Principles of Macroeconomics Final Exam
Course Introduction
Principles of Macroeconomics introduces students to the fundamental concepts and theories that explain the behavior of the economy as a whole. The course explores topics such as national income, inflation, unemployment, economic growth, fiscal and monetary policy, international trade, and the role of governments in economic stabilization. Through the examination of real-world issues and application of macroeconomic models, students develop a foundational understanding of how markets and government policies influence overall economic performance and societal well-being.
Recommended Textbook
Macroeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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Page 2
Chapter 1: What Is Economics
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Sample Questions
Q1) Which of the following statements is correct?
A)Canada produces more manufactured goods than services.
B)Canada produces more agricultural goods than services.
C)Canada produces more services than goods.
D)The percentage of the Canadian population that produces goods is greater than the percentage of the Chinese population that produces goods.
E)Canada produces more agricultural goods than manufactured goods.
Answer: C
Q2) Given the data in Table 1A.4.2, holding price constant, the graph of the purchases of strawberries, measured on the x-axis and family income, measured on the y-axis is a A)vertical line.
B)horizontal line.
C)positively sloped line.
D)negatively sloped line.
E)positively or negatively sloped line, depending on the price that is held constant.
Answer: C
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3
Chapter 2: The Economic Problem
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Q1) Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity cost of producing 3 more units of X
A)is 30 units of Y.
B)is 3 units of X.
C)is 20 units of Y.
D)is 10 units of Y.
E)cannot be determined from the diagram.
Answer: C
Q2) Refer to Fact 2.4.1. ________ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 7 caps, ________.
A)Sue; Tessa gains but Sue loses
B)Tessa; Sue loses but Tessa gains
C)Sue; both Sue and Tessa gain
D)Tessa; both Sue and Tessa gain
E)Tessa; Tessa loses but Sue gains
Answer: D
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4
Chapter 3: Demand and Supply
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Q1) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. This would be represented as a
A)movement up along the demand curve.
B)rightward shift of the demand curve.
C)leftward shift of the demand curve.
D)rightward shift of the supply curve.
E)leftward shift of the supply curve.
Answer: D
Q2) Initially, the demand curve for good A is D in Figure 3.5.1. If income increases and A is a normal good, we would expect to see a movement from point A to point A)B.
B)C.
C)D.
D)E.
E)C and back to point A.
Answer: B
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Chapter 20: Measuring Gdp and Economic Growth
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Q1) Refer to Table 20.2.4. Net domestic income at market prices is equal to
A)$2,150.
B)$1,920.
C)$2,400.
D)$1,940.
E)$2,350.
Q2) In the circular flow model,
A)households are sellers of factor services in goods markets.
B)households are buyers of goods and services in the factor markets.
C)firms are sellers of the factors in factor markets.
D)firms are sellers of goods and services in goods markets.
E)firms are buyers of goods and services in final markets.
Q3) A recession is a period with
A)negative growth rate in real GDP that lasts at least one quarter.
B)positive growth rate in real GDP that lasts at least one quarter.
C)positive growth rate in real GDP that lasts at least two quarters.
D)negative growth rate in real GDP that lasts at least two quarters.
E)a slowdown in real GDP growth but not necessarily negative real GDP growth.
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Chapter 21: Monitoring Jobs and Inflation
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Q1) Consider Fact 21.2.1. Choose the statement that is incorrect. If the labour market is working properly, there is still unemployment because
A)there are always firms laying off workers, and these workers search for another job.
B)there are always discouraged searchers.
C)there are always workers leaving one job to search for another job.
D)there are always workers who have left the labour market in the past and are entering the labour market to search for work.
E)there are always students who have finished school who are entering the labour market to search for work.
Q2) Refer to Table 21.3.2. From the data in Table 21.3.2, what is Southton's consumer price index for the current year?
A)112
B)105.6
C)100.5
D)100
E)94.7
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Chapter 22: Economic Growth
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Q1) Compared to growth in other countries, between 1960 and 2010 Canada
A)fell behind most other countries.
B)dramatically caught up to and passed other countries.
C)worsened dramatically versus the United States, but did better versus other countries.
D)did as well or better than most countries except certain Asian countries.
E)none of the above
Q2) Slowdonia's current growth rate of real GDP per person is 1 percent a year. How long will it take to double real GDP per person?
A)10 years
B)35 years
C)70 years
D)100 years
E)Real GDP per person will never double
Q3) According to Thomas Robert Malthus,
A)labour productivity increases continuously.
B)the population growth rate is fixed.
C)technological advances lead to permanent increases in real GDP per person.
D)increases in real GDP per person are only temporary.
E)knowledge capital does not experience diminishing returns.
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Page 8
Chapter 23: Finance, Saving, and Investment
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Sample Questions
Q1) Southton has investment of $100, private saving of $90, net taxes of $25, government expenditure of $30, exports of $25 and imports of $10. What is national saving?
A)$85
B)$90
C)$95
D)$100
E)$105
Q2) In January 2014, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the machines fell by 10 percent. During 2014, Tim spent $200,000 on new machines. During 2014, Tim's net investment was
A)$1 million.
B)$300,000.
C)$200,000.
D)$100,000.
E)$1.1 million.
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Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) Without money to act as a medium of exchange,
A)the standard of living in the economy would increase.
B)barter exchange would allow for a much simpler yet increased standard of living.
C)the increased transactions costs associated with trading would prohibit some trades from taking place.
