Economic Issues in Canada Exam Practice Tests
Course Introduction
This course provides an in-depth exploration of the major economic challenges and policies shaping contemporary Canada. Students will examine topics such as economic growth and productivity, natural resources and environmental concerns, trade relations, labor markets, income inequality, economic integration within North America, Indigenous economic issues, and the role of government policy. Through analysis of current data and case studies, the course encourages critical thinking about the complexities of Canadas economy and the impacts of globalization, technological change, and demographic trends on economic outcomes.
Recommended Textbook
Economics 15th Canadian Edition by Christopher T.S. Ragan
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Page 2
Chapter 1: Economic Issues and Concepts
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Sample Questions
Q1) An economic system that relies primarily upon custom and habit in economic decision making is referred to as a
A)market system.
B)traditional system.
C)command system.
D)mixed system.
E)communist system.
Answer: B
Q2) Suppose drought destroys many millions of acres of valuable Canadian farmland.The effect on the Canadian economy would be to move
A)it along its production possibilities boundary.
B)its production possibilities boundary inward.
C)it beyond its production possibilities boundary.
D)its production possibilities boundary outward.
E)None of the above.There would be no change in Canada's production possibilities boundary.
Answer: B
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Page 3
Chapter 2: Economic Theories,Data,and Graphs
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Sample Questions
Q1) If we seek to explain the number of seats sold on a particular air route,say Toronto to Halifax,over a one-year period,we would consider many variables.Which of the following variables would be endogenous to our theory?
A)the average salary of Canadian airline pilots
B)the number of airline seats sold on this route
C)the price of jet fuel
D)the number of fog days in Halifax
E)the unemployment rate in Toronto
Answer: B
Q2) Data collected of several variables but for the same time period are called
A)cross-sectional data.
B)time-analysis data.
C)logarithmic data.
D)topographic data.
E)time-series data.
Answer: A
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4
Chapter 3: Demand, Supply, and Price
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Sample Questions
Q1) Refer to Figure 3-6.If the demand curve shifts from D<sub>1</sub> to D<sub>2</sub>,while supply remains at S<sub>1</sub>,one could say that
A)the quantity demanded has decreased to Q<sub>1</sub> and price has fallen to P<sub>2</sub>.
B)there has been an increase in demand for X.
C)the price of a good which is a substitute for X must have fallen.
D)the price increase has caused an increase in quantity demanded.
E)there is now an excess demand at the new price of P<sub>1</sub>.
Answer: B
Q2) Refer to Figure 3-4.If the price of 1-bedroom apartments in Collegetown were $700,there would be a ________ of ________ apartments.
A)surplus; 150
B)shortage; 300
C)shortage; 150
D)surplus; 300
E)surplus; 100
Answer: D
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Page 5
Chapter 4: Elasticity
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Sample Questions
Q1) Suppose that the quantity demanded of paperback novels rises from 80 000 to 120 000 units per month when the price falls from $11 to $9 per unit.The price elasticity of demand for this product is
A)1/3.
B)1.
C)2/3.
D)3/2.
E)2.
Q2) If the income elasticity of demand for a good is - 3.4,a 25% increase in income results in
A)a 4% increase in quantity demanded.
B)a 0.85% increase in quantity demanded.
C)an 8.5% decrease in quantity demanded.
D)an 85% decrease in the quantity demanded.
E)There is not enough information to answer this question.
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6
Chapter 5: Price Controls and Market Efficiency
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Sample Questions
Q1) The shortages associated with a binding price ceiling will be the smallest when
A)both supply and demand are highly elastic.
B)both supply and demand are highly inelastic.
C)supply is highly elastic and demand is highly inelastic.
D)supply is highly inelastic and demand is highly elastic.
E)none of the above-the size of the shortage has nothing to do with demand and supply elasticities.
Q2) In general (and in the absence of market failures),economic surplus will be maximized and economic efficiency will be achieved
A)when the government is able to impose an equilibrium price.
B)when consumers and producers can agree on the most advantageous division of economic surplus.
C)when resources are allocated such that production of the good is maximized.
D)when the government successfully determines what is best for society as a whole.
E)in a competitive market where price is free to achieve its market-clearing equilibrium level.
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Chapter 6: Consumer Behaviour
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Sample Questions
Q1) Refer to Figure 6-12.Sophie's movement from point A to point C is
A)the income effect of an increase in the price of paperback novels.
