Global Economic Environment
Midterm Exam
Course Introduction
This course explores the dynamics of the global economic environment and its impact on businesses, policymakers, and society. Students will examine the roles of international trade, financial markets, exchange rates, and economic policies in shaping the interconnected world economy. Topics include globalization, economic development, international institutions, and the effects of political and cultural factors on economic decision-making. Through case studies and data analysis, students will gain critical insights into issues such as global imbalances, emerging markets, and the challenges and opportunities presented by a rapidly changing economic landscape.
Recommended Textbook
Economics Canada in the Global Environment 9th Edition by Robin Bade
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31 Chapters
4049 Verified Questions
4049 Flashcards
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Page 2
Chapter 1: What Is Economics
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Sample Questions
Q1) Which of the following creates an incentive to increase the amount of an activity?
A)an increase in the marginal cost of the activity and a decrease in the marginal benefit from the activity
B)a decrease in the marginal cost of the activity and an increase in the marginal benefit from the activity
C)constant marginal cost and constant marginal benefit from the activity
D)an increase in the marginal cost of the activity and an equal increase in the marginal benefit from the activity
E)a decrease in the marginal cost of the activity and an equal decrease in the marginal benefit from the activity
Answer: B
Q2) Which of the following would an economist classify as capital?
A)natural resources
B)a deposit of silver
C)entrepreneurship
D)a computer
E)land
Answer: D
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Page 3
Chapter 2: The Economic Problem
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Sample Questions
Q1) Refer to Table 2.1.3. In moving from combination C to combination B, the opportunity cost of producing one additional hockey stick is
A)2 maple leaves.
B)1/2 maple leaves.
C)6 maple leaves.
D)1/6 maple leaves.
E)3 maple leaves.
Answer: E
Q2) The fact that resources are not equally productive in all activities
A)implies that a production possibilities frontier will be bowed outward.
B)implies that gains from specialization and trade are unlikely.
C)follows from the law of demand.
D)implies a linear production possibilities frontier.
E)implies that an economy should not produce certain goods.
Answer: A
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Chapter 3: Demand and Supply
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Sample Questions
Q1) Refer to Fact 3.5.1. A new study comes out, revealing that drinking Pepsi increases your ability to study. The equilibrium quantity of coffee
A)increases.
B)decreases.
C)remains the same.
D)increases or decreases depending on the slope of the supply and demand curves.
E)increases or decreases depending on the relative shifts of the supply and demand curves.
Answer: B
Q2) If A and B are substitutes and the cost of a factor of production used in the production of A increases, then the price of
A)B falls, but the price of A rises.
B)B rises, but the price of A falls.
C)A falls, and the price of B will stay unchanged.
D)A and B fall.
E)A and B rise.
Answer: E
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Page 5
Chapter 4: Elasticity
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Sample Questions
Q1) The price elasticity of demand for oranges ________ if the quantity is measured in pounds instead of kilograms and ________ if the price is measured in dollars instead of cents.
A)changes; changes
B)changes; does not change
C)does not change; changes
D)does not change; does not change
E)increases; decreases
Q2) A given percentage rise in the price of a good is likely to result in a larger percentage decrease in the quantity of the good demanded
A)the shorter the passage of time.
B)the larger the proportion of income spent on it.
C)the harder it is to obtain good substitutes.
D)all of the above
E)none of the above
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6
Chapter 5: Efficiency and Equity
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Sample Questions
Q1) Markets may not achieve an efficient allocation of resources when there are A)public goods.
B)external benefits.
C)monopolies.
D)subsidies.
E)all of the above
Q2) Suppose that the Hot Dog House can produce hotdogs at a constant cost of $0.25 each. If the Hot Dog House sells hotdogs for $0.50 each, then the Hot Dog House A)receives a producer surplus.
B)will raise the price of hot dogs.
C)will allow consumers to receive a consumer surplus.
D)has no producer surplus.
E)has an opportunity cost of $0.50 a hot dog.
Q3) When a deadweight loss occurs in a market, we can be certain that A)taxes have been imposed in the market.
