Fundamentals of Macroeconomics Practice Exam
Course Introduction
Fundamentals of Macroeconomics introduces students to the core concepts and principles that govern the behavior of economies at a large scale. The course covers topics such as national income, economic growth, unemployment, inflation, fiscal and monetary policy, and international trade. Emphasis is placed on the ways in which governments and central banks influence economic performance and the tools used to address economic challenges. By analyzing real-world data and current events, students develop a solid foundation for understanding how macroeconomic forces shape society and impact everyday life.
Recommended Textbook
Principles of Macroeconomics 7th Canadian Edition by N. Mankiw
Available Study Resources on Quizplus
17 Chapters
3576 Verified Questions
3576 Flashcards
Source URL: https://quizplus.com/study-set/3595
Page 2
Chapter 1: Ten Principles of Economics
Available Study Resources on Quizplus for this Chatper
216 Verified Questions
216 Flashcards
Source URL: https://quizplus.com/quiz/71363
Sample Questions
Q1) Tuition is the single-largest cost of attending college for most students.
A)True
B)False
Answer: False
Q2) What is an example of an externality?
A) the impact of bad weather on the income of farmers
B) the impact of the personal income tax on a person's ability to purchase goods and services
C) the impact of pollution from a factory on the health of people in the vicinity of the factory
D) the impact of increases in health care costs on the health of individuals in society
Answer: C
Q3) What term refers to the amount of goods and services produced from each hour of a worker's time?
A) total output
B) productivity
C) marginal product
D) quantity
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Thinking Like an Economist
Available Study Resources on Quizplus for this Chatper
234 Verified Questions
234 Flashcards
Source URL: https://quizplus.com/quiz/71364
Sample Questions
Q1) What does macroeconomics study?
A) individual decision makers
B) economic history
C) economy-wide phenomena
D) how firms maximize profit
Answer: C
Q2) What is the ordered pair that represents the origin on a graph?
A) (1,1)
B) (0,0)
C) (0,1)
D) (1,0)
Answer: B
Q3) Which statement does NOT illustrate a characteristic of an economic model?
A) A model simplifies reality.
B) A model can explain how the economy is organized.
C) A model can assume away irrelevant details.
D) A model's conclusions are unrelated to assumptions
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Interdependence and the Gains From Trade
Available Study Resources on Quizplus for this Chatper
206 Verified Questions
206 Flashcards
Source URL: https://quizplus.com/quiz/71365
Sample Questions
Q1) Refer to Table 3-2.What does each producer have an absolute advantage in?
A) The farmer has an absolute advantage in meat,and the rancher has an absolute advantage in potatoes.
B) The farmer has an absolute advantage in neither,and the rancher has an absolute advantage in meat.
C) The farmer has an absolute advantage in potatoes good,and the rancher has an absolute advantage in both goods.
D) The farmer has an absolute advantage in potatoes,and the rancher has an absolute advantage in neither good.
Answer: B
Q2) Refer to Figure 3-2.What is the opportunity cost of 1 bushel of wheat for Cliff?
A) 1 / 4 bushel of corn
B) 1 / 2 bushel of corn
C) 1 bushel of corn
D) 4 bushels of corn
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: The Market Forces of Supply and Demand
Available Study Resources on Quizplus for this Chatper
349 Verified Questions
349 Flashcards
Source URL: https://quizplus.com/quiz/71366
Sample Questions
Q1) Which of the following would be most likely to decrease the price of a new house?
A) higher wages for carpenters,higher wood prices,increases in consumer incomes,higher apartment rents,increases in population,and expectations of higher house prices in the future
B) higher wages for carpenters,lower wood prices,reductions in consumer incomes,lower apartment rents,decreases in population,and expectations of lower house prices in the future
C) lower wages for carpenters,higher wood prices,decreases in consumer incomes,higher apartment rents,decreases in population,and expectations of higher house prices in the future
D) lower wages for carpenters,lower wood prices,decreases in consumer incomes,lower apartment rents,decreases in population,and expectations of lower house prices in the future
Q2) Refer to the Figure 4-4.If the price is $10,what would happen?
A) There would be a shortage of 200 and the price would rise.
B) There would be a surplus of 200 and the price would fall.
C) There would be a shortage of 600 and the price would rise.
