Intermediate Macroeconomics
Review Questions
Course Introduction
Intermediate Macroeconomics builds on foundational macroeconomic principles to deepen students understanding of aggregate economic behavior and policy-making. The course covers key concepts such as economic growth, business cycles, unemployment, inflation, and the roles of fiscal and monetary policy. Students analyze the determinants of output, income, and employment in closed and open economies, engage with classical and Keynesian models, and explore the impact of expectations and shocks on macroeconomic variables. Through theoretical frameworks and empirical evidence, the course equips students to critically evaluate real-world macroeconomic issues and policy debates.
Recommended Textbook
Macroeconomics 1st Canadian Edition by R. Glenn Hubbard
Available Study Resources on Quizplus
16 Chapters
1250 Verified Questions
1250 Flashcards
Source URL: https://quizplus.com/study-set/1248 Page 2
Chapter 1: Introduction to Macroeconomics and the Great Recession
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/24628
Sample Questions
Q1) Financial markets and financial intermediaries together comprise the A) business cycle.
B) economic system.
C) macroeconomic model.
D) financial system.
Answer: D
Q2) Long-run economic growth is the process by which productivity increases
A) the employment rate.
B) the average standard of living.
C) the size of the labour force.
D) federal tax revenues.
Answer: B
Q3) A hypothesis in an economic model is a statement that ________ about an economic variable.
A) is correct
B) is incorrect
C) may be either correct or incorrect
D) cannot be proven either correct or incorrect
Answer: C
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Measuring the Macroeconomy
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/24629
Sample Questions
Q1) The Bank of Canada may use core CPI,which excludes items such as food and energy,as a measure of inflation because
A) food and energy are necessities, so consumers have no choice but to purchase these.
B) food and energy prices tend to remain stable in the short run, so are not relevant to the calculation of inflation.
C) including food and energy prices tends to overstate the true inflation rate by 0.5% to 1%.
D) food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation.
Answer: D
Q2) <b>Refer to Figure 2.3.</b>Assume that 2010 is the base year.The GDP deflator for 2010 is
A) 67.1.
B) 84.5.
C) 100.0.
D) 118.3.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: The Canadian Financial System
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/24630
Sample Questions
Q1) Suppose you purchase a two-year bond that has a $450 coupon and a face value of $5000,and immediately after you purchase the bond,new bonds are issued that are otherwise identical,except they have coupons of $375.If you sell your bond,the price of your bond will be
A) $4868.07.
B) $5000.00.
C) $5069.76.
D) $5134.67.
Answer: D
Q2) One difference between stocks and bonds is that
A) unlike bonds, stocks do not represent a claim on a share in the profits and assets of firms.
B) stocks are financial securities and bonds are labour market securities.
C) unlike bonds, stocks do not promise to repay a fixed amount of money.
D) stocks represent ownership in companies and bonds represent ownership in the government.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Money and Inflation
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/24631
Sample Questions
Q1) Reserves are a bank ________ consisting of ________.
A) asset; vault cash plus bank deposits with the central bank
B) asset; chequing account deposits and savings account balances
C) liability; vault cash plus bank deposits with the Federal Reserve
D) liability; chequing account deposits and savings account balances
Q2) Which of the following is not an example of inflation causing a redistribution of income because the inflation was unexpected?
A) Firms have to hire extra workers to change prices because of inflation.
B) A firm signs a 4-year contract with a union based on a 3% expected rate of inflation per year, and the actual inflation rate ends up being 5% per year.
C) An employee receives an increase in salary that is less than the rate of inflation because management under-predicted inflation.
D) A bank collects a lower amount of interest from a loan because inflation was predicted to be 2% but was actually 4%.
Q3) Explain how inflation can be costly even if it is expected.
Q4) How is the quantity theory of money different from the quantity equation,and why must the quantity equation always be true?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Global Financial System and Exchange Rates
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/24632
Sample Questions
Q1) All else equal,an increase in net exports accompanied by a decrease in expected future profits would definitely result in
A) an increase in the equilibrium real interest rate.
B) a decrease in the equilibrium real interest rate.
C) an increase in the equilibrium level of saving and investment.
D) a decrease in the equilibrium level of saving and investment.
Q2) Which of the following is an example of foreign direct investment in the United Kingdom?
A) British Airways purchases a small, Toronto-based helicopter transport company.
B) The Bank of England purchases Canadian Treasury securities.
C) Rogers purchases stock in British Telecom.
D) Canada-based BlackBerry purchases a distribution warehouse in London.
Q3) An increase in capital outflows from Canada will
A) decrease the balance of the Canadian current account.
B) decrease the balance of the Canadian financial account.
C) increase the balance of the capital account of Canada.
D) decrease the balance of the capital account of Canada.
