Macroeconomic Theory Test Bank
Course Introduction
Macroeconomic Theory offers a comprehensive exploration of the fundamental principles and models that shape the behavior of economies as a whole. The course examines key topics such as national income determination, economic growth, unemployment, inflation, and fiscal and monetary policy. Students will analyze how aggregate demand and aggregate supply interact, explore the role of government intervention, and evaluate the effectiveness of different policy tools in promoting economic stability. By integrating theoretical frameworks with real-world applications, the course equips students with the analytical skills necessary to understand and assess macroeconomic challenges and trends in the global economy.
Recommended Textbook
Economics Canada in the Global Environment 8th Edition by Michael Parkin
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31 Chapters
3751 Verified Questions
3751 Flashcards
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Page 2
Chapter 1: What Is Economics?
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198 Verified Questions
198 Flashcards
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Sample Questions
Q1) Given the data in Table 1A.4.2,holding income constant,the graph relating the price of strawberries,measured on the y-axis and the purchases of strawberries,measured on the x-axis
A)is a vertical line.
B)is a horizontal line.
C)is a positively sloped line.
D)is a negatively sloped line.
E)reaches a minimum.
Answer: D
Q2) The data in Table 1A.2.1 shows that
A)x and y have a negative relationship.
B)x and y have a positive relationship.
C)there is no relationship between x and y.
D)there is first a negative and then a positive relationship between x and y.
E)there is first a positive and then a negative relationship between x and y.
Answer: A
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3
Chapter 2: The Economic Problem
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Sample Questions
Q1) Refer to Table 2.4.1.For Vulcan,the opportunity cost of producing an additional unit of X is
A)4 units of Y.
B)2 units of Y.
C)2/3 units of Y.
D)1 unit of Y.
E)dependent upon how many units of X are already produced.
Answer: B
Q2) Refer to Table 2.1.1.What does point C mean?
A)If 8 units of X are produced, then at least 28 units of Y can be produced.
B)If 8 units of X are produced, then at most 28 units of Y can be produced.
C)If 28 units of Y are produced, then more than 8 units of X can be produced.
D)If 8 units of X are produced, then only 36 units of Y can be produced.
E)There is unemployment at this point.
Answer: B
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4
Chapter 3: Demand and Supply
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178 Flashcards
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Sample Questions
Q1) If we observe a decrease in the equilibrium quantity of good A,we know that
A)either the demand for A has increased or the supply of A has decreased or both.
B)either the demand for A has increased or the supply of A has increased or both.
C)either the demand for A has decreased or the supply of A has increased or both.
D)either the demand for A has decreased or the supply of A has decreased or both.
E)none of the above.
Answer: D
Q2) At price P<sub>3</sub> in Figure 3.4.1,
A)this market is in equilibrium.
B)there is a shortage in the amount of Q<sub>5</sub> - Q<sub>1</sub>.
C)there is a tendency for the price to rise.
D)equilibrium quantity is Q<sub>5</sub>.
E)there is a surplus in the amount of Q<sub>5</sub> - Q<sub>1</sub>.
Answer: E
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Chapter 4: Elasticity
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Sample Questions
Q1) For which one of the following will demand be the most price inelastic?
A)milk
B)Happy Cow brand milk
C)Happy Cow brand milk in Regina
D)Happy Cow brand milk at Ralph's Grocery Store in Regina
E)All of the above will exhibit the same price elasticity of demand
Q2) For which one of the following is demand likely to be most inelastic?
A)diamonds
B)insulin for a diabetic
C)potatoes
D)gasoline
E)books
Q3) Fred's income increases from $800 per week to $1,200 per week.As a result,he decides to purchase 40 percent more bubble gum each week.The income elasticity of Fred's demand for bubble gum is
A)0.40.
B)40.
C)1.0.
D)0.12.
E)10.
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Chapter 5: Efficiency and Equity
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108 Flashcards
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Sample Questions
Q1) In a command system,resources are allocated by
A)people who show interest to use the resources.
