Contemporary Macroeconomics
Exam Bank
Course Introduction
Contemporary Macroeconomics explores the dynamics of modern economies by examining aggregate indicators such as GDP, unemployment, inflation, and interest rates. The course integrates classical theories with new developments, including the impacts of globalization, financial markets, fiscal and monetary policy, and technological innovation. Students analyze real-world economic challenges through both theoretical models and empirical data, gaining insight into business cycles, economic growth, and policy decision-making in complex global contexts. Emphasis is placed on current macroeconomic debates, policy responses to crises, and the role of international institutions in shaping economic outcomes.
Recommended Textbook
Principles of Macroeconomics 9th Edition by John Sayre
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13 Chapters
2035 Verified Questions
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Page 2
Chapter 1: The Economic Problem
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Sample Questions
Q1) A production possibility curve is a graphical representation of the various combinations of output that are wanted.
A)True
B)False
Answer: False
Q2) All of the following except one are true of economic theories or models.Which one is the exception?
A)They attempt to establish cause and effect between economic variables.
B)They always perfectly reflect reality.
C)They are built with assumptions and then tested with facts.
D)They are generalizations used to give context to our observations.
Answer: B
Q3) In reference to voluntary trade,what was Adam Smith the first to recognize?
A)It does not happen very often.
B)It may or may not benefit one or both of the parties to the trade.
C)It benefits one party to the trade but only at the expense of the other.
D)It benefits both parties to the trade.
Answer: D
Q4) Productivity refers to which type of efficiency?
Answer: Productive efficiency.
Page 3
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Chapter 2: Demand and Supply: an Introduction
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Sample Questions
Q1) What is true of substitute products?
A)When the price of one increases,the quantity purchased of the other decreases.
B)When the price of one increases,the quantity purchased of the other increases.
C)When the price of one decreases,the quantity purchased of the other increases.
D)They are products which are always purchased together.
Answer: B
Q2) Refer to the graph above to answer this question.Which of the following statements is correct?
A)Both ab and ac represent an increase in the quantity demanded.
B)Both ab and ac represent an increase in demand.
C)While ab represents an increase in demand,ac represents an increase in supply.
D)While ac represents an increase in demand,ab represents an increase in the quantity supplied.
E)Both ab and cb represent an increase in demand.
Answer: D
Q3) A decrease in the demand for a product will lead to a decrease in both the price and the quantity traded.
A)True
B)False
Answer: True
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Chapter 3: Measuring the Economy 1: GDP and Economic Growth
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Sample Questions
Q1) What can be said about Canada's real GDP growth rate between 2007 and 2012?
A)It was one of the highest among the G-7 countries.
B)It was the second highest of the G-7 countries.
C)It was the lowest of the G-7 countries.
D)It was the same as that in the United States.
Answer: A
Q2) In order to calculate net domestic income at basic prices,which of the following adjustments must be made to gross domestic income at market prices?
A)Both depreciation and Indirect taxes (net of subsidies)are deducted
B)Both depreciation and Indirect taxes (net of subsidies)are added
C)Indirect taxes (net of subsidies)is added and depreciation is deducted
D)Indirect taxes (net of subsidies)is deducted and depreciation is added
Answer: A
Q3) What is the term for spending on new capital goods?
A)Consumer durables.
B)Investment.
C)Consumption.
D)Factor incomes.
Answer: B
Page 5
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Chapter 4: Measuring the Economy 2: Unemployment and Inflation
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Sample Questions
Q1) What would be the effect of 50,000 unemployed people becoming discouraged workers?
A)The unemployment rate would remain unchanged,and the size of the labour force would decline.
B)Both the unemployment rate and the size of the labour force would decline.
C)The unemployment rate would decline,and the size of the labour force would remain unchanged.
D)Both the unemployment rate and the size of the labour force size would rise.
Q2) Assume that the consumer price index in 2016 was 120 and in 2017 it was 126.What was the rate of inflation in 2017?
A)3%
B)5%
C)6%
D)20%
E)26%
Q3) What is true of Canada's inflation rate from 2008 to 2015?
A)It has never been below 2%.
B)It ranged between 0.3% and 2.9%.
