Intermediate Macroeconomics
Exam Review
Course Introduction
Intermediate Macroeconomics delves into the core principles and analytical tools used to study the behavior and performance of national economies. Building on introductory concepts, the course explores topics such as economic growth, business cycles, unemployment, inflation, fiscal and monetary policy, and the roles of government and central banks. Students will analyze classical and modern macroeconomic models, interpret macroeconomic data, and apply theoretical frameworks to understand real-world economic issues and policy debates. Emphasis is placed on using graphical and mathematical tools to examine short-run and long-run macroeconomic equilibrium, as well as contemporary challenges facing open and closed economies.
Recommended Textbook
Macroeconomics 14th Canadian Edition by Campbell R. McConnell
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18 Chapters
3156 Verified Questions
3156 Flashcards
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Chapter 1: Limits, Alternatives, and Choices
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257 Verified Questions
257 Flashcards
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Sample Questions
Q1) The future location of the economy's production possibilities curve will be affected by:
A) the current division of domestic output between consumption and capital goods.
B) the rate of technological progress.
C) the growth of the economy's supplies of resources.
D) all of the above.
Answer: D
Q2) Refer to the above production possibilities curves.Given production possibilities curve (a),the combination of civilian and war goods indicated by point X is unattainable to this economy.
A)True
B)False
Answer: False
Q3) The vertical intercept of line (2)on the above graph is:
A) 8
B) 12
C) 16
D) 24
Answer: B
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Page 3
Chapter 2: The Market System and the Circular Flow
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112 Flashcards
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Sample Questions
Q1) The use of money for exchange:
A) increases the use of barter.
B) reduces consumer sovereignty.
C) decreases the coincidence of wants.
D) encourages more specialization in production.
Answer: D
Q2) Today,China's economy most closely approximates:
A) pure capitalism
B) a command economy
C) market socialism
D) authoritarian capitalism
Answer: C
Q3) A characteristic of the market system is:
A) extensive use of price controls.
B) extensive use of barter.
C) extensive use of capital goods.
D) low interest rates.
Answer: C
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4
Chapter 3: Demand, Supply, and Market Equilibrium
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284 Verified Questions
284 Flashcards
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Sample Questions
Q1) A leftward shift of a product supply curve might be caused by:
A) an improvement in the relevant technique of production.
B) a decline in the prices of needed inputs.
C) an increase in consumer incomes.
D) some firms leaving the industry.
Answer: D
Q2) The location of the product supply curve depends on:
A) production technology.
B) the number of buyers in the market.
C) the tastes of buyers.
D) the location of the demand curve.
Answer: A
Q3) If price is above the equilibrium level,competition among sellers to reduce the resulting:
A) surplus will increase quantity demanded and decrease quantity supplied.
B) shortage will decrease quantity demanded and increase quantity supplied.
C) surplus will decrease quantity demanded and increase quantity supplied.
D) shortage will increase quantity demanded and decrease quantity supplied.
Answer: A
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Page 5
Chapter 4: Market Failures: Public Goods and Externalities
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Sample Questions
Q1) If there are external benefits or positive externalities associated with consumption and production of a product,it can be said that the:
A) government should consider placing a special tax on producers.
B) government should consider prohibiting the production of the commodity.
C) supply curve for the product lies too far to the right to provide an efficient allocation of resources.
D) demand curve understates the total benefit from the product and resources are under-allocated to its production.
Q2) If the production of a product or service involves external benefits,then the government can improve efficiency in the market by:
A) providing a subsidy to correct for an over-allocation of resources.
B) providing a subsidy to correct for an under-allocation of resources.
C) imposing a corrective tax to correct for an over-allocation of resources.
D) imposing a corrective tax to correct for an under-allocation of resources.
Q3) Consumer surplus and the market price are positively related.
A)True
B)False
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Chapter 5: Governments Role and Government Failure
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) A debt crisis refers to how much government spending exceeds tax revenues in a given year.
A)True
B)False
Q2) Which of the following is an activity of government that is not an activity of private firms?
A) Enforcing involuntary transactions.
B) Paying equitable wages.
C) Creating positive externalities.
D) Pursuing economic efficiency.
Q3) Which of the following would be the best example of regulatory capture?
A) Starbucks buys up all the available supplies of coffee beans.
B) Nike executives influence the rules for track and field events.
C) Federal law makers write and pass legislation that protects domestic companies from foreign competition.
D) Executives from the Ford,General Motors,and Chrysler companies write the rules regulating automobile safety and fuel requirements.
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Chapter 6: An Introduction to Macroeconomics
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58 Flashcards
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Sample Questions
Q1) In economics,the term "investment" includes:
A) the purchase of a Microsoft stock.
B) the purchase of gold by a businessman.
C) the addition of cash to a savings account.
D) any increase in business inventories.
Q2) Economists believe that most short-run fluctuations are the result of:
A) supply shocks.
B) demand shocks.
C) unexpected changes in the availability of imported resources.
D) negative supply shocks.