B)the market is a monopoly.
C)there is underproduction in the market.
D)the entire economy experiences a loss.
E)both A and C.
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Page 7
Chapter 6: Governments Actions in Markets
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130 Flashcards
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Sample Questions
Q1) If a rent ceiling imposed by the government is greater than the equilibrium rent for housing, then
A)the supply of rental housing will increase.
B)a shortage of housing will occur.
C)a surplus of housing will occur.
D)the equilibrium rent will prevail as long as all else remains constant.
E)the equilibrium rent will rise.
Q2) Refer to Table 6.3.1. Suppose a sales tax of $2 a unit is imposed on the good described in the table. The buyers' share of the tax is
A)$2.00.
B)$1.50.
C)$1.00.
D)zero.
E)$2.50.
Q3) An illegal market in which the equilibrium price exceeds the price ceiling is
A)a rental market.
B)a capital market.
C)a black market.
D)an efficient market.
E)a housing market.
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Chapter 7: Global Markets in Action
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138 Flashcards
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Sample Questions
Q1) If Canada imposes a tariff of $1 per imported shirt, the tariff results in all of the following except it
A)raises the price of a shirt paid by Canadian consumers.
B)benefits Canadian shirt producers.
C)decreases imports of shirts into Canada.
D)creates a deadweight loss.
E)increases total surplus.
Q2) If Canada imposes a tariff on imported steel, the tariff
A)raises the Canadian price of imported steel.
B)decreases the Canadian production of steel.
C)increases the total Canadian consumption of steel.
D)decreases employment in the Canadian steel industry.
E)increases Canadian consumer surplus.
Q3) When Canada exports a good, Canada's consumer surplus ________ and Canada's total surplus ________.
A)increases; increases
B)increases; decreases
C)decreases; increases
D)decreases; decreases
E)decreases and Canada's producer surplus increases; does not change
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Chapter 8: Utility and Demand
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Sample Questions
Q1) When Kathryn is at her consumer equilibrium, she is
A)consuming the combination of goods that is at the midpoint of her budget line.
B)consuming a combination of goods that is located inside her budget line.
C)consuming a combination of goods that is located outside her budget line.
D)consuming a combination such that the marginal utility from good X divided by the marginal utility from good Y equals the price of good X divided by the price of good Y. E)on the midpoint of her demand curve.
Q2) Other things remaining the same, marginal utility theory implies that a rise in the price of a good
A)increases the consumer surplus.
B)decreases the consumer surplus.
C)leaves consumer surplus unchanged.
D)has an effect on consumer surplus that cannot be determined.
E)decreases consumer surplus by the amount equal to the total utility of all goods consumed before the price rise but not after the price rise.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) The shape of a person's indifference curves between two goods depends on A)the prices of the two goods.
B)the person's income.
C)the degree of substitutability between the two goods.
D)the level of satisfaction for the person.
E)the person's income and the prices of the two goods.
Q2) Albert is consuming at a point where his budget line is not as steep as indifference curve. To reach consumer equilibrium, Albert
A)consumes less of the good that is measured on the horizontal axis.
B)consumes none of the good that is measured on the horizontal axis.
C)must increase his income.
D)must shop at stores that have lower prices.
E)consumes more of the good that is measured on the horizontal axis.
Q3) If two consumption points are on different indifference curves, then one point is A)a substitute for the other.
B)preferred to the other.
C)a complement of the other.
D)a normal good and the other point is an inferior good.
E)more expensive than the other.
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Page 11
Chapter 10: Organizing Production
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111 Flashcards
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Sample Questions
Q1) A market structure where a small number of firms compete occurs in
A)perfect competition.
B)monopolistic competition.
C)the worldwide market for wheat, corn, and rice.
D)oligopoly.
E)monopoly.
Q2) Which one of the following is included in the implicit rental rate of capital?
A)economic depreciation
B)the cost of electricity
C)the cost of raw materials
D)the cost of low-skilled labour
E)the cost of heating
Q3) Team production is a production process in which
A)an assembly line is used.
