is a dislike of:
A) paying interest.
B) lending.
C) borrowing.
D) uncertainty in economic circumstances.
Q4) A bond (or debt instrument)is a(n):
A) ownership claim by the shareholder of a firm.
B) loan to a firm.
C) ongoing relationship between customers and a firm.
D) legal restriction on products a firm may produce.
Q5) How do deposit insurance and the "too big to fail" policy increase moral hazard?
Q6) What are the benefits of a well-functioning financial system? What are the costs of a financial crisis?
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