B)the total effect of a decrease in the price of paperback novels.
C)the income effect of a decrease in the price of paperback novels.
D)the substitution effect of an increase in the price of paperback novels.
E)the total effect of a change in money income.
Q2) Refer to Figure 6-2.Suppose that the price of Y is $1 and the consumer's income is $10.Initially,the price of X is $2 and the consumer is buying 4 units of good Y.If the price of X then falls to $1,which of the following pairs of quantities of X correctly completes the demand schedule below? Price of X: $1 $2
Quantity Demanded of X: ________ ________
A)2; 4
B)4; 4
C)4; 3
D)6; 3
E)6; 4
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Chapter 7: Producers in the Short Run
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Sample Questions
Q1) Refer to Table 7-2.The accounting profits for this firm are
A)$32 300.
B)$32 700.
C)$63 100.
D)$63 500.
E)$71 500.
Q2) Refer to Table 7-3.The average variable cost when producing 132 units of output is approximately
A)24 cents.
B)30 cents.
C)45 cents.
D)68 cents.
E)89 cents.
Q3) Refer to Table 7-3.If this firm is producing 20 units of output per period its marginal cost is
A)$1.00.
B)50 cents.
C)$1.67.
D)16.7 cents.
E)$10.00.
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Chapter 8: Producers in the Long Run
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Sample Questions
Q1) Movement from one point to another along an isocost line implies a change in
A)output levels,holding factor combinations constant.
B)factor combinations,holding expenditure constant.
C)factor prices.
D)the level of output,independent of what happens to factor combinations.
E)expenditure.
Q2) Suppose that capital costs $10 per unit and labour costs $4 per unit.If the marginal product of capital is 50 and the marginal product of labour is 50,the firm should ________ in order to minimize its costs of producing its output.
A)employ more capital and labour
B)employ less capital and labour
C)employ more capital and less labour
D)employ less capital and more labour
E)not change its current factor use
Q3) Movement from one point to another along an isoquant implies a change in
A)output levels,holding factor combinations constant.
B)factor combinations,holding output constant.
C)product prices.
D)the level of output,independent of what happens to factor combinations.
E)money income.
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Chapter 9: Competitive Markets
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Sample Questions
Q1) A perfectly competitive firm's total revenue is equal to which of the following?
A)average revenue multiplied by price.
B)price times quantity of the product sold,divided by quantity of the product sold.
C)the revenue received on the last unit sold.
D)marginal revenue times quantity of the product sold.
E)price multiplied by marginal revenue.
Q2) Suppose a perfectly competitive firm is producing a level of output such that its average revenue is less than its lowest average variable cost.The firm should
A)reduce its output.
B)expand its output.
C)produce zero output.
D)increase the market price.
E)not change its output.
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11
Chapter 10: Monopoly, cartels, and Price Discrimination
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Sample Questions
Q1) Refer to Table 10-2,and suppose that the firm is a single-price monopolist.At the profit-maximizing level of output,the price elasticity of demand is
A)less than one.
B)one.
C)greater than one.
D)infinite.
E)impossible to know with the available information.
Q2) A monopolistic firm faces a downward-sloping demand curve because
A)there are a large number of firms in the industry,all selling the same product.
B)the demand for its product is always inelastic.
C)the market price is affected by the amount sold by a monopolistic firm.
D)marginal revenue is negative throughout the feasible range of output.
E)the monopolistic firm can exploit economies of scale.
Q3) Which one of the following is a natural barrier to firms entering an industry?
A)decreasing returns to scale
B)a positively sloped LRAC curve over the whole range of output
C)a negatively sloped LRAC curve over the whole range of output
D)threats of punitive price-cutting by existing producers
E)licensing and patent restrictions
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Page 12
Chapter 11: Imperfect Competition and Strategic Behaviour
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Sample Questions
Q1) Oligopolists make decisions after taking into account the expected reaction of their competitors.In doing this,oligopolists are exhibiting
A)non-strategic behaviour.
B)collusive behaviour.
C)cooperative behaviour.
D)non-cooperative behaviour.
E)strategic behaviour.
Q2) Refer to Figure 11-5.Given the information provided in the figure,what is the cost to either firm of completing this project on its own?