C)It ranged between 0.3% and 1.0%.
D)It has never been above 2%.
Page 6
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Chapter 5: Aggregate Demand and Supply
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Sample Questions
Q1) An increase in the long-run aggregate supply has no effect on macroeconomic equilibrium.
A)True
B)False
Q2) Assume an economy is currently in equilibrium with Real GDP at $500 billion.If potential Real GDP (LAS)is $400 billion,which of the following is true?
A)There is a recessionary gap of 100 percent.
B)There is a recessionary gap of $100 billion.
C)There is an inflationary gap of 100 percent.
D)There is an inflationary gap of $100 billion.
Q3) Assume there is an inflationary gap in the economy.If investment spending increases,what will happen to the inflationary gap?
Q4) What will be the effect of a leftward shift in the AS curve?
A)It will shift the LAS curve left.
B)It will cause a rise in the price level.
C)It might be caused by a decrease in resource prices.
D)It will not affect output levels.
Q5) What are the components of aggregate demand?
Q6) Why is the aggregate supply curve upward sloping?
Page 7
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Chapter 6: Aggregate Expenditures
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Sample Questions
Q1) Which of the following will cause net exports to increase?
A)An increase in Canadian prices.
B)An increase in foreign prices.
C)A decrease in foreign incomes.
D)An appreciation in the Canadian dollar.
Q2) Refer to the table above to answer this question.If planned investment increased by $200,what would be the new value of equilibrium income?
A)$2,200
B)$2,400
C)$2,600
D)$2,800
E)Cannot be determined from the information.
Q3) What is meant by the term the marginal leakage rate?
A)Total leakages as a fraction of aggregate expenditures.
B)Total leakages as a fraction of the level of income.
C)The ratio of change in income that results from a change in leakages.
D)The ratio of change in leakages that results from a change in income.
Q4) What four factors will cause a change in autonomous consumption?
Q5) What is meant by the term induced expenditures? Provide an example.
Q6) Distinguish between the wealth effect and the real balance effect.
Page 8
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Chapter 7: Fiscal Policy
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Sample Questions
Q1) In 2015,in Canada,what percentage of the national debt was owned by foreigners?
A)None
B)5%
C)16%
D)26%
E)50%
Q2) What is net tax revenue?
A)It is the total of all taxes collected by the government.
B)It is the total of all taxes collected by government less spending by government on goods and services.
C)It is the total of all taxes collected by government plus transfer payments.
D)It is the total of all taxes collected by government less transfer payments.
Q3) Suppose that the government's total tax receipts are $130,government spending on goods and services is $100 and transfer payments are $40.What is the government's budget surplus or deficit?
A)A surplus of $30.
B)A surplus of $10.
C)A deficit of $30.
D)A deficit of $10.
Q4) Distinguish between a government's internal and external debt.
Page 9
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Chapter 8: Money and Banking
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Sample Questions
Q1) The currency held by banks is considered to be part of what definition of money?
A)M1.
B)M2.
C)M3.
D)Part of all three-M1,M2,and M3.
E)Not part of any definition of money.
Q2) Refer to the information above to answer this question.Assume the target reserve ratio is 8 percent.If the original balance sheet was for the commercial banking system rather than a single bank,what is the maximum amount by which loans and deposits can be expanded?
A)$4,800.
B)$19,200.
C)$240,000.
D)$60,000.
E)$35,000.
Q3) What are the three functions of money?
Q4) Canada's largest commercial bank is the Bank of Canada.
A)True
B)False
Q5) What gives the Canadian dollar its value?
Page 10
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Chapter 9: The Money Market and Monetary Policy
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Sample Questions
Q1) Explain why Keynesians believe that changes in the money supply have only a small impact on real GDP.
Q2) Why is the asset demand for money curve downward-sloping?
A)As the interest rate increases,the opportunity cost of holding money also increases.
B)As the interest rate increases,the opportunity cost of holding money decreases.
C)As the interest rate increases,so too do bond prices.
D)It becomes more attractive to hold money as the interest rate increases.
E)As people hold larger quantities of money,the interest rate is forced down.
Q3) Which of the following is one of the important routine functions of the Bank of Canada?