B)people who are able to pay for the resources.
C)market price.
D)the order of someone in authority.
E)those people who come first in line.
Q2) Suppose the government places a tax on business profits so that businesses decrease production and generate a deadweight loss.Revenues from the tax are used to boost the incomes of the poor.The decision to levy the tax implies that in this case the government
A)values people but not businesses.
B)values efficiency more than its view of fairness.
C)profits from collecting taxes.
D)values its view of fairness more than efficiency.
E)is unaware of the deadweight loss it is creating.
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Chapter 6: Government Actions in Markets
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Sample Questions
Q1) Refer to Figure 6.3.3.Suppose a tax of $1 is imposed.In which market would tax revenue be the lowest?
A)(a)
B)(b)
C)(c)
D)(d)
E)all markets equally
Q2) Consider the market for rental housing illustrated in Figure 6.1.1 when the demand curve is D?.The equilibrium in an unregulated market is
A)1,500 rooms rented at $150 a month.
B)1,500 rooms rented at $200 a month.
C)1,750 rooms rented at $175 a month.
D)1,750 rooms rented at $200 a month.
E)2,000 rooms rented at $150 a month.
Q3) The buyer pays most of a tax if demand is relatively inelastic because
A)the buyer cannot easily substitute to other markets.
B)the buyer can easily substitute to other markets.
C)the government forces the seller to bear the burden of the tax.
D)there is a black market for this good.
E)the seller cannot easily substitute to other goods.
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Chapter 7: Global Markets in Action
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Import quotas ________ the price of imported goods and ________ the quantity consumed in the country imposing the quota.
A)raise;increase
B)raise;decrease
C)lower;increase
D)lower;decrease
E)raise;do not change
Q2) Which of the following are reasons economists consider valid for trade protection?
I.Protection penalizes countries that have weak environmental standards.
II.Protection limits dumping of low-wage jobs into the domestic economy.
III.Protection prevents low-wage jobs in foreign countries from lowering wages in Canada.
A)I and II
B)II and III
C)I, II, and III
D)I and III
E)None of the above
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Chapter 8: Utility and Demand
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110 Flashcards
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Sample Questions
Q1) Behavioural economics
A)studies the activity of the human brain when a person makes an economic decision.
B)studies psychology by using the economist's toolbox.
C)studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behaviour.
D)was used extensively in the development of marginal utility theory.
E)all of the above.
Q2) Sam buys gasoline and coffee each week.To draw his budget line for gasoline and coffee,Sam needs to know
A)if his income is expected to rise in the future.
B)if the price of gasoline is expected to rise in the future.
C)if the price of coffee is expected to fall in the future.
D)the goods that he considers to be substitutes for gasoline and for coffee.
E)how much income he has to spend and the prices of one litre of gasoline and one cup of coffee.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Which one of the following is true at the best affordable choice of a consumer?
A)Marginal rate of substitution exceeds the slope of the budget line.
B)Marginal rate of substitution is less than the relative price of the good measured on the x-axis.
C)All income is spent.
D)The consumption choice is outside the budget line.
E)Other consumption points along the consumer's budget line lie on higher indifference curves.
Q2) A consumer's best affordable point occurs
A)inside the budget line.
B)outside the budget line.
C)on the budget line.
D)at a point that cannot be determined.
E)at a corner on the budget line, with only one good consumed.
Q3) When Jim is at his best affordable point,the budget line
A)is steeper than the highest attainable indifference curve.
B)is flatter than the highest attainable indifference curve.
C)does not touch the highest attainable indifference curve.
D)is tangent to the highest attainable indifference curve.
E)intersects the highest attainable indifference curve.
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Chapter 10: Organizing Production
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104 Flashcards
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Sample Questions
Q1) Consider Fact 10.2.1.Which production method is technologically inefficient?
