Principles of Macroeconomics
Midterm Exam
Course Introduction
Principles of Macroeconomics provides an introduction to the fundamental concepts and analytical tools used to understand the behavior of the economy as a whole. The course explores broad economic aggregates such as gross domestic product (GDP), unemployment, inflation, and economic growth, and examines the roles of government policies, including monetary and fiscal policy, in influencing economic performance. Students will learn to interpret economic indicators, analyze the causes and consequences of short- and long-term economic fluctuations, and assess the impact of macroeconomic events on individuals, businesses, and society at large.
Recommended Textbook
Macroeconomics 8th Canadian Edition by Andrew B. Abel
Available Study Resources on Quizplus
15 Chapters
1394 Verified Questions
1394 Flashcards
Source URL: https://quizplus.com/study-set/1237 Page 2
Chapter 1: Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/24413
Sample Questions
Q1) Describe what the two key assumptions are in the "invisible hand" idea.
Answer: The first assumption in the invisible hand idea is that people pursue their own economic self-interests.The second key assumption is that the various markets in the economy must function smoothly and without impediment.In particular,it is assumed that wages and prices are fully flexible and must adjust rapidly enough to maintain equilibrium in all markets.If there is a disequilibrium,the prices and wages would adjust quickly to restore the equilibrium.
Q2) Equilibrium in the economy means
A)unemployment is zero.
B)quantities demanded and supplied are equal in all markets.
C)prices aren't changing over time.
D)tax revenues equal government spending,so the government has no budget deficit.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: The Measurement and Structure of the Canadian Economy
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/24414
Sample Questions
Q1) Suppose that nominal GDP in 1990 was $1,015.5 billion,and in 2000 it was $2,732.0 billion.The GDP deflator is 42.0 for 1990 and 85.7 for 2000,where 1992 is the base year.Calculate the percent change in real GDP in the decade from 1990 and 2000.Round off to the nearest percentage point.
A)32%
B)104%
C)132%
D)169%
Answer: A
Q2) A variable-weight price index
A)equals the value of current output at current prices divided by the value of current output at base-year prices.
B)equals the value of a fixed basket at current prices divided by the value of a fixed basket at base-year prices.
C)is used in the consumer price index.
D)is misleading because it cannot distinguish between nominal and real measures.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Productivity, output, and Employment
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/24415
Sample Questions
Q1) A favourable supply shock,such as a fall in the price of oil,would
A)cause firms to demand less labour at any given real wage.
B)cause the labour demand curve to shift to the left.
C)increase the marginal product of labour.
D)decrease the real wage.
Answer: C
Q2) The marginal revenue product of labour (MRPN)is
A)less than the wage rate.
B)greater than the wage rate.
C)the amount of benefit of employing an additional worker in terms of the total value of output produced.
D)the amount of benefit of employing an additional worker in terms of the extra output produced.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Consumption, saving, and Investment
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/24416
Sample Questions
Q1) The nominal interest rate on taxable bonds is 8%,while on municipal bonds (which aren't taxable)it is 5%.The expected inflation rate is 3% and the tax rate on interest income is 40%.Calculate the expected after-tax real interest rate on both bonds.Which would be the better investment? Now suppose the actual inflation rate turned out to be 6%.Which bond was the better investment? Would your answer change if inflation had turned out to be 0%?
Q2) When a person gets an increase in current income,what is likely to happen to consumption and saving?
A)Consumption increases and saving increases.
B)Consumption increases and saving decreases.
C)Consumption decreases and saving increases.
D)Consumption decreases and saving decreases.
Q3) Your firm has capital stock of $15 million and a depreciation rate of 10%.Gross investment is $2.5 million.How much is net investment?
A)$13.5 million
B)$2.5 million
C)$1.5 million
D)$1.0 million
Q4) Explain why the Ricardian equivalence proposition is not supported by data.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Saving and Investment in the Open Economy
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/24417
Sample Questions
Q1) The main difference between the small open economy and the large open economy is that
A)the former faces a fixed international real interest rate,but the latter can influence it.
B)the former can influence the international real interest rate,but the latter cannot.
C)the former cannot maintain a large current account deficit,but the latter can.
D)the former can maintain a large current account deficit,but the latter cannot.
