Course Introduction
Macroeconomic Theory Study Guide
Questions
Macroeconomic Theory explores the behavior, performance, and structure of an economy as a whole. The course covers key concepts such as national income, output, employment, inflation, and economic growth. Students will analyze models of aggregate demand and supply, fiscal and monetary policy, and the role of government in stabilizing the economy. Through the study of both classical and contemporary macroeconomic theories, the course provides a foundation for understanding fluctuations in economic activity and the impact of policy decisions on overall economic health.
Recommended Textbook
Principles of Macroeconomics 6th Canadian Edition by N. Gregory Mankiw
Available Study Resources on Quizplus
18 Chapters
3510 Verified Questions
3510 Flashcards
Source URL: https://quizplus.com/study-set/1191
Page 2
Chapter 1: Ten Principles of Economics
Available Study Resources on Quizplus for this Chatper
210 Verified Questions
210 Flashcards
Source URL: https://quizplus.com/quiz/23592
Sample Questions
Q1) Which is the most correct statement about the relationship between inflation and unemployment?
A)In the short run, reducing inflation is associated with falling unemployment.
B)In the short run, reducing inflation is associated with rising unemployment.
C)In the long run, reducing inflation is associated with falling unemployment.
D)In the long run, reducing inflation is associated with rising unemployment.
Answer: B
Q2) A worker in Bangladesh can earn $1 per day making cotton cloth on a handloom.A worker in Canada can earn $100 per day making cotton cloth with a mechanical loom.What accounts for the difference in wages?
A)Canadian textile workers belong to a union.
B)There is little demand for cotton cloth in Bangladesh and great demand in Canada.
C)Labour is more productive making cotton cloth with a mechanical loom than with a hand loom.
D)Bangladesh has a low-wage policy to make its textile industry more competitive in world markets.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Thinking Like an Economist
Available Study Resources on Quizplus for this Chatper
235 Verified Questions
235 Flashcards
Source URL: https://quizplus.com/quiz/23593
Sample Questions
Q1) Which are terms used by an economist?
A)vector spaces and axioms
B)torts and venues
C)ego and cognitive dissonance
D)comparative advantage and elasticity
Answer: D
Q2) What happens when economists test theories?
A)They must make do with whatever data the world gives them.
B)They can manipulate conditions easier than other scientific fields.
C)They can enlist the government's help to manipulate economic conditions.
D)They can achieve statistically valid results with much smaller sample sizes.
Answer: A
Q3) Refer to Figure 2-2.What does the inner loop represent?
A)the flow of inputs to firms and output to households
B)the flow of output to firms and inputs to households
C)the flow of spending to firms and factor payments to households
D)the flow of spending to households and factor payments to firms
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Interdependence and the Gains from Trade
Available Study Resources on Quizplus for this Chatper
205 Verified Questions
205 Flashcards
Source URL: https://quizplus.com/quiz/23594
Sample Questions
Q1) Refer to Figure 3-4.Suppose Ben and Jerry both spend half their time producing beer and half their time producing wine.How much wine and beer does each produce?
A)Ben will produce 4 bottles of beer and 4 bottles of wine.
B)Ben will produce 4 bottles of beer and 2 bottles of wine.
C)Jerry will produce 1.5 bottles of beer and 4.5 bottles of wine.
D)Jerry will produce 8 bottles of beer and 4 bottles of wine.
Answer: B
Q2) Refer to Table 3-5.What is the opportunity cost of one car for Japan?
A)4 airplanes
B)3 airplanes
C)1/3 airplane
D)1/4 airplane
Answer: C
Q3) What are imports?
A)people who work in foreign countries
B)economic models
C)whatever is given up to obtain some item
D)goods produced abroad and sold domestically
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: The Market Forces of Supply and Demand (PART
1)
Available Study Resources on Quizplus for this Chatper
246 Verified Questions
246 Flashcards
Source URL: https://quizplus.com/quiz/23595
Sample Questions
Q1) Refer to the Figure 4-3.If price in this market is currently $8,what would happen?
A)Quantity supplied would be 40 and quantity demanded would be 60.
B)Quantity supplied would be 60 and quantity demanded would be 40.
C)Quantity supplied would be 50 and quantity demanded would be 50.
D)Quantity supplied would be 70 and quantity demanded would be 30.
Q2) Refer to the Figure 4-1.What could cause the movement from S to S1?