A)A
B)B
C)C
D)all of the above
E)none of the above
Q2) In a partnership,each partner is legally liable for
A)all the debts of the partnership.
B)the fraction of the debts corresponding to the fraction of ownership.
C)50 percent of the debt.
D)all debts of the partnership limited by the personal wealth of the partner.
E)an amount of debt limited to the amount of the partner's investment in the partnership.
Q3) Refer to Table 10.2.1,which shows three methods for making photon torpedoes.Which method is technologically efficient?
A)1 only
B)2 only
C)3 only
D)all of the methods
E)1 and 3 only
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Chapter 11: Output and Costs
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Sample Questions
Q1) A firm's total fixed cost is $100.If total cost is $200 for one unit of output and $310 for two units,what is the marginal cost of the second unit?
A)$100
B)$110
C)$200
D)$210
E)$310
Q2) Choose the correct statement.
A)Expenditure on a plant that has no resale value is a sunk cost.
B)A sunk cost is irrelevant to a firm's current decisions.
C)A cost that influences a firm's current decisions is the short-run cost of changing its labour inputs.
D)A cost that influences a firm's current decisions is the long-run cost of changing its plant.
E)All of the above.
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13
Chapter 12: Perfect Competition
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Sample Questions
Q1) Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the firm sells 5 units of output,total revenue is
A)$15.
B)$30.
C)$75.
D)$90.
E)$105.
Q2) Refer to Figure 12.4.3.which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market
A)demand will increase.
B)demand will decrease.
C)supply will increase.
D)supply will decrease.
E)demand and market supply will both increase.
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Chapter 13: Monopoly
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Sample Questions
Q1) Which one of the following is most likely to be a natural monopoly?
A)sandwich shops
B)printing services
C)welding services
D)automotive service
E)electric utilities
Q2) Consider the market demand curve in Figure 13.3.3.If the market is perfectly competitive,which area indicates producer surplus?
A)AEK
B)DHK
C)DIK
D)DIH
E)None of the above.
Q3) A monopolist under marginal cost pricing has an incentive to A)inflate costs.
B)produce more than the efficient quantity of output.
C)produce less than the efficient quantity of output.
D)maximize consumer surplus.
E)produce the efficient quantity of output.
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Page 15
Chapter 14: Monopolistic Competition
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111 Flashcards
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Sample Questions
Q1) Mrs.Smith's bakery shop is a firm in monopolistic competition.The firm's marginal revenue curve
A)is upward sloping.
B)is downward sloping and above the demand curve.
C)is a horizontal line.
D)is the same as the demand curve.
E)is downward sloping and lies below the demand curve.
Q2) Advertising by firms in monopolistic competition
A)does not provide consumers with useful information.
B)increases the marginal cost of production.
C)is inefficient.
D)is a waste of valuable resources because firms are forced by the entry of rival firms to be price takers.
E)generates the perception among consumers that product differentiation exists.
Q3) Firms in monopolistic competition have rivals that
A)will always match their price increases.
B)will always match their price decreases but not their price increases.
C)all agree on a common price.
D)set their price where the demand curve is tangent to the average cost curve.
E)set their price according to the demand they face.
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Chapter 15: Oligopoly
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Sample Questions
Q1) Refer to Table 15.2.1.This table includes the sentences that Bob and Joe will receive if convicted.They have been apprehended by the police under the suspicion of committing armed robbery.The two are immediately separated and questioned about the case.Which one of the following observations is correct?
A)Bob would be smart to confess no matter what Joe does.
B)Joe would be smart not to confess no matter what Bob does.
C)Both Bob and Joe would be better off not confessing if they both do not confess.
D)Both Bob and Joe would be better off "coming clean" and confessing to their crime.
E)Both Bob and Joe have a dominant strategy of not confessing.
Q2) Anti-combine law attempts to
A)support prices.
B)establish Crown corporations.
C)prevent monopoly behaviour.
D)establish fair trade laws.
E)deregulate monopolies.
