Canadian Macroeconomics
Final Exam
Course Introduction
Canadian Macroeconomics explores the fundamental principles and dynamics governing the Canadian economy at the aggregate level. The course covers topics such as national income, inflation, unemployment, monetary and fiscal policy, and international trade with a special emphasis on factors and policies uniquely affecting Canada. Students gain insight into the roles of government institutions, the Bank of Canada, and external forces shaping the countrys economic performance, enabling them to critically analyze current macroeconomic issues and policy challenges within the Canadian context.
Recommended Textbook
Principles of Macroeconomics 5th Canadian Edition by N. Mankiw
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17 Chapters
3430 Verified Questions
3430 Flashcards
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Page 2
Chapter 1: Ten Principles of Economics
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205 Verified Questions
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Sample Questions
Q1) Why do taxes adversely affect the allocation of resources in society?
A)because they do not always fall more heavily on the rich
B)because the taxes collected are not enough to finance government spending
C)because not everyone pays taxes
D)because they distort prices and thus the decisions of households and firms
Answer: D
Q2) Henry decides to spend 2 hours playing golf rather than working at his job which pays $8 per hour. What is Henry's tradeoff?
A)the $16 he could have earned working for 2 hours
B)nothing, because he enjoys playing golf more than working
C)the increase in skill he obtains from playing golf for those 2 hours
D)nothing, because he spent $16 for green fees to play golf
Answer: A
Q3) What does economics study?
A)business
B)how society manages its scarce resources
C)central planning
D)government regulation
Answer: B
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Chapter 2: Thinking Like an Economist
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230 Flashcards
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Sample Questions
Q1) What do economists at Industry Canada do?
A)prepare the federal budget
B)write government regulations
C)help design and enforce Canada's antimonopoly laws
D)write the annual Economic Report
Answer: D
Q2) When economists attempt to simplify the real world and make it easier to understand, what do they do?
A)They make assumptions.
B)They make mistakes in judgment.
C)They make predictions.
D)They make evaluations.
Answer: A
Q3) In order to provide information on two variables, what must an economist use?
A)a bar graph
B)pie chart
C)the coordinate system
D)a time-series graph
Answer: C
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Page 4
Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) It takes Russell 6 hours to produce a bushel of corn and 2 hours to wash and polish a car. It takes Wilma 6 hours to produce a bushel of corn and 1 hour to wash and polish a car. Wilma and Russell cannot gain from specialization and trade, since it takes each of them 6 hours to produce 1 bushel of corn.
A)True
B)False
Answer: False
Q2) Refer to Table 3-5. If Japan and Canada trade based on the principle of comparative advantage, which of the following is correct?
A)All individuals in both countries will gain.
B)Car producers in Japan and airplane producers in Canada will gain.
C)Some individuals within each society will be made worse off.
D)One country will be better off and the other country will be worse off.
Answer: C
Q3) Trade allows a country to consume outside its production possibilities frontier.
A)True
B)False
Answer: True
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Chapter 4: The Market Forces of Supply and Demand
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303 Verified Questions
303 Flashcards
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Sample Questions
Q1) In a perfectly competitive market, buyers and sellers are price setters.
A)True
B)False
Q2) Refer to Figure 4-2. What are the equilibrium price and quantity?
A)$35 and 200
B)$35 and 600
C)$25 and 400
D)$15 and 200
Q3) Refer to Figure 4-2. What happens at a price of $15?
A) There would be a shortage of 400 units.
B) There would be a surplus of 400 units.
C) There would be a shortage of 200 units
D) There would be a shortage of 400 units
Q4) What happens when there is a surplus in a market?
A)There is upward pressure on price.
B)There is downward pressure on price.
C)The market could still be in equilibrium.
D)There are too many buyers chasing too few goods.
Q5) Price, which is determined by all buyers and sellers as they interact in the marketplace, allocates the economy's scarce resources.
Page 6
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Chapter 5: Measuring a Nations Income
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Sample Questions
Q1) What is the goal of macroeconomics?
A)to explain how economic changes affect prices of particular goods
B)to devise policies to deal with market failures, such as externalities and monopoly
C)to explain changes that affect households and firms in general
D)to explain how income taxes influence labour supply
Q2) In computing GDP, what is investment?
A)spending on stocks, bonds, and other financial assets
B)spending on real estate and financial assets
C)spending on new capital equipment, inventories, and structures, including new housing
D)spending on capital equipment, inventories, and structures, excluding household purchases of new housing
Q3) In 2008, what were Canadian net exports?
A)negative and about 10 percent the size of GDP
B)negative and about 3 percent the size of GDP
C)positive and about 1 percent the size of GDP
D)positive and about 10 percent the size of GDP
Q4) Calculate the percentage changes in nominal GDP, real GDP, and GDP deflator.
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Page 7
Chapter 6: Measuring the Cost of Living
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176 Flashcards
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Sample Questions
Q1) For any given year, what is the CPI?