Q2) You have just read in the newspaper that a hurricane has destroyed Guatemala's coffee crop for this year.Guatemala is a small open economy.Based on this information alone,you would expect that
A)desired investment would fall in Guatemala.
B)desired investment would increase in Guatemala.
C)net foreign lending by Guatemala would increase.
D)net foreign lending by Guatemala would decrease.
Q3) A large open economy is an economy
A)that has a large government sector.
B)that has a positive net exports.
C)that is large enough to affect the world real interest rate.
D)that has a positive balance of payments.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Long-Run Economic Growth
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/24418
Sample Questions
Q1) The computerization of police departments throughout the country has greatly reduced the crime rate.What macroeconomic variable is likely to be directly affected by this change?
A)productivity
B)inflation
C)the real interest rate
D)the trade deficit
Q2) From 1982 to 1992 North Samaria's economy grew at an annual rate of 3.5%,but from 1992 to 2002 North Samaria's economy grew by only 1% per year.In 1992 Samaria's per capita income was $8000.How much higher would North Samaria's per capita income have been in 2002 if growth from 1992 to 2002 had been 3.5% rather than 1%?
A)$2241
B)$2448
C)$2508
D)$3285
Q3) Discuss what government policies can affect long-run economic growth.Do your answers depend on what growth model you use? Explain.
Q4) What is the empirical evidence on whether or not rich and poor countries converge?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: The Asset Market, money, and Prices
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/24419
Sample Questions
Q1) Which of the following assets is more liquid?
A)Your car.
B)Your money in the savings account.
C)Your money in the chequing account.
D)Your stock of a company.
Q2) If real money demand doubles while the nominal money supply is unchanged,what happens to the price level?
A)The price level increases by a factor of four.
B)The price level doubles.
C)The price level is unchanged.
D)The price level falls by one-half.
Q3) Money Market Mutual Funds (MMMFs)are similar to money because
A)they pay a high rate of interest.
B)they are as liquid as all other components of money.
C)holders can write cheques on them.
D)they cannot be liquidated except at great cost.
Q4) Many economic models use the expected inflation rate to explain changes in macroeconomic variables.Yet the expected inflation rate cannot be observed directly.Explain how the expected inflation is measured by economists.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Business Cycles
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/24420
Sample Questions
Q1) Explain why durable goods are more sensitive than semi- and non-durable goods to the business cycles.
Q2) Which of the following macroeconomic variables is countercyclical?
A)real interest rates
B)unemployment
C)the money supply
D)consumption
Q3) A variable that tends to move at the same time as aggregate economic activity is called
A)a leading variable.
B)a coincident variable.
C)a lagging variable.
D)an acyclical variable.
Q4) Economists use the term shocks to mean
A)unexpected government actions that affect the economy.
B)typically unpredictable forces that have major impacts on the economy.
C)sudden rises in oil prices.
D)the business cycle.
Q5) Explain the index of leading indicators,its applications,and its potential problems.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: The Is-Lm-Fe Model: a General Framework for
Macroeconomic Analysis
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/24421
Sample Questions
Q1) An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
Q2) Classical economists think general equilibrium is attained relatively quickly because
A)the real interest rate adjusts quickly.
B)the level of output adjusts quickly.
C)the real wage rate adjusts quickly.
D)the price level adjusts quickly.
Q3) The FE line shows the level of output at which the ________ market is in equilibrium.
A)goods
B)asset
C)labour
D)money
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Exchange Rates, business Cycles, and Macroeconomic Policy
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/24422
Sample Questions
Q1) When a group of countries agree to share a common currency,they are said to have formed a
A)currency union.
B)welfare state.
C)monetary alliance.
D)monetary cartel.
Q2) Under a fixed exchange rate system,if the nominal interest parity condition holds,
A)the nominal interest rates in domestic and foreign economies must be the same.
B)the inflation rates in domestic and foreign economy must be the same.
C)the real exchange rates in domestic and foreign economies must be the same.
D)the net exports in domestic and foreign economies must be the same.
Q3) When the domestic currency strengthens under a fixed-exchange rate system,this is called
A)a depreciation.
B)an appreciation.
C)a devaluation.
D)a revaluation.
Q4) Describe the pros and cons of the fixed exchange rate system.