D)independence in production would lead to a proliferation of new products.
E)all exchanges that take place under a monetary system would still take place.
Q2) Which of the following is a store of value?
A)a credit card
B)a cheque
C)a debit card
D)a fixed term deposit
E)fresh fruit and vegetables
Q3) The opportunity cost of holding currency is
A)the price level.
B)consumption given up.
C)the real interest rate.
D)the nominal interest rate.
E)the inflation rate.
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Page 10
Chapter 25: The Exchange Rate and the Balance of Payments
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Q1) Other things remaining the same, the Canadian interest rate differential increases for sure if the Canadian interest rate
A)rises and the U.S. interest rate falls.
B)rises and the U.S. interest rate rises.
C)falls and the U.S. interest rate falls.
D)falls and the U.S. interest rate rises.
E)doesn't change and the U.S. interest rate rises.
Q2) A very small country is an international borrower. Its supply of loanable funds increases but it still remains a net foreign borrower. As a result, the equilibrium quantity of loanable funds used in the country ________ and the country's foreign borrowing
A)does not change; decreases
B)does not change; does not change
C)does not change; increases
D)increases; does not change
E)increases; decreases
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11
Chapter 26: Aggregate Supply and Aggregate Demand
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Q1) Which of the following situations illustrates how fiscal policy can influence aggregate demand?
A)The Bank of Canada raises interest rates so people plan to buy less consumer durables. As a result, aggregate demand decreases.
B)Investors, anticipating an erosion of financial wealth due to inflation, decide to save more. As a result, aggregate demand decreases.
C)The government reduces the goods and services tax. As a result, consumption expenditure increases and aggregate demand increases.
D)The exchange rate value of the Canadian dollar rises. As a result, people living near the U.S.-Canada border increase their imports of goods and net exports decrease.
E)The government increases its expenditures. The demand for loanable funds increases, which raises the real interest rate. Investment increases.
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Chapter 27: Expenditure Multipliers
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Q1) Refer to Figure 27.3.1. If investment increases by $25 billion, then real GDP increases by
A)$25 billion.
B)$125 billion.
C)$50 billion.
D)$100 billion.
E)$75 billion.
Q2) Refer to Table 27.1.2. When saving is zero, what is the level of disposable income?
A)$325
B)$400
C)$475
D)$550
E)$625
Q3) If the saving function is S = -25 + 0.4YD, then the consumption function is
A)C = 25 + 0.6Y.
B)C = -25 + 0.4YD.
C)C = 25 - 0.4YD.
D)C = 25 + 0.6YD.
E)C = 25 + 0.4YD.
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13
Chapter 28: The Business Cycle, Inflation, and Deflation
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Sample Questions
Q1) According to the real business cycle theory, during a recession the demand for labour ________ and the supply of labour ________.
A)increases; decreases
B)decreases; does not change
C)does not change; decreases D)decreases; decreases E)decreases; increases
Q2) Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. If the current inflation rate is 3 percent, what is the current unemployment rate?
A)9 percent
B)6 percent
C)4 percent
D)3 percent
E)cannot be determined without more information
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Chapter 29: Fiscal Policy
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Q1) Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If real GDP equals $550 billion, the budget is A)in balance.
B)a surplus of $60 billion.
C)a surplus of $40 billion.
D)a deficit of $60 billion.
E)a deficit of $40 billion.
Q2) Everything else remaining the same, as the economy enters an expansion, A)tax revenues rise and transfer payments fall.
B)tax revenues and transfer payments fall.
C)tax revenues and transfer payments rise.
D)tax revenues fall and transfer payments remain constant.
E)transfer payments and interest on the debt rise.
Q3) The difference between the before-tax and after-tax rates is the A)tax plug.
B)deadweight gain.
C)tax wedge.
D)taxation penalty.
E)deadweight loss.
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Page 15
Chapter 30: Monetary Policy
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Q1) Refer to Fact 30.1.1. Choose the statement that is incorrect.
A)It is important to renew the agreement because the target provides an anchor for low inflation expectations.
B)It is important to renew the agreement because knowing that the Bank of Canada is striving to reach the target makes the short-run output-inflation tradeoff as favourable as possible.
C)It is important to renew the agreement because with the agreement the inflation rate will always remain between 1 and 3 percent a year.
D)Obstacles to the renewal of the agreement may occur because some critics argue that by focusing on inflation, the Bank sometimes permits the unemployment rate to rise.
E)Obstacles to the renewal of the agreement may occur because some critics argue that by focusing on inflation, the Bank sometimes permits real GDP growth to suffer.
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16
Chapter 31: International Trade Policy
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Q1) When the Canadian government imposes a tariff,
A)Canadian consumers gain and Canadian producers lose, and the gain exceeds the loss.
B)the tariff revenue earned by the government is a social loss.
C)a social loss occurs because increased domestic production could have been obtained at a lower cost as an import.
D)Canadian producers lose.
E)A and B are both correct.
Q2) A Canadian tariff imposed on items that can be produced more cheaply abroad
A)benefits Canadians by making these goods cheaper.
B)makes the goods more expensive in foreign markets.
C)creates a social loss.
D)equalizes the cost of production between Canada and foreign producers.
E)all of the above
Q3) If Canada imposes a tariff on imported steel, the tariff
A)raises the Canadian price of imported steel.
B)decreases the Canadian production of steel.
C)increases the total Canadian consumption of steel.
D)decreases employment in the Canadian steel industry.
E)all of the above
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