Canadian Macroeconomic Policy
Test Preparation
Course Introduction
This course provides an in-depth examination of macroeconomic policy in Canada, focusing on the theory, formulation, and implementation of fiscal and monetary policy within the Canadian context. Students will explore the roles of federal institutions such as the Bank of Canada and the Department of Finance, analyze recent economic trends, and evaluate the impact of policy decisions on economic growth, inflation, unemployment, and exchange rates. Through real-world case studies and policy debates, the course emphasizes how domestic and global factors influence Canada's macroeconomic outcomes and addresses current challenges faced by policymakers in maintaining economic stability and fostering sustainable growth.
Recommended Textbook
Macroeconomics 14th Canadian Edition by Campbell R. McConnell
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18 Chapters
3156 Verified Questions
3156 Flashcards
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Chapter 1: Limits, Alternatives, and Choices
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257 Verified Questions
257 Flashcards
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Sample Questions
Q1) Refer to the above diagram.If society is currently producing the combination of bicycles and computers shown by point D,the production of 2 more units of bicycles:
A) cannot be realized because resources are fully employed.
B) will cost 1 unit of computers.
C) will cost 2 units of computers.
D) will cause some resources to become unemployed.
Answer: B
Q2) Refer to the above diagram.The slope of curve ZZ at point B is:
A) infinity.
B) zero.
C) one.
D) none of the above.
Answer: B
Q3) The global financial crisis that spread to Canada in late 2008 has been dubbed:
A) The housing bubble crash.
B) The great financial crisis.
C) The great recession.
D) The great depression.
Answer: C
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Page 3
Chapter 2: The Market System and the Circular Flow
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112 Flashcards
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Sample Questions
Q1) A characteristic of the market system is:
A) extensive use of price controls.
B) extensive use of barter.
C) extensive use of capital goods.
D) low interest rates.
Answer: C
Q2) Households and businesses are both suppliers in the product market.
A)True
B)False
Answer: False
Q3) As opposed to the market system,in command economies:
A) the reward for innovation is extensive.
B) the reward for innovation does not exist.
C) meeting the production targets are extremely important.
D) the profit motives are extremely high.
Answer: B
Q4) Property rights do not encourage people to cooperate.
A)True
B)False
Answer: False
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Chapter 3: Demand, Supply, and Market Equilibrium
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284 Verified Questions
284 Flashcards
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Sample Questions
Q1) Refer to the above.An increase in income,if X is a normal good,will:
A) increase D,increase P,and increase Q.
B) increase D,increase P,and decrease Q.
C) increase S,increase P,and increase Q.
D) decrease D,increase P,and increase Q.
Answer: A
Q2) Other things equal,the provision of a per unit subsidy for a product will:
A) increase its supply.
B) increase its price.
C) decrease the quantity sold.
D) decrease its demand.
Answer: A
Q3) A price ceiling means that:
A) there is currently a surplus of the relevant product.
B) government is imposing a legal price which is below the equilibrium price.
C) government wants to stop a deflationary spiral.
D) government is imposing a legal price which is above the equilibrium price.
Answer: B
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5
Chapter 4: Market Failures: Public Goods and Externalities
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122 Flashcards
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Sample Questions
Q1) The Coase Theorem:
A) applies only to circumstances in which externalities are extensive and bargaining costs are high.
B) holds that the median voter will decide the outcome of elections.
C) states that in some circumstances majority voting can yield inconsistent results.
D) suggests that in some circumstances government intervention is not needed to resolve externality problems.
Q2) Assume there is no way to prevent someone from using an inter-provincial highway,regardless of whether or not he or she helps pay for it.This characteristic is associated with:
A) rival goods.
B) complementary goods.
C) public goods.
D) capital goods.
Q3) A demand curve for a public good is determined by summing horizontally the individual demand curves for the public good.
A)True
B)False
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6
Chapter 5: Governments Role and Government Failure
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109 Flashcards
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Sample Questions
Q1) Fiscal policy is more susceptible to politicization than monetary policy.
A)True
B)False
Q2) Government officials tend to make:
A) better economic decisions than private individuals because of the wealth of information at their disposal.
B) better economic decisions than private individuals because of the efficient processes and flexibility built into the government bureaucracy.
C) inefficient choices because they lack the information necessary to accurately weigh marginal benefits and marginal costs.
D) inefficient choices because the invisible hand directs them away from the resource allocation where marginal benefits equal marginal costs.
Q3) Monetary policy attempts to change the level of spending by altering interest rates.
A)True
B)False
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Chapter 6: An Introduction to Macroeconomics
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58 Flashcards
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Sample Questions
Q1) Modern economic growth refers to:
A) an increase in the general price level.
B) an increase in output per person.
C) an increase in the output.
D) an increase in percentage of the population which participates in the labour force.
Q2) The short-run fluctuations in output and unemployment that we see in the real world are the result of:
A) shocks and events that are going according to the plans.
B) shocks and events that are not going according to the plans.
C) the actual demand to be exactly what the firms were expecting.
D) the actual supply to be exactly what the firms were planning.