B)individuals rotate from one task to another.
C)competing groups perform identical tasks.
D)individuals specialize in mutually supportive tasks.
E)pay is based on group output.
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Chapter 11: Output and Costs
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142 Flashcards
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Sample Questions
Q1) The marginal cost curve slopes upward due to A)diminishing marginal utility.
B)diminishing marginal returns.
C)technological inefficiency.
D)economic inefficiency.
E)none of the above
Q2) If ATC is rising then MC must be
A)rising.
B)falling.
C)equal to ATC.
D)above ATC.
E)both A and D
Q3) Given an upward-sloping, straight line total variable cost curve, what does the marginal cost curve look like?
A)an upward-sloping straight line
B)a downward-sloping straight line
C)a U-shaped curve
D)a horizontal line
E)a vertical line
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Page 13
Chapter 12: Perfect Competition
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Sample Questions
Q1) If firms in a perfectly competitive market are making an economic profit, new firms will enter. This entry shifts the market
A)demand curve leftward, and the market price falls.
B)demand curve rightward, and the market price rises.
C)supply curve leftward, and the market price rises.
D)supply curve rightward, and the market price falls.
E)supply curve rightward and the market demand curve leftward.
Q2) An efficient allocation is achieved when
A)consumers are selecting points on their demand curves.
B)producers are selecting points on their supply curves.
C)the sum of consumer surplus and producer surplus is maximized.
D)all of the above
E)none of the above
Q3) In a perfectly competitive market, the market demand curve is illustrated by A)a downward-sloping curve.
B)a line that is vertical at the market output.
C)an upward-sloping curve.
D)a line that is horizontal at the market price.
E)a curve that is bowed towards the origin.
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Page 14
Chapter 13: Monopoly
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118 Flashcards
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Sample Questions
Q1) Refer to Fact 13.1.1. The firm described in ________ can price discriminate if it can
A)statements 2, 3, 6, and 7; eliminate the barriers to entry
B)statements 2, 3, 6, and 7; distinguish between different classes of consumers
C)statements 2 and 3; eliminate the current barriers to entry
D)statement 1; increase advertising
E)statement 1; decrease its costs
Q2) Rate of return regulation can end up serving the self-interest of the firm if
A)there is a great demand for the good.
B)there is a competitive struggle to determine which firms will supply the market.
C)the regulated firm overstates its costs of production.
D)price is set at average total cost.
E)the rate is set too low.
Q3) Social interest theory states that
A)public officials favour consumers over producers.
B)regulations promote the attainment of an efficient outcome.
C)regulations promote the attainment of an inefficient outcome.
D)regulation maximizes economic profit.
E)rate of return regulation is best for all parties.
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Page 15
Chapter 14: Monopolistic Competition
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Sample Questions
Q1) Refer to Figure 14.2.1. This firm in monopolistic competition will
A)make an economic profit in the short run.
B)make zero economic profit in the short run.
C)incur an economic loss.
D)make an economic profit in the long run.
E)incur an economic loss in the long run.
Q2) Refer to Fact 14.3.3. After the advertising begins, the average total cost of a jacket sold in this store is
A)$200.00.
B)$175.00.
C)$150.00.
D)$125.00.
E)$100.00.
Q3) Under monopolistic competition, long-run economic profit is zero because of A)product differentiation.
B)no barriers to entry.
C)excess capacity.
D)economic inefficiency.
E)the downward-sloping demand curve facing each firm.
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Page 16
Chapter 15: Oligopoly
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Sample Questions
Q1) Which of the following quotes shows cheating on a cartel in the widget industry?
A)"I am producing extra widgets, even though it costs me short-run profit, to stop Wally's Widgets from expanding into my market."
B)"I am producing more widgets than Wally and I agreed to in our talk last week."
C)"If only Wally and I could agree on a higher price, we could make more profit."
D)"I have been spending extra on research and development of my new two-way widget."
E)None of the above
Q2) A contestable market is similar to a perfectly competitive market in that there
A)are barriers to entry.
B)are no barriers to entry.
C)can be only one firm in the market.
