Introduction to Macroeconomics Final
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Course Introduction
Introduction to Macroeconomics provides students with a foundational understanding of how the overall economy operates at a national and global scale. The course explores core concepts such as gross domestic product (GDP), unemployment, inflation, and the role of government fiscal and monetary policy. Students will analyze how economic indicators reflect the health of an economy, the factors influencing business cycles, and the implications of international trade and finance. This course emphasizes the use of models and real-world examples to understand policy debates and economic events, equipping students with analytical tools to interpret and evaluate macroeconomic issues in contemporary society.
Recommended Textbook Principles of Macroeconomics 9th Edition by John Sayre
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Chapter 1: The Economic Problem
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Sample Questions
Q1) Distinguish between a capital good and a consumer good.
Answer: Consumer goods are products used by consumers to satisfy their wants and needs,for example bread and beer.Capital goods are goods used to produce consumer goods and they do not directly satisfy consumer wants and needs.
Q2) Refer to the graph above to answer this question.If 150 units of rye are currently being produced,what is the cost of producing 50 more units of rye?
A)25 units of wheat.
B)50 units of wheat.
C)100 units of wheat.
D)400 units of wheat.
E)Cannot be determined.
Answer: C
Q3) Refer to the graph above to answer this question.What might point U indicate?
A)Not all resources available to the economy are being used.
B)The resources being used are not being used efficiently.
C)The technology being used is not the most appropriate one.
D)All of these.
Answer: D
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3
Chapter 2: Demand and Supply: an Introduction
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Sample Questions
Q1) Refer to the diagram above to answer this question.If buyers think that the price of grapefruits is going to rise,causing the demand to change by 6 kilos,what will be the new equilibrium price and quantity?
A)$2.50 and 28 kilos
B)$2.75 and 26 kilos
C)$2.50 and 26 kilos
D)$3.00 and 36 kilos
Answer: D
Q2) What is the term for the substitution of one product for another as a result of a change in their relative prices?
A)Income effect.
B)Substitution effect.
C)Market effect.
D)Law of demand.
Answer: B
Q3) An increase in the price of a product leads to an increase in the supply.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Measuring the Economy 1: GDP and Economic Growth
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Sample Questions
Q1) Under which circumstance will the level of national income expand?
A)If injections increase.
B)If savings expand.
C)If government spending is reduced.
D)If taxes increase.
E)None of these.
Answer: C
Q2) How is real GDP per capita measured?
A)Nominal GDP multiplied by the population.
B)Real GDP divided by the population.
C)Real GDP divided by the population and multiplied by 100.
D)Real GDP multiplied by the population and divided by 100.
Answer: B
Q3) Refer to the graph above to answer this question.What is flow (5)?
A)Imports.
B)Investment.
C)Exports.
D)Loanable funds.
E)Consumption.
Answer: A
Page 5
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Chapter 4: Measuring the Economy 2: Unemployment and Inflation
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Sample Questions
Q1) List the three different types of cost-push inflation?
Q2) Truscan's nominal GDP rose by 7% between 2016 and 2017.If its inflation rate was 2%,by how much did its real GDP increase?
A)1.4%
B)5%
C)9%
D)14%
Q3) Using the "rule of 70",how can we find the number of years it will take for prices to double?
A)By dividing the annual rate of inflation by 70.
B)By dividing 70 by the annual rate of inflation.
C)By subtracting the annual change in nominal incomes from 70.
D)By multiplying the annual rate of inflation by 70.
E)By subtracting nominal income from real income and multiplying by 70.
Q4) Distinguish between participation rate and unemployment rate.
Q5) Distinguish between demand-pull and cost-push inflation.
Q6) If the annual inflation rate is 7 percent,then the price level will double in ten years.
A)True
B)False
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Chapter 5: Aggregate Demand and Supply
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Sample Questions
Q1) All of the following,except one,refer to the total amount of production when all of an economy's resources are being fully utilized.Which is the exception?
