Contemporary Economic Issues
Exam Questions
Course Introduction
This course offers an in-depth exploration of major economic issues shaping the modern world, including income inequality, globalization, unemployment, inflation, and environmental sustainability. Students will examine how economic theory applies to real-world problems, analyze the impact of policy decisions on society, and discuss the role of global institutions in addressing economic challenges. Through case studies, current data, and policy debates, learners will develop critical thinking skills and gain a comprehensive understanding of the complex economic forces influencing contemporary society.
Recommended Textbook
Economics Today The Macro View 5th Canadian Edition by Roger LeRoy Miller
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17 Chapters
2077 Verified Questions
2077 Flashcards
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Page 2
Chapter 1: The Nature of Economics
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Sample Questions
Q1) One topic of study for a microeconomist would be
A)the effects of an increase in the price of gasoline on sales of gasoline
B)the effects of an increase in government spending on unemployment levels
C)the causes of aggregate unemployment
D)the causes of inflation
Answer: A
Q2) Economics is an empirical science,which means that economists
A)prove their models are true by referring to logic.
B)evaluate their models or theories by whether their assumptions are consistent with the real world.
C)have to use laboratory experiments to test their models at least some of the time.
D)look for evidence on whether their models are useful or not.
Answer: D
Q3) Normative economic analysis
A)generates testable hypotheses.
B)includes statements about the way someone thinks things should be.
C)involves descriptive statements about the world.
D)leads to empirically testable statements.
Answer: B
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Page 3
Chapter 2: Production Possibilities and Economic Systems
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Sample Questions
Q1) In Figure 2-2,the PPC has the bowed shape because
A)some resources are better at producing one product than another.
B)all resources are equally good at producing both products.
C)all resources are perfectly adaptable.
D)some resources are equally good at producing both products.
Answer: A
Q2) Given the production possibilities schedule in Table 2-1,a combination of 23 televisions and 6 computers
A)is attainable but involves the unemployment of some of society's resources.
B)cannot be produced by society given its current level of resources and production technology.
C)clearly illustrates the trade-off between televisions and computers.
D)can be produced only if society is willing to have some of its resources used inefficiently.
Answer: B
Q3) In Table 2-1,if the economy moves from point F to point D,________ televisions are gained at a cost of ________ computers given up.
Answer: 9,2
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Chapter 3: Demand and Supply
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Sample Questions
Q1) Explain what is wrong with saying that market equilibrium occurs when "supply equals demand."
Answer: "Supply" refers to the entire supply curve."Demand" means the demand curve.What are equal in equilibrium are quantity demanded and quantity supplied.Quantities can be equal but unless the two curves overlap exactly on the graph,supply never equals demand.
Q2) In the market described by Table 3-2 there will be a shortage of the product if price is below ________.
Answer: $3
Q3) In determining the demand for a good,economists
A)hold constant all other influences on demand except the product price.
B)assume no consumer will allocate all of her income to one good.
C)allow income to change at each point on the demand schedule.
D)assume consumers have equal incomes to allocate among goods.
Answer: A
Q4) In the market described by Table 3-2 there will be a surplus of the product if price is above ________.
Answer: $3
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Page 5
Chapter 4: Introduction to Macroeconomics
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Sample Questions
Q1) Hidden unemployment describes individuals who
A)goof-off on the job.
B)are employed by the federal government.
C)would like to work,but are discouraged from looking for a job.
D)do voluntary work.
Q2) An increase in the duration of unemployment occurs when
A)business activity goes into a downturn.
B)employment increases.
C)the labour force shrinks.
D)the labour force grows.
Q3) Typically,nominal interest rates and anticipated inflation rates
A)move in opposite directions.
B)are not related.
C)move in the same direction.
D)are such that the nominal rate is one-half the anticipated rate.
Q4) Unanticipated positive inflation will create
A)losses for creditors and gains for debtors.
