Intermediate Macroeconomics
Final Exam
Course Introduction
Intermediate Macroeconomics delves into the analysis of aggregate economic activity and the determinants of national income, output, employment, and price levels. Building on foundational macroeconomic concepts, the course examines models such as the IS-LM framework, AD-AS model, and introduces dynamic perspectives on economic growth, business cycles, inflation, and unemployment. Students explore the effects of fiscal and monetary policies, the roles of expectations and international linkages, and develop analytical tools for evaluating contemporary macroeconomic issues. Through a mix of theoretical exploration and empirical applications, the course prepares students for advanced studies and practical decision-making in economics and related fields.
Recommended Textbook
Principles of Macroeconomics 9th Edition by John Sayre
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13 Chapters
2035 Verified Questions
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Chapter 1: The Economic Problem
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Sample Questions
Q1) Which type of economy would involve a central governing body making all of the fundamental economic decisions?
A)Cooperation.
B)Command.
C)Custom.
D)Competition.
E)Consumer.
Answer: B
Q2) All of the following,except one,are capital goods.Which is the exception?
A)An office building.
B)A boiler in a pulp mill.
C)A garden shed.
D)An airport runway.
Answer: C
Q3) Which of the following was argued by John Stuart Mill?
A)It is ideas,not vested interests,which are dangerous for good and evil.
B)The distribution of money is dictated by the pattern of resource use.
C)As technology changes,what is produced also necessarily changes.
D)Society can intervene in any fashion that it may wish to redistribute income.
Answer: D
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Chapter 2: Demand and Supply: an Introduction
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Sample Questions
Q1) All of the following except one will cause the demand for a normal product to increase.Which is the exception?
A)The expectation by consumers that the future price will be higher.
B)The fear of consumers of a future strike in the industry.
C)An increase in the price of a complementary product.
D)An increase in the price of a substitute product.
E)An increase in consumer incomes.
Answer: C
Q2) In what way are products A and B related if an increase in the price of product A leads to a decrease in the demand for product B?
A)Consumer income has increased,and product A is an inferior product.
B)Consumer income has decreased,and product A is a normal product.
C)The two products must be complements.
D)The two products must be substitutes.
E)The two products must be inferior products.
Answer: C
Q3) Define demand.
Answer: Demand refers to the quantities that consumers are willing and able to buy per period of time at various prices.
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Page 4
Chapter 3: Measuring the Economy 1: GDP and Economic Growth
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Sample Questions
Q1) Refer to the graph above to answer this question.What are flows (1)and (2)respectively?
A)Consumption expenditures and factor payments.
B)Consumption expenditures and goods and services.
C)Factor payments and factors.
D)Factor payments and goods and services.
E)Goods and services and consumption expenditures.
Answer: B
Q2) An increase in the quality of goods produced would increase the well-being of people,but this will not be captured in real GDP figures.
A)True
B)False
Answer: True
Q3) What does HDI measure? What factors are included in the HDI?
Answer: HDI is the Human Development Index and it is used to measure the wellbeing of a country's citizens.The HDI includes GDP,life expectancy and literacy rates.
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Chapter 4: Measuring the Economy 2: Unemployment and Inflation
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Sample Questions
Q1) Which of the following statements is correct concerning unanticipated inflation?
A)It redistributes income and wealth in unpredictable and uneven ways.
B)It increases the real value of debt.
C)It increases the purchasing power of the dollar.
D)It benefits creditors at the expense of debtors.
E)It hits everyone equally hard.
Q2) Under what condition could the number of people employed and the number of people unemployed both increase?
A)If the economy entered a severe recession.
B)If the number of people in the labour force increased more than the number of people employed.
C)If the total number of discouraged workers increased.
D)If the total population decreased.
E)If the number of people in the labour force grew slower than the increase in the number of people employed.
Q3) What is the difference between the CPI and the GDP deflator?
A)the GDP deflator includes imports while the CPI excludes them.
B)The CPI includes imports while the GDP deflator excludes them.
C)the CPI includes investment while the GDP deflator excludes it.
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D)the CPI includes exports while the GDP deflator excludes them.
