Introduction to Economics Exam Review
Course Introduction
Introduction to Economics provides students with a foundational understanding of the principles that govern how societies allocate scarce resources. The course covers key concepts such as supply and demand, opportunity cost, market equilibrium, and the roles of consumers, firms, and governments in economic decision-making. Through real-world examples and analytical frameworks, students will examine how markets operate, what causes market failures, and how public policies can address economic challenges. By the end of the course, learners will be equipped to critically analyze economic issues and understand the impact of economics on everyday life.
Recommended Textbook
Principles of Macroeconomics 4th Canadian Edition by Robert H. Frank
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16 Chapters
2776 Verified Questions
2776 Flashcards
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Page 2
Chapter 1: Measuring Macroeconomic Performance: Output and Prices
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) If the activity in question is yearly fishing trips,which of the following is an appropriate example of Cost B?
A) Money spent on a new,durable summer hat.
B) The annual parking fee at the fishing port.
C) Money spent on repairing the fishing boat.
D) Money spent on worms and tackle.
E) An annual fishing licencE.
Answer: D
Q2) The value of the best alternative to any action you undertake is referred to as its A) production cost.
B) opportunity cost.
C) resource cost.
D) increasing cost.
E) accounting cost.
Answer: B
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Page 3
Chapter 2: Measuring Macroeconomic Performance:
Saving and Wealth
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) A circular flow diagram of an economy shows that
A) individuals tend to be highly specialized.
B) households earn wages and salaries for their labour supplied to the firms.
C) households buy goods and services from firms.
D) firms use the labour they hire to produce goods and services.
E) All of thesE.
Answer: E
Q2) While there exists the potential for specialization to go too far,it is equally true that A) these fears are overstated by the media.
B) any work is mind numbing and distasteful.
C) failure to specialize has significant costs.
D) less specialization means higher wages.
E) less specialization would improve conversation at parties.
Answer: C
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4
Chapter 3: Measuring Macroeconomic Performance:
Wages, Employment and the Labour Market
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) One observes that both the equilibrium price and the equilibrium quantity of coffee fall.Which of the following best fits the observed data?
A) An increase in demand with supply constant.
B) An increase in demand coupled with a decrease in supply.
C) An increase in demand coupled with an increase in supply.
D) A decrease in demand with supply constant.
E) An increase in supply with demand constant.
Answer: D
Q2) If a market is in equilibrium and then demand increases while supply decreases,the change in the equilibrium price is ________ and the change in the equilibrium quantity is _________.
A) positive;positive
B) positive;negative
C) positive;indeterminate
D) indeterminate;positive
E) negative;negative
Answer: C
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Chapter 4: Short-Term Economic Fluctuations
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) _________ policy focuses on the government's budget,while _________ policy aims at changing the underlying structures or institutions of the economy.
A) Monetary;structural
B) Monetary;fiscal
C) Fiscal;monetary
D) Fiscal;structural
E) Structural;monetary
Q2) Average labour productivity is defined as
A) output per person.
B) output per employed worker.
C) per-capita output.
D) output per skilled worker.
E) output per unskilled worker.
Q3) Compared to 1926,total output per person in Canada today is about ________ times larger.
A) 2
B) 6
C) 25
D) 50
E) 100
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Chapter 5: Spending and Output in the Short Run
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) Life expectancy is ________ and the probability at birth of surviving to age 65 is ________ in countries with ________ GDP per capita.
A) low;low;high
B) high;high;low
C) high;high;high
D) low;high;low
E) high;low;high
Q2) The accuracy of Canada's official unemployment rate is criticized because A) unemployed homemakers and students who are not actively seeking employment are not included in the number of unemployed people.
B) people who would like to work but have given up trying to find work are not included in the number of unemployed people.
C) it fails to indicate how many people work at more than one job.
D) people under 15 years of age and over 65 years of age are excluded from the data.
E) the Statistics Canada survey does not include all the households in Canada.
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Chapter 6: Fiscal Policy
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) A labour contract provides for a first-year wage of $10 per hour,and specifies that the real wage will rise by 3% in the second year of the contract.The consumer price index (CPI)is 100 in the first year and 107 in the second year.What dollar wage must be paid in the second year?