A)$2.5 million
B)$5 million
C)$10 million
D)$20 million
E)$30 million
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13
Chapter 12: Economic Efficiency and Public Policy
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Sample Questions
Q1) The economic efficiency of a natural monopoly can be improved with the use of two-part tariffs because it allows the monopoly to
A)charge users according to their willingness to pay.
B)charge residential users different rates than business users.
C)charge users according to their ability to pay.
D)charge users separately for fixed and variable costs.
E)lower its total costs.
Q2) Refer to Figure 12-7.Suppose this firm is being regulated using a policy of average-cost pricing.The resulting price and output would be ________ per kwh and ________ kwh per day.
A)$0.06; 1 million
B)$0.07; 1.5 million
C)$0.09; 1.4 million
D)$0.11; 1 million
E)$0.12; 1 million
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14
Chapter 13: How Factor Markets Work
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Sample Questions
Q1) Refer to Figure 13-2.This factor market is in equilibrium at point B.In equilibrium,the 20th unit of the factor is being paid transfer earnings of ________ and economic rent of ________.
A)$120; -$2
B)$16; $2
C)$320; $80
D)$120; $40
E)$6; $2
Q2) Refer to Figure 13-3.Consider the supply of oil tankers to an individual Canadian shipping firm,the North American shipping industry,and the world shipping industry.Which diagram best shows the supply of oil tankers that is relevant to the world shipping industry?
A)diagram 1
B)diagram 2
C)diagram 3
D)diagrams 2 or 3
E)diagrams 1 or 2
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Chapter 14: Labour Markets and Income Inequality
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Sample Questions
Q1) Refer to Figure 14-6.The market begins in equilibrium with the curves labelled Demand and Supply.If a labour union negotiates the wage to W<sub>2</sub>,the difference between this wage and the competitive equilibrium wage is called
A)the industry's wage premium.
B)the union wage premium.
C)a temporary wage differential.
D)a discrimination differential.
E)a legislated wage differential.
Q2) A legislated minimum wage is comparable to A)bilateral monopoly.
B)a black-market price.
C)a rent control.
D)a price ceiling.
E)a price floor.
Q3) A legislated minimum wage is said to be binding when
A)it is below an industry's free-market equilibrium wage.
B)an industry is poorly organized and composed largely of unskilled labour.
C)it raises wage rates in an industry above the free-market equilibrium level.
D)it decreases the turnover rate among employees.
E)it is enforced by legal authorities.
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Chapter 15: Interest Rates and the Capital Market
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Sample Questions
Q1) When we discuss household saving as the supply of capital to financial markets,the term includes which of the following?
A)households' savings accounts
B)education and retirement savings
C)private-sector pension plans
D)Canada Pension Plan and Quebec Pension Plan
E)all of the above
Q2) If the annual interest rate is 10%,the present value of $200 paid 3 years from now is
A)$20.00.
B)$40.00.
C)$56.45.
D)$150.26.
E)$165.28.
Q3) The amount of physical capital is a ________ variable;________.
A)flow; its usefulness lasts over a long period of time
B)flow; it is usually put in place and maintained over a long period of time
C)stock; any flow of investment adds to the current capital stock
D)stock; most equipment is solidly built and lasts for a long time
E)stock; it generally increases its value through use
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Page 17
Chapter 16: Market Failures and Government Intervention
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Sample Questions
Q1) Suppose an advertising firm purchases additional insurance against theft,and as a result,the partners are not very careful about locking their office doors when they leave.This is an example of
A)the free-rider problem.
B)adverse selection.
C)a public good.
D)a common property resource.
E)moral hazard.
Q2) Refer to Figure 16-1.Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC<sub>0</sub> and MB<sub>0</sub>,respectively,then
A)the competitive price is too high.
B)the competitive price is too low.
C)the competitive quantity is too high.
D)the competitive quantity is too low.
E)the competitive price and quantity are consistent with allocative efficiency.
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18
Chapter 17: The Economics of Environmental Protection
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Sample Questions
Q1) Refer to Figure 17-5.Suppose Firm 1 and Firm 2 are each abating Q<sub>3 </sub>units of pollution.If the government imposed an emissions tax of $40 per unit of emissions,and this tax rate was known to equal the social marginal cost of pollution,then we can predict with confidence that
A)each firm would abate to Q<sub>3</sub>.
B)each firm would abate to the same level.
C)the resulting level of pollution would be socially optimal.
