Macroeconomic Policy Test
Questions
Course Introduction
Macroeconomic Policy explores the tools and objectives of government intervention in the economy at the aggregate level. The course covers fiscal and monetary policy, including the roles of government spending, taxation, and central banking in stabilizing economic growth, controlling inflation, and reducing unemployment. Students will learn to analyze current policy debates, understand the impacts of international economic dynamics, and critically evaluate the effectiveness and limitations of different macroeconomic strategies in achieving sustainable and inclusive economic outcomes.
Recommended Textbook
Exploring Macroeconomics 3rd canadian Edition by Robert L. Sexton
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15 Chapters
2208 Verified Questions
2208 Flashcards
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2
Chapter 1: The Role and Method of Economics
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288 Flashcards
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Sample Questions
Q1) What does the term "ceteris paribus" mean?
A)Everything is variable.
B)What is true for the individual is not necessarily true for the whole.
C)All variables except those specified are constant.
D)No one knows which variables will change and which will remain constant.
Answer: C
Q2) What is implied by the expression,"There's no such thing as a free lunch"?
A)Costs are incurred when resources are used to produce goods and services.
B)No one has time for a good lunch anymore.
C)The person consuming a good must always pay for it.
D)Everyone has to pay for his/her own lunch.
Answer: A
Q3) Which of the following statements about the opportunity cost of an action is the most accurate?
A)It is the same for everyone who undertakes the action.
B)It is the difference between the benefits that result and the expenses incurred as a result of the action.
C)It is the value of the best forgone alternative.
D)It is the same as the expected benefit of the action.
Answer: C
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Chapter 2: Scarcity, trade-Offs, and Production Possibilities
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Sample Questions
Q1) If the production possibilities curve is a straight line,what does this illustrate?
A)Resources are not equally substitutable between productions of the goods because there is an increase in opportunity cost.
B)As an increasing quantity of resources is shifted from one manufacturing process to another, there is no increase in opportunity cost.
C)Opportunity costs are negative.
D)Opportunity costs increase as output of either commodity is expanded.
Answer: B
Q2) What occurs with a movement in a southeast direction along a production possibilities curve?
A)a reduction in unemployment
B)an increase in the production of one good with a decrease in production of the other
C)an increase in the production of both goods
D)an increase in unemployment
Answer: B
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Chapter 3: Supply and Demand
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Sample Questions
Q1) Refer to Figure 3-3.The University Theatre faces market demand curve D and has begun charging $10,up from $5,for tickets for Friday and Saturday night shows.What will students do as a result?
A)Increase their quantity of tickets demanded to Q .
B)Decrease their demand for tickets to Q .
C)Increase their demand for tickets to Q .
D)Decrease their quantity of tickets demanded to Q .
Answer: D
Q2) When the relative price of steak falls,we would expect people to buy a greater quantity of steak.
A)True
B)False
Answer: True
Q3) Other things constant,what will be the effect of a decrease in the price of fertilizer on the market for wheat?
A)an increase the supply of wheat
B)an increase the demand for wheat
C)a decrease the supply of wheat
D)a decrease the demand for wheat
Answer: A
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Chapter 4: Bringing Supply and Demand Together
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Sample Questions
Q1) Which action will always result in a shortage?
A)when the government imposes a price ceiling below equilibrium price
B)when the government imposes a price ceiling above equilibrium price
C)when the government imposes a price floor below equilibrium price
D)when the government imposes a price floor above equilibrium price
Q2) Wool and cotton can both be used to manufacture clothing in the garment industry.Suppose that bad weather destroys cotton crops at the same time that the price of wool increases significantly.What is likely to be the impact on the market for cotton?
A)a decrease in both the equilibrium price and the quantity sold
B)an increase in the equilibrium price and a decrease in the quantity sold
C)an increase in both the equilibrium price and the quantity sold
D)an uncertain effect on the equilibrium quantity but an increase in the equilibrium price
Q3) Ceteris paribus,if the market supply of a product increases,what will happen to the equilibrium quantity and price of the product?
A)The quantity will decrease and the price will increase.
B)The quantity will increase and the price will decrease.
C)The quantity will decrease and the price will be indeterminate.
D)The quantity will increase and the price will increase.
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Page 6
Chapter 5: Introduction to the Macroeconomy
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Sample Questions
Q1) When does structural unemployment occur?
A)when frictional unemployment exceeds 5 percent of the labour force
B)when a person leaves a job to seek a better position and can't find the job he or she wants
C)when steelworkers are laid off due to a downturn in the economy
D)when automation reduces the need for welders in Oshawa
Q2) In the CPI,what is the base year?