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Chapter 5: Aggregate Demand and Supply
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Sample Questions
Q1) If at a certain price level the AS exceeds the AD then what are the implications?
A)There is a shortage of goods and services,and eventually prices will increase.
B)There is a surplus of goods and services,and eventually prices will increase.
C)There is a shortage of goods and services,and eventually prices will decrease.
D)There is a surplus of goods and services,and eventually prices will decrease.
Q2) All of the following,except one,are possible causes of the business cycle.Which is the exception?
A)An increase in the economic growth rate.
B)A change in government spending.
C)A change in interest rates.
D)A change in the foreign demand for Canadian products.
E)A significant technological breakthrough.
Q3) Which of the following is true regarding changes in aggregate demand?
A)It would never change the price level according to Keynesians.
B)It may or may not change the price level according to Keynesians.
C)It would never change Real GDP according to Keynesians.
D)It would never change the price level according to neoclassicists.
E)It may or may not change the price level according to neoclassicists.
Q4) Distinguish between physical capital and human capital.
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Chapter 6: Aggregate Expenditures
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Sample Questions
Q1) Refer to the above information to answer this question.What is the value of the MPE?
A)0.1.
B)0.3.
C)0.5
D)0.7.
Q2) Refer to the above graph to answer this question.What is the value of the MPM?
A)0.
B)0.1
C)0.2
D)0.6
E)1
Q3) Which of the following is true of induced spending?
A)It rises as income increases.
B)It is a function of income.
C)It is zero when income is zero.
D)It rises as income increase,it is a function of income,and it is zero when income is zero.
Q4) Assume an economy has a budget deficit.Now suppose national income increases,what is its impact on the budget deficit? Explain.
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8
Chapter 7: Fiscal Policy
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Sample Questions
Q1) All of the following,except one,are examples of automatic stabilizers.Which is the exception?
A)Progressive income taxes.
B)Expenditures on education which automatically rise when the number of school-aged children increases.
C)Welfare payments which increase when the economy suffers a recession.
D)Employment insurance which decreases when the economy is doing well.
Q2) What is the effect of a counter-cyclical fiscal policy?
A)It intensifies changes in GDP caused by the business cycle.
B)It dampens changes in GDP caused by the business cycle.
C)It has no effect on changes in GDP caused by the business cycle.
D)It allows the government to balance its budget.
Q3) Distinguish between a government's internal and external debt.
Q4) What would be appropriate government action to close an inflationary gap?
A)Use policy to decrease aggregate supply.
B)Use policy to decrease potential GDP.
C)Use counter-cyclical fiscal policy to decrease aggregate demand.
D)Use counter-cyclical fiscal policy to increase aggregate demand.
Q5) Why do economists prefer to examine the debt as a percentage of GDP rather than the level of debt?
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Chapter 8: Money and Banking
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Sample Questions
Q1) Which of the following describes the fundamental identity found in all balance sheets?
A)Equity plus Assets equal Liabilities.
B)Assets plus Liabilities equal Equity.
C)Assets equal Liabilities plus Equity.
D)Assets plus Reserves equal Equity.
E)Reserves plus Liabilities equals Assets plus Equity.
Q2) Define the term target reserve ratio.
Q3) Refer to the information above to answer this question.Which item(s)is included in the M1 definition of money?
A)6 only.
B)2,3 and 4.
C)3 and 4.
D)3,4 and 6.
E)3 only.
Q4) If you were working out the cost of attending school next year,which function of money would you be using?
A)A medium of exchange.
B)A unit of account.
C)A store of wealth.
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Chapter 9: The Money Market and Monetary Policy
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Sample Questions
Q1) Which of the following accurately describes Milton Friedman?
A)He was a classical economist and contemporary of Adam Smith.
B)He popularized monetarism.
C)He advanced Keynesian analysis of Say's Law.
D)He followed Keynes into the British civil service.
E)He is considered the father of modern economics.
Q2) Ginny's aunt has sent her a $10,000 bond to help finance her studies.The bond pays an annual interest of 8 percent and has two years left until redemption.Ginny wishes to cash in the bond now when the current interest rate is 5 percent.Ignoring brokerage and other costs,approximately how much will Ginny get for the bond?