D) There would be a surplus of 600 and the price would fall.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Measuring a Nations Income
Available Study Resources on Quizplus for this Chatper
169 Verified Questions
169 Flashcards
Source URL: https://quizplus.com/quiz/71367
Sample Questions
Q1) To encourage formation of small businesses,the government could provide subsidies.How would these subsidies be treated?
A) They would be included in GDP because they are part of government expenditures.
B) They would be included in GDP because they are part of investment expenditures.
C) They would not be included in GDP because they are transfer payments.
D) They would not be included in GDP because the government raises taxes to pay for them.
Q2) When economists talk about growth in the economy,how do they measure that growth?
A) with the absolute change in nominal GDP
B) with the percentage change in real GDP
C) with the absolute change in real GDP
D) with the percentage change in nominal GDP
Q3) In the national income accounts,what is depreciation called?
A) total consumption depreciation
B) capital consumption allowance
C) consumption of circulating capital
D) loss due to wear
To view all questions and flashcards with answers, click on the resource link above.
7
Chapter 6: Measuring the Cost of Living
Available Study Resources on Quizplus for this Chatper
181 Verified Questions
181 Flashcards
Source URL: https://quizplus.com/quiz/71368
Sample Questions
Q1) Which problem in the construction of the CPI is the invention of pocket-sized computers most relevant to?
A) substitution bias
B) introduction of new goods
C) unmeasured quality change
D) income bias
Q2) Suppose the price of a litre of milk rises from $1 to $1.25 and the price of a T-shirt rises from $8 to $10.If the CPI rises from 150 to 175,what will people likely buy?
A) more milk and more T-shirts
B) more milk and fewer T-shirts
C) less milk and more T-shirts
D) less milk and fewer T-shirts
Q3) In 1972 in Kelowna,BC,one could buy model rocket engines for $1.50.If those same engines cost $3.00 today,which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?
A) 60 in 1972 and 100 today
B) 60 in 1972 and 110 today
C) 60 in 1972 and 120 today
D) 60 in 1972 and 130 today
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Production and Growth
Available Study Resources on Quizplus for this Chatper
191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/71369
Sample Questions
Q1) In the traditional view,which production process is considered when studying economic growth?
A) constant returns
B) increasing returns
C) diminishing returns
D) diminishing returns for low levels of capital,and increasing returns for high levels of capital
Q2) When a country removes trade barriers and exports pork chops and imports stereos,what will most likely happen?
A) Its growth will slow down.
B) Its productivity will decrease.
C) It will essentially be transforming pork chops into stereos.
D) Its economic well-being will decrease,while that of the country that sells stereos will increase.
Q3) If there are constant returns to scale,how is the production function written?
A) xY = 2 x A F(L,K,H,N)
B) Y / L = A F(xL,xK,xH,xN)
C) Y / L = A F( 1,K / L,H / L,N / L)
D) xL = A F(1,Y,K,H,N)
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Saving, investment, and the Financial System
Available Study Resources on Quizplus for this Chatper
213 Verified Questions
213 Flashcards
Source URL: https://quizplus.com/quiz/71370
Sample Questions
Q1) How does the supply and demand for loanable funds model reflect an increase in the goods and services tax rate?
A) The supply curve shifts to the left,while the demand curve remains unchanged.
B) The supply curve shifts to the right,while the demand curve remains unchanged.
C) The supply curve remains unchanged,while the demand curve shifts to the left.
D) The supply curve remains unchanged,while the demand curve shifts to the right.
Q2) Lenders sell bonds,and borrowers buy them.
A)True
B)False
Q3) Suppose a developing country decides to institute an investment tax credit.As a result,what is most likely to happen?
A) Interest rates would rise,and investment would fall.
B) Interest rates would fall,and investment would rise.
C) Both interest rates and investment would fall.
D) Both interest rates and investment would rise.
Q4) Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Unemployment and Its Natural Rate
Available Study Resources on Quizplus for this Chatper
197 Verified Questions
197 Flashcards
Source URL: https://quizplus.com/quiz/71371
Sample Questions
Q1) Which condition causes structural unemployment?
A) Wages are kept above the equilibrium level.
B) People choose not to work at the equilibrium wage.
C) Some wages are below the equilibrium level.
D) Conditions for unemployment insurance benefits relax.
Q2) Which statement best defines collective bargaining?
A) It is the process by which the government sets exemptions from the minimum-wage law.
B) It is setting the same wage for all employees to prevent jealousy among workers.
C) It is the situation when firms collude to set the wages of employees in order to keep them below equilibrium.