A) $10.00 per hour.
B) $10.30 per hour.
C) $10.70 per hour.
D) $11.00 per hour.
E) $11.02 per hour.
Q2) Indexing is the process of
A) dividing a real quantity by a price index.
B) dividing a nominal quantity by a price index.
C) increasing a nominal quantity by an amount equal to the percentage change in a price index.
D) increasing a real quantity by an amount equal to the percentage change in a price index.
E) measuring the average price of a given class of goods or services relative to the price of the same goods and services in a base year.
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Chapter 7: Money, Prices and the Reserve Bank
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Suppose that Human Resources and Social Development Canada (HRSDC)estimated Canada's natural rate of unemployment at 5.8% for 1994.The actual unemployment rate was 10.3% in 1994.Okun's law implies that,in 1994,Canada's negative output gap was
A) 8.1% of potential output.
B) 6.1% of potential output.
C) 5.1% of potential output.
D) 4.1% of potential output.
E) 9.0% of potential output.
Q2) The unemployment duration is the length of a period during which an individual
A) remains seasonally unemployed before becoming cyclically unemployed.
B) remains frictionally unemployed before becoming cyclically unemployed.
C) is continuously unemployed.
D) stays out of the labour force.
E) does not actively seek employment.
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9
Chapter 8: The Reserve Bank and the Economy
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) Suppose C = 100 + 0.6(Y - T)and T = 0.25Y,I = 150,G = 250 and NX = 50.The income-expenditure multiplier is equal to
A) 0.6.
B) 1.3.
C) 1.8.
D) 2.3.
E) 2.7.
Q2) The marginal propensity to import (m)is the amount by which
A) taxes rise when income rises by $1.
B) imports rise when income falls by $1.
C) imports rise when income rises by $1.
D) savings rise when income rises by $1.
E) imports fall when income rises by $1.
Q3) The relationship between consumption and its determinants,such as disposable income,is called the
A) marginal propensity to consume.
B) opportunity cost of consumption.
C) marginal benefit of consumption.
D) consumption function.
E) disposable income function.
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Chapter 9: The Aggregate Demand - Aggregate Supply
Model
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) In Macroland,there is $1,000,000 in currency that can either be held by the public or used by banks as reserves.If the banks' desired reserve-deposit ratio decreases from 10% to 5% and the public continues to hold the same amount of currency,the money supply in Macroland will
A) increase.
B) decrease.
C) remain the same.
D) either increase or decrease.
E) increase initially,but then return to the original level.
Q2) Growth in the money supply is typically extremely high for countries experiencing periods of A) hyperinflation.
B) recession.
C) depression.
D) recessionary gaps.
E) low demand.
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11
Chapter 10: Macroeconomic Policy
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) In Econland,the components of planned aggregate expenditure are given by:
C = 500 + 0.75(Y - T)- 500r
I = 300 - 500r
G = 400
NX = 30
If potential output equals 4,680,net taxes equal 40 and the central bank sets the interest rate at 0.05 (5%),then the bank must _______ the interest rate to ________ to restore full employment.
A) raise;6%
B) raise;7%
C) lower;4%
D) lower;3%
E) lower;2%
Q2) A Bank of Canada action that increases nominal interest rates is called
A) expansionary monetary policy.
B) contractionary monetary policy.
C) a policy reaction function.
D) a monetary easing.
E) recessionary monetary policy.
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Page 12
Chapter 11: The Economy in the Long Run: an Introduction to Economic Growth
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) In recent decades,the statistical inverse relationship between the inflation rate and the unemployment rate observed during the 1960s appears to have broken down.One explanation for this puzzle is provided by the
A) basic Keynesian model.
B) AD-AS model.
C) short-run Phillips curve model.
D) expectations-augmented Phillips curve model.
E) planned aggregate expenditure model.
Q2) The leftward shift in the aggregate demand (AD)curve,from AD1 to AD2,shown in the diagram above may be caused by a(n)
A) decrease in consumption induced by a decrease in national income.
