Introduction to Macroeconomics Exam
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Course Introduction
Introduction to Macroeconomics explores the fundamental principles that govern the behavior of entire economies. This course examines key topics such as national income, economic growth, unemployment, inflation, government fiscal and monetary policies, and international trade. Students will learn how economic indicators are measured and interpreted, and gain an understanding of how policy decisions impact economic stability and growth on a national and global scale. Through real-world examples and analytical tools, the course provides a solid foundation for understanding the economic forces that shape society and influence everyday life.
Recommended Textbook
Macroeconomics 5th Canadian Edition by N Gregory Mankiw
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Page 2
Chapter 1: The Science of Macroeconomics
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Sample Questions
Q1) The ability of macroeconomists to predict the future course of economic events:
A) is no better than the meteorologist's ability to predict the next month's weather.
B) is much better than the meteorologist's ability to predict the next month's weather.
C) has gotten worse over time.
D) is less precise than it was in the 1920s.
Answer: A
Q2) Exogenous variables are:
A) determined outside the model.
B) determined within the model.
C) the outputs of the model.
D) explained by the model.
Answer: A
Q3) Macroeconomists are like scientists because they both:
A) design data and conduct controlled experiments to test their theories.
B) rely on data analyzed from experiments they set up in a laboratory.
C) are unlimited in their use of controlled experiments.
D) collect data,develop hypotheses,and analyze the results.
Answer: D
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3
Chapter 2: The Data of Macroeconomics
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Sample Questions
Q1) All of the following transactions that took place in 2014 would be included in GDP for 2014 except the purchase of a:
A) book printed in 2014,entitled The Year 3000.
B) 2001 Jeep Cherokee.
C) year 2015 calendar printed in 2014.
D) ticket to see the movie 2001.
Answer: B
Q2) Nominal GDP is measured in _____ dollars _____ time.
A) current; at a point in
B) current; over a period of
C) constant; at a point in
D) constant; over a period of
Answer: B
Q3) In principle,the GDP accounts should-but do not-have an imputation for:
A) housing services enjoyed by homeowners.
B) rental services of automobiles driven by owners.
C) meals cooked in restaurants.
D) housing services enjoyed by renters.
Answer: B
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Page 4
Chapter 5: The Open Economy
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Sample Questions
Q1) A country's real exchange rate:
A) measures how many units of foreign exchange one really gets for one unit of domestic currency.
B) is equal to the nominal exchange rate multiplied by the domestic price level divided by the foreign price level.
C) is equal to the nominal exchange rate multiplied by the foreign price level divided by the domestic price level.
D) the price of a domestic car divided by the price of a foreign car.
Q2) Net capital outflow is equal to:
A) national saving minus the trade balance.
B) domestic investment plus the trade balance.
C) domestic investment minus national saving.
D) national saving minus domestic investment.
Q3) If the purchasing-power parity theory is true,then:
A) the net exports schedule is very steep.
B) all changes in the real exchange rate result from changes in price levels.
C) all changes in the nominal exchange rate result from changes in price levels.
D) changes in saving or investment influence only the real exchange rate.
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Chapter 6: Unemployment
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Sample Questions
Q1) All of the following policies were adopted by government in an attempt to reduce the natural rate of unemployment except:
A) employment insurance.
B) government employment agencies.
C) public retraining programs.
D) bonus programs for employment insurance claimants who found jobs quickly.
Q2) One reason for unemployment is that:
A) it takes time to match workers and jobs.
B) all jobs are identical.
C) the labour market is always in equilibrium.
D) a laid-off worker can immediately find a new job at the market wage.
Q3) A typical worker in Canada who is covered by employment insurance receives ______ percent of his or her former wages for ______ weeks.
A) 50; 26
B) 50; 52
C) 67; 26
D) 67; 52
Q4) Explain how paying efficiency wages can help employers overcome both moral hazard and adverse selection problems in employment.
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Chapter 7: Economic Growth I
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Sample Questions
Q1) Investment per worker (i)as a function of the saving ratio (s)and output per worker (f(k))may be expressed as:
A) s + f(k).
B) s - f(k).