Q4) Why is the balance of payments always zero?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Q5) What is the difference between nominal exchange rates and real exchange rates?
Chapter 6: The Labour Market
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/24633
Sample Questions
Q1) <b>Refer to Figure 6.1.</b>Holding other variables constant,an increase in the real wage rate will result in a
A) shift from curve D to curve D .
B) shift from curve D to curve D .
C) movement from point A to point B.
D) movement from point B to point A.
Q2) High unemployment rates persisted for several years after the official end of the Great Recession.The long duration of unemployment for many workers can be viewed as being consistent with an increase in ________ unemployment,and therefore an increase in the natural rate of unemployment.
A) frictional
B) cyclical
C) structural
D) seasonal
Q3) How does a real wage above the equilibrium wage cause unemployment?
Q4) Luke was earning $60 per hour and working 40 hours per week.Luke's wage rose to $70 per hour,and as a result,he now works 50 hours per week.What can you conclude from this information about the substitution and income effects of a wage increase for Luke?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: The Standard of Living Over Time and Across Countries
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/24634
Sample Questions
Q1) All else equal,in an economy with an upward-sloping production function,as an economy accumulates more capital goods,
A) the labour supply must increase.
B) real GDP increases.
C) the labour supply must decrease.
D) the marginal product of capital will increase.
Q2) The two basic ways for workers to acquire human capital are
A) formal education and "learning by doing."
B) purchases in the capital market and trade.
C) increases in the capital stock and increases in total factor productivity.
D) training and intuition.
Q3) Explain the relationships between the marginal product of labour and the demand for labour,and the marginal product of capital and the demand for capital.
Q4) The marginal product of capital is always ________ and it ________ as the capital stock increases.
A) positive; increases
B) positive; decreases
C) negative; increases
D) negative; decreases
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Long-Run Economic Growth
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/24635
Sample Questions
Q1) According to the AK growth model,budget surpluses ________ the national saving rate and ________ the steady-state growth rate.
A) increase; increase
B) reduce; reduce
C) increase; do not change
D) reduce; do not change
Q2) In the two-sector growth models,endogenous growth arises from A) increased saving.
B) the research sector.
C) increased capital.
D) the manufacturing sector.
Q3) Labour-augmenting technological change refers to improvements in efficiency that A) occur without increasing the productivity of labour or the efficiency of capital goods. B) increase the productivity of labour and the efficiency of capital goods.
C) increase the efficiency of capital goods without having to increase the productivity of labour.
D) increase the productivity of labour but that do not directly make capital goods more efficient.
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: Business Cycles
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/24636
Sample Questions
Q1) If potential GDP for the fourth quarter of 2012 = $58.5 billion,and real GDP for the fourth quarter of 2012 = $53.7 billion,then the output gap was
A) -8.9%.
B) -8.2%.
C) 8.2%.
D) 8.9%.
Q2) Suppose for every dollar change in household wealth,consumption expenditures change by $0.05.If real household wealth declines by $45 billion,potential GDP is $120 billion,and the multiplier effect for the third year after an expenditure shock is 0.7,what is the total change in output relative to potential for the third year?
A) -1.31%
B) -1.84%
C) -2.68%
D) -3.57%
Q3) The economy is in an expansion when it is
A) moving from a peak to a trough.
B) moving from a trough to a peak.
C) at its peak.
D) at its trough.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Explaining Aggregate Demand: the Is-Mp Model
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/24637
Sample Questions
Q1) Equilibrium in the goods market occurs where A) real GDP equals nominal GDP.
B) aggregate expenditure equals autonomous consumption.
C) autonomous consumption equals induced consumption.
D) aggregate expenditure equals real GDP.
Q2) <b>Refer to Figure 10.7.</b>A movement from point D to point C could be caused by A) a positive demand shock.
B) an increase in the term premium investors expect in the future.
C) an increase in the term structure effect.
D) an increase in the expected rate of inflation.
Q3) <b>Refer to Figure 10.8.</b>.Other things equal,an increase in the demand for money and the accompanying change in the real interest rate would best be represented by A) a movement from point A to point C.
B) a movement from point A to point D.
C) a shift from LM to LM . D) a shift from LM to LM .
Q4) Explain how the AD curve can be derived from the IS-MP model.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: The Is-Mp Model: Adding Inflation and the Open Economy
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/24638
Sample Questions
Q1) An increase in the real interest rate in Canada will cause the dollar to ________ relative to other currencies and ________ net exports and real GDP.
A) appreciate; increase
B) appreciate; reduce
C) depreciate; increase
D) depreciate; reduce
Q2) How does the open-economy IS-MP model incorporate net exports with a fixed exchange rate system?