D)Firm 2 would increase abatement beyond Q<sub>3 </sub>and Firm 1 would abate less than Q<sub>3</sub>.
E)Firm 2 would increase its emissions and this would not be socially optimal.
Q2) Refer to Figure 17-8,which depicts the market for tradable pollution permits.If there is an increase in firms' marginal cost of pollution abatement,
A)firms decide to abate more pollution.
B)the price of pollution permits will fall.
C)firms will demand more pollution permits.
D)firms will demand fewer pollution permits.
E)firms require exactly Q* permits.
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Chapter 18: Taxation and Public Expenditure
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Sample Questions
Q1) If a tax system contains some important taxes that are regressive,substantial progressivity in other taxes would be required in order to achieve
A)proportionality in the overall tax system.
B)a negative income tax.
C)a flat-rate tax.
D)equity in the overall tax system.
E)efficiency in the overall tax system.
Q2) Refer to Figure 18-1.A regressive tax is illustrated by curve(s)
A)A and B.
B)B and C.
C)C and D.
D)A only.
E)C only.
Q3) In Canada,post-secondary education is
A)a provincial responsibility,funded by property taxes.
B)a form of transfer payment.
C)a provincial responsibility not funded by the federal government.
D)a form of equalization payment across geographic boundaries.
E)a provincial responsibility,funded almost completely from provincial budgets.
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Page 20
Chapter 19: What Macroeconomics Is All About
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Sample Questions
Q1) A worker currently earning $3000 per month has negotiated a 4% wage increase in anticipation of a 4% inflation rate in the next year.Under what scenario will the worker have a higher purchasing power?
A)if next year's inflation rate is 4%
B)if next year's inflation rate is 3%
C)if next year's inflation rate is 5%
D)if next year some prices increase by only 4%
E)if next year some prices increase by only 5%
Q2) The real rate of interest is equal to the nominal interest rate
A)divided by the price level.
B)minus the rate of inflation.
C)multiplied by the rate of inflation.
D)plus the risk ratio.
E)plus the price level.
Q3) A change in the Consumer Price Index measures
A)a change in a specific absolute price.
B)a change in quantities of commodities sold.
C)a change in relative prices.
D)a change in a broad average price over some particular time span.
E)the change in gross domestic product.
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Chapter 20: The Measurement of National Income
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Sample Questions
Q1) Consider the circular flow of expenditure and income in the Canadian economy.Which of the following is an injection into the circular flow?
A)imports
B)taxes
C)saving
D)consumption
E)investment
Q2) Refer to Table 20-7.The real GDP in 2014,expressed in 2007 prices,was
A)$773 585.
B)$798 000.
C)$800 000.
D)$869 200.
E)$900 000.
Q3) Refer to Table 20-7.The growth rate of real output from 2014 to 2015 is A)1.03%.
B)1.84%.
C)3.25%.
D)3.41%.
E)4.27%.
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Page 22
Chapter 21: The Simplest Short-Run Macro Model
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Q1) Consider a simple macro model with a constant price level and demand-determined output.Suppose desired aggregate expenditures are less than the current level of national income.The vertical distance between the AE curve and the 45-degree line represents
A)desired accumulation of inventories.
B)desired decumulation of inventories.
C)the amount by which output exceeds desired expenditures.
D)the output gap.
E)the amount by which desired expenditures exceeds output.
Q2) Consider a simple macro model with a constant price level.If the AE function is horizontal,then we know the simple multiplier is
A)less than zero.
B)zero.
C)between zero and one.
D)exactly one.
E)greater than one.
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Chapter 22: Adding Government and Trade to the Simple Macro Model
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Q1) Refer to Figure 22-1.If actual national income in this economy is equal to $1000,then net exports are equal to
A)$90.
B)$200.
C)$250.
D)$375.
E)$400.
Q2) Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.When Y = 11 000,the government is running a budget
A)deficit of 1500.
B)surplus of 300.
C)balance.
D)deficit of 300.
E)surplus of 1500.
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Page 24
Chapter 23: Output and Prices in the Short Run
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Q1) The aggregate supply (AS)curve is drawn with which variables on the axes of the graph?
A)the price level on the vertical axis and MPC on the horizontal axis
B)national income on the vertical axis and total desired consumption on the horizontal axis
C)the price level on the vertical axis and real GDP on the horizontal axis
D)national income on the vertical axis and marginal cost on the horizontal axis
E)the price level on the vertical axis and real disposable income on the horizontal axis
Q2) Which of the following would likely cause an upward parallel shift in the AE curve and a rightward shift in the AD curve?
