Intermediate Macroeconomics
Mock Exam
Course Introduction
Intermediate Macroeconomics delves into the theoretical frameworks and empirical evidence underlying national and global economic performance. The course builds on introductory concepts to analyze economic growth, business cycles, inflation, unemployment, monetary and fiscal policy, and open economy macroeconomics. Students explore how aggregate demand and supply interact, the roles of government and central banks, and the impact of macroeconomic policy decisions on economic stability and welfare. Through mathematical modeling, case studies, and current events, the course equips students with the analytical tools to understand and evaluate real-world macroeconomic issues.
Recommended Textbook
Macroeconomics 3rd Edition Canadian by Paul Krugman Robin Wells
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19 Chapters
5325 Verified Questions
5325 Flashcards
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Page 2
Chapter 1: First Principles
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Sample Questions
Q1) An increase in efficiency means that an economy has:
A) reduced its opportunity costs.
B) increased the equity of its distribution of goods and services.
C) made more people better off without making others worse off.
D) increased the incentives for its citizens to follow their own self-interest.
Answer: C
Q2) In an attempt to reduce shooting deaths,some cities have offered money to people who turn in illegal guns.This programme is an example of the government using _____ to influence behaviour.
A) financial incentives
B) law
C) marginal analysis
D) the gains from trade
Answer: A
Q3) Equity is the same as efficiency.
A)True
B)False
Answer: False
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Chapter 2: Economic Models: Trade-Offs and Trade
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Sample Questions
Q1) As long as people have different _____,everyone has a comparative advantage in something.
A) direct costs
B) benefits
C) utility
D) opportunity costs
Answer: D
Q2) (Scenario: Linear Production Possibility Frontier)Use Scenario: Linear Production Possibility Frontier.Largetown CANNOT produce _____ shirts and _____ pairs of socks.
A) 20;0
B) 40;40
C) 0;40
D) 10;20
Answer: B
Q3) Labour and capital are the only two factors of production.
A)True
B)False
Answer: False
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Chapter 3: Supply and Demand
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264 Flashcards
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Sample Questions
Q1) If the price of a commodity increases,you can usually expect the:
A) supply to increase.
B) quantity supplied to increase.
C) quantity supplied to decrease.
D) supply curve to shift to the right.
Answer: B
Q2) Which statement illustrates the law of demand?
A) An increase in tuition encourages more students to enroll in university because the quality of education has risen.
B) Consumers buy more personal computers because prices have fallen.
C) Oil companies drill for new sources because prices are higher.
D) Fewer people play golf because incomes are lower.
Answer: B
Q3) In the market for corn tortilla chips,what would cause a price increase?
A) Doctors tell their patients that tortilla chips are unhealthy.
B) There is a technological advance in tortilla chip production.
C) A fungus kills much of the corn crop in Quebec.
D) The price of salsa triples.
Answer: C
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Page 5
Chapter 4: Price Controls and Quotas: Meddling With Markets
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Sample Questions
Q1) (Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 1 000 kilograms,the quota rent per kilogram is:
A) $15.
B) $10.
C) $5.
D) $0.
Q2) A binding price floor causes:
A) a shortage in the market.
B) a surplus in the market.
C) an efficient use of resources.
D) equilibrium.
Q3) A price ceiling benefits all consumers.
A)True
B)False
Q4) Quota limits that are less than the market equilibrium quantity cause:
A) the demand price to be above the supply price.
B) the quantity demanded to be more than the quantity supplied.
C) the quantity demanded to be less than the quantity supplied.
D) the demand price to be equal to the supply price.
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Chapter 5: International Trade
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Sample Questions
Q1) (Figure: The Market for Computers)Use Figure: The Market for Computers.Assume that P<sub>A</sub> is the autarky price and P<sub>W</sub> is the world price.Producer surplus with international trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
Q2) (Figure: The Market for Computers)Use Figure: The Market for Computers.Assume that P<sub>A</sub> is the autarky price and P<sub>W</sub> is the world price.Consumer surplus with international trade is area:
A) W + X + Y.
B) W.
C) Y.
D) W + X.
Q3) If a market begins to engage in international trade,we can assume that:
A) producers in the exporting industry may be worse off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry may be worse off.
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Page 7
Chapter 6: Macroeconomics: the Big Picture
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153 Flashcards
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Sample Questions
Q1) In Canada,recessions are typically associated with a(n):
A) falling unemployment rate.
B) decrease in the number of people living in poverty.
C) decrease in the percentage of Canadians with dental insurance.
D) increase in corporate profits.
Q2) Which one of the following measures long-run economic growth?
A) a rise in employment
B) an increase in the money supply
C) a sustained increase in the production of goods and services
D) an increase in the labour force
Q3) In a typical business cycle,the peak is immediately followed by the:
A) recession.
B) trough.
C) expansion.
D) depression.
Q4) If a country runs a trade deficit,its investment spending is probably:
A) above its level of saving.
B) less than its level of saving.
C) equal to its level of saving.