A)Equilibrium GDP.
B)Full-employment GDP.
C)Potential GDP.
D)Economic capacity.
Q2) What does the term aggregate supply mean?
Q3) Refer to the information above to answer this question.Which of the following would be true if the price level was 190?
A)There would be a surplus of goods and services of 200.
B)There would be a shortage of goods and services of 200.
C)Prices would fall.
D)Equilibrium exists.
E)Aggregate supply will rise.
Q4) Assume that the economy is at full employment.Now suppose there is an increase in consumption.At the new equilibrium,
a)will there be an output gap? What type?
b)what is the effect on the price level?
c)what is the effect on the level of Real GDP
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Chapter 6: Aggregate Expenditures
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Sample Questions
Q1) Refer to Table 6.5 to answer this question.What is the value of the multiplier in this economy?
A)1.
B)1.54.
C)1.67.
D)2.
E)5.
Q2) The budget function for the economy of Sunsville is T - G = -400 + 0.25Y.
a)Suppose income is $4,000.What is the value of the budget surplus or deficit?
b)What range of income will give Sunsville a budget surplus?
c)What range of income will give Sunsville a budget deficit?
d)At what level of income will there be a balanced budget?
Q3) Which of the following variables in the expenditure model are wholly autonomous and which are partly induced?
A)I,G,and X<sub>N</sub> are autonomous;S,IM,and C are partly induced.
B)I,G,and C are autonomous;S,IM,and X are partly induced.
C)I,G,and X are autonomous;S,IM,and C are partly induced.
D)G,X,and IM are autonomous;S,C,and I are partly induced.
Q4) What shifts the aggregate expenditures function? What changes its slope?
Q5) What is meant by the term induced expenditures? Provide an example.
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Chapter 7: Fiscal Policy
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Sample Questions
Q1) What are the problems associated with a cyclically balanced budget fiscal policy?
Q2) Those who advocate a balanced budget fiscal policy would agree with all but one of the following statements.Which is the exception?
A)Governments should be non-interventionist.
B)Automatic stabilizers are an effective way of avoiding extreme levels of unemployment or inflation.
C)The economy is capable of automatic self-adjustment in response the problems of unemployment and inflation.
D)Counter cyclical fiscal policy is a powerful and effective tool.
E)Government budget deficits are a serious problem.
Q3) Assume that the economy is at full employment.
a)Explain the effect to the economy if there is a decrease in investment spending.
b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.
Q4) Define the terms deficit and debt.Which is a flow concept and which is a stock concept?
Q5) Explain how the Government of Canada finances its budget deficits.
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Page 9
Chapter 8: Money and Banking
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Sample Questions
Q1) All of the following,except one,will decrease the size of the multiplier.Which is the exception?
A)An increase in the banks' target reserves.
B)An increase in the amount of cash that people hold.
C)An insufficient number of creditworthy applicants for loans.
D)A decrease in interest rates.
E)A reduced demand for loans by people in times of recession.
Q2) Suppose that Adam Ricardo deposits $1,000 of cash into the Penguins Bank.On the same day,David Smith negotiates a loan for $4,000.By how much has the money supply changed?
A)It has increased by $3,000.
B)It has decreased by $3,000.
C)It has increased by $4,000.
D)It has increased by $5,000.
Q3) Which of the following will result in a larger money multiplier?
A)An decrease in cash holdings by the public.
B)An increase in the banks' target reserves.
C)An increase in excess reserves at banks.
D)A decrease in creditworthy applicants for loans.
E)An increase in interest rates.
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Chapter 9: The Money Market and Monetary Policy
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Sample Questions
Q1) Why is the asset demand for money curve downward-sloping?
A)As the interest rate increases,the opportunity cost of holding money also increases.
B)As the interest rate increases,the opportunity cost of holding money decreases.
C)As the interest rate increases,so too do bond prices.
D)It becomes more attractive to hold money as the interest rate increases.
