Economics I Final Exam
Course Introduction
Economics I provides an introduction to the basic principles and concepts of microeconomics and macroeconomics. The course examines how individuals, businesses, and governments make decisions regarding the allocation of scarce resources, the functioning of markets, supply and demand, price mechanisms, and the role of competition. Students will explore topics such as consumer behavior, production and costs, market structures, and the economic impact of government policies. By the end of the course, learners will have a foundational understanding of how economic systems operate and how economic agents interact within these systems.
Recommended Textbook
ECON Macro Principles of Macroeconomics 1st Canadian Edition by Moir OShaughnessy
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Chapter 1: The Art and Science of Economic Analysis
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) In a circular-flow model, which of the following is NOT supplied by households?
A) labour
B) goods and services
C) capital
D) entrepreneurial ability
Answer: B
Q2) What is the major difference between a good and a service?
A) A good is tangible, but a service is NOT.
B) A service helps satisfy unlimited wants, but a good does NOT.
C) A service is available in unlimited quantities, but a good is NOT.
D) A good is available in unlimited quantities, but a service is NOT.
Answer: A
Q3) Which of the four types of decision makers in the Canadian economy plays the largest role?
A) consumers
B) business
C) government
D) exporters
Answer: A
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3
Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) How is opportunity cost defined?
A) as the value of all alternatives NOT chosen
B) as value of the best alternative NOT chosen
C) as the difference between the benefits from a choice and the benefits from the next best alternative
D) as the difference between the benefits from a choice and the costs of that choice
Answer: B
Q2) Suppose James trades a ginger snap cookie for a chocolate chip cookie.What is James engaging in?
A) barter
B) comparative advantage
C) absolute advantage
D) division of labour
Answer: A
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Which of the following is most likely to be a partnership?
A) the accounting firm of Hope and Williams
B) General Motors
C) the Toronto Symphony Orchestra
D) Canada Post
Answer: A
Q2) How are owners of corporations most frequently referred to?
A) as entrepreneurs
B) as limited partners
C) as managers
D) as shareholders
Answer: D
Q3) How are contracts enforced?
A) by the firms that make the contracts through buy-out clauses
B) by law firms that specialize in contract enforcement
C) by corporations specializing in contract writing and enforcement
D) by the government through the judicial system
Answer: D
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5
Chapter 4: Demand, Supply, and Markets
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Sample Questions
Q1) Which statement best describes what happens when there is a change in quantity demanded?
A) A change in quantity demanded is shown by a shift in a given demand curve.
B) The demand curve shifts whenever the quantity demanded of a substitute good changes.
C) A change in the price of a good, other things constant, will lead to a change in quantity demanded.
D) The lower the price of a product, other things constant, the lower the quantity demanded.
Q2) Suppose the market for beef cattle was initially in equilibrium.What will be the effect of an increase in the price of the feed grains used to fatten cattle?
A) The demand for beef cattle will increase, driving the price of beef upward.
B) The supply of beef cattle will decline, driving the price of beef upward in the long run.
C) The supply of beef will increase, placing downward pressure on the price of beef in the long run.
D) Both supply and demand will fall, leaving the price of beef virtually unchanged.
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Chapter 5: Algebraic Approach to Demand, Supply, and Equilibrium
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Sample Questions
Q1) Market demand is given as Qd = 100 - 2P.Market supply is given as Qs = P + 10.What would result if the market price were $20?
A) a shortage of 30
B) a surplus of 60
C) a surplus of 30
D) a shortage of 60
Q2) Market demand is given as Qd = 100 - 2P.Market supply is given as Qs = P + 10.In a perfectly competitive equilibrium, what will be price and quantity traded in the market?
A) Price will be $40, and quantity will be 30.
B) Price will be $35 and quantity will be 30.
C) Price will be $30, and quantity will be 40.
D) Price will be $25, and quantity will be 50.
Q3) Refer to the exhibit.At the equilibrium price, what would consumer surplus be?
A) $480
B) $640
C) $1120
D) $1280
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Page 7
Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) An economic variable can be measured in units of time, such as spending per year.What is this economic variable known as?
A) as a stock variable
B) as a periodic variable
C) as an expectations variable
D) as a flow variable
Q2) Suppose the Canadian price level increases.What happens to the aggregate quantity of Canadian output demanded?
A) It decreases because Canadian products become cheaper relative to foreign products.
B) It decreases because Canadian products become more expensive relative to foreign products.
C) It increases because Canadian products become cheaper relative to foreign products.
D) It increases because Canadian products become more expensive relative to foreign products.
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8
Chapter 7: Tracking the Canadian Economy
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Sample Questions
Q1) Suppose a product becomes widely used.How would this tend to be reflected in the consumer price index over time?
A) Inflation would be understated.
B) Inflation would NOT be affected.
C) Inflation would be overstated.
D) The inflation rate would become zero.
Q2) Suppose the CPI is 160 in one year and 175 in the next year.What is the approximate annual rate of inflation as measured by the CPI?