Q3) The oil shock of 2007-2008 saw the price of oil rising from less than $60 a barrel in March 2007 to over $145 a barrel in July 2008,and decreasing again to just over $30 a barrel in December 2008.Assuming the economy was at potential GDP prior to the oil shock,the increase in the price of oil,such as what occurred between March 2007 and July 2008,acts as a negative supply shock,causing the inflation rate to ________ and the output gap to ________.
A) increase; become negative
B) increase; become positive
C) decrease; become negative
D) decrease; become positive
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Monetary Policy in the Short Run
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/24639
Sample Questions
Q1) By rescuing large,troubled institutions,as happened during the Great Recession with institutions like AIG and General Motors,policymakers attempted to achieve financial and economic stability in the short run,but their actions may encourage even riskier behaviour on the part of these large institutions in the future if these institutions believe that they,too,will be bailed out if they get in trouble.This risk faced by policymakers is known as
A) asymmetric information.
B) quantitative easing.
C) too-big-to-fail policy.
D) moral hazard.
Q2) <b>Refer to Figure 12.4.</b>Since the housing bubble burst and the economy returned to its initial,pre-bubble level before the corrective policy changed output,the economy actually moved from ________ after the bubble burst.
A) point A to point B
B) point B to point D
C) point A to point C
D) point C to point B
Q3) What is the policy trilemma?
Q4) What are the main arguments for and against central bank independence?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Fiscal Policy in the Short Run
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/24640
Sample Questions
Q1) Other things equal,a decrease in the personal income tax rate will ________ disposable income,which leads to ________ in output and employment.
A) increase; an increase
B) increase; a decrease
C) decrease; an increase
D) decrease; a decrease
Q2) Suppose the federal budget deficit for the year was $500 billion and the economy were in a recession.If the economy had been at potential GDP,it is estimated that tax revenue would have been $350 billion higher and government spending on transfer payments would have been $200 billion lower.Using these estimates,the cyclically adjusted budget
A) deficit was $1050 billion.
B) deficit was $650 billion.
C) surplus was $50 billion.
D) surplus was $650 billion.
Q3) Explain the differences between a federal budget deficit,a federal budget surplus,and the federal government debt.
Q4) What is the goal of fiscal policy,and what tools have policymakers traditionally used to conduct fiscal policy?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Aggregate Demand, aggregate Supply, and Monetary Policy
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/24641
Sample Questions
Q1) Suppose the economy is initially in equilibrium where real GDP equals potential GDP and the inflation rate is at the target rate.Other things equal,a housing boom will cause aggregate expenditures to increase,which will result in
A) an increase in aggregate demand and an increase in the inflation rate.
B) an increase in aggregate supply and an increase in the inflation rate.
C) an increase in aggregate demand and a decrease in the inflation rate.
D) an increase in aggregate supply and a decrease in the inflation rate.
Q2) <b>Refer to Figure 14.1.</b>Other things equal,an increase in the inflation rate is best represented as a movement from
A) point A to point B.
B) point C to point A.
C) point C to point B.
D) point B to point C.
Q3) What are the primary arguments in favour of a rules approach,and what are the primary arguments in favour of a discretionary approach?
Q4) What is stagflation,and how does it occur? How is stagflation represented in the aggregate demand-aggregate supply model?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Fiscal Policy and the Government Budget in the
Long Run
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/24642
Sample Questions
Q1) The Canadian federal government obtains most of its revenues primarily through four main taxes.Which of the following is not one of the main sources of federal revenue?
A) corporate income taxes
B) social insurance contributions
C) excise taxes
D) individual income taxes
Q2) Assume that seigniorage and the government's primary deficit are both zero.If the real interest rate is greater than the growth rate of real GDP,the debt-to-GDP ratio
A) will increase.
B) will decrease.
C) will either decrease or not change.
D) will either increase or not change.
Q3) <b>Refer to Table 15.3</b>.Based on the data in the table,fiscal policy in Cordelia is ________ and fiscal policy in Saldinia is ________.
A) sustainable; sustainable
B) sustainable; unsustainable
C) unsustainable; sustainable
D) unsustainable; unsustainable
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Consumption and Investment
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/24643
Sample Questions
Q1) If the substitution effect is stronger than the income effect,an increase in real interest rates will lead to ________ in aggregate consumption and will lead to ________ in household saving.
A) an increase; a decrease
B) a decrease; a decrease
C) a decrease; an increase
D) an increase; an unclear change
Q2) The tendency for households to consume an equal amount over time is called
A) the savings-consumption constraint.
B) intertemporal consumption.
C) consumption equality.
D) consumption smoothing.
Q3) Assume that a temporary tax break has been put in place that allows for an increase in allowable depreciation.If and when the government changes the depreciation allowance back to its original amount,this should cause the
A) uc curve to shift down.
B) uc curve to shift up.
C) MPK curve to shift to the right.
D) MPK curve to shift to the left.
To view all questions and flashcards with answers, click on the resource link above.
Page 18