Macroeconomic Theory Exam
Preparation Guide
Course Introduction
Macroeconomic Theory examines the behavior and performance of an economy as a whole, focusing on aggregate measures such as national income, unemployment, inflation, economic growth, and fiscal and monetary policy. The course introduces foundational concepts and analytical tools used to study fluctuations in output, the determination of aggregate demand and supply, the role of government intervention, and the effects of policy changes on economic stability. Students will explore classical, Keynesian, and modern macroeconomic frameworks, analyze real-world policy debates, and develop the ability to critically assess macroeconomic issues affecting countries and the global economy.
Recommended Textbook
Economics Today The Macro View 5th Canadian Edition by Roger LeRoy Miller
Available Study Resources on Quizplus
17 Chapters
2077 Verified Questions
2077 Flashcards
Source URL: https://quizplus.com/study-set/3706 Page 2
Chapter 1: The Nature of Economics
Available Study Resources on Quizplus for this Chatper
171 Verified Questions
171 Flashcards
Source URL: https://quizplus.com/quiz/73781
Sample Questions
Q1) Macroeconomics studies economics from the standpoint of A)a specific individual.
B)a typical household.
C)a typical firm.
D)the economy as a whole.
Answer: D
Q2) Microeconomics is the study of
A)the behaviour of the economy as a whole.
B)how rising prices affect the level of employment in the economy.
C)the effect that money has in the economic system.
D)decisions made by individuals and firms.
Answer: D
Q3) "Wants" are
A)another term for needs.
B)all the things people would consume if they had unlimited incomes.
C)the things people consume with their current incomes.
D)all the things people really need in order to live comfortably.
Answer: B
Q4) Economists typically assume people act as if they are motivated by ________.
Answer: self-interest.
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Production Possibilities and Economic Systems
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/73782
Sample Questions
Q1) In Figure 2-3,how many units of corn are produced at point "a"?
A)2,500
B)3,000
C)2,000
D)Can't tell without more information.
Answer: A
Q2) What problems does Canada face because of international and inter-provincial trade?
Answer: Specialization and trade expand a country's ability to produce and consume goods and services,making it richer overall.However,that does not mean there are never any losers.If one region or country develops a lower-cost way of producing a product,it takes employment away from workers elsewhere.If Alaska crab fishers develop a cheaper method of harvesting crabs than fishers in British Columbia,BC fishers will lose out and perhaps try to raise trade barriers to protect their jobs.The same effects happen within Canada but firms and workers will more likely to call for subsidies than for barriers to trade.
Q3) In Table 2-1,if the economy moves from point F to point E,________ televisions are gained at a cost of ________ given up.
Answer: 5,1
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Demand and Supply
Available Study Resources on Quizplus for this Chatper
177 Verified Questions
177 Flashcards
Source URL: https://quizplus.com/quiz/73783
Sample Questions
Q1) The price of a new textbook was $60 in one year and $75 two years later.Over the same period,the price of a used copy of the text rose from $25 to $37.50.Over the two years,the relative price of a new textbook
A)increased by 25 percent.
B)decreased from 2.4 to 2.0.
C)increased from 2.4 to 3.
D)decreased from 1.4 to 1.25
Answer: B
Q2) In Table 3-1,if Buyer 2 leaves the market,what market quantity would be demanded at a price of $10?
A)33
B)25
C)22
D)8
Answer: B
Q3) In the market described by Table 3-2 there will be a surplus of the product if price is above ________.
Answer: $3
To view all questions and flashcards with answers, click on the resource link above.
5
Chapter 4: Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/73784
Sample Questions
Q1) Prices have been rising 8 percent a year for ten years.The nominal interest rate is 12 percent.The real rate of interest is
A)20 percent.
B)12 percent.
C)8 percent.
D)4 percent.
Q2) Assume you borrow money to buy a new car at 10 percent interest,and you think that the economy-wide rate of inflation over the life of the loan will be 8 percent.If you are correct in your assumption,your real rate of interest on the car loan will be
A)2 percent.