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Chapter 16: Externalities
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Sample Questions
Q1) Pollution occurs when lumber is produced.If the lumber market is unregulated,there would be
A)overproduction of lumber compared to the efficient amount.
B)underproduction of lumber compared to the efficient amount.
C)sometimes overproduction and sometimes underproduction of lumber compared to the efficient amount.
D)an external benefit from producing lumber.
E)no deadweight loss from production.
Q2) Three ways governments can encourage production of goods with external benefits are
A)private subsidies, marketable permits, and intellectual property rights.
B)private subsidies, marketable permits, and vouchers.
C)intellectual property rights, marketable permits, and vouchers.
D)taxes, emission charges, and marketable permits.
E)private subsidies, vouchers, and intellectual property rights.
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Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) The marginal social benefit curve for a public good is derived by
A)adding the marginal benefits of all individuals at each quantity.
B)adding the quantities demanded by all individuals at each price.
C)surveying consumers and asking how much they use a certain good or service.
D)adding the total benefits for all consumers for a given quantity of the good.
E)finding the maximum amount someone is willing to pay for one more unit of the good.
Q2) The idea that the platforms of the political parties will tend to become similar over time is
A)not a reflection of reality.
B)true in theory but not true in actuality.
C)called the principle of minimum differentiation.
D)called the principle of minimal political confrontation.
E)the result of intense lobbying pressure.
Q3) The efficient scale of provision of a public good occurs where
A)total benefit is at a maximum.
B)total benefit is at a minimum.
C)marginal social benefit is at a maximum.
D)marginal social benefit minus marginal social cost equals zero.
E)marginal social cost is at a minimum.
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Page 19
Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) The labour supply curve may eventually become "backward bending" at high wages because
A)the income effect of the higher wage is dominated by the substitution effect.
B)the income effect of the higher wage dominates the substitution effect of the higher wage.
C)firms will demand added productivity from the workers as the wage reaches very high levels.
D)firms will demand longer hours in trade for the higher wages.
E)people get tired of working so many hours and refuse to increase their labour supply.
Q2) A firm can sell its output for $40 per unit.When it increases its labour force from 4 workers to 5 workers its output increases from 15 to 17 units.The value of marginal product of the 5th worker is
A)$80.
B)$40.
C)$600.
D)$680.
E)$136.
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Chapter 19: Economic Inequality
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Sample Questions
Q1) The demand for high-skilled labour is derived from the A)exploitation of the low-skilled workers.
B)marginal cost of production.
C)lower wage of the labour.
D)supply of the high-skilled labourers.
E)value of marginal product of high-skilled labour.
Q2) Consider the Lorenz curves in Figure 19.1.2.Which point indicates that the poorest 20 percent of families earn 9 percent of the income?
A)a
B)b
C)c
D)d
E)none of the above
Q3) Government transfer payments,such as welfare payments,redistribute income and A)increase the incentive to work.
B)improve economic efficiency.
C)increase tax receipts.
D)decrease the incentive to work.
E)push the Lorenz curve further away from the line of equality.
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Page 21
Chapter 20: Measuring GDP and Economic Growth
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Sample Questions
Q1) Refer to Table 20.2.4.Gross investment is equal to A)$460.
B)$260.
C)$400.
D)$560.
E)$250.
Q2) Suppose the economy's capital increases over the year.It must be true that
A)net investment was greater than gross investment.
B)net investment was positive.
C)depreciation was greater than net investment.
D)depreciation was greater than gross investment.
E)depreciation is less than zero.
Q3) Refer to Fact 20.1.1.Peter's capital at the beginning of 2012 is A)$8,100.
B)$7,000.
C)$3,100.
D)$7,600.
E)$5,000.
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22
Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) Which one of the following people would be counted as unemployed in Canada?
A)Doris works only 5 hours a week but is looking for a full-time job.
B)Kanhaya has stopped looking for work since he was unable to find a suitable job during a two-month search.