C) sf(k).
D) s/f(k).
Q2) In the Solow growth model of an economy with population growth but no technological change,the break-even level of investment must do all of the following except:
A) offset the depreciation of existing capital.
B) provide capital for new workers.
C) equal the marginal productivity of capital (MPK).
D) keep the level of capital per worker constant.
Q3) In the Solow growth model,with a given production function,depreciation rate,saving rate,and no technological change,higher rates of population growth produce:
A) higher steady-state ratios of capital per worker.
B) higher steady-state growth rates of output per worker.
C) higher steady-state growth rates of total output.
D) higher steady-state levels of output per worker.
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Page 7
Chapter 8: Economic Growth II
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Sample Questions
Q1) Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from:
A) using up scarce natural resources to create new products.
B) breaking down barriers to trade and development.
C) new product producers driving incumbent producers out of business.
D) creating new methods to destroy the environment.
Q2) Explain how the Solow growth model differs from models of endogenous growth with respect to:
a.the sources of technological progress.b.returns to capital.
Q3) If the labour force is growing at a 3 percent rate and the efficiency of a unit of labour is growing at a 2 percent rate,then the number of effective workers is growing at a rate of:
A) 2 percent.
B) 3 percent.
C) 5 percent.
D) 6 percent.
Q4) What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.
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8
Chapter 9: Introduction to Economic Fluctuations
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Sample Questions
Q1) Along an aggregate demand curve,derived from the quantity theory of money which of the following are held constant?
A) real output and prices
B) nominal output and velocity
C) the money supply and real output
D) the money supply and velocity
Q2) Starting from long-run equilibrium,if a drought pushes up food prices throughout the economy,the Bank of Canada could move the economy more rapidly back to full employment output by:
A) increasing the money supply,but at the cost of permanently higher prices.
B) decreasing the money supply,but at the cost of permanently lower prices.
C) increasing the money supply,which would restore the original price level.
D) decreasing the money supply,which would restore the original price level.
Q3) Long-run growth in real GDP is determined primarily by ______,while short-run movements in real GDP are associated with ______.
A) variations in labour-market utilization; technological progress
B) technological progress; variations in labour-market utilization
C) money supply growth rates; changes in velocity
D) changes in velocity; money supply growth rates
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Page 9
Chapter 10: Aggregate Demand I
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Sample Questions
Q1) The assumption of constant velocity is equivalent to assuming that the demand for real money balances depends on:
A) income alone.
B) the interest rate alone.
C) income and interest rates.
D) people economizing on real balances as the interest rate rises.
Q2) (Exhibit: Keynesian Cross)In this graph,if firms are producing at level Y<sub>1</sub>,then inventories will ______ inducing firms to ______ production.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease
Q3) The theory of liquidity preference implies that the quantity of real money balances demanded is:
A) negatively related to both the interest rate and income.
B) positively related to both the interest rate and income.
C) positively related to the interest rate and negatively related to income.
D) negatively related to the interest rate and positively related to income.
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Chapter 13: Aggregate Supply and the Short-Run
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Sample Questions
Q1) (Exhibit: AD-AS Shifts)Starting from long-run equilibrium at A with output equal to Y and the price level equal to P<sub>1</sub>,if there is an unexpected monetary contraction that shifts aggregate demand from AD<sub>1</sub> to AD<sub>3</sub>,then the long-run neutrality of money is represented by the movement from:
A) A to B.
B) A to G.
C) A to C.
D) A to D.
Q2) Demand-pull inflation is the result of:
A) high aggregate demand.
B) low aggregate demand.
C) favourable supply shocks.
D) adverse supply shocks.
Q3) In the sticky-wage model,if labour contracts specify that the nominal wage be fully indexed for inflation,the short-run aggregate supply schedule will:
A) slope upward to the right.
B) be vertical.
C) be horizontal.
D) shift upward.
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Chapter 15: Stabilization Policy
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Sample Questions
Q1) Monetarists believe all of the following except:
A) fluctuations in the money supply are responsible for most large fluctuations in the economy.
B) the central bank should keep the money supply growing at a steady rate.