B)8 percent.
C)10 percent.
D)18 percent.
Q3) A price index shows
A)the current cost of a basket of goods.
B)the relative price of necessities.
C)the price of goods in the future.
D)the cost of today's goods expressed in terms of the cost of goods in a base year.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Measuring the Economys Performance
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/73785
Sample Questions
Q1) Which of the following is a component of net domestic product,but NOT of national income?
A)capital consumption allowance
B)indirect business taxes
C)corporate taxes
D)personal taxes
Q2) In calculating wages for gross domestic income
A)social security taxes paid by the employee are also included,but not the portion of the tax paid by the employer.
B)social security taxes paid by the employer are also included,but not the portion of the tax paid by the employee.
C)social security taxes paid by the employee are subtracted from the social security taxes paid by the employer and the net figure is included.
D)social security taxes paid by both the employer and the employee are included.
Q3) Define and explain gross domestic product.
Q4) Describe in detail the "other" components of GDP and National Income Accounting.
Q5) How do GDP and NDP differ? What does it mean if net investment is negative?
Q6) Explain how value added is used to compute GDP.
Q7) How is interest measured when used in deriving GDP?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Modelling Real Gdp and the Price Level in the Long Run
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73786
Sample Questions
Q1) When prices increase the interest rate effect
A)will increase and the aggregate demand for goods and services will increase.
B)will increase and the aggregate demand for goods and services will decrease.
C)will decrease and the aggregate demand for goods and services will decrease.
D)will not be affected.
Q2) Because we have full employment at the level of potential output,
A)aggregate demand is downward sloping.
B)aggregate demand is upward sloping.
C)the long-run aggregate supply curve is upward sloping at potential output.
D)the long-run aggregate supply curve is vertical at potential output .
Q3) If other factors are held constant,an increase in the price level
A)causes the quantity of goods and services demanded to increase.
B)causes the quantity of goods and services demanded to fall.
C)causes the real value of the money to increase.
D)induces people to spend their money faster.
Q4) In Figure 6-1,a movement from point B to point A can be explained by
A)an increase in the real value of cash balances.
B)a decrease in the real value of cash balances.
C)the decrease in interest rates.
D)the increase in exports to the foreign sector.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Economic Growth and Development
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/73787
Sample Questions
Q1) The rate of economic growth will be faster
A)the greater the rate of growth of the money supply.
B)the greater the rate of saving.
C)the greater the rate of growth of the population.
D)the greater consumption spending is.
Q2) Other things held constant,a decline in saving implies
A)an increase in consumption spending.
B)a decline in government spending.
C)a higher standard of living in the future.
D)economic growth will soon increase.
Q3) Economic growth will tend to be higher in a country that
A)has a low savings rate.
B)has an open economy that encourages the rapid spread of technology.
C)has an undeveloped system of property rights.
D)does not grant patents to investors.
Q4) Economic growth may understate changes in the standard of living if
A)people are retiring at a younger age.
B)the average work week is decreasing.
C)the number of students attending college is increasing.
D)expected life spans are increasing.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Modelling Real Gdp and the Price Level in the
Short Run
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73788
Sample Questions
Q1) In Figure 8-4,the economy would most likely move from A D to A D because of A)a supply shock.
B)a demand shock.
C)a recession.
D)a depression.
Q2) As the ________ increases,the short-run aggregate supply curve becomes increasingly steep.
A)price level
B)inflation rate
C)unemployment rate
D)labour force participation rate
Q3) With respect to slope,the short-run aggregate supply function is normally A)vertical.
B)positively sloped.
C)negatively sloped.
D)horizontal.
Q4) If the money wage rate is constant and the price level rises,what happens to the real wage rate,firms' profits,and the quantity of real GDP supplied?
Page 10
Q5) How can a country experience economic growth and stable prices?
Q6) Explain what is meant by cost-push inflation?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 9: Consumption, investment, and the Multiplier
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/73789
Sample Questions
Q1) An increase in the interest rate will cause
A)the quantity of investment spending to increase.
