Macroeconomic Theory Final
Exam
Course Introduction
Macroeconomic Theory explores the behavior and performance of an economy as a whole, examining key aggregate indicators such as GDP, inflation, unemployment, and economic growth. The course covers foundational models and concepts including the goods and money markets, fiscal and monetary policy, consumption, investment, and the role of government and central banks. Students will analyze how economic policies impact overall economic stability and growth, apply theoretical frameworks to real-world scenarios, and critically assess contemporary macroeconomic debates.
Recommended Textbook
Macroeconomics 5th Canadian Edition by N Gregory Mankiw
Available Study Resources on Quizplus
14 Chapters
1476 Verified Questions
1476 Flashcards
Source URL: https://quizplus.com/study-set/3819 Page 2
Chapter 1: The Science of Macroeconomics
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/76220
Sample Questions
Q1) An assumption of _______ is more plausible for studying the short-run behaviour of the economy,while an assumption of ______ is more plausible for studying the long-run,equilibrium behaviour of the economy.
A) deflation; inflation
B) inflation; deflation
C) flexible prices; sticky prices
D) sticky prices; flexible prices
Answer: D
Q2) Macroeconomics is the study of the:
A) activities of individual units of the economy.
B) decision-making by households and firms.
C) economy as a whole.
D) interaction of firms and households in the marketplace.
Answer: C
Q3) All of the following are important macroeconomic variables except:
A) real GDP.
B) the unemployment rate.
C) the marginal rate of substitution.
D) the inflation rate.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Data of Macroeconomics
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/76213
Sample Questions
Q1) According to the definition used by Statistics Canada,people are considered to be unemployed if they:
A) are out of a job but not looking for work.
B) retired from the labour force.
C) have found a job but are waiting for it to start.
D) are in the military service.
Answer: C
Q2) Disposable personal income:
A) is computed by subtracting personal tax and nontax payments from personal income.
B) is generally greater than personal income.
C) includes corporate profits but not dividends.
D) does not include government transfers to individuals.
Answer: A
Q3) The economic statistic used to measure the level of prices is the:
A) GDP.
B) CPI.
C) GNP.
D) real GDP.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 5: The Open Economy
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/76211
Sample Questions
Q1) Suppose that the International Monetary Fund (IMF)is concerned about currency depreciation in a small open economy.Use the basic version of our exchange-rate model for your answers.a.What type of fiscal policy should the IMF propose to the government of the small open economy to generate a currency appreciation? b.Illustrate graphically the impact of the IMF proposal on the exchange rate of the small open economy.c.What will happen to the trade balance of the small open economy,assuming that it started from a position of balanced trade?
Q2) As the U.S.budget deficit shrank in the 1990s,the increase in U.S.national saving was ______ than the expansionary shift in the U.S.investment function,resulting in a trade
A) stronger; deficit
B) stronger; surplus
C) weaker; deficit
D) weaker; surplus
Q3) What determines the real exchange rate and what determines the nominal exchange rate in a small open economy with perfect capital mobility,fully employed factors of production,and flexible prices?
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 6: Unemployment
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/76210
Sample Questions
Q1) If wage rigidity holds the real wage above the equilibrium level,an increase in the supply of labour will ______ the number unemployed.
A) increase
B) decrease
C) not change
D) possibly increase,decrease,or leave unchanged
Q2) Transitions into and out of the labour force:
A) rarely occur.
B) do not affect unemployment statistics.
C) make unemployment statistics difficult to interpret.
D) reduce the amount of frictional unemployment.
Q3) All of the following are possible explanations for the trends in the Canadian unemployment rate in the last half of the twentieth century except:
A) the changing composition of the Canadian work force.
B) sectoral shifts.
C) a generally increasing real value of the minimum wage.
D) the links between unemployment and productivity.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 7: Economic Growth I
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/76209
Sample Questions
Q1) With a per-worker production function y = k<sup>1/2</sup>,the steady-state capital stock per worker (k<sup>*</sup>)as a function of the saving rate (s)is given by:
A) k* = (s/\(\delta\))<sup>2</sup>.