Q3) The higher is the current level of saving:
A) the higher is the current level of investment and higher the future level of consumption.
B) the lower is the current level of investment and lower the future level of consumption.
C) the higher is the current level of investment and lower the future level of consumption.
D) the lower is the current level of investment and higher the future level of consumption.
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8
Chapter 7: Measuring the Economys Output
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181 Flashcards
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Sample Questions
Q1) In an economy,the value of inventories rose from $100 billion in 2012 to $150 billion in 2013.In calculating total investment for 2013,national income accountants would:
A) decrease it by $50 billion.
B) increase it by $50 billion.
C) decrease it by $100 billion.
D) increase it by $150 billion.
Q2) Which of the following is a final good or service?
A) diesel fuel bought for a delivery truck
B) fertilizer purchased by a farm supplier
C) a haircut
D) Chevrolet windows purchased by a General Motors assembly plant
Q3) Interest on the public debt is included as a part of government purchases in determining GDP by the expenditures method.
A)True
B)False
Q4) If nominal GDP is 150 and the GDP price index is 200,real GDP is 75.
A)True
B)False
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9
Chapter 8: Economic Growth
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Sample Questions
Q1) Refer to the above diagram.If there is a movement away from the full employment of resources in an economy with production possibilities curve AB,this can be shown by:
A) a shift of the curve from AB to CD.
B) a movement from point 3 to point 1.
C) a movement from point 2 to point 4.
D) point 5 in the diagram.
Q2) If a nation's real GDP is growing by 5 percent per year,its real GDP will double in approximately:
A) 22 years.
B) 20 years.
C) 14 years.
D) 8 years.
Q3) Improvements in education and training explain nearly 80 percent of the historical growth of Canadian labour productivity.
A)True
B)False
Q4) Real GDP = worker-hours × labour productivity.
A)True
B)False
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Chapter 9: Business Cycles, Unemployment, and Inflation
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184 Flashcards
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Sample Questions
Q1) In an economy,35 million workers are employed out of a labour force of 50 million and a total population of 70 million.The unemployment rate is:
A) 15 percent.
B) 25 percent.
C) 50 percent.
D) 30 percent.
Q2) A nation has a population of 260 million people.Of these,60 million are retired,in the military,in institutions,or under 15 years old.There are 188 million who are employed.What is the unemployment rate?
A) 4 percent
B) 6 percent
C) 9 percent
D) 27 percent
Q3) The business cycle is so named because upswings and downswings in business activity are equal in terms of duration and intensity.
A)True
B)False
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Chapter 10: Basic Macroeconomic Relationships
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187 Verified Questions
187 Flashcards
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Sample Questions
Q1) If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then other things equal:
A) investment will take place until i and r are equal.
B) investment will take place until r exceeds i by the greatest amount.
C) r will rise as more investment is undertaken.
D) i will rise as more investment is undertaken.
Q2) Assume a machine which has a useful life of only one year costs $2,000.Assume,also,that net of such operating costs as power,taxes,and so forth,the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:
A) 7.5 percent.
B) 10 percent.
C) 15 percent.
D) 20 percent.
Q3) The investment-demand curve will shift to the left:
A) if firms plan to increase their inventories.
B) if firms plan to decrease their inventories.
C) if firms expect an increase in their sales.
D) if firms expect no change in their sales.
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Page 12
Chapter 11: The Aggregate Expenditures Model
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230 Verified Questions
230 Flashcards
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Sample Questions
Q1) Which of the following statements is correct for a private closed economy?
A) Saving equals planned investment only at the equilibrium level of domestic output.
B) All levels of domestic output where planned investment exceeds saving will be too high for equilibrium.
C) Planned and actual investment are identical at all possible levels of domestic output.
D) Saving equals actual investment only at the equilibrium level of domestic output.
Q2) Refer to the above information.When the real interest rate is 10 percent,unplanned changes in inventories are equal to:
A) $40
B) -$30.
C) $20
D) -$60.
Q3) Equal increases in government expenditures and tax collections will leave the equilibrium GDP unchanged.
A)True
B)False
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13
Chapter 12: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) Which of the above diagrams best portrays the effects of a decrease in the availability of key natural resources?
A) A
B) B
C) C
D) D
Q2) The aggregate demand curve:
A) is upward sloping because a higher price level is necessary to make production profitable as production costs rise.
B) is downward sloping because production costs decline as real output increases?
C) shows the amount of expenditures required to induce the production of each possible level of real output.
D) shows the amount of real output which will be purchased at each possible price level.
Q3) Using the aggregate demand-aggregate supply (short-run)model,explain how the depreciation of the Canadian dollar in terms of foreign currencies would affect the economy.
Q4) What is the aggregate demand curve? What is the characteristic of its slope?
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14
Chapter 13: Fiscal Policy, Deficits, Surpluses, and Debt
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223 Verified Questions
223 Flashcards
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Sample Questions
Q1) An increase in taxes would be an expansionary fiscal policy.