D) equal to zero.
8
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Chapter 7: Gdp and the Cpi: Tracking the Macroeconomy
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Sample Questions
Q1) (Table: The Consumer Price Index)Use Table: The Consumer Price Index.The approximate rate of inflation in year 3 is:
A) 5%.
B) 10%.
C) 19%.
D) 20%.
Q2) (Figure 7-1: Circular-Flow Model)Use Figure 7-1: Circular-Flow Model.If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it)and there is a decrease in investment spending,holding everything else constant,which outcome is likely to occur?
A) an increase in the nominal GDP
B) an increase in the real GDP
C) an increase in the unemployment rate
D) an increase in the inflation rate
Q3) Which factor causes an outflow of funds from a domestic economy?
A) household savings
B) government tax collections
C) government transfer payments
D) imports
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Page 9
Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Suppose that banks are issuing personal loans at 9%.If expected inflation is 3%,then the nominal interest rate is _____% and the real interest rate is _____%.
A) 6;9
B) 9;6
C) 9;3
D) 6;12
Q2) Scenario: The Employment Rate
A group of 10 people includes three retirees,two part-time workers,two discouraged workers,one unemployed worker,and two full-time workers.
The unemployment rate is _____%.
A) 10
B) 30
C) 20
D) 50
Q3) The nominal interest rate equals the real interest rate:
A) times the rate of inflation.
B) minus the rate of inflation.
C) plus the rate of inflation.
D) when inflation is correctly anticipated.
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Page 10
Chapter 9: Long-Run Economic Growth
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Sample Questions
Q1) Technological progress is advanced through:
A) research and development.
B) government regulation.
C) consumption.
D) infrastructure.
Q2) According to the text,productivity is NOT driven by:
A) physical capital.
B) human capital.
C) technological progress.
D) natural resources.
Q3) Which country is NOT characterized by abundant farmland and mineral deposits?
A) the United States
B) Canada
C) Argentina
D) Japan
Q4) Many economists view resource scarcity as a:
A) major obstacle to long-run economic growth.
B) problem resolved fairly well by the market mechanism.
C) primary reason for poor countries' lack of economic growth.
D) problem for wealthy countries but not for poorer countries.
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Chapter 10: Savings, Investment Spending, and the Financial System
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385 Verified Questions
385 Flashcards
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Sample Questions
Q1) Economists use _____ as a model to explain how savers and borrowers come together to determine the equilibrium rate of interest.
A) the money market
B) loanable funds market
C) aggregate demand and aggregate supply
D) the financial system
Q2) Financial intermediaries do NOT include:
A) mutual funds.
B) pension funds.
C) insurance companies.
D) the Toronto Stock Exchange.
Q3) A liquid asset:
A) can be easily converted to a loan.
B) can be easily converted to cash with little or no loss of value.
C) are the only assets which financial markets work with.
D) carries no financial risk.
Q4) The crowding-out effect is the negative effect of government budget deficits on private investment spending.
A)True
B)False
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Chapter 11: Income and Expenditure
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Sample Questions
Q1) Changes in unplanned inventory investment move the economy towards the income-expenditure equilibrium.
A)True
B)False
Q2) Inventories are counted as investment because inventories are a source of future sales.
A)True
B)False
Q3) Finland's real GDP per capita grew rapidly in 2008 due to Nokia's ability to innovate and stay ahead of its competition.
A)True
B)False
Q4) A decrease in consumer spending is likely to be caused by:
A) expectation of an increase in personal income taxes.
B) expectation of a decrease in personal income taxes.
C) an increase in the multiplier.
D) an increase in investment spending.
Q5) The digital revolution led to a decline in Finnish paper exports.
A)True
B)False
Page 13
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Chapter 12: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) An increase in investment spending leads to _____ in the price level and _____ in real GDP in the short run.
A) an increase;no change
B) a decrease;no change
C) no change;no change
D) an increase;an increase
Q2) Nominal wages are sticky because:
A) wages are slow to rise when there are labour shortages and slow to fall even when the level of unemployment is significant.
B) wages remain fixed in the long run,increasing the profitability of the firms.
C) wages are slow to fall when there are labour shortages and slow to rise even when the level of unemployment is significant.
D) in the long run all wages are adjusted for inflation.
Q3) Aggregate demand will NOT increase when:
A) household wealth rises but prices are constant.
B) government purchases of goods rise.
C) the quantity of money increases.
D) interest rates increase.
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14
Chapter 13: Fiscal Policy
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Sample Questions
Q1) Suppose the government increases spending to fund tuition for qualified university students.Automatic stabilizers will _____ the _____ effect of the _____ in aggregate demand.
A) increase;contractionary;decrease B) decrease;contractionary;increase C) increase;expansionary;increase D) decrease;expansionary;increase
Q2) Automatic stabilizers are government spending and taxation rules that cause fiscal policy to be automatically contractionary when the economy contracts and automatically expansionary when the economy expands. A)True B)False
Q3) The cyclically adjusted budget deficit fluctuates _____ the actual budget deficit. A) more than B) less than C) about the same as D) inversely with
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15
Chapter 14: Money, Banking, and the Federal Reserve System
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Sample Questions
Q1) Debit cards:
A) are considered part of the money supply,since they allow access to a part of the money supply.