B)losses for both creditors and debtors.
C)gains for both creditors and debtors.
D)gains for creditors and losses for debtors.
Page 6
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Chapter 5: Measuring the Economys Performance
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Sample Questions
Q1) If deflation is occurring and nominal GDP is increasing over time,then real GDP is A)decreasing.
B)increasing at the same rate as nominal GDP.
C)increasing more slowly than nominal GDP.
D)increasing faster than nominal GDP.
Q2) Which of the following is included in determining GDP?
A)the purchase of a new car
B)the purchase of a used car
C)a housewife preparing breakfast
D)a gardener cans vegetables for consumption during the winter
Q3) To determine how well an economy is doing,it is better to use
A)nominal GDP figures.
B)real GDP figures.
C)GDP figures measured by the expenditure approach.
D)GDP figures measured by the income approach.
Q4) What is the difference between GDP and GNP? If Canadians generate the same income abroad as foreigners generate for their Canadian owned assets and enterprises,what will be true about the relation between GDP and GNP?
Q5) Explain how value added is used to compute GDP.
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Chapter 6: Modelling Real Gdp and the Price Level in the Long Run
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Sample Questions
Q1) Other things constant,the economy's aggregate demand curve shows that
A)as the price level falls,so does real national income.
B)any change in the general price level causes the curve to shift.
C)real GDP decreases when the price level rises.
D)real GDP and the price level are not related.
Q2) Holding nominal money balances constant,a decrease in the price level
A)causes the real value of the money balances to increase,in turn increasing the quantity of goods and services demanded.
B)causes the real value of the money balances to decrease,in turn decreasing the quantity of goods and services demanded.
C)causes the real value of the money balances to increase,thereby increasing the interest rate.
D)generates a reduction in the value of the money balances,leading to higher interest rates and a decrease in the quantity of goods and services demanded.
Q3) Explain with the aid of diagrams and explanations how price level changes effect the long run equilibrium
Q4) What are the three forces that cause the aggregate demand curve to slope down? Explain.
Page 8
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Chapter 7: Economic Growth and Development
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Sample Questions
Q1) Other things held constant,a decrease in consumption spending implies
A)an increase in saving.
B)an increase in government spending.
C)a lower standard of living in the future.
D)economic growth will soon decrease.
Q2) Other things held constant,an increase in consumption spending implies
A)a decrease in saving.
B)a decrease in government spending.
C)a lower standard of living in the future.
D)economic growth is stagnant.
Q3) Which of the following is an example of a measure of labour productivity?
A)Farm workers produce 30 bushels of wheat per worker per day
B)Autos get 30 gallons to the mile
C)The growth rate of per capita real GDP is 3.5 percent per year
D)Wages increase by 3.5 percent per year for 5 years
Q4) Economic growth may understate changes in real per-capita GDP if
A)the growth is accompanied by increasing congestion.
B)leisure time is also increasing.
C)the types of jobs generated feelings of alienation.
D)deflation is taking place.
Page 9
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Chapter 8: Modelling Real Gdp and the Price Level in the Short Run
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Sample Questions
Q1) As the ________ increases,the short-run aggregate supply curve becomes increasingly steep.
A)price level
B)inflation rate
C)unemployment rate
D)labour force participation rate
Q2) List the changes that cause an increase (decrease)in Aggregate Supply.Once completed,explain each in relation to their effect on the factors of production and the endowment.
Q3) Explain with the aid of diagrams the effect of a policy or action that would result in an inflationary and recessionary gap.Show the result graphically and explain the short-run and long-run adjustments that will take place in each case.
Q4) According to Figure 8-3,what will the price level be in the new long-run equilibrium?
A)115
B)110
C)100
D)Less than 100
Q5) What is the affect of a rise in the price level on potential output?
Page 10
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Chapter 9: Consumption, investment, and the Multiplier
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Sample Questions
Q1) If the aggregate supply curve is upward sloping,then increases in aggregate demand lead to
A)increases in the price level.