A) 4.5 percent
B) 8.6 percent
C) 9.4 percent
D) 15 percent
Q3) Which of the following is an injection into the circular flow?
A) taxes
B) saving
C) transfer payments
D) government borrowing
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Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Suppose that top government officials claim that "more people are working now than ever before." What does this mean?
A) The unemployment rate is lower now than ever before.
B) The number of unemployed people is lower now than ever before.
C) The number of people in the labour force is higher now than ever before.
D) The number of employed people is higher now than ever before.
Q2) Which term refers to workers who are overqualified for their current jobs or can find only part-time work?
A) unemployed
B) discouraged workers
C) NOT in the labour force
D) underemployed
Q3) Suppose the interest rate increases.Other things constant, how will the loanable funds market be affected?
A) The demand for loanable funds curve will shift to the right.
B) The demand for loanable funds curve will shift to the left.
C) The quantity of loanable funds supplied will decrease.
D) The quantity of loanable funds demanded will decrease.
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Page 10
Chapter 9: Productivity and Growth
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Sample Questions
Q1) One economic theory states that as time passes, economic systems become much more similar, such that they have common rates of growth, common employment levels, and common rates of inflation.What is the name of this theory?
A) divergence theory
B) parallel path theory
C) convergence theory
D) noncompeting economic systems theory
Q2) Suppose a nation moves upward along its per-worker production function.In terms of relating output per worker to capital per worker, how will labour productivity be affected?
A) Labour productivity will rise.
B) Labour productivity will fall.
C) Labour productivity will remain the same.
D) Labour productivity will first rise and then fall.
Q3) What does labour productivity measure?
A) the input per unit of labour
B) the output per unit of labour
C) the average input per unit of labour
D) the units of capital per unit of labour
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Page 11
Chapter 10: Aggregate Expenditure and Aggregate
Demand
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Sample Questions
Q1) Refer to the table in the exhibit.At the equilibrium level of GDP, what do injections equal?
A) $1.0 trillion
B) $1.3 trillion
C) $1.4 trillion
D) $1.5 trillion
Q2) How will an increase in autonomous investment affect the aggregate expenditure line?
A) It will shift the aggregate expenditure line upward.
B) It will shift the aggregate expenditure line downward.
C) It will result in an upward movement along the aggregate expenditure line.
D) It will result in a downward movement along the aggregate expenditure line.
Q3) What does the aggregate expenditure line represent?
A) total planned spending at each income level
B) total planned spending at each price level
C) total planned spending at each income level, holding the price level constant
D) total planned spending at each price level, holding the level of income constant
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Page 12
Chapter 11: Aggregate Supply
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Sample Questions
Q1) What does the real wage represent?
A) the quantity of goods and services a worker can purchase in exchange for performing work
B) the dollar value of the goods and services a worker can purchase in exchange for performing work
C) a worker's nominal wage minus taxes paid on wages
D) the actual amount of income a worker receives after deductions for such things as taxes and insurance
Q2) What is the definition of stagflation?
A) decreased output accompanied by a higher price level
B) decreased output accompanied by a lower price level
C) increased output accompanied by a higher price level
D) increased output accompanied by a lower price level
Q3) Refer to the graph in the exhibit.What does the graph illustrate regarding aggregate supply?
A) an increase in short-run aggregate supply
B) an increase in long-run aggregate supply
C) a decrease in short-run aggregate supply
D) a decrease in long-run aggregate supply
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Page 13
Chapter 12: Fiscal Policy
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Sample Questions
Q1) What set of fiscal policies could the government use to close an expansionary gap?
A) decrease taxes, increase government purchases, and increase transfer payments
B) increase taxes, increase government purchases, and increase transfer payments
C) increase taxes, increase transfer payments, and decrease government purchases
D) increase taxes, decrease transfer payments, and decrease government purchases
Q2) Which of the following is a component of aggregate demand?
A) transfer payments from government
B) taxation by government
C) purchases by government
D) borrowing by government
Q3) How is the aggregate demand curve affected when spending by the federal government exceeds net taxes?
A) The aggregate demand curve shifts leftward.
B) The aggregate demand curve remains the same.
C) The aggregate demand curve shifts rightward.
D) A downward movement occurs along the aggregate demand curve.
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14
Chapter 13: Money and the Financial System
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Sample Questions
Q1) Under what circumstances would it be less likely that a double coincidence of wants exists and the more likely that a monetary exchange will develop?
A) the fewer the number of goods available in an economy
B) the greater the number of goods available in an economy
C) when are no goods are available in an economy
D) when individuals are producing only the goods they want to consume
Q2) Which of the following does the Bank of Canada have the power to do?
A) raise or lower federal income tax rates
B) increase or decrease federal government spending
C) compete with chartered banks in making loans to business firms
D) buy and sell federal government securities
Q3) During the first few years of this century in the United States, how did the availability of subprime mortgages initially affect the demand for houses?
A) The demand for houses increased.
B) The demand for houses decreased.
C) The demand for houses stayed the same.