Q3) The term "inflation" describes the situation where:
A) general price levels are declining.
B) stock market prices are increasing.
C) all prices are increasing at the same rate.
D) the overall price level is increasing.
Q4) Modern economic growth in a country implies that output per person increases.
A)True
B)False
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Chapter 7: Measuring the Economys Output
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181 Flashcards
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Sample Questions
Q1) The before-tax income received by resource suppliers is measured by disposable income.
A)True
B)False
Q2) GDP may be defined as:
A) the monetary value of all goods and services (final,intermediate,and non-market)produced in a given year.
B) total resource income less taxes,saving,and spending on exports.
C) the economic value of all economic resources used in the production of a year's output.
D) the market value of all final goods and services produced within country in a specific year.
Q3) Refer to the above information.If the per unit prices of the three goods each were $1 in a base year used to construct a GDP price index,then real GDP in the current year:
A) is $110.
B) is $115.
C) is $45.
D) cannot be determined on the basis of this data.
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Chapter 8: Economic Growth
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112 Flashcards
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Sample Questions
Q1) The achievement of full employment through time will:
A) diminish labour productivity.
B) reduce the level of investment as a percentage of GDP.
C) increase the rate of growth of real GDP.
D) have no impact on the rate of growth of real GDP.
Q2) Improvements in education and training explain nearly 80 percent of the historical growth of Canadian labour productivity.
A)True
B)False
Q3) The movement of workers from lower productivity jobs to higher productivity jobs would be an example of a(n):
A) technological advance.
B) network effects.
C) simultaneous consumption.
D) improved resource allocation.
Q4) If the economy's real GDP doubles in 18 years,we can:
A) not say anything about the average annual rate of growth.
B) conclude that its average annual rate of growth is about 5.5 percent.
C) conclude that its average annual rate of growth is about 2 percent.
D) conclude that its average annual rate of growth is about 4 percent.
Page 10
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Chapter 9: Business Cycles, Unemployment, and Inflation
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184 Flashcards
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Sample Questions
Q1) Which of the following is correct?
A) inflation will always increase the real income.
B) inflation does not affect the distribution of income.
C) the redistribution effects of inflation does not depend upon expectation.
D) the redistribution effects of inflation depends upon whether or not it is expected.
Q2) The rate of unemployment tends to be lower the:
A) slower the economy grows.
B) the younger the workers are.
C) lower are the education level and the skill of workers.
D) higher are the education level and the skill of workers.
Q3) When a group of workers find that their job skills and work experience have become obsolete and are not needed by industry,this type of unemployment is:
A) search.
B) frictional.
C) structural.
D) cyclical.
Q4) Hyperinflation does not have a devastating impact on real output and employment.
A)True
B)False
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Chapter 10: Basic Macroeconomic Relationships
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187 Flashcards
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Sample Questions
Q1) Refer to the above diagram.The MPC and APC are both constant as income increases for:
A) none of the consumption schedules shown.
B) C<sub>3</sub> only.
C) C<sub>3</sub> and C<sub>4</sub> only.
D) C<sub>1</sub> and C<sub>2</sub> only.
Q2) Refer to the above table.The total change in consumption resulting from the initial change in investment will be:
A) $100
B) $96
C) $180
D) $80
Q3) The relationship between consumption and disposable income is such that:
A) an inverse and stable relationship exists between consumption and income.
B) a direct,but very volatile,relationship exists between consumption and income.
C) a direct and quite stable relationship exists between consumption and income.
D) the two are always equal.
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Chapter 11: The Aggregate Expenditures Model
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230 Verified Questions
230 Flashcards
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Sample Questions
Q1) Refer to the above information.The equilibrium GDP will be:
A) $160
B) $400
C) $360
D) $480
Q2) A recessionary expenditure gap exists if:
A) planned investment exceeds saving at the full-employment GDP.
B) the aggregate expenditures schedule lies below the 45-degree line at the full-employment GDP.
C) the aggregate expenditures schedule intersects the 45-degree line at any level of GDP.
D) the aggregate expenditures schedule lies above the 45-degree line at the full-employment GDP.
Q3) An upward shift of the aggregate expenditures schedule might be caused by:
A) a decrease in exports,with no change in imports.
B) a decrease in imports,with no change in exports.
C) an increase in exports,with an equal decrease in investment spending.
D) an increase in imports,with no change in exports.
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Chapter 12: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) What are five reasons for the downward price-level inflexibility,especially as it pertains to wages and prices?
Q2) An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:
A) rightward shift of the aggregate demand curve.
B) leftward shift of the aggregate demand curve.
C) movement downward along a fixed aggregate demand curve.
D) decrease in aggregate supply.
Q3) Which of the above diagrams best portrays the effects of an increase in productivity?
A) A
B) B
C) C D) D
Q4) How is the immediate short-run aggregate supply curve sloped? Explain.
Q5) In the late 1990s and early 2000s:
A) both AD and AS increased
B) inflation was relatively high.
C) AD increased but AS decreased.
D) AD decreased but AS increased.