B)decreases in output.
C)decreases in the price level.
D)no change in the price level.
Q2) According to Figure 9-3,planned consumption and income are equal at an income level of
A)Y .
B)Y .
C)Y .
D)Y .
Q3) Compared to consumption spending,investment historically has tended to be A)greater.
B)more stable.
C)stagnant.
D)more variable.
Q4) Define the difference between the MPC and MPS.How are the two related to one another through planned aggregate expenditures and how a change in autonomous consumption will necessarily affect Saving.
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Chapter 10: The Public Sector
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Sample Questions
Q1) What is the free-rider problem and how is it related to public goods?
Q2) Cocaine is an example of
A)a free good.
B)a public good.
C)a merit good.
D)a demerit good.
Q3) A family making $30,000 pays $4,500 in taxes and a family making $40,000 pays $5,500 in taxes.The tax system is ________.
Q4) Which of the following does NOT describe the purpose of anti-combines legislation?
A)reducing the power of monopolies
B)restricting the formation of monopolies
C)promoting competition within the economic system
D)prohibiting activities that promote trade
Q5) A family making $30,000 pays $4,500 in taxes and a family making $40,000 pays $6,500 in taxes.The tax system is ________.
Q6) Using appropriate diagrams,explain how a tax on consumers could be used not to collect revenue but to to correct for a negative externality in the production of a product.
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Page 12
Chapter 11: Fiscal Policy and the Public Debt
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Sample Questions
Q1) Suppose the government increased marginal tax rates from 30 percent to 50 percent.This would be an example of A)crowding out.
B)demand-side economics.
C)an expansionary fiscal policy.
D)a contractionary fiscal policy.
Q2) The amount by which the equilibrium level of real GDP is less than the long-run equilibrium level as given by LRAS is referred to as A)a contractionary gap.
B)economic growth.
C)the amount by which taxes should be increased in order to put the brakes on run-away inflation.
D)an inflationary gap.
Q3) In Figure 11-1,assume that the economy is originally at E .If the government imposes contractionary economic policies,it is likely that
A)the new equilibrium will be E .
B)the new equilibrium will be E .
C)the price level will fall to 110.
D)aggregate demand will be represented by the A D line.
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Page 13
Chapter 12: Money and the Banking System
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Sample Questions
Q1) Without an accepted medium of exchange,people
A)have to specialize in one area of production.
B)have to rely on gold or silver in order to exchange goods and services.
C)have to resort to barter in order to exchange goods and services.
D)can efficiently obtain goods and services.
Q2) When a person deposits a check into her checking account,
A)she owes the bank money.
B)the bank owes her money.
C)no one owes anybody anything.The deposit is an asset to both the bank and the person.
D)no one owes anybody anything.The deposit is an asset to the person,but is neither an asset nor a liability to the bank.
Q3) When we examine the Canadian money supply,the largest component of M1+ is A)coins minted by the treasury.
B)chequable deposits.
C)certificates of deposit.
D)Bank of Canada notes.
Q4) In terms of the functions of money,can credit cards be considered money?
Q5) What is barter? What is a double coincidence of wants? How does the existence of money affect barter?
Page 14
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Chapter 13: Money Creation and Deposit Insurance
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Sample Questions
Q1) The desired reserve ratio is 10 percent.A bank with $100 million in deposits has $5 million in vault cash,$6 million on deposit with the Bank of Canada,government securities of $9 million,and other assets of $80 million.If someone deposits a cheque for $1 million in the bank,the maximum loan the bank can now make is
A)$1 million.
B)$2 million.
C)$1.9 million.
D)$900,000.
Q2) With the fractional banking system in Canada,a commercial bank with $1,000 of deposits generally would
A)maintain $1,000 of cash reserves.
B)have no reserves.
C)maintain less than $1,000 but more than $0 in cash reserves.