D)will be no entry if the existing firm makes an economic profit.
E)is a perfectly elastic demand.
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17
Chapter 16: Externalities
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Sample Questions
Q1) Air pollution generated by a paper mill factory is an example of a A)positive production externality.
B)positive consumption externality.
C)negative consumption externality.
D)marginal external benefit.
E)negative production externality.
Q2) An example of an activity that creates a negative consumption externality is
A)logging, which pollutes rivers.
B)locating beehives next to an orange orchard.
C)smoking, which harms the health of a bystander.
D)a flu vaccination.
E)a sales tax.
Q3) An example of an activity that creates a positive consumption externality is A)logging, which pollutes rivers.
B)locating beehives next to an orange orchard.
C)smoking, which harms the health of a bystander.
D)a flu vaccination.
E)a noisy party.
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Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) Which of the following quotations describes a rival good?
A)"Mom, Ashley is looking at me."
B)"Mom, Morgan won't let me watch the Backyardigans because she is watching Dora the Explorer."
C)"Mom, Harrison won't let me in his room."
D)"Mom, Taylor told me on the phone that he is also watching the Backyardigans on TV at his house."
E)"Mom said everyone in this house gets to enjoy the flowers in the garden."
Q2) Figure 17.3.1 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. The efficient quantity is A)0 kilograms a week.
B)4,000 kilograms a week.
C)3,000 kilograms a week.
D)5,000 kilograms a week.
E)1,000 kilograms a week.
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19
Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) All of the following statements are correct except
A)the supply of capital is derived from the value of marginal product of capital.
B)the lower the rental rate of capital, other things remaining the same, the greater is the quantity of capital demanded.
C)the higher the rental rate, other things remaining the same, the greater is the quantity of capital supplied.
D)profit-maximizing firms hire the quantity of capital services that makes the value of marginal product of capital equal to the rental rate of capital.
E)if the present value of the future rental payments of an item of capital equipment is less than the cost of buying the capital, the firm will rent or lease the equipment.
Q2) To maximize profit, the firm must equate the
A)wage rate to the price of the good.
B)wage rate to the marginal product of labour.
C)value of marginal product to the factor price.
D)marginal factor cost to the price of the output.
E)marginal cost of the factor to the marginal product of the factor.
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Chapter 19: Economic Inequality
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Sample Questions
Q1) If discrimination takes the form of consumers discriminating against a group of workers, the effect on this group of workers will be to shift their
A)value of marginal product curve rightward and increase their wage rate.
B)value of marginal product curve leftward and decrease their wage rate.
C)value of marginal product curve rightward and decrease their wage rate.
D)supply of labour curve leftward and increase their wage rate.
E)supply of labour curve rightward and decrease their wage rate.
Q2) One criticism of social security programs such as the Guaranteed Income Supplement is that
A)it promotes efficiency rather than equity.
B)it helps equity but hurts efficiency.
C)it gives too much money to the elderly.
D)it gives too much money to the poor.
E)it gives too much money to the rich.
Q3) The demand for high-skilled labour is derived from the
A)exploitation of the low-skilled workers.
B)marginal cost of production.
C)lower wage of the labour.
D)supply of the high-skilled labourers.
E)value of marginal product of high-skilled labour.
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Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) In recent history, real GDP has risen less rapidly than nominal GDP. This is because
A)the general price level fell.
B)capital increased.
C)the goal of zero population growth has been reached.
D)the general price level rose.
E)the level of population rose.
Q2) Refer to Table 20.2.1. From the information given in the table, the value of gross domestic product is
A)$1,280.
B)$1,290.
C)$1,360.
D)$1,120.
E)$1,100.
Q3) Which one of the following is an income flow from firms to households?
A)goods and services
B)factor services
C)payments for goods and services
D)payments for factor services
E)loans
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Page 22
Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) People end unemployment when they
A)retire from a job.
B)quit work to go to school.
C)quit work to raise a family.
D)are recalled from a layoff.
E)are laid off.
Q2) Of the following sequences of price levels, which correctly represents a 5 percent inflation rate?