D) It is the process by which unions and firms agree on the terms of employment.
Q3) Which law is most likely to reduce the natural rate of unemployment?
A) a law that makes all provinces repeal right-to-work laws
B) a law that makes it harder to find out about job candidates' past job history
C) a law that abolishes the minimum wage
D) a law that make it more difficult to monitor the efforts of workers
Q4) Most spells of unemployment are short,and most unemployment observed at any given time is long term.How can this be?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Monetary System
Available Study Resources on Quizplus for this Chatper
204 Verified Questions
204 Flashcards
Source URL: https://quizplus.com/quiz/71372
Sample Questions
Q1) Suppose the reserve ratio is 25 percent and the public holds $10 million in cash.Then the public decides to withdraw $5 million from the banks.How does the money supply eventually change?
A) falls by $5 million
B) falls by $10 million
C) falls by $20 million
D) falls by $35 million
Q2) Refer to the Table 10-3.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves,how much in excess reserves does the Bank of Kamloops now hold?
A) $5
B) $25
C) $60
D) $65
Q3) Denote a bank's assets by A,the bank's debt (deposits plus debt issued by the bank)by D,and the bank's capital by C.Starting from the identity A = C + D and using the definition of leverage ratio L = A / C,show that the percentage change in capital is equal to the leverage ratio times the percentage change in assets.
Q4) What is the difference between money and wealth?
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Money Growth and Inflation
Available Study Resources on Quizplus for this Chatper
195 Verified Questions
195 Flashcards
Source URL: https://quizplus.com/quiz/71373
Sample Questions
Q1) If a country had deflation of 2 percent while the nominal interest rate increased by 1 percentage point,how would the real interest rate change?
A) The real interest rate would decrease by 1 percentage point.
B) The real interest rate would increase by 1 percentage point.
C) The real interest rate would decrease by 3 percentage points.
D) The real interest rate would increase by 3 percentage points.
Q2) Which statement best describes the evolution of the price level in Canada?
A) The price level rose at an average annual rate of about 2 percent over the past 70 years.
B) The price level has increased about 12-fold over the past 70 years.
C) The price level increased in the 1970s at a rate above the average of the past 70 years.
D) The price level has never decreased over the past 70 years.
Q3) What would be the effect of indexing the tax system to take into account the effects of inflation on taxing capital gains?
A) Only real interest earnings would be taxed.
B) The tax burden on capital gains would increase.
C) Average tax rates would increase.
D) Investors would be worse off.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Open-Economy Macroeconomics: Basic Concepts
Available Study Resources on Quizplus for this Chatper
220 Verified Questions
220 Flashcards
Source URL: https://quizplus.com/quiz/71374
Sample Questions
Q1) Suppose that a country exports $300 million of goods and services and imports $180 million of goods and services.What is the value of that country's net exports?
A) $-120 million
B) $120 million
C) $300 million
D) $380 million
Q2) What is the logic behind the theory of purchasing-power parity?
Q3) A German company sells vehicles to a dealership in Canada.Which statement best identifies the effects of these transactions?
A) They have no effect on Canadian net exports,and they increase German net exports.
B) They decrease Canadian net exports and increase German net exports.
C) They increase Canadian and German net exports.
D) They increase Canadian net exports and decrease German net exports.
Q4) Which of the following would be Canadian foreign direct investment?
A) A Polish company opens a shipbuilding plant in Halifax.
B) A Bolivian bank buys Canadian corporate bonds.
C) A Canadian bank buys Peruvian corporate bonds.
D) A Canadian canning company opens a plant in Ecuador.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: A Macroeconomic Theory of the Small Open Economy
Available Study Resources on Quizplus for this Chatper
196 Verified Questions
196 Flashcards
Source URL: https://quizplus.com/quiz/71375
Sample Questions
Q1) Using the macroeconomic model of a foreign-currency exchange market,(a)analyze the situation in which a government imposes a fixed exchange rate,and (b)determine what that government should do in order to maintain the fixed exchange.
Q2) Refer to the Figure13-1.If the world interest rate equals 6 percent,what is the net capital outflow?
A) -$4000
B) -$2000
C) $2000
D) $4000
Q3) Which list contains only things that decrease when the budget deficit of the Canadian government increases?
A) Canadian net exports,national saving,and net capital outflow
B) Canadian supply of loanable funds,the real exchange rate of the dollar,and domestic investment
C) Canadian imports,interest rates,and the real exchange rate of the dollar
D) interest rate,net exports,and the quantity demanded for loanable funds for domestic investment
Q4) Explain why saving need not equal domestic investment in an open economy.