A)a decrease in the price of the good
B)an improvement in technology
C)an increase in income
D)an increase in input prices
Q3) Refer to the Figure 4-5.Which of the four graphs shown illustrates a decrease in quantity demanded?
A)graph A
B)graph B
C)graph C
D)graph D
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: The Market Forces of Supply and Demand (PART
2)
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/23596
Sample Questions
Q1) Refer to the Figure 4-10.What is the movement from point B to point A on the graph called?
A)a decrease in supply
B)an increase in supply
C)an increase in the quantity supplied
D)a decrease in the quantity supplied
Q2) The market demand is the average of all of the individual demands for a particular good or service.
A)True
B)False
Q3) Anyone willing to pay the market price for a resource may have it.
A)True
B)False
Q4) Refer to the Figure 4-10.What would cause the movement from point A to point B on the graph?
A)a decrease in the price of the good
B)an increase in the price of the good
C)an increase in technology
D)a decrease in input prices
To view all questions and flashcards with answers, click on the resource
Chapter 5: Measuring a Nation's Income
Available Study Resources on Quizplus for this Chatper
169 Verified Questions
169 Flashcards
Source URL: https://quizplus.com/quiz/23597
Sample Questions
Q1) Refer to the Table 5-4.What is the nominal GDP for 2011?
A)$900
B)$1000
C)$1100
D)$1250
Q2) Roommates Grace and Kelly are sharing household chores and think they have an even exchange.Other things the same,if instead they paid each other for the chores the other did,what would happen to GDP?
A)It would fall.
B)It would rise.
C)It would be unaffected because paid or not, household chores are not included in GDP.
D)It would be unaffected because paid or not, household chores are included in GDP.
Q3) A Canadian tourist buys a $75 handbag in Italy.What happens to Canadian imports/exports and GDP?
A)Canadian imports increase by $75, and Canadian GDP increases by $75.
B)Canadian imports increase by $75, but Canadian GDP is unaffected.
C)Canadian imports and Canadian GDP are unaffected.
D)Canadian exports increase by $75, and Canadian GDP increases by $75.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 6: Measuring the Cost of Living
Available Study Resources on Quizplus for this Chatper
181 Verified Questions
181 Flashcards
Source URL: https://quizplus.com/quiz/23598
Sample Questions
Q1) Which of the following happened in the early 2000s?
A)Real interest rates were high, and nominal interest rates were low.
B)Real interest rates were low, and nominal interest rates were high.
C)Both real interest rates and nominal interest rates were high.
D)Both real interest rates and nominal interest rates were low.
Q2) Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price.By itself,what will this do to the GDP deflator and the consumer price index?
A)The GDP deflator and the consumer price index will fall.
B)The GDP deflator and the consumer price index will be unaffected.
C)The GDP deflator will be unaffected, but the consumer price index will fall.
D)The GDP deflator will fall, but the consumer price index will be unaffected.
Q3) What is the purpose of measuring the overall level of prices in the economy?
A)to allow the measurement of GDP
B)to allow consumers to know what kinds of prices to expect in the future
C)to allow comparison between dollar figures from different points in time
D)to allow government officials to determine whether the value of the dollar has increased or decreased
Q4) List the three major problems in using the CPI as a measure of the cost of living.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 7: Production and Growth
Available Study Resources on Quizplus for this Chatper
191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/23599
Sample Questions
Q1) Changes in the prices of most natural resources compared to other goods indicate that natural resources are generally becoming scarcer.
A)True
B)False
Q2) Which of the following is the source of most technological progress?
A)private research by firms and individual inventors
B)private research by firms and government
C)government research
D)government-sponsored research by universities
Q3) Which of the following would increase productivity,everything else being the same?
A)an increase in population
B)an increase in the number of hours of work per week
C)an increase in prices
D)an increase in physical capital per worker
Q4) How do inward-oriented policies affect a nation's growth?
Q5) What is a production function? Write an equation for a typical production function,and explain what each of the terms represents.
Q6) Compare and contrast the population theories of Malthus and Kremer.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 8: Saving,Investment,and the Financial System
Available Study Resources on Quizplus for this Chatper
213 Verified Questions
213 Flashcards
Source URL: https://quizplus.com/quiz/23600
Sample Questions
Q1) In a closed economy,what is private saving?
