Introduction to Macroeconomics
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Course Introduction
Introduction to Macroeconomics explores the foundational principles that govern the functioning of entire economies. This course examines key concepts such as gross domestic product (GDP), inflation, unemployment, fiscal policy, monetary policy, and international trade. Students will learn how these elements interact to influence economic growth and stability on a national and global scale. By analyzing real-world case studies and economic models, the course equips students with a comprehensive understanding of how economic indicators are measured, interpreted, and used to inform policy decisions that impact society as a whole.
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Macroeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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Chapter 1: What Is Economics
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Q1) When asked in an interview what she missed the most because of the time she spent training for the Olympics, a rower, who lived on her own, answered "a normal social life." She also revealed that she had given up a job that paid $30,000 per year to train fulltime. She received a grant of $8,000 per year from Sport Canada, but this failed to cover all her training expenses. Her food and rent were $5,000 per year and training expenses were $12,000 per year. Aside from the value of a normal social life, what is the annual opportunity cost, expressed in dollars, to this rower of "Going for Gold"?
A)$25,000
B)$4,000
C)$30,000
D)$39,000
E)$34,000
Answer: E
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3
Chapter 2: The Economic Problem
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Q1) Consider the following household. In 5 hours, Bob can cook 5 meals or clean 6 rooms. In 5 hours, Mary can cook 30 meals or clean 10 rooms. Select the best statement.
A)Bob has an absolute advantage in the production of both goods.
B)Since Mary is better at producing both goods, she should produce both.
C)Bob has a comparative advantage in cooking.
D)Mary has a comparative advantage in cooking.
E)Mary has a comparative advantage in cooking and cleaning.
Answer: D
Q2) Which one of the following would cause a production possibilities frontier to shift outward?
A)an increase in the stock of capital
B)an increase in the production of consumption goods
C)bad weather
D)a decision to fully utilize unemployed resources
E)a decrease in the population
Answer: A
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Chapter 3: Demand and Supply
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Q1) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students. Students double their demand for coffee and the quantity of coffee demanded at each price doubles. The new equilibrium price is $________, and the new equilibrium quantity is ________ cups a day.
A)1.20; 1,000
B)1.30; 1,200
C)1.50; 1,600
D)1.40; 1,400
E)2.20; 800
Answer: B
Q2) Refer to Fact 3.5.1. A new study comes out, revealing that drinking Pepsi increases your ability to study. The equilibrium quantity of coffee
A)increases.
B)decreases.
C)remains the same.
D)increases or decreases depending on the slope of the supply and demand curves.
E)increases or decreases depending on the relative shifts of the supply and demand curves.
Answer: B
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Chapter 20: Measuring Gdp and Economic Growth
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Q1) Stock and bond sales are not included in GDP because they
A)do not occur in the year in which the production represented by them takes place.
B)represent corporate production.
C)represent indebtedness.
D)are not goods and services.
E)are not sold in the country in which they are produced.
Q2) Which one of the following would not be counted as part of this year's GDP?
A)the lumber you purchase when building bookshelves for your room
B)the government bond you buy for your newborn niece
C)the purchase of a new personal computer that was produced in the current year
D)the purchase of wheat that was produced in the current year by a Saskatchewan farmer
E)the purchase of a house that was produced in the current year
Q3) Which of the following items would be included in a current measure of GDP?
A)your labour in fixing a leaky pipe under your sink
B)the value of safety on the streets of your community
C)a professional gardener who regularly cuts your lawn
D)the illegal sale of a bag of marijuana
E)your purchase of a used car
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Page 6
Chapter 21: Monitoring Jobs and Inflation
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Q1) If the working-age population increases, then
A)the size of the labour force will increase.
B)the number of people employed will increase.
C)the unemployment rate will increase.
D)the labour force participation rate will increase.
E)the total number of people aged 15 years and above will increase.
Q2) If the CPI was 228 at the end of 2013 and 236 at the end of 2014, what was the inflation rate in 2014?
