Introduction to Macroeconomics Review
Questions
Course Introduction
Introduction to Macroeconomics provides students with a foundational understanding of the economy as a whole, focusing on aggregate behavior and the broad economic factors that influence national and global outcomes. Key topics include national income accounting, economic growth, unemployment, inflation, fiscal policy, monetary policy, and the roles of government and central banks in managing economic stability. Through theoretical frameworks and real-world examples, students will explore how policy decisions affect economic performance, and they will develop tools to analyze issues such as recessions, booms, and international trade. This course equips students with essential economic concepts and critical thinking skills applicable to a wide range of fields.
Recommended Textbook
Macroeconomics 5th Canadian Edition by N Gregory Mankiw
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14 Chapters
1476 Verified Questions
1476 Flashcards
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Page 2
Chapter 1: The Science of Macroeconomics
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) Macroeconomics is:
A) based on microeconomic foundations.
B) completely separate from microeconomics.
C) explicitly based on microeconomic behaviour.
D) a subsidiary branch of microeconomics.
Answer: A
Q2) Endogenous variables are:
A) determined outside the model.
B) determined within the model.
C) the inputs of the model.
D) from outside the model.
Answer: B
Q3) Compared with a recession,real GDP during a depression:
A) increases more rapidly.
B) increases at approximately the same rate.
C) decreases at approximately the same rate.
D) decreases more severely.
Answer: D
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Chapter 2: The Data of Macroeconomics
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) In the national income accounts,government purchases are goods and services purchased by:
A) the federal government.
B) the federal and provincial governments.
C) provincial and municipal governments.
D) federal,provincial,and municipal governments.
Answer: D
Q2) Okun's Law is the _______ relationship between real GDP and the _________.
A) negative; unemployment rate
B) negative; inflation rate
C) positive; unemployment rate
D) positive; inflation rate
Answer: A
Q3) Unlike the GDP deflator,the CPI includes the prices of:
A) goods purchased by firms.
B) goods purchased by governments.
C) exported goods.
D) imported goods.
Answer: D
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Page 4
Chapter 5: The Open Economy
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) In a small open economy,policies that increase:
A) investment tend to cause a trade surplus.
B) investment tend to cause a trade deficit.
C) saving do not affect the trade balance.
D) saving tend to cause a trade deficit.
Q2) An "open" economy is one in which:
A) the level of output is fixed.
B) government spending exceeds revenues.
C) the national interest rate equals the world interest rate.
D) there is trade in goods and services with the rest of the world.
Q3) If a small open economy is in long-run equilibrium with no foreign debt:
A) its balance of trade is positive.
B) its balance of trade is zero.
C) its balance of trade is negative.
D) not enough information is given to determine the sign of the trade balance.
Q4) The law of one price is enforced by:
A) governments.
B) producers.
C) consumers.
D) arbitrageurs.
Page 5
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Chapter 6: Unemployment
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) If the economy were at a steady-state unemployment rate with a separation rate of 0.02 per month and a job-finding rate of 0.10 per month,and the labour force was 100 million,how many individuals would lose their jobs each month?
Q2) Unemployment would decline in the face of rising productivity if:
A) real wages only increased sluggishly.
B) real wages adjusted instantaneously.
C) labour supply remained fixed in the face of increases in labour demand.
D) the demand for labour did not respond to the rising productivity.
Q3) Suppose that over the course of a year 100 people are unemployed for four weeks each (the short-term unemployed),while 10 people are unemployed for 52 weeks each (the long-term unemployed).Approximately what percentage of the total weeks of unemployment were attributable to the long-term unemployed?
A) 9 percent
B) 10 percent
C) 43.5 percent
D) 56.5 percent
Q4) Explain how paying efficiency wages can help employers overcome both moral hazard and adverse selection problems in employment.
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Page 6
Chapter 7: Economic Growth I
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) In the Solow growth model of Chapter 7,for any given capital stock,the ______ determines how much output the economy produces and the ______ determines the allocation of output between consumption and investment.