A)an increase in the business confidence of firms
B)a reduction in government purchases
C)an increase in the MPC
D)a decrease in the price level
E)an increase in the price level
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Chapter 24: From the Short Run to the Long Run: The Adjustment of Factor Prices
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Q1) The growth rate of potential output might be decreased by an expansionary fiscal policy if
A)the budget deficits are persistent.
B)the simple multiplier is small.
C)the policy crowds out private investment.
D)public investment has high productivity.
E)the composition of output is not altered.
Q2) Suppose the government implements a permanent reduction in the net tax rate in an effort to increase real GDP.One disadvantage of this policy is that
A)the effect of economic shocks on government revenues becomes more volatile,while the economy becomes more stable.
B)further reductions in the net tax rate will be required to maintain the effectiveness of the tax rate as an automatic stabilizer.
C)private investment is crowded out,which may reduce the future growth rate of potential output.
D)the effect of the automatic stabilizer is reduced and the economy will be more unstable.
E)both C and D are correct.
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Page 26
Chapter 25: Long-Run Economic Growth
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Q1) In the long run,an increase in the demand for investment pushes ________ the real interest rate,encourages ________ saving by households,and leads to a ________ future growth rate of potential output.
A)down; less; lower B)up; less; lower C)down; less; higher D)up; more; higher E)up; more; lower
Q2) Modern growth theories are more optimistic than Neoclassical growth theories because the former emphasize the unlimited potential of A)modern capital.
B)knowledge-driven technological change.
C)more educated government policy making.
D)modern labour.
E)economic theory.
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Chapter 26: Money and Banking
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Q1) A bank run is unlikely to occur in Canada today because
A)if necessary,the central bank can provide all the reserves that are necessary to avoid this situation.
B)the commercial banks are required by law to maintain 100% of their deposits in cash.
C)there is relatively little demand for cash at present.
D)banking is done mostly electronically.
E)the commercial banks hold enough government securities that are convertible into cash.
Q2) The Canadian banking system is a
A)gold-reserve system.
B)fractional-reserve system.
C)target-reserve system.
D)asset-backed reserve system.
E)treasury-bill reserve system.
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28
Chapter 27: Money, Interest Rates, and Economic Activity
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Q1) Consider the monetary transmission mechanism.In an open economy,such as Canada's,a decrease in the money supply leads to a rise in the interest rate.This is followed by
A)an outflow of financial capital and an appreciation of the Canadian dollar.
B)an inflow of financial capital and a depreciation of the Canadian dollar.
C)an outflow of financial capital and a depreciation of the Canadian dollar.
D)an inflow of financial capital and an appreciation of the Canadian dollar.
Q2) The hypothesis in economics known as hysteresis is that
A)the economy's adjustment process operates in response to an expansion of the money supply,but not a contraction.
B)changes in the money supply have a stronger influence on investment demand than do changes in fiscal policy.
C)the monetary transmission mechanism does not apply in an open-economy setting.
D)the role of money in the long run is neutral.
E)the path of real GDP in an economy can influence that economy's level of potential output.
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Chapter 28: Monetary Policy in Canada
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Q1) Refer to Figure 28-1.If the Bank of Canada pursues a(n)________ monetary policy and raises the target interest rate from 2% to 3%,then the quantity of money demanded will ________.
A)contractionary; rise
B)contractionary; fall
C)expansionary; not change
D)expansionary; rise
E)expansionary; fall
Q2) In an effort to maintain inflation at its targeted level the Bank of Canada designs its policies,in the short run,to
A)eliminate all unemployment.
B)keep real GDP close to potential output.
C)minimize the growth of the money supply.
D)allow the aggregate supply curve to close any output gaps.
E)eliminate all negative shocks to the economy.
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Chapter 29: Inflation and Disinflation
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Q1) Refer to Figure 29-3.The movement of the economy from E<sub>0</sub> to E<sub>1</sub> was likely caused by
A)a positive demand shock due to an increase in investment.
B)a positive supply shock caused by improved productivity.
C)a negative demand shock caused by fall in consumption.
D)a negative supply shock caused by higher input prices.
E)an increase in the price level.