A)8 percent
B)236 percent
C)3.5 percent
D)3.4 percent
E)4 percent
Q3) R4 is
A)long-term unemployment.
B)the official unemployment rate.
C)comparable to the official U.S. rate.
D)short-term unemployment.
E)the unemployment rate that adds discouraged searchers to the official rate.
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Page 7
Chapter 22: Economic Growth
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Q1) The key difference between the neoclassical growth theory and the new growth theory is that
A)capital is not subject to diminishing returns under new growth theory.
B)capital is subject to diminishing returns under new growth theory.
C)increases in population drive workers' incomes back down to the subsistence level in neoclassical growth theory.
D)the pace of technological advances are caused by chance in new growth theory.
E)labour productivity grows indefinitely in neoclassical growth theory.
Q2) In 2012, Northland had real GDP of $4.21 billion and a population of 2.98 million. In 2013, real GDP was $4.59 billion and population was 2.97 million. Northland's real GDP per person in 2013 was
A)$1,545.
B)$380.
C)$1,413.
D)$132.
E)$1.41.
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8
Chapter 23: Finance, Saving, and Investment
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Q1) If the economy's capital increases over time,
A)net investment is positive.
B)depreciation is less than zero.
C)depreciation exceeds gross investment.
D)gross investment equals depreciation.
E)gross investment is zero.
Q2) The Ricardo-Barro effect holds that
A)equal increases in taxes and government expenditures have no effect on equilibrium real GDP.
B)a government budget deficit has no effect on the real interest rate.
C)a government budget deficit crowds out private investment.
D)a government budget deficit induces a decrease in saving that magnifies the crowding out effect.
E)a government budget deficit increases the real interest rate.
Q3) When a government has a budget surplus, the surplus
A)helps finance investment.
B)crowds-out private saving.
C)must be subtracted from private saving.
D)increases the world real interest rate.
E)decreases the demand for loanable funds.
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Chapter
24: Money, the Price Level, and Inflation
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Q1) Money market equilibrium occurs
A)when interest rates are constant.
B)when the level of real GDP is constant.
C)when the quantity of real money supplied equals the quantity of real money demanded.
D)only under a fixed exchange rate.
E)when bond prices are constant.
Q2) Real GDP is $2,000 billion, the GDP deflator is 120 (a price level of 1.2), and the velocity of circulation is 5. Nominal GDP is
A)$24 billion.
B)$600 billion.
C)$2,000 billion.
D)$2,400 billion.
E)$166.67 billion.
Q3) Which one of the following is considered to be money?
A)a chequable deposit
B)a blank cheque
C)a credit card
D)a debit card
E)a Canada Savings Bond
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Chapter 25: The Exchange Rate and the Balance of Payments
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Q1) A change in the exchange rate, other things remaining the same, brings a A)shift of the supply curve for Canadian dollars with no movement along the supply curve.
B)change in the quantity of Canadian dollars supplied and a shift of the supply curve.
C)shift of the supply curve for Canadian with a movement along the demand curve.
D)change in the quantity of Canadian dollars supplied with no movement along the supply curve.
E)change in the quantity of Canadian dollars supplied and a movement along the supply curve.
Q2) China has used a fixed yuan exchange rate and a crawling peg exchange rate. In both cases, China pegs its currency to the A)U.S. dollar.
B)Japanese yen.
C)euro.
D)Mexican peso.
E)Russian ruble.
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Chapter 26: Aggregate Supply and Aggregate Demand
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Q1) Which of the following situations illustrates how fiscal policy can influence aggregate demand?
A)The Bank of Canada raises interest rates so people plan to buy less consumer durables. As a result, aggregate demand decreases.
B)Investors, anticipating an erosion of financial wealth due to inflation, decide to save more. As a result, aggregate demand decreases.
C)The government reduces the goods and services tax. As a result, consumption expenditure increases and aggregate demand increases.