D)maintain more than $1,000 of cash reserves.
Q3) Excess reserves are defined as
A)actual reserves plus vault cash.
B)actual reserves minus desired reserves.
C)actual reserves minus vault cash.
D)actual reserves plus desired reserves.
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Page 15
Chapter 14: The Bank of Canada and Monetary Policy
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Sample Questions
Q1) According to the quantity theory of money,
A)a change in the money supply can lead only to a proportionate change in the price level.
B)the velocity of money is the least stable factor in monetary analysis.
C)the rate of inflation is not related to changes in the money supply.
D)price level changes can best be explained by Keynesian analysis.
Q2) The Bank of Canada is said to be the "lender of last resort" in that
A)it stands ready to "bail out" any chartered bank that it has decided should not fail.
B)it makes loans to individuals whom commercial banks do not believe are credit-worthy.
C)it charges a higher interest rate to borrowers than does any other bank.
D)it functions as the government's bank only when commercial banks fail to do so.
Q3) The equation of exchange is
A)MsV = PQ.
B)MsQ = PV.
C)Ms = PV/Q.
D)MsP = QV.
Q4) What are three reasons people want to hold money balances?
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Page 16
Chapter 15: Issues in Stabilization Policy
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Sample Questions
Q1) What is the main tenet(s)of the Real Business Cycle Theory?
Q2) The rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall is called.
A)structural unemployment.
B)extraneous inflation rate.
C)the unemployment rate.
D)the NAIRU.
Q3) In Figure 15-3,if the economy is initially at equilibrium at point A,an unanticipated reduction in aggregate demand from A D to A D would cause,in the short run,
A)the price level to fall from P to P ,real GDP to fall from Q to Q ,and the rate of unemployment to increase.
B)the price level to move from P to P ,but real GDP would stay at Q .
C)the price level to fall by some amount less than P but greater than P ,and the rate of unemployment would decrease.
D)no change in either the price level or real GDP,but a decrease in unemployment.
Q4) What are the criticisms of supply-side economics?
Q5) What is meant by the natural rate of unemployment?
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Page 17
Chapter 16: Comparative Advantage and the Open Economy
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Sample Questions
Q1) Absolute advantage is defined as
A)the ability to produce more output of one good relative to another good than another country can.
B)the ability to produce more output from given inputs of resources than others can.
C)the ability to use more input of resources than others can.
D)having a lower average fixed cost in the production of a good than does someone else.
Q2) An assumption behind the infant industry argument for tariff protection is that
A)foreign competitors are selling output below average cost.
B)the domestic industry will be facing an upward adjustment in its average cost.
C)the domestic industry will eventually gain comparative advantage in producing the good.
D)the market needs additional competition to satisfy consumer demand.
Q3) Specialization can lead to an increase in the production of all goods only if
A)the two nations specialized in the production of goods.
B)each nation were to produce all goods.
C)the opportunity cost of producing goods differs between two nations.
D)neither country has a comparative advantage in the production of any good.
Q4) Distinguish between absolute advantage and comparative advantage.
Page 18
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Chapter 17: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) Suppose the Canadian inflation rate falls while the inflation rate among the members of the European Union holds constant.Other things equal,what will happen in the balance of payments accounts?
Q2) If the capital account is in deficit,we know that
A)the merchandise trade balance is also in deficit.
B)the merchandise trade balance is in surplus.
C)the current account is in surplus.
D)there is a statistical discrepancy in the surplus.
Q3) In the original International Monetary Fund system,the legally established value of the monetary unit of one country in terms of another is known as
A)the par value.
B)the purchasing power parity.
C)the flexible exchange rate.
D)the dirty float.
Q4) How did the International Monetary Fund operate? What brought about the end of the Bretton Woods Agreement?
Q5) If the current account balance is $235 billion and Canadian official reserves increase by $35 billion,what is the official settlements account balance and the capital account balance?
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