A) saving rate; production function
B) depreciation rate; population growth rate
C) production function; saving rate
D) population growth rate; saving rate
Q2) If an economy with no population growth or technological change has a steady-state MPK of 0.1,a depreciation rate of 0.1,and a saving rate of 0.2,then the steady-state capital stock:
A) is greater than the Golden Rule level.
B) is less than the Golden Rule level.
C) equals the Golden Rule level.
D) could be either above or below the Golden Rule level.
Q3) The Solow growth model describes:
A) how output is determined at a point in time.
B) how output is determined with fixed amounts of capital and labour.
C) how saving,population growth,and technological change affect output over time.
D) the static allocation,production,and distribution of the economy's output.
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Page 7
Chapter 8: Economic Growth II
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94 Flashcards
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Sample Questions
Q1) The number of effective workers takes into account the number of workers and the:
A) amount of capital available to each worker.
B) rate of growth of the number of workers.
C) efficiency of each worker.
D) saving rate of each worker.
Q2) Empirical studies indicate that the rate of social return from positive "standing on shoulders" externalities of research ______ the negative "stepping on toes" externalities of research.
A) greatly exceed
B) approximately equal
C) are substantially less than D) are only slightly less than
Q3) The type of legal system in a country and the level of corruption in a country have been found to be:
A) unrelated to the rate of economic growth in a country.
B) significant determinants of the rate of economic growth in a country.
C) important topics for political discussion,but not economic explanations of growth.
D) important variables explaining the Golden Rule level of capital.
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Chapter 9: Introduction to Economic Fluctuations
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) If the short-run aggregate supply curve is horizontal,and,if each member of the general public chooses to hold a larger fraction of his or her income as cash balances,then:
A) output and employment will increase in the short run.
B) output and employment will decrease in the short run.
C) prices will increase in the short run.
D) prices will decrease in the short run.
Q2) In the mid-1980s,oil prices ______,inflation was ______,and the unemployment rate ______.
A) rose rapidly; high; rose
B) rose slowly; moderate; high
C) fell; low; declined
D) fell; low; rose
Q3) In the aggregate demand-aggregate supply model,short-run equilibrium occurs at the combination of output and prices where:
A) aggregate demand equals long-run aggregate supply.
B) aggregate demand equals short-run aggregate supply.
C) aggregate demand equals short-run and long-run aggregate supply.
D) short-run aggregate supply equals long-run aggregate supply.
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Page 9
Chapter 10: Aggregate Demand I
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) The IS curve may be interpreted as showing the:
A) interest rate that equates money supply and demand for given income.
B) income level that equates money supply and demand for given interest rate.
C) interest rate that equilibrates the market for loanable funds for given income.
D) amount of loanable funds that will be demanded for given interest rate and income.
Q2) The IS-LM model simultaneously determines equilibrium in two markets.a.Which two markets?
b.What two variables adjust to bring equilibrium in the markets?
Q3) According to the analysis underlying the Keynesian cross,when planned expenditure exceeds income:
A) income falls.
B) planned expenditure falls.
C) unplanned inventory investment is negative.
D) prices rise.
Q4) Explain why an increase in the money supply,which is a change in the money market,will upset the equilibrium in the goods market.
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10
Chapter 13: Aggregate Supply and the Short-Run
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Sample Questions
Q1) In the short run,if the price level is greater than the expected price level,then in the long run,the aggregate:
A) demand curve will shift leftward.
B) demand curve will shift rightward.
C) supply curve will shift upward.
D) supply curve will shift downward.
Q2) Inflation inertia is represented in the aggregate supply and aggregate demand model by continuing upward shifts in the:
A) aggregate demand curve.
B) short-run aggregate supply curve.
C) long-run aggregate supply curve.
D) aggregate demand and short-run aggregate supply curves.
Q3) The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so expected inflation:
A) exceeds the inflation rate.
B) equals the inflation rate.
C) is below the inflation rate.
D) equals the inflation rate of the previous year.