C) slow and steady growth of the money supply would yield stable output,employment,and prices.
D) the central bank should adjust the money supply to adjust to various shocks to the economy.
Q2) A time-inconsistency problem in macroeconomic policy can occur when the policymaker:
A) is made to follow a strict and an inflexible rule.
B) has discretion in the short run but follows a rule in the long run.
C) has discretion to act as it seems best in each situation,based on his or her own knowledge and experience.
D) has no discretion.
Q3) Active economic policy seeks to do all of the following except:
A) offset fluctuations in real GDP.
B) use monetary and fiscal policy to shift aggregate demand.
C) respond to changing economic conditions.
D) take a hands-off approach to macroeconomic policy.
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Chapter 16: Government Debt and Budget Deficits
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Sample Questions
Q1) If the government levies a one-time temporary tax on the young and gives the proceeds to the elderly,and both generations follow the life-cycle consumption pattern but are not altruistically linked:
A) both the young and the old will consume more.
B) there will be a net increase in overall consumption.
C) there will be a net decrease in overall consumption.
D) there will be no change in overall consumption.
Q2) Explain how tax cuts can affect both aggregate demand and aggregate supply.
Q3) If the debt of the Canadian federal government at the start of this millennium were divided equally among the people in Canada,then the debt per person would equal approximately:
A) $5,000.
B) $19,000.
C) $29,000.
D) $35,000.
Q4) Ricardian equivalence refers to the same impact of financing government:
A) whether by printing money or raising taxes.
B) in the long run as in the short run.
C) whether by debt or taxes.
D) in an open economy as in a closed economy.
Page 13
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Chapter 18: Investment
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Sample Questions
Q1) Interest rates affect investment spending and,as a result,the steady-state capital stock.I: An increase in interest rates lowers the steady-state capital stock.II: With a Cobb-Douglas production function,the higher is the capital-share parameter,the bigger is the change in the steady-state capital stock.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
Q2) A firm renting out capital does not bear as cost the:
A) lost interest it could have earned by depositing the purchase price of the capital in a bank.
B) wear and tear on the capital.
C) wages of the labour that works with the capital.
D) capital loss or gain in the asset's value.
Q3) If Tobin's q is greater than 1,then managers should:
A) increase the capital stock of the firm.
B) maintain the existing capital stock of the firm.
C) allow inventories to run down.
D) decrease the capital stock of the firm.
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Page 14
Chapter 19: Money Supply and Money Demand
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Sample Questions
Q1) In the portfolio theory of money demand,all of the following economic factors play a direct role except:
A) the expected real return on stock.
B) the expected inflation rate.
C) the unemployment rate.
D) wealth.
Q2) Banks create money in:
A) a 100-percent-reserve banking system but not in a fractional-reserve banking system.
B) a fractional-reserve banking system but not in a 100-percent-reserve banking system.
C) both a 100-percent-reserve banking system and a fractional-reserve banking system.
D) neither a 100-percent-reserve banking system nor a fractional-reserve banking system.
Q3) In Canada,chartered bank reserves consist of:
A) currency and the deposits of bank customers.
B) vault cash and deposits at the Bank of Canada.
C) gold deposits at the Bank of Canada.
D) the money supply.
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Chapter 20: The Financial System
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Sample Questions
Q1) What are the benefits of a well-functioning financial system? What are the costs of a financial crisis?
Q2) Sovereign debt refers to debt issued:
A) without collateral.
B) with no rating by a credit-rating agency.
C) by governments.
D) with a promise to repay in a foreign currency.
Q3) The mortgage defaults during the 2008-2009 financial crisis in the United States severely reduced the capital positions of:
A) major investment banks.
B) government-sponsored enterprises involved in the mortgage market.
C) a large insurance company (AIG).
D) all of the above.
Q4) Banks help mitigate the problem of moral hazard in lending by:
A) requiring lengthy applications for loans.
B) making loans to many different types of borrowers.
C) adjusting the amount of the loan to fit the requirements of the borrower.
D) monitoring the business after a loan is made to the business.
Q5) How do deposit insurance and the "too big to fail" policy increase moral hazard?
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