A)the year of the first basket, which was 1986
B)the benchmark against which other years are compared
C)the previous year
D)the current year
Q3) What is the term for unemployment resulting from normal turnover in the labour market?
A)structural unemployment
B)frictional unemployment
C)cyclical unemployment
D)season unemployment
Q4) Unanticipated deflation will benefit creditors at the expense of debtors.
A)True
B)False
Page 7
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Chapter 6: Measuring Economic Performance
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Sample Questions
Q1) When you buy a pickup truck to use at home,it is included in the investment component of GDP.
A)True
B)False
Q2) Which of the following purchases is an example of an intermediate product?
A)tires by Ford Motor Company to put on the CEO's Lincoln
B)by Enrique as inventory at his repair shop
C)tires by Ford Motor Company to put on its Ford Explorers
D)tires by Cheryl to put on her 1983 Mercedes
Q3) What category of GDP generally includes residential construction?
A)government expenditures
B)net exports
C)consumption
D)investment
Q4) Which of the following is an example of an intermediate good?
A)a pair of jeans sold by a clothing retailer
B)cloth sold to a suit manufacturer
C)a used Ford Mustang sold from one neighbour to another
D)a share of Walmart stock
Q5) How do pollution and crime affect GDP?
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Chapter 7: Economic Growth in the Global Economy
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Sample Questions
Q1) An increase in the quantity of labour inputs always leads to economic growth.
A)True
B)False
Q2) Which of the following exists when an economy experiences significant economic growth?
A)No observed relationship exists between output per capita and adult literacy rates.
B)A direct relationship exists between output per capita and adult literacy rates.
C)An indirect relationship exists between output per capita and adult literacy rates.
D)A negative relationship exists between output per capita and adult literacy rates.
Q3) What should a nation do to achieve a high standard of living?
A)increase the tax deduction for child dependents
B)promote economic growth
C)use less capital and more labour in the production process
D)increase welfare payments to the poor
Q4) How can increased investment help a country achieve increased economic growth? What are the costs involved?
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9
Chapter 8: Aggregate Demand
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Sample Questions
Q1) With which of the following marginal propensities to consume would a given change in disposable income have the greatest effect on consumption?
A)0.2
B)0.4
C)0.6
D)0.8
Q2) With which of the following marginal propensities to consume would a given change in disposable income have the smallest effect on consumption?
A)0.2
B)0.4
C)0.6
D)0.8
Q3) Which of the following will NOT result as part of the interest rate effect when the price level rises?
A)Money demand will increase.
B)The dollar amount of investment will increase.
C)Interest rates will increase.
D)A lower quantity of real GDP will be demanded.
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10
Chapter 9: Aggregate Supply and Macroeconomic
Equilibrium
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Sample Questions
Q1) Which of the following statements best illustrates a correct shift of the short run aggregate supply curve?
A)The short-run aggregate supply curve is shifted rightward by an increase in the price of any input, and it is shifted leftward by a decrease.
B)The short-run aggregate supply curve is shifted rightward by a technological breakthrough that increases the productivity of the labour force.
C)The short-run aggregate supply curve is shifted leftward by a decrease in the price of any input, and it is shifted rightward by an increase.
D)The short-run aggregate supply curve is shifted leftward by an increase of skilled workers in the labour force.
Q2) What impact will a temporary increase in the supply of a major input have on real output?
A)It will increase real output in both the short run and the long run.
B)It will increase real output in the short run but not in the long run.
C)It will decrease real output in the short run but not the long run.
D)It will decrease real output in both the short run and the long run.
Q3) What is the natural level of output?
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Page 11
Chapter 10: Fiscal Policy
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Sample Questions
Q1) What impact does a larger crowding-out effect have on the magnitude of a given fiscal policy's effect on AD and investment?
A)It decreases the magnitude of a given fiscal policy's effect on AD and increases the magnitude of its effect on investment.
B)It decreases the magnitude of a given fiscal policy's effect on AD and decreases the magnitude of its effect on investment.
C)It increases the magnitude of a given fiscal policy's effect on AD and increases the magnitude of its effect on investment.
D)It increases the magnitude of a given fiscal policy's effect on AD and decreases the magnitude of its effect on investment.
Q2) Which of the following circumstances will shift AD to the right,other things being equal?