B) are not generally accepted as a medium of exchange.
C) are less liquid than stocks and bonds.
D) are a liability for the user of the card.
Q2) (Table: ABC Bank's Balance Sheet)Refer to Table: ABC Bank's Balance Sheet.The bank is holding excess reserves of:
A) $17 million.
B) $15 million.
C) $5 million.
D) $25 million.
Q3) (Scenario: Money Creation)Refer to Scenario: Money Creation.How much of the $1000 deposit is the bank required to keep in reserves?
A) $1000
B) $100
C) $200
D) $800
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Chapter 15: Monetary Policy
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Sample Questions
Q1) Stephen Poloz is the Governor of the Bank of Canada.
A)True
B)False
Q2) (Figure: Money Market I)Refer to Figure: Money Market I.If the money market is initially in equilibrium at point E and the central bank buys Treasury bills,then the interest rate will:
A) move towards i<sub>H</sub>.
B) move towards i<sub>L</sub>
C) remain at i<sub>E</sub>.
D) shift leftwards.
Q3) Suppose that the economy is operating at potential output and the money supply increases.Aggregate output will _____ potential output,nominal wages will _____,and the SRAS will shift _____.
A) rise above;rise;leftwards
B) fall below;rise;leftwards
C) rise above;fall;leftwards
D) rise above;rise;rightwards
Q4) Expansionary monetary policy may increase consumer spending.
A)True
B)False
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Chapter 16: Inflation, Disinflation, and Deflation
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Sample Questions
Q1) The classical model of the price level is most likely to be a good approximation of reality during periods of:
A) recession.
B) high unemployment.
C) low inflation.
D) high inflation.
Q2) Fiat money is:
A) money backed by gold.
B) money that only the government will accept to pay taxes.
C) paper money with no intrinsic value.
D) used only in Canada as a medium of exchange.
Q3) Which statement is likely to be TRUE if actual output is equal to potential output?
A) The actual unemployment rate is equal to the natural rate of unemployment.
B) The actual unemployment rate is above the natural rate of unemployment.
C) There will be zero unemployment.
D) The natural rate of unemployment will be above the actual unemployment rate.
Q4) In June 2008,Zimbabwe had the world's highest unemployment rate.
A)True
B)False
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Chapter 17: Macroeconomics: Events and Ideas
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Sample Questions
Q1) According to the classical model,prices are _____,making the aggregate supply curve _____ in the short run.
A) sticky;upward sloping
B) flexible;vertical
C) flexible;downward sloping
D) sticky;vertical
Q2) The school of thought that monetary policy should be the main tool of stabilization policy,that is skeptical about the use of fiscal policy,and that recognizes constraints on policy imposed by the natural rate of unemployment and the political business cycle is:
A) classical macroeconomics.
B) Keynesian macroeconomics.
C) monetarism.
D) the Great Moderation consensus.
Q3) The General Theory of Employment,Interest,and Money was written by:
A) Adam Smith.
B) Paul Samuelson.
C) Joseph Schumpeter.
D) John Maynard Keynes.
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19
Chapter 18: International Macroeconomics
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Sample Questions
Q1) One of the advantages of adopting a fixed exchange rate system is that it:
A) reduces uncertainty.
B) reduces the need for fiscal policy.
C) increases the strength of monetary policy.
D) does not require the country to maintain any large foreign exchange reserve.
Q2) A fixed exchange rate:
I.leaves monetary policy available for domestic stabilization.
II.reduces the uncertainty of international trade.
A) I only
B) II only
C) I and II
D) neither I nor II
Q3) If a country wishes to raise the exchange rate above its equilibrium value in the foreign exchange market,it will notice:
A) a surplus of its currency at the desired exchange rate.
B) a shortage of its currency at the desired exchange rate.
C) that it can achieve this rate by expanding the money supply.
D) that it must increase the supply of its currency in the foreign exchange market.
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Chapter 19: Graphs in Economics
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Sample Questions
Q1) The point at which the axes of a graph intersect is called the:
A) slope.
B) origin.
C) graph.
D) intercept.
Q2) (Figure: Unemployment Rate over Time)Use Figure: Unemployment Rate over Time.In the time-series graph,as we move from 1991 to 1993,we see that the unemployment rate has _____ from approximately _____% to approximately _____%.
A) decreased;5;4
B) increased;5.5;7
C) decreased;7.8;5
D) increased;4;6.3
Q3) (Table: Price,Quantity Demanded,and Quantity Supplied)Use Table: Price,Quantity Demanded,and Quantity Supplied.A linear relationship exists between:
A) price and quantity demanded.
B) price and quantity supplied.
C) price and quantity demanded minus quantity supplied.
D) quantity demanded and quantity supplied.
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