A)the price of the basket of goods and services in the given year divided by the price of the basket in the base year, then multiplied by 100
B)the price of the basket of goods and services in the given year divided by the price of the basket in the previous year, then multiplied by 100
C)the price of the basket of goods and services in the base year divided by the price of the basket in the given year, then multiplied by 100
D)the price of the basket of goods and services in the previous year divided by the price of the basket in the given year, then multiplied by 100
Q2) In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which of the following sets of CPIs would make the cost in today's
dollars the same for both years?
A)60 in 1972 and 150 today
B)65 in 1972 and 156 today
C)90 in 1972 and 145.8 today
D)100 in 1972 1nd 41.67 today
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Chapter 7: Production and Growth
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185 Flashcards
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Sample Questions
Q1) Suppose Japanese-based Sony Corporation builds and operates a new chip factory in Canada. What would the future production from such an investment do?
A)increase Canadian GNP more than it would increase Canadian GDP
B)increase Canadian GDP more than it would increase Canadian GNP
C)not affect Canadian GNP, but it would increase Canadian GDP
D)have no effect on Canadian GNP or GDP
Q2) On average, by how much does each year of schooling raise a person's wage in Canada?
A)about 5 percent
B)about 10 percent
C)about 15 percent
D)about 20 percent
Q3) Which of the following is consistent with the catch-up effect?
A)The United States had a lower growth rate before 1900 than after.
B)Japan has a higher growth rate than Germany.
C)Although Canada has a relatively high level of output per person, its growth rate is still high compared to some poorer countries, such as Pakistan.
D)After World War II, Canada had lower growth rates than war-ravaged European countries.
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Page 9
Chapter 8: Saving, Investment, and the Financial System
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Sample Questions
Q1) Suppose that interest rates and investment both rise. Which of the following best explains these changes?
A)The government is running a larger deficit.
B)The government has instituted an investment tax credit.
C)The government has replaced the income tax with a consumption tax.
D)The government has reduced its deficit.
Q2) Which of the following determines the price of stocks traded on exchanges?
A)the Corporate Stock Administration
B)the NASDAQ
C)the supply and demand for the stock
D)the Montreal Stock Exchange
Q3) If the government's expenditures exceeded its receipts, what would it most likely do?
A)It would lend money to a bank or other financial intermediary.
B)It would borrow money from a bank or other financial intermediary.
C)It would directly buy bonds from the public.
D)It would directly sell bonds to the public.
Q4) When the federal government is in debt, it follows that it has a deficit.
A)True
B)False
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Chapter 9: Unemployment and Its Natural Rate
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186 Flashcards
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Sample Questions
Q1) Which of the following is most likely to happen when someone becomes unemployed?
A)It is likely that the person will be unemployed a long time and that most of the unemployed he or she joins have been unemployed a long time.
B)It is likely that the person will be unemployed for a long time, even though most of the unemployed he or she joins have been unemployed for a short time.
C)It is likely that the person will be unemployed for a short time, even though most of the unemployed he or she joins have been unemployed for a long time.
D)It is likely that the person will be unemployed for a short time, and that most of the unemployed he or she joins have been unemployed for a short time.
Q2) Even though most spells of unemployment are short, most unemployment results from long-term unemployment.
A)True
B)False
Q3) Teenage unemployment is higher than unemployment of people ages 20 and over. Explain why economists would attribute at least part of this difference to minimum-wage laws. (Hint: who is likely to get paid more?)
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Page 11
Chapter 10: The Monetary System
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196 Flashcards
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Sample Questions
Q1) Which of the following is most likely to happen under a fractional reserve banking system?
A)Banks hold more reserves than deposits.
B)Banks generally lend out a majority of the funds deposited.
C)Banks cause the money supply to fall by lending out reserves.
D)Banks only accept savings deposits.
Q2) Which of the following best explains the role of the Bank of Canada?
A)It maintains a target exchange rate.
B)It determines the bank rate.
C)It makes loans to large corporations.
D)It controls the government budget deficit.
Q3) What do economists use the word "money" to refer to?
A)income generated by the production of goods and services
B)those assets regularly used to buy goods and services
C)the value of a person's assets
D)the value of stocks and bonds
Q4) M1 includes savings deposits.
A)True
B)False
Q5) What is the difference between money and wealth?
Page 12
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Chapter 11: Money Growth and Inflation
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Sample Questions
Q1) Which of the following terms refers to economic variables whose values are measured in monetary units?
A)dichotomous variables
B)nominal variables
C)classical variables
D)real variables
Q2) When a graph of the money market is drawn with the value of money on the vertical axis, which of the following will happen if the value of money is below the equilibrium level?
A)The price level will rise.
B)The value of money will rise.
C)Money demand will shift left.
D)Money demand will shift right.
Q3) Which of the following kinds of variables are the interest rates stated in the Wall Street Journal?
A)classical variables
B)dichotomous variables
C)nominal variables
D)real variables
Q4) List and define any two of the costs of high inflation.