B) decrease in consumption induced by a rise in the price level.
C) decrease in consumption induced by a fall in real wealth due to a rise in the price level.
D) decrease in autonomous private investment.
E) increase in autonomous consumption.
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13
Chapter 12: The Production Function Approach to Understanding Growth
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) Which would be one of the factors that shift the aggregate demand (ADI)curve? A change in
A) productivity.
B) the prices of imported resources.
C) domestic resource availability.
D) profit expectations on investment projects.
E) the price level.
Q2) A current high rate of inflation will tend to promote a
A) low expected inflation and a low rate of actual inflation.
B) moderate expected inflation and a moderate rate of actual inflation.
C) high expected inflation and a high rate of actual inflation.
D) low expected inflation and a high rate of actual inflation.
E) built-in expectation of low inflation in the futurE.
Q3) Which of the following will shift the aggregate demand (ADI)curve to the right?
A) Income taxes are raised.
B) The government increases spending on education.
C) Consumers become pessimistic about the future.
D) Business managers become pessimistic about the future.
E) Foreign economies fall into recession,reducing their demand for domestic exports.
Page 14
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Chapter 13: Savings, Capital Formation and Comparative
Economic Growth
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) The currency used in the Duchy of Saxony is the ducet.If the market equilibrium value of the exchange rate equals $0.20 per ducet,but the ducet is officially fixed at $0.25 per ducet,then the ducet exchange rate is __________ and,to maintain this exchange rate,there will be __________ in the government's stock of international reserves.
A) undervalued;a net decline
B) undervalued;a net increase
C) overvalued;no change
D) overvalued;a net decline
E) overvalued;a net increase
Q2) Holding all else constant,a decrease in preferences by Americans for Canadian goods will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.
A) increase;increase
B) increase;decrease
C) not change;not change
D) decrease;increase
E) decrease;decrease
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Page 15
Chapter 14: International Trade
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Bank C promises to pay a compound annual interest rate of 6%,while Bank S pays an 8% simple annual interest rate,on deposits.If you deposit $1,000 in each bank,and do not make any withdrawals,after 10 years your deposit in Bank C equals _________,while your deposit in Bank S equals __________.
A) $1,060;$1,800
B) $1,600;$1,800
C) $1,600;$2,159
D) $1,791;$1,800
E) $1,791;$2,159
Q2) Low-income countries often face the resource curse because they have A) few natural resources.
B) highly diversified economies.
C) high levels of capital per worker.
D) domestic conflict associated with control over natural resources.
E) fixed exchange rates.
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16
Chapter 15: Exchange Rates and the Open Economy
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) If a tariff is placed on a good,then imports of the good _________,domestic production of the good ________,and domestic consumption of the good
A) increase;increases;increases
B) increase;increases;decreases
C) increase;decreases;decreases
D) decrease;decreases;decreases
E) decrease;increases;decreases
Q2) The demand for DVD players in a country is given by D = 300 - 0.2P,where P is the price of a DVD player.Supply by domestic producers is given by S = 100 + 0.8P.The world price of a DVD player equals $100.In equilibrium,when this economy is closed to trade,domestic DVD player production equals __________,and when this economy opens to trade,domestic DVD player production equals _________.
A) 180;260
B) 180;280
C) 260;180
D) 260;280
E) 280;260
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Chapter 16: The Balance of Payments: Net Exports and International Capital Flows
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247 Verified Questions
247 Flashcards
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Sample Questions
Q1) The excess of government spending over tax collections is
A) national income.
B) national saving.
C) national wealth.
D) the government budget deficit.
E) the government budget surplus.
Q2) Canada's ________,which determines the total amount of investment funds available to Canada during a year,includes ________________________.
A) gross saving;household saving
B) national saving;household saving + corporate saving
C) national saving;household saving + corporate saving + government saving
D) gross saving;household saving + corporate saving + government saving + non-resident saving
E) national saving;household saving + government saving
Q3) Saving for the purpose of leaving an inheritance is called ________ saving.
A) public
B) national
C) precautionary
D) life-cycle
E) bequest
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