B) k* = (\(\delta\) /s)<sup>2</sup>.
C) k* = s/ \(\delta\).
D) k* = \(\delta\) /s.
Q2) If a larger share of national output is devoted to investment,then living standards will:
A) always decline in the short run but rise in the long run.
B) always rise in both the short and long runs.
C) decline in the short run and may not rise in the long run.
D) rise in the short run but may not rise in the long run.
Q3) In the Solow growth model of an economy with population growth but no technological change,a higher level of steady-state output per worker can be obtained by all of the following except:
A) increasing the saving rate.
B) decreasing the depreciation rate.
C) increasing the population growth rate.
D) increasing the capital per worker ratio.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 8: Economic Growth II
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/76208
Sample Questions
Q1) Total factor productivity may be measured by:
A) subtracting the rate of growth of capital input and the rate of growth of labour input from the rate of growth of output.
B) subtracting the rate of growth of capital input,multiplied by capital's share of output,plus the rate of growth of labour input,multiplied by labour's share of output,from the rate of growth of output.
C) adding the rate of growth of capital input to the rate of growth of labour input.
D) adding the rate of growth of capital input,multiplied by capital's share of output,to the rate of growth of labour input,multiplied by labour's share of output.
Q2) The efficiency of labour is a term that does not reflect the:
A) high output that comes from labour cooperating with a large amount of capital.
B) health of the labour force.
C) education of the labour force.
D) skills of the labour force acquired through on-the-job training.
Q3) What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 9: Introduction to Economic Fluctuations
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/76207
Sample Questions
Q1) The short-run aggregate supply curve is horizontal at:
A) a level of output determined by aggregate demand.
B) the natural level of output.
C) the level of output at which the economy's resources are fully employed.
D) a fixed price level.
Q2) (Exhibit: Supply Shock)Assume that the economy is at point B.With no further shocks or policy moves,the economy in the long run will be at point:
A) A.
B) B.
C) C.
D) D.
Q3) The short run refers to a period:
A) of several days.
B) during which prices are sticky and unemployment may occur.
C) during which capital and labour are fully employed.
D) during which there are no fluctuations.
Q4) Monetary policy can be either a stabilizing influence on the economy or a source of instability.Give an explanation for both possibilities.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Aggregate Demand I
Available Study Resources on Quizplus for this Chatper
142 Verified Questions
142 Flashcards
Source URL: https://quizplus.com/quiz/76219
Sample Questions
Q1) According to the theory of liquidity preference,if the demand for real money balances exceeds the supply of real money balances,individuals will:
A) sell interest-earning assets in order to obtain non-interest-bearing money.
B) purchase interest-earning assets in order to reduce holdings of non-interest-bearing money.
C) purchase fewer goods and services.
D) be content with their portfolios.
Q2) The IS-LM model is generally used:
A) only in the short run.
B) only in the long run.
C) both in the short run and the long run.
D) in determining the price level.
Q3) The equilibrium condition in the Keynesian-cross analysis in a closed economy is:
A) income equals consumption plus investment plus government spending.
B) planned expenditure equals consumption plus planned investment plus government spending.
C) actual expenditure equals planned expenditure.
D) actual saving equals actual investment.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 13: Aggregate Supply and the Short-Run
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/76218
Sample Questions
Q1) Based on the sticky-price model,the short-run aggregate supply curve will be steeper,the greater the:
A) target nominal-wage rate.
B) target real-wage rate.
C) proportion of firms with flexible prices.
D) proportion of firms with sticky prices.
Q2) In the sticky-price model,the relationship between output and the price level depends on:
A) the proportion of firms with flexible prices.
B) the target real wage rate.
C) the target nominal wage rate.
D) the implicit agreements between workers and firms.
Q3) The percentage of a year's real GDP that must be foregone to reduce inflation by 1 percentage point is called the:
A) NAIRU.
B) short-run Phillips curve.
C) sacrifice ratio.
D) Okun's law.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Stabilization Policy
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/76217
Sample Questions
Q1) Economists who view the economy as inherently unstable generally argue that:
A) stabilization policy is too dangerous to be used.