B)the quantity of investment spending to decrease.
C)the investment function to shift out.
D)the investment function to shift in.
Q2) An increase in the price level causes
A)reduced investment spending because interest rates increase,but an increase in net exports as Canadians buy fewer imports.The change in investment is usually greater than the change in net exports.
B)a reduction in net exports as higher priced Canadian goods induce foreigners to buy fewer Canadian products,and an increase in investment spending as the higher prices make businesses more profitable.
C)reduced investment spending because interest rates increase and a decrease in net exports as the higher prices induce foreigners to buy fewer Canadian goods.
D)increased government spending which crowds out investment spending so that the net effect on aggregate demand is nil.
Q3) What are the simplifying assumptions that are made in the Keynesian Model?
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 10: The Public Sector
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/73790
Sample Questions
Q1) A flat-tax on all personal income would be an example of
A)a regressive tax.
B)a progressive tax.
C)a value added tax.
D)a proportional tax.
Q2) Provincial sales taxes are
A)progressive because higher income earners pay more tax.
B)regressive because they tax consumption at the same rate for both rich and poor.
C)regressive because higher income families don't pay as much tax as lower income families.
D)proportional because everyone is charged the same percentage tax rate.
Q3) One characteristic of a public good is that it
A)can be easily subdivided into small units.
B)can be consumed by many individuals at the same time.
C)always eliminates the free-rider problem.
D)is available for consumption by only a few individuals at any particular time.
Q4) A family making $30,000 pays $4,500 in taxes and a family making $40,000 pays $6,000 in taxes.The tax system is ________.
Q5) What is the free-rider problem and how is it related to public goods?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 11: Fiscal Policy and the Public Debt
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/73791
Sample Questions
Q1) Suppose the economy is at an equilibrium on the LRAS curve and the government decreases spending.In the short run one would expect
A)output and prices to decrease.
B)output to remain constant and prices to increase.
C)output to increase and prices to remain constant.
D)output and prices to remain constant.
Q2) When interest rates increase in Canada,the value of the dollar is likely to
A)increase and net exports are likely to decline.
B)decrease and net exports are likely to decline.
C)increase and net exports are likely to increase.
D)remain constant and net exports are likely to remain unchanged.
Q3) The Ricardian equivalence theorem states that
A)an increase in government spending has no effect on aggregate supply.
B)increases in government spending have a larger impact on real national income than decreases in taxes.
C)an increase in the government budget deficit created by a current tax cut has no effect on aggregate demand.
D)an increase in the government budget deficit has no effect on real national income because it only affects the price index.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 12: Money and the Banking System
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/73792
Sample Questions
Q1) Suppose a new customer opens a checking account and a savings account in a commercial bank,placing $100,000 in each.Later,the bank loans the customer $100,000.For this bank,
A)assets increased by $200,000 and liabilities increased by $100,000.
B)assets increased by $100,000 because the loan is an asset and liabilities increased by $100,000 because the checking deposit is a liability.The savings deposit is neither an asset nor a liability.
C)liabilities increased by $200,000 since the checking account and the savings account are liabilities while it generated no new assets.
D)assets increased by $100,000 because the loan is an asset and liabilities increased by $200,000 because both the checking deposit and the savings deposit are liabilities to the bank.
Q2) As a unit of account,money is used
A)to define prices of all other goods.
B)to pay off future debts.
C)to hold purchasing power over time.
D)to exchange for goods and services.
Q3) Describe monetary standards and how they relate in the Canadian context.
Q4) Provide an overview of the Canadian financial system.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 13: Money Creation and Deposit Insurance
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73793
Sample Questions
Q1) If the desired reserve requirement is raised,the money multiplier
A)is lowered.
B)is increased.
C)stays the same.
D)is doubled.
Q2) If a bank has $100,000 in demand deposits and $30,000 on reserve with a 20 percent reserve requirement,the bank
A)has desired reserves of $30,000.
B)has legal reserves of $10,000.