A)To help new commercial banks sell securities.
B)To supply the economy with currency.
C)To advise commercial banks as to the most profitable ways of reinvesting profits.
D)To help commercial banks establish good financial arrangements with foreign banks.
E)All of these.
Q4) Write out the equation of exchange,and identify each term.
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Page 11
Chapter 10: International Trade
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Sample Questions
Q1) If a country's trading possibilities curve lies to the right of its production possibilities curve,there are no gains from trade.
A)True
B)False
Q2) Refer to the information above to answer this question.In which product should Mental specialize and export?
A)It should specialize in soya milk and export rice cakes.
B)It should specialize and export soya milk.
C)It should specialize and export rice cakes.
D)It should specialize in rice cakes and export soya milk.
Q3) Which of the following statements about the impact of the introduction of free trade is correct?
A)It results in higher prices for domestic producers.
B)It results in lower prices for foreign consumers.
C)It results in lower prices for foreign producers.
D)It results in lower prices for domestic consumers.
Q4) Explain why Canada imports banana.
Q5) List four arguments against free trade.
Q6) Explain why consumers lose and producers win if a tariff is imposed.
Page 12
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Chapter 11: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) What is the long-term result of a central bank fixing an exchange rate below the equilibrium market rate?
A)The money supply will have to decrease resulting in inflation.
B)The money supply will have to decrease resulting in deflation.
C)The money supply will have to increase resulting in inflation.
D)The money supply will have to increase resulting in deflation.
E)The money supply will decrease but the price level will be unaffected.
Q2) Assuming flexible exchange rates,which of the following would result in an increase in a country's exchange rate?
A)The purchase by the central bank of its own currency.
B)The purchase by the central bank of foreign currencies.
C)The sale by the central bank of its own currencies.
D)The central bank decreasing the country's interest rates.
E)The government imposing an export tax.
Q3) Refer to Table 11.8 to answer this question.Which of the following statements is correct?
A)The Canadian dollar has appreciated and the Japanese yen has depreciated.
B)The Canadian dollar has depreciated and the Japanese yen has appreciated.
C)The Japanese yen is now worth less in terms of the Canadian dollar.
D)The Canadian dollar is now worth more in terms of the Japanese yen.
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Chapter 12: Macroeconomic Policy Revisited
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Sample Questions
Q1) Which of the following is an argument of Arthur Laffer,the supply-side economist?
A)That present tax rates are too high but a cut in tax rates will lead to a drop in tax revenues.
B)That present tax rates are too low and should be increased.
C)That an increase in tax rates will force people to work harder.
D)That a cut in tax rates will lead to higher tax revenues.
Q2) The rise of supply-side economics is rooted in the stagflation of the 1970s.
A)True
B)False
Q3) Refer to the above diagram for a specific economy.Which of the following best describes the relationship shown by this curve?
A)The demand for labor is large when the rate of inflation is small.
B)When the rate of unemployment is high,the rate of inflation is high.
C)The rate of inflation and the rate of unemployment are inversely related.
D)The rate of inflation and the rate of unemployment are directly related.
Q4) The Canadian dollar has not fallen below $0.80 U.S.for over twenty years.
A)True
B)False
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Page 14
Chapter 13: A Walk Through the Twentieth Century and Beyond
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Sample Questions
Q1) What are the key aspects of Keynesian economics?
Q2) Explain the link between the credit-rating of derivatives and the demand for traditional mortgages.
Q3) A major shift in perceptions about the role of government occurred during which of the following periods in history?
A)Immediately following WW II
B)In the middle of the Great Depression
C)Just prior to World War I
D)In the 1990s
Q4) What is the difference between demand side policies and supply side policies?
Q5) The Great Depression led to the development of Keynesian economics. What does this approach argue?
Q6) In the decade of the 1990s several significant events occurred.What were these events which changed the world and provided evidence of the predominance of the market system?
Q7) Define 'investment bank'
Q8) What is a 'restraint program'?
Q9) Explain how a surplus in the labour market is eliminated. Page 15
Q10) Explain the development of sub-prime mortgages into bundled financial security.
Q11) What is the significance of Keynesian economics?
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