A)100, 100, 100, 100
B)100, 105, 105, 105
C)100, 105, 110, 115
D)100, 105, 110.25, 115.76
E)95, 100, 105, 110
Q3) Rochelle lost her job as a salesperson when sales fell off during the recession. Now she is looking for a new job. Rochelle is
A)frictionally unemployed.
B)structurally unemployed.
C)not unemployed.
D)cyclically unemployed.
E)not in the labour force.
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Chapter 22: Economic Growth
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Sample Questions
Q1) The aggregate production function shows how ________ varies with ________.
A)real GDP; labour
B)labour; leisure
C)real GDP; leisure
D)labour; capital
E)real GDP; capital
Q2) If real GDP is $800 million and aggregate labour hours are 20 million, labour productivity is
A)$40 an hour.
B)$16,000 million.
C)$40 million.
D)$160 an hour.
E)$16 an hour.
Q3) Refer to Figure 22.3.2. If the real wage is $20 an hour, a labour
A)shortage will occur and the real wage will rise.
B)shortage will occur and the real wage will fall.
C)surplus will occur and the real wage will rise.
D)surplus will occur and the real wage will fall.
E)surplus will occur and the demand for labour will increase.
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Page 24
Chapter 23: Finance, Saving, and Investment
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Sample Questions
Q1) Refer to Figure 23.2.2. In Figure 23.2.2, a decrease in the real interest rate will result in a movement from point E to
A)point F.
B)point G.
C)point H.
D)point I.
E)either point G or point F.
Q2) A firm's decision to invest in a project is based on the A)real interest rate and expected total revenue.
B)nominal interest rate and expected total revenue.
C)nominal interest rate and the expected profit.
D)real interest rate and the expected profit.
E)expected future income, wealth, and default risk.
Q3) Which of the following is correct?
A)As disposable income increases, the real interest rate rises.
B)As disposable income decreases, saving decreases.
C)The higher a household's wealth the greater is its saving.
D)Both B and C are correct.
E)Both A and C are correct.
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Page 25
Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) The largest component of M1 is
A)currency outside banks.
B)personal chequable deposits.
C)non-personal chequable deposits.
D)fixed term deposits.
E)non-personal non-chequable deposits.
Q2) If the prices of goods and services are stated in terms of kilograms of salt, then salt is
A)a unit of account.
B)a standard of deferred payment.
C)a store of value.
D)quasi-money.
E)a medium of exchange.
Q3) Nominal money is equal to real
A)money times the price level.
B)GDP times the price level.
C)GDP times the GDP deflator.
D)money divided by the price level.
E)GDP times real money.
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Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) The Canadian exchange rate depreciates if
A)prices increase in the United States and other countries but remain constant in Canada.
B)the Canadian interest rate differential rises.
C)the Canadian interest rate differential falls.
D)the demand for Canada's exports increases.
E)Canada's demand for imports decreases.
Q2) If the Bank of Canada sets a target exchange rate that is higher than the current exchange rate, then
A)the Bank must sell dollars.
B)the Bank must buy dollars.
C)the Bank can do nothing in the short run.
D)the Bank will print more dollars for foreign distribution.
E)the Bank should rethink its policy.
Q3) The demand curve for dollars shifts rightward if
A)the Canadian exchange rate falls.
B)the price of Canadian goods and services increases.
C)Canadian interest rates rise.
D)foreign interest rates rise.
E)the expected future value of the dollar falls.
Page 27
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Chapter 26: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) The Canadian price level rises. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?
A)The quantity of Canadian real GDP demanded increases.
B)The quantity of Canadian real GDP demanded decreases.
C)Canadian aggregate demand increases.
D)Canadian aggregate demand decreases.
E)There is no change to either the quantity of real GDP demanded or to aggregate demand.
Q2) The Canadian government increases its expenditure on goods and services in a time of war or increased international tension. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?
A)Real GDP increases and the price level rises.
B)Real GDP decreases and the price level falls.
C)Real GDP increases and the price level falls.
D)Real GDP decreases and the price level rises.