C)has excess reserves of $10,000.
D)has desired reserves of $10,000.
Q3) There are zero excess reserves at all banks and the required reserve ratio is 20 percent.If a check for $100,000 on Bank ABC is deposited in Bank XYZ,then excess reserves at Bank ABC equal ________ and excess reserves at Bank XYZ equal
A)-$20,000;+$80,000
B)-$100,000;+$80,000
C)-$80,000;+$100,000
D)-$80,000;+$80,000
Q4) Comment on deposit insurance and flawed bank regulation.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: The Bank of Canada and Monetary Policy
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/73794
Sample Questions
Q1) What are the functions of the Bank of Canada?
Q2) The transactions demand for money refers to
A)the desire for wealth.
B)the demand to hold money because money is used in all non-barter transactions.
C)the desire for income.
D)the demand to hold money as a long-term store of value.
Q3) Expansionary monetary policy during periods of underutilized resources can cause
A)real national income to increase without an increase in the price level.
B)real national income to increase with a decrease in the price level.
C)real national income to increase with an increase in the price level.
D)nominal national income to increase but cannot affect real national income.
Q4) The equation of exchange is
A)MsV = PQ.
B)MsQ = PV.
C)Ms = PV/Q.
D)MsP = QV.
Q5) Describe with the aid of diagrams the effect of an increase in the money supply on interest rates and in turn aggregate demand and the price level.
Q6) What effects does an expansionary monetary policy have on the trade balance? Why?
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Issues in Stabilization Policy
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73795
Sample Questions
Q1) According to the real business cycle theory,an increase in an input price,such as oil,will
A)increase both real income and the price level.
B)increase real income but not change the price level.
C)decrease real income but increase the price level.
D)decrease both real income and the price level.
Q2) In Figure 15-2,suppose the economy is at a short run equilibrium at point C and the Bank of Canada announces that the money supply will be decreased over the next six months.What point represents the new equilibrium according to the rational expectations theory?
A)A
B)B
C)C
D)D
Q3) In the short run,an unanticipated increase in the rate of inflation would
A)increase the unemployment rate.
B)decrease the unemployment rate.
C)unambiguously improve the misery index.
D)lower the natural rate of unemployment.
Q4) What is the main tenet(s)of the Real Business Cycle Theory?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 16: Comparative Advantage and the Open Economy
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/73796
Sample Questions
Q1) When the principle of comparative advantage is used to guide trade,then a country will
A)specialize only in that good with the highest opportunity cost.
B)specialize only in goods with the lowest opportunity costs.
C)specialize only in that good where production is less per worker-hour than another country.
D)specialize only in that good where production costs are more than average total costs.
Q2) What do you think are the main benefits of China's membership in the WTO?
Q3) The effects of a tariff are
A)reduced quantity supplied overall,reduced quantity supplied by domestic producers,and a lower price.
B)reduced quantity supplied overall,increased quantity supplied by domestic producers,and a higher price.
C)reduced quantity supplied overall,decreased quantity supplied by domestic producers,and a lower price.
D)identical to the effects of a quota,except that the price of the good is higher.
Q4) What are the effects of a tariff on a good?
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Exchange Rates and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/73797
Sample Questions
Q1) If the exchange rate is such that $1 equal 5 euros,then the price of a euro is
A)$5.
B)$1.
C)$0.40.
D)$0.20.
Q2) An important problem of the gold standard was that A)it was too complicated and restricted business activity.
B)a country didn't have control of its domestic monetary policy.
C)exchange rates tended to fluctuate a great deal,making it difficult for businesses to make long-run plans.
D)one country could easily manipulate the system to its advantage and the disadvantage of other countries.
Q3) In the original International Monetary Fund system,the legally established value of the monetary unit of one country in terms of another is known as A)the par value.
B)the purchasing power parity.
C)the flexible exchange rate.
D)the dirty float.
Q4) Define the three categories of balance of payments transactions.
To view all questions and flashcards with answers, click on the resource link above. Page 20