C)Sharon recently began looking for work after staying at home for 10 years to look after her children.
D)Maurice is on a 2 month vacation out of the country but is still looking for a job using the internet.
E)Taylor is a homemaker.
Q2) Jesse just graduated from university,and is looking for her first job.Jesse is A)frictionally unemployed.
B)structurally unemployed.
C)not unemployed.
D)cyclically unemployed.
E)not in the labour force.
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23
Chapter 22: Economic Growth
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Sample
Questions
Q1) The key difference between the neoclassical growth theory and the classical growth theory is that
A)capital is not subject to diminishing returns under classical growth theory.
B)capital is subject to diminishing returns under classical growth theory.
C)increases in population drive workers' incomes back down to the subsistence level in classical growth theory.
D)growth in the neoclassical growth theory ends with a population explosion.
E)in classical growth theory, the pace of technological change influences the economic growth rate but economic growth does not influence the pace of technological change.
Q2) Knowledge capital is different from physical capital because knowledge capital
A)does not experience diminishing returns.
B)experiences diminishing returns.
C)is free.
D)increases with investment.
E)none of the above.
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Page 24
Chapter 23: Finance, Saving, and Investment
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Sample Questions
Q1) Refer to Table 23.2.1.Government saving is
A)$15 million.
B)-$5 million.
C)$5 million.
D)$45 million.
E)$20 million.
Q2) The total amount spent on new capital is
A)wealth.
B)gross investment.
C)depreciation.
D)net investment.
E)saving.
Q3) Which of the following is correct?
A)As disposable income increases, the real interest rate rises.
B)As disposable income decreases, saving decreases.
C)The higher a household's wealth the greater is its saving.
D)Both B and C are correct.
E)Both A and C are correct.
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25
Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) According to the quantity theory of money,an increase in the quantity of money will increase the price level
A)but have no effect on real GDP or the velocity of circulation.
B)and increase real GDP and the velocity of circulation.
C)and increase real GDP but decrease the velocity of circulation.
D)and decrease real GDP and increase the velocity of circulation.
E)but have no effect on real GDP and will decrease the velocity of circulation.
Q2) Which of the following will increase the size of the money multiplier?
A)a decrease in the desired reserve ratio
B)an increase in the desired reserve ratio
C)a decrease in the currency drain ratio
D)an increase in the currency drain ratio
E)either A or C above
Q3) Which of the following best fits the definition of money?
A)gold
B)any commodity or token that is generally acceptable as a means of payment
C)an obligation between the parties to a transaction
D)any unit of account
E)any medium of exchange
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Page 26
Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) If a country's central bank does not intervene in the foreign exchange market,the country has
A)a crawling peg exchange rate policy.
B)a fixed exchange rate policy.
C)a flexible exchange rate policy.
D)no exchange rate policy.
E)a responsible exchange rate policy.
Q2) Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.05 U.S,and 1 Canadian dollar buys 8.6 Chinese yuan.How many yuan will $1 U.S.buy?
A)8.6 yuan
B)1.0 yuan
C)8.2 yuan
D)0.12 yuan
E)0.14 yuan
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Chapter 26: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) Refer to Figure 26.3.5.When the economy is at full employment,real GDP is
A)$13 trillion.
B)$13.5 trillion.
C)more than $13 trillion and less than $13.5 trillion.
D)less than $13 trillion.
E)100.
Q2) Which of the following does not change aggregate demand?
A)an increase in expected future income
B)a change in fiscal policy
C)a change in monetary policy
D)an advance in technology
E)a rise in the exchange rate
Q3) If real GDP is greater than potential GDP,the economy is
A)not in short-run equilibrium.
B)in a recessionary equilibrium.
C)in an above full-employment equilibrium.
D)in a below full-employment equilibrium.
E)in long-run equilibrium.
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Chapter 27: Expenditure Multipliers: The Keynesian Model
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Sample Questions
Q1) The marginal propensity to consume is the
A)fraction of the first dollar of disposable income received that is saved.