Q2) If the economy is faced with continued negative supply shocks,such as annual wage increases for unionized workers,and there is no monetary validation,we can expect
A)an inflationary gap.
B)a one-time rise in the price level.
C)rising unemployment until the wage increases cease,or are offset by other wage decreases.
D)a shrinking output gap.
E)peace in labour-management relations.
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Chapter 30: Unemployment Fluctuations and the Nairu
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Q1) An increase in the rate of aggregate economic growth usually speeds up the rate of change in the structure of labour demand.As a result,we can expect that structural unemployment will ________,and will therefore cause the NAIRU to ________.
A)decrease; increase
B)decrease; decrease C)remain constant; remain constant
D)increase; increase
E)increase; decrease
Q2) Suppose that unemployed workers searching to replace their lost jobs become discouraged and so decide to temporarily give up the search.Such a decision
A)increases the NAIRU.
B)decreases the NAIRU.
C)increases the official unemployment rate.
D)decreases the official unemployment rate.
E)has no effect on the official unemployment rate.
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Chapter 31: Government Debt and Deficits
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Q1) Consider the government's budget deficit function.With an unchanged fiscal policy by government,an increase in GDP tends to ________ net tax revenues and thus ________ the budget deficit.
A)raise; raise
B)raise; lower
C)lower; raise
D)lower; lower
E)lower; leave unchanged
Q2) When a government changes its fiscal policy,it is
A)changing the exchange rates to change national income.
B)increasing the money supply to increase national income.
C)changing government spending and/or tax rates to achieve some objective.
D)using government spending and taxes together with changing the money supply in order to achieve full employment.
E)buying and selling private bonds to increase or decrease the overnight lending rate.
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Chapter 32: The Gains From International Trade
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Q1) Refer to Figure 32-3.Suppose a trading partner offers to give coconuts to Robinson Crusoe in exchange for his bananas.If Robinson Crusoe is to improve his consumption possibilities,the terms of trade must be 1 kg coconuts for
A)5 kg bananas.
B)4 kg bananas.
C)3 kg bananas.
D)2 kg bananas.
E)1 kg bananas.
Q2) There will be no gains from specialization and trade between two countries if 1)neither country has an absolute advantage in the production of any good; 2)neither country has a comparative advantage in the production of any good; 3)opportunity costs are the same in the two countries.
A)1 only
B)2 only
C)3 only
D)1 and 2
E)2 and 3
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Chapter 33: Trade Policy
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Q1) Suppose Canada has a 20% tariff on the import of carpets,and Canada currently imports this product from India at a with-tariff price of $22.The with-tariff price of identical carpets from the United States is $24.Now suppose a free-trade agreement with the U.S.eliminates the tariff and so the no-tariff price from the U.S.is $20.Canada now purchases carpets from the U.S.This is an example of A)dumping.
B)trade diversion.
C)a countervailing duty.
D)trade creation.
E)specialization.
Q2) In international trade,"dumping" is defined as charging
A)a lower price in foreign markets than in the domestic market.
B)a domestic retail price above the marginal cost faced by a firm importing the product at the wholesale level.
C)export prices below average cost for a short period of time.
D)export prices below average cost for any period of time.
E)export prices below marginal cost for any period of time.
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Chapter 34: Exchange Rates and the Balance of Payments
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Q1) Which of the following would appear as a debit item in the trade account of the Canadian balance of payments?
A)dividends payable to Canadians on Canadian-owned assets located in Australia
B)sales of Canadian steel to European importers
C)Canadian purchases of Colombian coffee
D)purchases by a Japanese pension fund of CN Rail shares
E)purchases by General Motors of Canadian-made auto parts
Q2) Other things being equal,if the Canadian dollar depreciates,the quantity of foreign exchange demanded will decline because
A)the Canadian-dollar price of foreign goods will rise.
B)the foreign-exchange price of foreign goods will fall.
C)the Canadian-dollar price of foreign goods will fall.
D)the foreign-exchange price of foreign goods will rise.
E)the Canadian-dollar price of Canadian goods will rise.
Q3) Refer to Figure 34-2.If the exchange rate is e<sub>1</sub>,there is
A)a shortage of foreign exchange.
B)a surplus of Canadian dollars.
C)pressure on the Canadian dollar to depreciate.
D)pressure on the exchange rate to rise.
E)a shortage of Canadian dollars.
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