B) the economy should be stimulated when it is depressed and slowed when it is overheated.
C) the economy should be slowed when it is depressed and stimulated when it is overheated.
D) monetary and fiscal policies should follow rigid rules of constant growth.
Q2) The long and variable lag before a policy influences the economy makes the job of economic forecasters:
A) impossible.
B) easier.
C) less important.
D) more important.
Q3) The political business cycle refers to the:
A) pattern of holding general elections every four or five years.
B) pattern of rising political donations during the run-up to each election.
C) manipulation of the economy to win elections.
D) pattern of recession and expansion that follows every election.
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 16: Government Debt and Budget Deficits
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/76216
Sample Questions
Q1) In a time of inflation when the real (i.e.,deflated)value of the government debt is constant,then the conventionally:
A) reported government budget will show a deficit equal to the inflation rate times the outstanding debt.
B) reported government budget will show a deficit equal to less than the inflation rate times the outstanding debt.
C) reported government budget will be balanced.
D) measured government budget will show a surplus equal to the inflation rate times the outstanding debt.
Q2) If the government balances its primary deficit every period I: the national debt will stay constant forever.II: the debt-to-GDP ratio will fall to zero as long as nominal GDP growth is positive.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.
Q3) What is Ricardian equivalence? Explain at least three reasons why Ricardian equivalence might not correctly describe an economy.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 18: Investment
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/76215
Sample Questions
Q1) In the accelerator model of inventory investment,when there is no change in output,inventory investment is:
A) positive.
B) zero.
C) negative.
D) declining.
Q2) Graphically illustrate how house prices and residential investment were affected by lowered lending standards that allowed many people with less than perfect credit (subprime borrowers),who had previously been unable to obtain mortgages,to purchase houses.
Q3) The theory behind Tobin's q indicates that:
A) the stock market may be expected to predict every turning point in real GDP.
B) the stock market may be expected to be closely tied to fluctuations in output and employment.
C) every time investment goes up we would expect the stock market to go down.
D) the stock market and the economy are basically independent of each other.
Q4) How will a decrease in output during a recession affect:
a.business fixed investment?
b.residential investment?
c.inventory investment?
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Money Supply and Money Demand
Available Study Resources on Quizplus for this Chatper
102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/76214
Sample Questions
Q1) According to the Baumol-Tobin model,an increase in the fixed costs of going to the bank will ______ the demand for money.
A) increase
B) decrease
C) not change
D) possibly increase or decrease
Q2) The basic definition of the money supply involves:
A) currency plus reserves.
B) currency plus the monetary base.
C) currency plus deposits.
D) the monetary base plus deposits.
Q3) Some economists have advocated replacing government deposit insurance with 100-percent reserve banking.Under this plan,banks would hold all deposits as reserves.Deposit insurance would no longer be necessary,because banks would always have the reserves to meet customer withdrawals.a.What would happen to the money supply (defined as currency and bank deposits)in the transition from fractional reserve to 100-percent reserve,if this plan were implemented,holding other factors constant? b.What will be the value of the money multiplier?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 20: The Financial System
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/76212
Sample Questions
Q1) Reducing risk by holding many imperfectly correlated assets is called:
A) diversification.
B) moral hazard.
C) risk aversion.
D) leveraging.
Q2) How do deposit insurance and the "too big to fail" policy increase moral hazard?
Q3) The TED spread is the difference between the interest rate paid on _____ and the interest rate paid on _____.
A) three-month U.S.certificates of deposit; three-month eurodollar loans
B) overnight interbank loans in London; overnight interbank loans in the United States
C) four-week Treasury bills; overnight federal funds
D) three-month eurodollar interbank loans; three-month Treasury bills
Q4) An indicator of the increased lack of confidence in the banking system during the financial crisis of 2008-2009 in the United States was the:
A) increase in the federal government budget deficit.
B) decrease in interest rates.
C) increase in the TED spread.
D) decrease in the TED spread.
To view all questions and flashcards with answers, click on the resource link above.
Page 16