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Chapter 15: Stabilization Policy
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98 Verified Questions
98 Flashcards
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Sample Questions
Q1) The time between a shock to the economy and the policy action responding to that shock is called the:
A) automatic stabilizer.
B) time inconsistency of policy.
C) inside lag.
D) outside lag.
Q2) Conducting monetary policy so that the nominal interest rate = 0.05,is an example of:
A) an active policy rule.
B) a passive policy rule.
C) discretionary policy.
D) an automatic stabilizer.
Q3) Explain why each of the following statements is a rationale for conducting active or passive policy:
a.Economic circumstances can change dramatically between the time that an economic downturn begins and the time when policy actions have an effect on the economy.b.Economists are not very accurate forecasters.c.Increases in government spending generate increases in economic output.d.Fluctuations in economic output have been less severe since World War II.
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Page 12
Chapter 16: Government Debt and Budget Deficits
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) In Canada,a rule precluding budget deficits is currently in force for:
A) the federal government.
B) no provincial governments.
C) all provincial governments.
D) some provincial governments.
Q2) ______ are considered part of the federal debt.
A) Treasury bills
B) Future CPP-QPP benefits
C) Student loans,which may go into default
D) Potential liabilities of credit unions
Q3) In a time of inflation when the government budget is balanced in the conventional sense,the real (i.e.,deflated)value of the government debt is:
A) growing at the rate of inflation.
B) growing,but at a rate less than the rate of inflation.
C) constant.
D) decreasing at the rate of inflation.
Q4) Countries seeking to adopt the euro as their currency must meet certain criteria,including the requirements to keep their government budget deficit from getting too big.Discuss why there are fiscal policy criteria for joining a monetary union.
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Chapter 18: Investment
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) When banks make rules on maximum permissible mortgage payments for borrowers,they use:
A) nominal interest rates,and economists feel that this practice is appropriate.
B) real interest rates,and economists feel that this practice is appropriate.
C) real interest rates,but economists feel that this practice is inappropriate.
D) nominal interest rates,but economists feel that this practice is inappropriate.
Q2) For a firm facing financing constraints on its investment spending,the most important determinant of how much it invests is the:
A) firm's expected future profitability.
B) firm's current profitability.
C) interest rate.
D) firm's cost of capital.
Q3) The demand for housing is brought into equilibrium with the existing stock of housing by changes in the:
A) real interest rate.
B) nominal interest rate.
C) relative price of housing.
D) overall price level.
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14
Chapter 19: Money Supply and Money Demand
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) Portfolio theories of money demand emphasize the ______ of money compared to other assets.
A) combination of risk and return
B) liquidity
C) optimal quantity
D) demand and supply
Q2) The instability of the money-demand function led central banks in the 1980s to:
A) take actions to reduce the instability of money demand.
B) increase the instability of the money supply.
C) prohibit the further development of near money.
D) abandon the money supply as a target for monetary policy.
Q3) According to portfolio theories of money demand,increases in the expected return on stock ______ the demand for money,and increases in the expected return on bonds ______ the demand for money.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q4) Why does the Bank of Canada not have complete control over the size of the money supply? Give at least two reasons.
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Chapter 20: The Financial System
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Diversification allows savers to largely eliminate:
A) risk aversion.
B) idiosyncratic risk.
C) systematic risk.
D) risk premiums.
Q2) An asset-price bubble bursts if there is:
A) a panic cycle of asset sales and falling asset prices.
B) a statement from the central bank stating that the bubble is over.
C) an excess demand for an asset that raises asset prices.
D) a sharp decrease in interest rates that pricks the asset-price bubble.
Q3) Two types of problems that arise due to asymmetric information are:
A) systematic and idiosyncratic risk.
B) risk aversion and diversification
C) illiquidity and insolvency.
D) moral hazard and adverse selection.
Q4) Reducing risk by holding many imperfectly correlated assets is called:
A) diversification.
B) moral hazard.
C) risk aversion.
D) leveraging.
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