A)the amount of income that households have left after paying for their taxes and consumption
B)the amount of income that businesses have left after paying for the factors of production
C)the amount of tax revenue that the government has left after paying for its spending
D)the amount of tax revenue that the government has left after paying for transfers
Q2) Australia has recently implemented a national sales tax.If that country uses the proceeds from this tax to reduce income tax rates,what happens in the loanable funds market?
Q3) What does the slope of the supply of loanable funds curve represent?
A)the positive relation between the real interest rate and investment
B)the positive relation between the real interest rate and saving
C)the negative relation between the real interest rate and investment
D)the negative relation between the real interest rate and saving
Q4) National saving is equal to Y - T - C.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 9: Unemployment and Its Natural Rate
Available Study Resources on Quizplus for this Chatper
191 Verified Questions
191 Flashcards
Source URL: https://quizplus.com/quiz/23601
Sample Questions
Q1) Refer to the Table 9-1.What is the adult population in Dan?
A)90 million
B)150 million
C)160 million
D)240 million
Q2) Regarding the categories of unemployment,which of the following best describes how the effect of sectoral changes compares to the effect of firms paying higher-than-equilibrium wages?
A)Sectoral changes create frictional unemployment, while firms paying wages above equilibrium create structural unemployment.
B)Sectoral changes create structural unemployment, while firms paying wages above equilibrium create frictional unemployment.
C)Sectoral changes and firms paying wages above equilibrium both create structural unemployment.
D)Sectoral changes and firms paying wages above equilibrium both create frictional unemployment.
Q3) Most spells of unemployment are short,and most unemployment observed at any given time is long term.How can this be?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: The Monetary System
Available Study Resources on Quizplus for this Chatper
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/quiz/23602
Sample Questions
Q1) What is a debit card?
A)a form of money
B)a means of payment
C)a form of investment
D)a means of borrowing
Q2) How could the Bank of Canada decrease the money supply?
A)by buying government bonds
B)by decreasing the bank rate
C)by decreasing the reserve requirement
D)by increasing the bank rate
Q3) Which of the following best describes the process of open-market purchases conducted by the Bank of Canada?
A)The Bank of Canada buys Treasury bills, which increases the money supply.
B)The Bank of Canada buys Treasury bills, which decreases the money supply.
C)The Bank of Canada borrows from member banks, which increases the money supply.
D)The Bank of Canada lends money to member banks, which decreases the money supply.
Q4) Which two of the ten principles of economics imply that the Bank of Canada can profoundly affect the economy?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 11: Money Growth and Inflation
Available Study Resources on Quizplus for this Chatper
198 Verified Questions
198 Flashcards
Source URL: https://quizplus.com/quiz/23603
Sample Questions
Q1) Canada has never experienced deflation.
A)True
B)False
Q2) According to the classical dichotomy,which of the following is influenced by monetary factors?
A)the amount of goods and services that wages can buy
B)the interest rate adjusted for inflation
C)the current-dollar wage
D)the constant-dollar GDP
Q3) Nominal GDP measures output of final goods and services in physical terms.
A)True
B)False
Q4) When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.
A)True
B)False
Q5) Explain the adjustment process that creates a change in the price level when the money supply increases.
Q6) Explain how inflation affects savings.
Q7) Define each of the symbols and explain the meaning of M × V = P × Y.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 12: Open-Economy Macroeconomics: Basic Concepts
Available Study Resources on Quizplus for this Chatper
220 Verified Questions
220 Flashcards
Source URL: https://quizplus.com/quiz/23604
Sample Questions
Q1) What terms refers to the process of taking advantage of different prices for a good in different markets?
A)arbitrage
B)absolute advantage
C)capitalism
D)the law of one price
Q2) What is the value of Peru's exports minus the value of Peru's imports called?
A)Peru's net capital inflow
B)Peru's foreign direct investment
C)Peru's net exports
D)Peru's net imports
Q3) How has Canadian national saving changed in recent history?
A)It remained positive from 1999 to 2008.
B)It decreased below 10 percent toward the end of the 1990s.
C)It had a historic high in early 1990s.
D)It has been decreasing since 1991.
Q4) If the real exchange rate of the Canadian dollar falls,Canadian net exports will fall.
A)True
B)False
15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: A Macroeconomic Theory of the Small Open Economy
Available Study Resources on Quizplus for this Chatper
189 Verified Questions
189 Flashcards
Source URL: https://quizplus.com/quiz/23605
Sample Questions
Q1) Following an increase in the Canadian budget deficit,it has been observed that the trade deficit has increased,the Canadian real exchange rate has appreciated,the net capital outflow has decreased,and the interest rate has decreased.Which one of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?