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Chapter 13: Fiscal Policy, Deficits, Surpluses, and Debt
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223 Verified Questions
223 Flashcards
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Sample Questions
Q1) Which one of the following might offset a crowding-out effect of an increase in government spending financed through expansion of the public debt?
A) a decline in net exports
B) an improvement in business profit expectations
C) a decrease in the money supply
D) a decline in public investment
Q2) A contractionary fiscal policy shifts the aggregate demand curve leftward and may or may not reduce real GDP.
A)True
B)False
Q3) An expansionary fiscal policy in Canada might unintentionally cause demand-pull inflation if:
A) the dollar unexpectedly appreciates while the expansionary policy is in place.
B) the dollar unexpectedly depreciates while the expansionary policy is in place.
C) the policy produces severe crowding out.
D) our trading partners experience recession during the time of the fiscal policy action.
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15
Chapter 14: Money, Banking, and Money Creation
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) Coins and paper money are:
A) debts of Chartered banks and savings institutions.
B) debts of the Bank of Canada.
C) credits of the Bank of Canada.
D) credits of chartered banks and savings institutions.
Q2) Refer to the above information.The maximum amount by which this chartered banking system can expand the supply of money by lending is:
A) $120 billion.
B) $300 billion.
C) $480 billion.
D) $600 billion.
Q3) Token money is:
A) minted by the Bank of Canada.
B) minted by the Royal Canadian mint.
C) minted by the Treasury of Canada.
D) not considered to be part of the money supply.
Q4) Chartered banks create money in the form of chequable deposits when they make loans.
A)True
B)False
Page 16
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Chapter 15: Interest Rates and Monetary Policy
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238 Verified Questions
238 Flashcards
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Sample Questions
Q1) Refer to the above information.All else equal,the transaction demand for money in this table would increase if:
A) nominal GDP increased.
B) the interest rate fell.
C) the supply of money increased.
D) the supply of money decreased.
Q2) The reserves of the chartered banks are a(n):
A) asset to the chartered banks and an asset to the Bank of Canada.
B) asset to the chartered banks and a security to the Bank of Canada.
C) asset to the chartered banks and a liability to the Bank of Canada.
D) liability to the chartered banks and an asset to the Bank of Canada.
Q3) The interest rate will fall when the:
A) quantity of money demanded exceeds the quantity of money supplied.
B) quantity of money supplied exceeds the quantity of money demanded.
C) demand for money increases.
D) supply of money decreases.
Q4) An expansionary monetary policy will decrease net exports.
A)True
B)False
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Chapter 16: Long-Run Macroeconomic Adjustments
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Sample Questions
Q1) Critics of supply-side economics:
A) argue that a tax cut will increase aggregate demand by more than it increases real output.
B) contend that the relationship between tax rates and economic incentives is small and of uncertain direction.
C) believe that a decline in tax rates will give rise to budget deficits.
D) make all of the above points.
Q2) Economic growth driven by supply factors causes:
A) continuous leftward shifts of aggregate supply.
B) a rightward shift of an economy's long-run aggregate supply.
C) one time shift in aggregate supply.
D) no shift in aggregate supply.
Q3) The Phillips Curve suggests an inverse relationship between increases in the price level and the level of employment.
A)True
B)False
Q4) The long-run aggregate supply curve is vertical.
A)True
B)False
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Chapter 17: International Trade
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Sample Questions
Q1) The best example of a land-intensive commodity is:
A) cameras.
B) radios.
C) meat.
D) chemicals.
Q2) In a two-nation world,comparative advantage means that one nation can produce:
A) a product with fewer inputs than the other nation.
B) a product at lower average cost than the other nation.
C) a product at a lower domestic opportunity cost than the other nation.
D) more of a product than the other nation.
Q3) Refer to the above diagram showing the domestic demand and supply curves for a specific standardized product in a particular nation.If the world price for this product is $1.60,this nation will experience a domestic:
A) shortage of 160 units,which it will meet with 160 units of imports.
B) shortage of 160 units,which will increase the domestic price to $1.60.
C) surplus of 160 units,which it will export.
D) surplus of 160 units,which will reduce the world price to $1.00.
Q4) Refer to the above information.Alpha should specialize in Y and Beta in X.
A)True
B)False
Page 19
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Chapter 18: Exchange Rates and the Balance of Payments
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127 Flashcards
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Sample Questions
Q1) In the balance of payments of Canada,capital inflows are recorded as:
A) a positive entry.
B) a current account entry.
C) official reserves.
D) net investment income.
Q2) Refer to the above information.Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate cited in the previous question?
A) Japan exported far more to Canada during this period than it imported from Canada.
B) Japan greatly increased its purchases from Canada during this period.
C) Japan's economy grew far faster than the Canadian economy during this period.
D) Japan's government devalued the yen during this period.
Q3) A nation's balance on the current account is equal to its exports less its imports of:
A) goods and services.
B) goods and services,minus Canadian purchases of assets abroad.
C) goods and services,plus net investment income and net transfers.
D) goods and services,plus foreign purchases of assets in Canada.
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Page 20