D) The demand for houses was NOT affected by subprime mortgages.
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) Suppose the Bank of Canada purchases government securities on the open market.How will the money supply be affected?
A) The money supply will decrease.
B) The money supply will increase only if the seller of those securities is a chartered bank.
C) The money supply will increase through the system of securities dealers rather than through the chartered banking system.
D) The money supply will increase through the chartered banking system regardless of who the seller is.
Q2) Which of the following would likely increase the money supply?
A) One bank buys government securities from another bank.
B) The desired reserve ratio increases.
C) A chartered bank sells securities to the Bank of Canada.
D) A chartered bank buys securities from the Bank of Canada.
Q3) Refer to the table in the exhibit.How have LeftBank's total reserves changed?
A) Total reserves fell by $9,000.
B) Total reserves rose by $9,000.
C) Total reserves fell by $10,000.
D) Total reserves rose by $10,000.
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Page 16
Chapter 15: Monetary Theory and Policy in an Open Economy
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Sample Questions
Q1) What does an increase in the money supply lead to?
A) a decline in interest rates, an increase in investment, and an increase in aggregate demand
B) a decline in interest rates, a decrease in investment, and an increase in aggregate demand
C) a decline in interest rates, an increase in investment, and a decline in aggregate demand
D) an increase in interest rates, an increase in investment, and an increase in aggregate demand
Q2) Suppose the money supply expands.What will be the shape of the short-run aggregate supply curve that yields the largest short-run increase in real GDP?
A) vertical
B) steeply sloped
C) 45 degrees
D) relatively flat
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Page 17
Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Which of the following statements about the long-run Phillips curve is NOT accurate?
A) Unemployment is at the natural rate.
B) Employers and workers have the time and ability to adjust fully to unexpected changes in aggregate demand.
C) The only choices for policymakers are different levels of inflation.
D) Inflation and unemployment are inversely related.
Q2) Which of the following is a belief generally held by individuals who are opposed to using policy to stabilize the economy?
A) that neither fiscal policy nor monetary policy has much impact on aggregate demand
B) that attempts to stabilize the economy can increase the magnitude of economic fluctuations
C) that unemployment and inflation are NOT cause for much concern
D) that unemployment is a cause for concern, but inflation is NOT
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18
Chapter 17: International Finance
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Sample Questions
Q1) Suppose the Canadian dollar depreciates in the foreign exchange market.What is the effect on Canadian exports and imports?
A) Exports become more expensive, and imports become more expensive.
B) Exports and imports remain the same.
C) Exports become less expensive, and imports become less expensive.
D) Exports become less expensive, and imports become more expensive.
Q2) How is the trade balance calculated?
A) the services balance + the current account balance + the capital account balance
B) merchandise exports - merchandise imports
C) the current account balance + the capital account balance
D) foreign purchases of domestic assets - domestic purchases of foreign assets
Q3) How are exchange rates determined?
A) They fluctuate to equate the quantity of foreign currency demanded with the quantity supplied.
B) They fluctuate to equate imports and exports.
C) They fluctuate to equate interest rates in various countries.
D) They fluctuate according to agreements between the governments of various countries.
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Page 19
Chapter 18: International Trade
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Sample Questions
Q1) What is the world price of a good?
A) the price paid for a good by consumers in all nations
B) the price at which a good is traded internationally
C) the price paid for a good in Canadian dollars
D) the price paid for a good in foreign currency
Q2) Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $1.00.If the tariff is $0.50 per unit, what area represents the resulting loss of consumer surplus?
A) area a
B) area b + d
C) area c
D) area c + i + e + f
Q3) What was the largest category of exports from Canada in 2011?
A) motor vehicles and parts
B) services
C) energy products
D) consumer goods
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Chapter 19: Economic Development
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Sample Questions
Q1) What is the yardstick most often used to compare living standards across nations?
A) average production cost per unit
B) sales revenue per month
C) output per capita
D) imports per year
Q2) On average, what group of countries would be most likely to have a high number of telephone lines per 1,000 people?
A) low-income countries
B) middle-income countries
C) high-income countries
D) developing countries
Q3) Which of the following is most unlikely to be an industrial market?
A) Western Europe
B) North American
C) Australia
D) sub-Saharan African economies
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21
Chapter 20: Understanding Graphs
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Sample Questions
Q1) Refer to the exhibit.What is the slope of the line?
A) -10
B) -0.1
C) 0.1
D) 10
Q2) Refer to the exhibit.Which graph illustrates an inverse or negative relationship between variable X and variable Y?
A) graph a
B) graph b
C) graph c
D) graph d
Q3) A graph shows Ron's weight on the vertical axis and his consumption of ice cream on the horizontal axis.Suppose the graph indicates that for each serving of ice cream he eats, Ron gains 2 kilograms, regardless of how much ice cream he had already eaten.What would this graph show?
A) a straight line with slope = 2
B) a straight line with slope = 1/2
C) a straight line with slope = -1/2
D) a straight line with slope = -2
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