D)The exchange rate value of the Canadian dollar rises. As a result, people living near the U.S.-Canada border increase their imports of goods and net exports decrease.
E)The government increases its expenditures. The demand for loanable funds increases, which raises the real interest rate. Investment increases.
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Chapter 27: Expenditure Multipliers
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Q1) Suppose the multiplier is 2 and the short-run aggregate supply curve is positively sloped. Investment increases by $10 billion. In the short run, equilibrium real GDP
A)increases by $20 billion.
B)increases by more than $20 billion.
C)decreases by less than $20 billion.
D)does not change.
E)increases by less than $20 billion.
Q2) The fraction of a change in disposable income spent on consumption is the A)marginal propensity to consume.
B)marginal propensity to save.
C)marginal propensity to dispose.
D)marginal tax rate.
E)consumption function.
Q3) Equilibrium expenditure occurs when
A)consumption equals real GDP.
B)aggregate planned expenditure equals real GDP.
C)aggregate planned expenditure equals consumption.
D)induced consumption equals aggregate planned expenditure.
E)the price level equals 100.
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Page 13
Chapter 28: The Business Cycle, Inflation, and Deflation
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Q1) Suppose aggregate demand increases by more than expected. Which of the following does not occur?
A)Real GDP is greater than potential GDP.
B)The price level rises.
C)Unemployment falls.
D)The natural unemployment rate does not change.
E)Stagflation occurs.
Q2) Refer to Figure 28.1.1. Suppose the economy moves from point D to point B. According to the monetarist theory of the business cycle, what could have caused this movement?
A)a decrease in the money wage rate
B)an increase in uncertainty about future sales and profits
C)an increase in the growth rate of the quantity of money
D)an increase in the money wage rate
E)a decrease in exports
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14
Chapter 29: Fiscal Policy
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Q1) Consider the economy of NoTax, where the government expenditure multiplier is 2.5. If the government desires to shift the AD curve rightward by $5 billion, the correct increase in government expenditure is
A)$2 billion.
B)$2.5 billion.
C)$3 billion.
D)$7.5 billion.
E)$8.33 billion.
Q2) An income tax ________ potential GDP by shifting the labour ________.
A)increases; demand curve rightward
B)decreases; demand curve rightward
C)increases; supply curve rightward
D)decreases; supply curve leftward
E)increases; supply curve and labour demand curve rightward
Q3) The difference between the before-tax and after-tax rates is the A)tax plug.
B)deadweight gain.
C)tax wedge.
D)taxation penalty.
E)deadweight loss.
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Chapter 30: Monetary Policy
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Q1) When the Bank of Canada fights recession by lowering the overnight loans rate, the supply of reserves curve shifts ________ and the supply of money curve shifts
A)leftward; leftward
B)leftward; rightward
C)rightward; leftward
D)rightward; rightward
E)rightward; rightward, and the demand for loanable funds increases
Q2) Which of the following benefits flow from the application of an inflation-control target?
A)If actual inflation exceeds the target range, the Bank of Canada can induce a recession to correct the matter.
B)The monetary authorities can change the target range whenever they feel it is appropriate.
C)People can make decisions with an understanding that inflation rates will remain relatively low.
D)Financial market traders have a clearer understanding of the Bank of Canada's intentions.
E)Both C and D
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Chapter 31: International Trade Policy
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Q1) Canada produces both lumber and wine. Canada exports lumber and imports wine. The rest of the world imports Canadian lumber and exports wine to Canada. If Canada did not trade with the rest of the world, then the equilibrium price of lumber would be ________ in Canada than the rest of the world, and the equilibrium price of wine would be ________ in Canada than the rest of the world.
A)lower; higher
B)higher; lower
C)higher; higher
D)lower; lower
E)sometimes higher and sometimes lower; always higher
Q2) Among the following, the domestic government gains the most revenue when it A)imposes an import quota.
B)eliminates an import quota.
C)encourages freer trade.
D)imposes a tariff.
E)increases the demand for a domestically-produced good.
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