E)There is no change in either real GDP or the price level.
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Chapter 27: Expenditure Multipliers
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Sample Questions
Q1) Refer to Figure 27.3.1. Autonomous expenditure equals
A)$100 billion.
B)$25 billion.
C)$50 billion.
D)$125 billion.
E)$200 billion.
Q2) An increase in autonomous consumption
A)shifts the consumption function upward.
B)shifts the consumption function downward.
C)creates a movement downward along the consumption function.
D)creates a movement upward along the consumption function.
E)changes the slope of the consumption function.
Q3) If consumption expenditure for a household increases from $300 to $500 when disposable income increases from $200 to $500, the marginal propensity to consume is A)equal to 1.
B)equal to 0.75.
C)equal to 1.33.
D)negative.
E)equal to 0.67.
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Chapter 28: The Business Cycle, Inflation, and Deflation
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Sample Questions
Q1) Stagflation can result from
A)a leftward shift of the demand curve.
B)a rightward shift of the demand curve.
C)a leftward shift of the short-run aggregate supply curve.
D)a rightward shift of the short-run aggregate supply curve.
E)a rightward shift of the long-run aggregate supply curve.
Q2) Which of the following is not a mainstream theory of the business cycle?
A)Keynesian cycle theory
B)monetarist cycle theory
C)new Keynesian cycle theory
D)real business cycle theory
E)new classical cycle theory
Q3) Refer to Table 28.4.1. The table gives points on the short-run Phillips curve for the country of Ruritania. If the expected inflation rate is 10 percent, what is the natural unemployment rate?
A)4 percent
B)5 percent
C)6 percent
D)7 percent
E)9 percent
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Chapter 29: Fiscal Policy
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Sample Questions
Q1) A tax cut on capital income
A)does not affect potential GDP because the interest rate affects aggregate expenditure only.
B)does not affect potential GDP because it has no impact on the supply of labour.
C)increases potential GDP because workers have greater incentives to work.
D)increases potential GDP because the supply of loanable funds increases.
E)increases potential GDP because households have more disposable income to spend.
Q2) Currently the government of Ricardia has outlays equal to $100 billion, and a tax scheme that is related positively to real GDP by the following equation: Taxes = $25 billion + 0.1(real GDP). What are autonomous taxes in Ricardia?
A)It depends on the level of real GDP.
B)0.1
C)$2.5 billion
D)$250 billion
E)$25 billion
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Chapter 30: Monetary Policy
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Q1) In response to an inflationary gap, the Bank of Canada
A)waits until the price level falls before acting.
B)lowers the overnight loans rate by selling securities.
C)raises the overnight loans rate by selling securities.
D)lowers the overnight loans rate by buying securities.
E)raises the overnight loans rate by buying securities.
Q2) The Bank of Canada can lower the overnight loans rate by
A)raising the bank rate.
B)lowering the bank rate.
C)raising the settlement balances rate.
D)lowering the settlement balances rate.
E)both B and D
Q3) In a situation of inflationary pressure, an increase in the overnight loans rate results in
A)an increase in real GDP and the price level.
B)an increase in real GDP, but a fall in the price level.
C)an increase in real GDP, but no change in the price level.
D)a rise in the price level, but no change in real GDP.
E)a fall in the price level and a decrease in real GDP.
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Chapter 31: Macro Only: International Trade Policy
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Q1) A tariff ________ the domestic price of the good and an import quota ________ the domestic price of the good.
A)lowers; lowers B)lowers; raises C)raises; lowers D)raises; raises
E)does not change; does not change
Q2) Choose the correct statement.
A)Exports include goods and services.
B)Imports include goods but not services.
C)Imports include services but not goods.
D)Exports include goods but not services.
E)Exports include services but not goods.
Q3) Canada has a comparative advantage in producing airplanes if
A)it can produce them at a lower dollar cost than another country.
B)it can produce a larger quantity than another country.
C)it has a larger quantity of skilled workers than another country.
D)it can produce them at a higher opportunity cost than another country.
E)it can produce them at a lower opportunity cost than another country.
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