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Classical Business Cycle Analysis:
Market-Clearing Macroeconomics
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/24423
Sample Questions
Q1) According to classical economists,the government should increase government purchases when
A)the benefits of the spending exceed the costs.
B)the economy is in a recession.
C)the economy is likely to go into a recession in the next six months to a year.
D)inflation is lower than its targeted level.
Q2) According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift to the ________ to restore general equilibrium;as it does so,the price level ________.
A)right;rises
B)right;falls
C)left;rises
D)left;falls
Q3) Which of the following is NOT considered as a real supply shock?
A)The 2008 financial crisis.
B)The rise in oil prices in the 1970s.
C)The fall in oil prices in 2014.
D)The digital tech revolution in the 1990s.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Keynesian Business Cycle Analysis: Non Market
Clearing Macroeconomics
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/24424
Sample Questions
Q1) Suppose the government decided to tighten monetary policy and decrease government expenditures.In the short run in the Keynesian model,the effect of these policies would be to ________ the real interest rate and ________ the level of output.
A)lower;decrease
B)lower;have an ambiguous effect on
C)have an ambiguous effect on;decrease
D)raise;decrease
Q2) When the demand for an imperfect competitor's product is greater than it planned,the firm will
A)increase the price of the product until supply equals demand.
B)meet the demand at its set price.
C)reduce the price until supply equals demand.
D)allow a shortage of the product to develop,without changing the product's price.
Q3) In the Keynesian model,wages and prices are
A)sticky in the short run,but flexible in the long run.
B)sticky in the long run,but flexible in the short run.
C)forecast accurately by both employees and employers.
D)flexible in the short run and the long run.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/24425
Sample Questions
Q1) Describe the major costs of inflation,being sure to distinguish between anticipated and unanticipated inflation.
Q2) One cost of an unanticipated inflation is that it
A)damages the role of prices as signals in the economy.
B)transfers wealth from borrowers to lenders.
C)decreases menu costs.
D)increases the purchasing power of money.
Q3) Shoe leather costs refer to
A)the costs of changing prices during inflation.
B)income redistribution cost of inflation.
C)resources used by people to reduce their holdings of currency.
D)resources used by people to reduce their risk.
Q4) Which of the following policies will NOT reduce the natural unemployment rate?
A)policies to increase labour market flexibility
B)job training and worker relocation
C)increasing unemployment benefits
D)expansionary policies to reduce actual unemployment rate
Q5) If you were prime minister,what would you do to reduce the natural rate of unemployment? Propose at least three different methods.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Monetary Policy and the Bank of Canada
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/24426
Sample Questions
Q1) Discuss how the Bank of Canada responded to the 2008 financial crisis and compare it with Federal Reserve's policy in the U.S.
Q2) The primary criticism by Keynesians of the credibility argument for rules is that
A)reputations are a less costly method of gaining credibility.
B)reputations are a less costly method of maintaining credibility.
C)the cost of losing flexibility over policy choices may exceed the cost of gaining credibility.
D)rules that reduce government influence over monetary policy could ultimately be harmful to the economy.
Q3) The money supply is $6 million,currency held by the public is $2 million,and the reserve-deposit ratio is 0.1.The monetary base is equal to A)$2 million.
B)$2.4 million.
C)$2.6 million.
D)$4 million.
Q4) If you could determine the goals of the Bank of Canada,what goals would you choose? Should the Bank's policy be activist? Discuss the pros and cons.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Government Spending and Its Financing
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/24427
Sample Questions
Q1) Increases in the debt-GDP ratio are primarily caused by
A)a high growth rate of GDP.
B)a high primary government deficit.
C)increases in government.
D)increases in interest rates.
Q2) The DEBTLAND's debt-GDP ratio in 2004 was 0.7,but it went down by 20 percent in 2005.If the interest rate paid on debt is 4 percent and the economy grows by 4 percent in 2005,the DEBTLAND's primary deficit to GDP ratio must
A)have increased by 20 percent.
B)have decreased by 20 percent.
C)have remained unchanged.
D)have decreased by 4 percent.
Q3) Which one of the following is NOT considered as an automatic stabilizer?
A)employment insurance program
B)the income tax system
C)the transfer payments.
D)the stock market
Q4) Why should government smooth tax rates? If they do so,what happens to deficits over the business cycle?
To view all questions and flashcards with answers, click on the resource link above. Page 17