A)True
B)False
Q2) Crowding out is a decrease in private investment caused by:
A) a contractionary fiscal policy.
B) an expansionary fiscal policy.
C) a full-employment budget deficit.
D) the political business cycle.
Q3) Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment and actual GDP are each $400 billion,government can balance its budget by:
A) increasing T by $40 billion.
B) reducing G by $20 billion.
C) reducing T by $20 billion.
D) increasing T by $10 billion and reducing G by $20 billion.
Q4) Built-in stability refers to the fact that net tax revenues vary inversely with the level of GDP.
A)True
B)False
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Chapter 14: Money, Banking, and Money Creation
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) When we say that the Canadian banking system is fractional reserve system,it means:
A) chartered banks loan out only a small fraction of their deposits.
B) chartered banks have to keep a large percentage of their deposit to meet everyday cash withdrawals.
C) chartered banks loan out the entire deposits and do not have to meet their everyday cash withdrawal.
D) chartered banks loan out most of their deposits,keeping only a small percentage of their deposits to meet everyday cash withdrawals.
Q2) The purchasing power of the dollar:
A) has been increasing in recent years because of economic growth.
B) varies directly with the cost-of-living index.
C) is inversely related to the level of aggregate demand.
D) is the reciprocal of the price level.
Q3) The paper money used in Canada is:
A) National Bank notes.
B) Treasury notes of 1890.
C) Canada notes.
D) Bank of Canada notes.
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Page 16
Chapter 15: Interest Rates and Monetary Policy
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Sample Questions
Q1) Which of the following is an asset on the balance sheet of the Bank of Canada?
A) reserves of chartered banks
B) Government of Canada deposits
C) Bank of Canada notes in circulation
D) advances to chartered banks
Q2) To have an independent monetary policy and target inflation,the Bank of Canada must allow the Canadian Dollar to float.
A)True
B)False
Q3) Bond prices and interest rates are directly related.
A)True
B)False
Q4) A bond with no expiration has an original price of $10,000 and a fixed annual interest payment of $1000.If the price of this bond increases by $2500,the interest rate in effect will:
A) decrease by 1 percentage point.
B) decrease by 2 percentage points.
C) increase by 1 percentage point.
D) increase by 2 percentage points.
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Chapter 16: Long-Run Macroeconomic Adjustments
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119 Flashcards
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Sample Questions
Q1) The short run in macroeconomics is a period in which nominal wages:
A) remain fixed as the price level stays constant.
B) change as the price level stays constant.
C) remain fixed as the price level changes.
D) change as the price level changes.
Q2) In the long-run aggregate demand-aggregate supply model:
A) long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve.
B) the long-run aggregate supply curve is horizontal.
C) the price level is the same regardless of the location of the aggregate demand curve.
D) long-run equilibrium occurs at the intersection of the aggregate demand curve,the short-run aggregate supply curve,and the long-run aggregate supply curve.
Q3) A rightward shift of the Phillips Curve suggests that:
A) a higher rate of unemployment is associated with each inflation rate.
B) a lower rate of unemployment is associated with each inflation rate.
C) the aggregate supply curve has shifted to the right.
D) the aggregate demand curve has shifted to the left.
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Page 18
Chapter 17: International Trade
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Sample Questions
Q1) Canadian exports of goods and services are about:
A) 20 percent of Canadian GDP.
B) 5 percent of Canadian GDP.
C) 10 percent of Canadian GDP.
D) 30 percent of Canadian GDP.
Q2) When a tariff on a product is removed,it will result in a(n):
A) decrease in the supply of a product and a higher price.
B) increase in the supply of the product and a higher price.
C) increase in the supply of the product and a lower price.
D) decrease in the supply of the product and a lower price.
Q3) The cheap foreign labour argument suggests that:
A) trade barriers between rich and poor countries would definitely create a negative impact on the Canadian economy.
B) free trade between rich and poor countries would definitely create a positive impact on the Canadian economy.
C) it is not mutually beneficial for rich and poor countries to trade with one another.
D) it is mutually beneficial for rich and poor countries to trade with one another.
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Page 19
Chapter 18: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) Evidence of a chronic balance of payments deficit is:
A) a decline in amount of the nation's currency held by other nations.
B) an excess of exports over imports.
C) diminishing reserves of foreign currencies.
D) an increase in the international value of the nation's currency.
Q2) In considering pounds and dollars,when the dollar rate of exchange for the British pound rises:
A) the pound rate of exchange for the dollar will fall.
B) the pound rate of exchange for the dollar will also rise.
C) the pound rate of exchange for the dollar may either fall or rise.
D) Canadian net exports to Britain will tend to fall.
Q3) According to the purchasing power parity theory of exchange rates:
A) a dollar,when converted to other currencies at the prevailing flexible exchange rate,has the same purchasing power in various countries.
B) in equilibrium,national currencies have equal value in terms of gold.
C) the higher a nation's price level in terms of its own currency,the greater is the amount of foreign exchange it can obtain for a unit of its currency.
D) all of the above are true.
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Page 20