Q5) Why do higher real interest rates lead to lower net capital outflow?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Aggregate Demand and Aggregate Supply
Available Study Resources on Quizplus for this Chatper
257 Verified Questions
257 Flashcards
Source URL: https://quizplus.com/quiz/71376
Sample Questions
Q1) According to the aggregate demand and aggregate supply model,in the long run what is the impact of an increase in the money supply?
A) It lowers both the price level and real GDP.
B) It increases GDP,but it does not change the price level.
C) It increases the price level,but it does not change real GDP.
D) It increases both the price level and real GDP.
Q2) The explanations for the downward slope of the aggregate demand curve say that as the price level rises,consumption,investment,and net exports all fall.
A)True
B)False
Q3) Which of the following best defines business cycles?
A) long-term trends in economic activity
B) regular,predictable fluctuations in GDP
C) the rise and fall of multinational companies
D) fluctuations in the economy
Q4) A change in the money supply changes only nominal variables in the long run.
A)True
B)False
Q5) Make a list of expenditures whose sum equals GDP.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
Available Study Resources on Quizplus for this Chatper
222 Verified Questions
222 Flashcards
Source URL: https://quizplus.com/quiz/71377
Sample Questions
Q1) When the Bank of Canada buys government bonds,how do the reserves of the banking system change and what happens to the money supply?
A) The reserves increase,so the money supply increases.
B) The reserves increase,so the money supply decreases.
C) The reserves decrease,so the money supply increases.
D) The reserves decrease,so the money supply decreases.
Q2) According to liquidity-preference theory,if the price level increases,how do the equilibrium interest rate and the aggregate quantity of goods change?
A) The interest rate and the quantity demanded rise.
B) The interest rate rises and the quantity demanded falls.
C) The interest rate falls and the quantity demanded rises.
D) The interest rate and the quantity demanded fall.
Q3) What is most likely to happen in the short run?
A) The price level alone adjusts to balance the supply and demand for money.
B) Output responds to changes in the aggregate demand for goods and services.
C) Changes in the money supply cause a proportional change in the price level.
D) Changes in available production technology for turning capital and labour into output.
Q4) Explain how unemployment insurance acts as an automatic stabilizer.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
Available Study Resources on Quizplus for this Chatper
207 Verified Questions
207 Flashcards
Source URL: https://quizplus.com/quiz/71378
Sample Questions
Q1) If the short-run Phillips curve were stable,what would be unusual?
A) an increase in inflation and an increase in output
B) a decrease in inflation and an increase in unemployment
C) an increase in both inflation and unemployment
D) an increase in output and a decrease in unemployment
Q2) Proponents of rational expectations theory have argued that,in the most extreme case,if policymakers are credibly committed to reducing inflation,and if rational people understand that commitment and quickly lower their inflation expectation,the sacrifice ratio could be as small as what?
A) 0
B) 1
C) 3
D) 5
Q3) In the long run,what are the effects of a decrease in the rate of growth of the money supply?
A) It will increase inflation and shift the short-run Phillips curve right.
B) It will increase inflation and shift the short-run Phillips curve left.
C) It will decrease inflation and shift the short-run Philips curve right.
D) It will decrease inflation and shift the short-run Phillips curve left.
Q4) Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Five Debates Over Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/71379
Sample Questions
Q1) If a central bank followed a rule for monetary policy,the time-inconsistency problem would be eliminated.
A)True
B)False
Q2) In which situation is a program to reduce inflation likely to have the lowest costs?
A) if the sacrifice ratio is high and the reduction is unexpected
B) if the sacrifice ratio is high and the reduction is expected
C) if the sacrifice ratio is low and the reduction is unexpected
D) if the sacrifice ratio is low and the reduction is expected
Q3) The Bank of Canada raised interest rates in 1999 and 2000.By doing this,what did the Bank of Canada do to the money supply and why?
A) It increased the money supply because it was concerned about unemployment.
B) It increased the money supply because it was concerned about inflation.
C) It decreased the money supply because it was concerned about unemployment.
D) It decreased the money supply because it was concerned about inflation.
Q4) Explain how it is possible for the government debt to grow forever.
Q5) Explain why a government deficit is likely to lead to lower living standards in the future.
To view all questions and flashcards with answers, click on the resource link above. Page 19