Page 13
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Chapter 12: Open-Economy Macroeconomics: Basic Concepts
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215 Flashcards
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Sample Questions
Q1) Which of the following is the most likely effect of an appreciation of the Canadian real exchange rate on the quantity of Alberta beef demanded by French citizens?
A)French citizens will buy less of Alberta beef.
B)French citizens will buy more of Alberta beef.
C)The quantity of Alberta beef demanded by French citizens will not change because the nominal exchange rate has not changed.
D)The quantity of Alberta beef demanded by French citizens will not change because it is the French real interest rate that matters for French citizens.
Q2) If purchasing-power parity holds, which of the following is the implication for the Canadian dollar?
A)The Canadian dollar will buy more goods in foreign countries than in Canada.
B)The Canadian dollar will buy as many goods in foreign countries as it does in Canada.
C)The Canadian dollar will buy fewer goods in foreign countries than it does in Canada.
D)The amount of goods that the Canadian dollar buys is not determined by purchasing power parity.
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Page 14
Chapter 13: A Macroeconomic Theory of the Open Economy
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Sample Questions
Q1) Which of the following does the open-economy macroeconomic model include?
A)only the market for loanable funds
B)only the market for foreign-currency exchange
C)both the market for loanable funds and the market for foreign-currency exchange
D)neither the market for loanable funds or the market for foreign-currency exchange
Q2) If policymakers impose import restrictions on automobiles, the Canadian trade deficit would shrink.
A)True
B)False
Q3) In the open-economy macroeconomic model, other things the same, when a Canadian resident imports a foreign good, our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.
A)True
B)False
Q4) A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.
A)True
B)False
Q5) Explain why saving need not equal domestic investment in an open economy.
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Chapter 14: Aggregate Demand and Aggregate Supply
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241 Verified Questions
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Sample Questions
Q1) Make a list of things that would shift the aggregate demand curve to the right.
Q2) Which of the following does NOT determine the long-run level of real GDP?
A)the price level
B)the supply of labour
C)available natural resources
D)available technology
Q3) Which of the following relationships does the model of aggregate demand and aggregate supply explain?
A)the relationship between the price and quantity of a particular good
B)the relationship between unemployment and output
C)the relationship between wages and employment
D)the relationship between real GDP and the price level
Q4) Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?
A)because as wealth falls, interest rates rise, and the dollar appreciates
B)because as wealth falls, interest rates rise, and the dollar depreciates
C)because as wealth rises, interest rates rise, and the dollar appreciates
D)because as wealth rises, interest rates fall, and the dollar depreciates
Q5) Make a list of things that would shift the long-run aggregate supply curve to the right.
Page 16
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Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
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Sample Questions
Q1) If there is crowding out, which of the following might decrease as government expenditures increase?
A)the overall change in real GDP
B)the demand for money curve
C)interest rates
D)demand for capital goods
Q2) What is the variable that balances the money demand and supply in the liquidity preference and the classical theories?
A)the interest rate in both theories
B)the price level in both theories
C)the interest rate in the liquidity preference theory and the price level in the classical theory
D)the price level in the liquidity preference theory and the interest rate in the classical theory
Q3) Which of the following is an effect of an increase in government purchases?
A)It decreases interest rates.
B)It results in a net decrease in aggregate demand.
C)It crowds out investment spending by business.
D)It decreases money demand.
Page 17
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Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
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Sample Questions
Q1) Refer to Figure 16-4. If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which of the following points in the short run?
A)point a
B)point b
C)point c
D)point d
Q2) Suppose that weather around the world is especially good next year, so farmers have unusually good crops. What might we expect that this will do to the short-run and long-run Phillips curves?
A)This will shift both the short-run and long-run Phillips curves to the right.
B)This will shift both the short-run and long-run Phillips curves to the left.
C)This will shift the short-run Phillips curve to the left, but not affect the long-run Phillips curve.
D)This will shift the long-run Phillips curve to the left, but not affect the short-run Phillips curve.
Q3) Suppose that the Bank of Canada unexpectedly decreases the money supply. What will happen to unemployment in the short run? What will happen to unemployment in the long run?
Page 18
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Chapter 17: Five Debates Over Macroeconomic Policy
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Sample Questions
Q1) Which of the following would transfer wealth from the old to the young?
A)increases in the budget deficit
B)decreased building of highways and bridges
C)more generous education subsidies
D)indexation of pensions to inflation
Q2) Suppose the budget deficit is rising 6 percent per year and nominal GDP is rising 10 percent per year. Which of the following best describes the debt created by these deficits?
A)sustainable, but the future burden on your children cannot be offset
B)not sustainable, and the future burden on your children cannot be offset
C)not sustainable, but the future burden on your children can be offset if you save for them
D)sustainable, and the future burden on your children can be offset if you save for them
Q3) In essence, a consumption tax puts all saving into tax-advantaged savings accounts.
A)True
B)False
Q4) What was the evolution of Canada's federal debt over the period 1967-2009?
Q5) Identify three government policies that discourage saving.
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