B)fraction of the first dollar of disposable income received that is consumed.
C)fraction of the last dollar of disposable income received that is saved.
D)fraction of a change in disposable income that is spent on consumption.
E)total amount of consumption divided by the total amount of disposable income.
Q2) The marginal propensity to import is calculated as
A)imports divided by the change in real GDP.
B)the change in imports divided by real GDP.
C)imports divided by real GDP.
D)the change in imports divided by the change in real GDP.
E)none of the above.
Q3) Suppose the multiplier is 2.5 and investment increases by $20 billion.Starting at potential GDP,in the long run,equilibrium real GDP
A)increases by $50 billion.
B)increases by more than $50 billion.
C)decreases by less than $50 billion.
D)does not change.
E)increases by less than $50 billion.
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Page 29
Chapter 28: Canadian Inflation, Unemployment, and Business Cycle
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Sample Questions
Q1) Cost-push inflation can result from an initial
A)decrease in personal income taxes.
B)increase in personal income taxes.
C)increase in government expenditure.
D)increase in the money wage rate.
E)increase in transfer payments.
Q2) Refer to Table 28.2.2.The economy's natural unemployment rate is 4 percent.Table 28.2.2 gives some points on the economy's short-run Phillips curve.When the unemployment rate is 4 percent ________.
A)actual inflation is greater than expected inflation
B)actual inflation is less than expected inflation
C)and the inflation rate is 6 percent a year, the short-run and long-run Phillips curves intersect
D)and the expected inflation rate is 8 percent a year, the short-run Phillips curve shifts downward
E)aggregate demand increases
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30
Chapter 29: Fiscal Policy
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91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/12223
Sample Questions
Q1) Which of the following is a government outlay?
A)personal income taxes
B)investment income
C)debt interest
D)indirect taxes
E)corporate income taxes
Q2) If we compare the United States to France,we see that potential GDP per person in France is ________ than that in the United States because the French tax wedge is ________ than the U.S.tax wedge.
A)greater;larger
B)greater;smaller
C)less;larger
D)less;smaller
E)none of the above
Q3) Government debt is
A)equal to revenues minus outlays.
B)always increasing.
C)a phenomena that occurs only during times of war.
D)the total amount of government borrowing.
E)the result of a rising price level.
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Chapter 30: Monetary Policy
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/12224
Sample Questions
Q1) 25 basis points is
A)a quarter of a percentage point.
B)a quarter of the Bank of Canada's target inflation rate.
C)the spread between the savings rate and the lending rate.
D)the spread between the bank rate and the settlement balances rate.
E)the gap by which real GDP exceeds potential GDP.
Q2) How is consultation between the Bank of Canada and the Government of Canada on monetary policy arranged?
A)Consultations are arranged at the discretion of the Minister of Finance.
B)No consultation is required or needed.
C)The Bank of Canada Act requires regular consultations between the Governor and the Minister of Finance.
D)Consultations are arranged at the discretion of the Governor of the Bank of Canada.
E)Consultations are arranged through the Parliamentary Committee on Finance.
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Chapter 31:International Trade Policy
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116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/12225
Sample Questions
Q1) Offshoring occurs when a firm in Canada
A)hires foreign labour and produces in other countries.
B)buys finished goods, components, or services from other firms in other countries.
C)hires Canadian labour and produces in Canada.
D)buys finished goods, components, or services from other firms in Canada.
E)Both A and B are correct.
Q2) A country opens up to trade.In an export industry,
A)domestic consumers lose and domestic producers win.
B)domestic producers lose and domestic consumers win.
C)domestic producers lose and the government wins.
D)the government loses and domestic consumers win.
E)none of the above.
Q3) Reducing a tariff ________ the domestic production of the good and ________ the total domestic consumption of the good.
A)increases;increases
B)increases;decreases
C)decreases;increases
D)decreases;decreases
E)does not change;increases
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