A)The trade deficit has increased.
B)The real exchange rate has appreciated.
C)The net capital outflow has decreased.
D)The interest rate has decreased.
Q2) In the open-economy macroeconomic model,other things the same,when a Canadian resident imports a foreign good,our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.
A)True
B)False
Q3) Suppose the Canadian government institutes a "Buy Canadian" campaign,in order to encourage spending on domestic goods.What effect will this have on the Canadian trade balance?
Q4) Explain why saving need not equal domestic investment in an open economy.
Q5) Why do higher real interest rates lead to lower net capital outflow?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 14: Aggregate Demand and Aggregate Supply
Available Study Resources on Quizplus for this Chatper
246 Verified Questions
246 Flashcards
Source URL: https://quizplus.com/quiz/23606
Sample Questions
Q1) A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.
A)True
B)False
Q2) Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.
A)True
B)False
Q3) What happens when the price level rises?
A)Interest rates rise, so firms increase investment.
B)Interest rates rise, so firms decrease investment.
C)Interest rates fall, so firms increase investment.
D)Interest rates fall, so firms decrease investment.
Q4) Which of the following would cause prices to rise and real GDP to fall in the short run?
A)an increase in the expected price level
B)an increase in the capital stock
C)an increase in the quantity of labour available
D)an increase in money supply
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
Available Study Resources on Quizplus for this Chatper
224 Verified Questions
224 Flashcards
Source URL: https://quizplus.com/quiz/23607
Sample Questions
Q1) Refer to the Figure 15-2.Which of the following can happen in a closed economy?
A) Unemployment falls as the economy moves from a to b.
B) Fiscal policy is ineffective to move the economy from b to a.
C) If the economy is left alone, then as the economy moves from b to long-run equilibrium, the price level will increase.
D) An increase in money supply increases both output and prices.
Q2) If the multiplier is 4,what is the MPC?
A)0.25
B)0.50
C)0.75
D)1.00
Q3) During recessions,how do automatic stabilizers change government deficit and taxes?
A)Both deficit and taxes increase.
B)Both deficit and taxes decrease.
C)Deficit increases and taxes decrease.
D)Deficit decreases and taxes increase.
Q4) Use the money market to explain why the aggregate demand curve slopes downward.
Page 18
Q5) How does a reduction in the money supply by the Bank of Canada make owning stocks less attractive?
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 16: The Short-Run Tradeoff between Inflation and Unemployment
Available Study Resources on Quizplus for this Chatper
207 Verified Questions
207 Flashcards
Source URL: https://quizplus.com/quiz/23608
Sample Questions
Q1) How will a favourable supply shock shift the short-run Phillips curve,and how does unemployment change?
A)It will shift the short-run Phillips curve right, and unemployment will rise.
B)It will shift the short-run Phillips curve right, and unemployment will fall.
C)It will shift the short-run Phillips curve left, and unemployment will rise.
D)It will shift the short-run Phillips curve left, and unemployment will fall.
Q2) In the long run,which of the following will shift the long-run Phillips curve to the right?
A)an increase in the minimum wage
B)an increase in the money supply
C)a decrease in the money supply
D)tax cuts
Q3) The position of the long-run Phillips curve depends on what?
A)the natural rate of unemployment
B)the actual rate of unemployment
C)the actual inflation rate
D)the expected inflation rate
Q4) Explain the causes and consequences of the early 1970s recession in Canada.How did the authorities respond,and what were the long-term effects of this response? What do we learn from this case study?
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Five Debates over Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/23609
Sample Questions
Q1) Which of the following is a part of the argument against deficits?
A)They increase interest rates and investment.
B)They increase interest rates and decrease investment.
C)They decrease interest rates and investment.
D)They decrease interest rates and increase investment.
Q2) Some social programs transfer wealth from younger generations to older generations.
A)True
B)False
Q3) There are ways that policymakers could reduce the costs of inflation without reducing inflation.
A)True
B)False
Q4) Explain the main argument in favour of economic stabilization.
Q5) Which of the following would transfer wealth from the old to the young?
A)increases in the budget deficit
B)decreased building of highways and bridges
C)more generous education subsidies
D)indexation of pensions to inflation
Q6) Explain why policy lags could make stabilization policies counterproductive.
Page 21
To view all questions and flashcards with answers, click on the resource link above.