A)when the government budget deficit increases because transfer payments fell
B)when the government budget deficit increases because taxes rose
C)when the government budget deficit increases because GST revenue rose
D)when the government budget deficit increases because government purchases rose
Q3) What are the component parts of fiscal policy and how do they affect aggregate demand?
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Chapter 11: Money and the Banking System
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Sample Questions
Q1) Assume the desired reserve ratio is 10 percent.First National Bank has vault cash and deposits with the Bank of Canada of $40 million,loans and securities of $360 million,and demand deposits of $400 million.Which of the following statements about First National is the most accurate?
A)It is not in a position to extend additional loans.
B)It could extend a maximum of $10 million of additional loans.
C)It could extend a maximum of $20 million of additional loans.
D)It could extend a maximum of $40 million of additional loans.
Q2) Paper money is fiat money because it has been declared by government as a means of exchange.
A)True
B)False
Q3) Money makes it easier to borrow and repay loans.What is this function of money referred to as?
A)a standard of value
B)a means of deferred payment
C)a unit of account
D)a store of value
Q4) Explain why gold and silver have historically been used as money.
Q5) What is fiat money? Why is fiat money important in Canada today?
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Chapter 12: The Bank of Canada
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Sample Questions
Q1) What is the impact on GDP if M increases and V remains constant?
A)real GDP decreases
B)nominal GDP decreases
C)real GDP increases
D)nominal GDP increases
Q2) Which of the following is NOT a function of the Bank of Canada?
A)limiting the national debt
B)controlling inflation
C)buying and selling government bonds to control the size and growth rate of the money supply
D)managing the federal government's bank accounts
Q3) If money supply increases,P will rise as long as V and Q remain constant.
A)True
B)False
Q4) Who is the Bank of Canada owned by?
A)the depositors
B)multiple shareholders
C)chartered banks
D)the federal government
Q5) Name four of the five primary functions of the Bank of Canada.
Page 14
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Chapter 13: Monetary Policy
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Sample Questions
Q1) Monetary policy can influence interest rates,which in turn can change spending.
A)True
B)False
Q2) The problem of time lags in making policy changes is less acute for monetary policy than it is for fiscal policy.
A)True
B)False
Q3) Which one of the following would be the most appropriate stabilization policy if the economy is operating beyond its long-run potential capacity?
A)an increase in government purchases, holding taxes constant
B)a purchase of bonds by the Bank of Canada
C)an increase in the bank rate
D)a reduction in taxes, holding government purchases constant
Q4) What the relationship among money,interest rates,and inflation?
A)Money, interest rates, and inflation are directly related.
B)Money, interest rates, and inflation are weakly related.
C)Money, interest rates, and inflation are unrelated.
D)Money, interest rates, and inflation are related, but the relationship is difficult to predict.
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Chapter 14: International Trade
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Sample Questions
Q1) Mexico is a member of NAFTA.
A)True
B)False
Q2) Assume that an exporter's supply curve of a commodity is upward sloping.If a change in import demands in other countries leads it to increase its exports,other things equal,what would be the impact on the domestic price of the commodity?
A)The domestic price of the commodity will fall.
B)The domestic price of the commodity will exceed the price in foreign countries.
C)The domestic price of the commodity will be below the price in foreign countries.
D)The domestic price of the commodity will rise.
Q3) Suppose that Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical workweek,while Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical workweek.What can we conclude from these numbers?
A)Canada has a comparative advantage in the production of hockey sticks.
B)Canada has an absolute advantage in the production of maple syrup.
C)Germany has a comparative advantage in the production of hockey sticks.
D)Germany has an absolute advantage in the production of maple syrup.
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Page 16
Chapter 15: International Finance
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Sample Questions
Q1) If Canada exports coal to Japan,what is the effect in the exchange market?
A)It will decrease the supply of Canadian dollars.
B)It will increase the demand for Canadian dollars.
C)It will increase the supply of Canadian dollars.
D)It will decrease the demand for Canadian dollars.
Q2) Which of the following would most likely cause a nation's currency to depreciate?
A)an increase in domestic real interest rates
B)a balance-of-trade surplus
C)an increase in the nation's inflation rate
D)an increase in exports coupled with a decline in imports
Q3) Which of the following statements about the Canadian balance of trade is most accurate?
A)It is the difference between merchandise exports and merchandise imports.
B)It is the same as the current account balance.
C)It typically is negative since Canada imports far more goods than it exports.
D)It includes net stock transactions.
Q4) The exchange rate is the price of one currency in terms of a second currency.
A)True
B)False
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