Q3) The transactions demand for money is determined by how much money people need.
A)True
B)False
Q4) A new one-year bond with a face value of $1,000 was issued that pays a coupon rate of 6%.What is the market interest rate if the price of the bond is
a)$1,029.15
b)$1,000
c)$972.5
Q5) Why is the money supply curve a vertical line?
Page 11
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Chapter 10: International Trade
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Sample Questions
Q1) Refer to the information above to answer this question.If both countries produce combination D what will be the combined outputs?
A)50 million units of soya milk and 130 million units of rice cakes.
B)60 million units of soya milk and 120 million units of rice cakes.
C)60 million units of soya milk and 130 million units of rice cakes.
D)120 million units of soya milk and 100 million units of rice cakes.
Q2) Define tariffs and Quotas,and explain the similarities and differences between them.
Q3) Refer to the data above to answer this question.Which of the following statements is correct?
A)Caledonia should specialize and export wheat.
B)Ibrox should specialize and export wheat.
C)Caledonia should specialize and export beans.
D)Ibrox should specialize in beans but export wheat.
Q4) Domestic producers gain and domestic consumers lose as a result of the imposition of tariffs or quotas.
A)True
B)False
Q5) Explain why consumers lose and producers win if a tariff is imposed.
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Chapter 11: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) For each of the following,state whether it creates a demand for or supply of Canadian dollars:
(a)A Japanese automobile firm builds an assembly plant in Manitoba.
(b)A Canadian importer purchases a shipload of Saudi Arabia oil.
(c)A Canadian student spends a summer in England studying in Oxford.
(d)A French exporter ships products to Argentina using a Canadian freighter.
(e)Currency traders feel that the value of the Canadian dollar will fall in the near future and act on that feeling.
Q2) Refer to Table 11.8 to answer this question.Which of the following statements is correct?
A)The Canadian dollar has appreciated and the Japanese yen has depreciated.
B)The Canadian dollar has depreciated and the Japanese yen has appreciated.
C)The Japanese yen is now worth less in terms of the Canadian dollar.
D)The Canadian dollar is now worth more in terms of the Japanese yen.
Q3) Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is a decrease in foreign income.What will the Bank of Canada do to maintain the fixed exchange rate?
Q4) What is the difference between a fixed,flexible,and managed ("dirty")float exchange rate regime?
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Chapter 12: Macroeconomic Policy Revisited
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Sample Questions
Q1) What is the crowding-out effect?
A)The idea that when a government borrows to finance a deficit,it crowds out private investment because it causes interest rates to fall
B)The idea that when a government borrows to finance a deficit,it crowds out private investment because it causes interest rates to rise
C)The idea that fiscal policy crowds out economic growth
D)The idea that balanced budgets crowd out economic growth
Q2) What does "monetizing the debt" involve?
A)Government selling bonds to the general public
B)Government selling bonds to the Bank of Canada
C)The Bank of Canada selling bonds to government
D)The Bank of Canada selling bonds to the general public
Q3) Which of the following best explains the Phillips curve relationship?
A)Inflation increases at a faster rate as the economy moves toward full employment.
B)Unemployment falls as the economy moves toward full employment.
C)Inflation decreases as the economy moves closer to full employment.
D)As unemployment decreases,so does the rate of inflation.
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Chapter 13: A Walk Through the Twentieth Century and Beyond
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Sample Questions
Q1) Sub-prime mortgages and derivatives are associated with stagflation.
A)True
B)False
Q2) Which of the following economic issues were emerging and gaining intense controversy in North America and Europe between 2012-2016?
A.Globalization and income inequality.
B.Globalization and the re-emergence of fixed exchange rates.
C.Currency devaluations and income inequality.
D.Trickle-down economics and industrialization.
A)True
B)False
Q3) Aggregate demand policies are effective in curing the problems of stagflation.
A)True
B)False
Q4) Why did post-World War I boom not last?
Q5) Explain why the supply of loanable funds is an upward sloping curve.(Why is there a graph here? It's not part of the question or answer. )
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Q6) Explain why the value of the Canadian dollar in terms of the U.S.dollar was low during the 1990s?