E)As people hold larger quantities of money,the interest rate is forced down.
Q2) In the Keynesian transmission process what follows after an increase in the money supply has caused a fall in the interest rate?
A)GDP falls.
B)Investment spending falls.
C)Investment spending rises.
D)Nothing happens.
Q3) Which of the following is the most important function of the Bank of Canada?
A)The collection and clearing of cheques among commercial banks.
B)Regulating the supply of money.
C)Holding the reserves of commercial banks.
D)Issuing new currency.
Q4) How and why is the asset demand for money related to the interest rate?
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Page 11
Chapter 10: International Trade
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Sample Questions
Q1) What is a quota?
A)A limit imposed on the production or sale of a product.
B)A restriction placed on the importation of foreign products.
C)A tax levied on imports.
D)A maximum or minimum price placed on a product by government regulation.
Q2) Refer to the data above to answer this question.In which product does Catalonia have a comparative advantage?
A)Rice.
B)Beer.
C)Both rice and beer.
D)Neither rice nor beer.
Q3) What does it mean if the opportunity costs differ between two countries?
A)Then comparative costs must be the same.
B)There can be no gains from trade.
C)It is possible for both countries to gain from specialization and trade.
D)Then absolute costs must be the same.
Q4) Explain why Canada imports banana.
Q5) List four major advantages of free trade.
Q6) Explain why consumers lose and producers win if a tariff is imposed.
Q7) List four arguments against free trade.
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Chapter 11: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) All of the following,except one,are implications of the purchasing power parity theory.Which is the exception?
A)The relative prices of products in different countries should be the same.
B)Exchange rates will adjust to ensure that the cost of living in one country is the same as that in another.
C)Inflation should lead to the depreciation of that country's currency.
D)One hour's labour,of a given quality,should pay the same (though in different currencies)in all countries.
E)The currencies of different countries should be at par.
Q2) 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?
Q3) What is the theory of purchasing power parity?
A)A theory suggesting that exchange rates will change so as to equate the purchasing power of each currency.
B)A theory suggesting that exchange rates tend to diverge over time.
C)A theory suggesting that all currencies will be,in time,at par.
D)A formula used to calculate the exchange rate of one currency for another.
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Chapter 12: Macroeconomic Policy Revisited
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Sample Questions
Q1) The problem portrayed by the short-run Phillips curve is that:
A)unemployment tends to increase when prices are rising.
B)changes in the composition of the labor force tend to increase the natural rate of unemployment.
C)inflation tends to increase when unemployment falls.
D)stagflation is unavoidable.
Q2) Which of the following is an element of supply side policies?
A)The privatization of crown corporations.
B)The deregulation of industry.
C)The contracting-out of government services.
D)The reduction of tax rates.
E)The privatization of crown corporations,the deregulation of industry,the contracting-out of government services,and the reduction of tax rates.
Q3) One of the major criticisms of the supply-side emphasis on tax cuts as a way to stimulate the economy is that such cuts affect aggregate demand more than they do aggregate supply.
A)True
B)False
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Chapter 13: A Walk Through the Twentieth Century and Beyond
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Sample Questions
Q1) According to the neoclassical economists,what two things could cause an increase in interest rates?
Q2) Explain the link between the credit-rating of derivatives and the demand for traditional mortgages.
Q3) According to neoclassical theory,the aggregate supply curve is horizontal at the prevailing price level.
A)True
B)False
Q4) What characterized the decades of the 1950s and 1960s?
A)Low growth and high unemployment
B)Low unemployment and high inflation
C)Stagflation
D)Economic stability with reasonably low unemployment and inflation
Q5) Define 'sub-prime mortgage'
Q6) What is the difference between demand side policies and supply side policies?
Q7) When did the Great Depression occur?
A)At the beginning of the twentieth century
B)In the seven years following World War I
C)During the decade of the 1930s
D)In the five years following World War II Page 15
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