Public Policy and Macroeconomics
Pre-Test Questions
Course Introduction
This course explores the intersection of public policy and macroeconomic theory, analyzing how government decisions impact national and global economic performance. Students will examine key macroeconomic indicators such as GDP growth, inflation, unemployment, and fiscal deficits and study how policy tools like taxation, government spending, and monetary interventions are used to steer economic outcomes. Through case studies and empirical analysis, the course emphasizes the evaluation of policy effectiveness in addressing challenges like economic cycles, inequality, and development. By the end, students will gain a foundational understanding of macroeconomic principles and their critical application in the policy-making process.
Recommended Textbook
Macroeconomics 5th Canadian Edition by N Gregory Mankiw
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14 Chapters
1476 Verified Questions
1476 Flashcards
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Page 2
Chapter 1: The Science of Macroeconomics
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54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/76220
Sample Questions
Q1) Variables that a model takes as given are called:
A) endogenous.
B) exogenous.
C) market clearing.
D) macroeconomic.
Answer: B
Q2) The total income of everyone in the economy adjusted for the level of prices is called:
A) a recession.
B) an inflation.
C) real GDP.
D) a business fluctuation.
Answer: C
Q3) Compared with a recession,real GDP during a depression:
A) increases more rapidly.
B) increases at approximately the same rate.
C) decreases at approximately the same rate.
D) decreases more severely.
Answer: D
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Page 3
Chapter 2: The Data of Macroeconomics
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) Imputed values included in GDP are the:
A) market prices of goods and services.
B) estimated value of goods and services that are not sold in the marketplace.
C) price of goods and services measured in constant prices.
D) price of goods and services measured in current prices.
Answer: B
Q2) In 2012,Canadian spent about _____ percent of per-capita GDP on imports.
A) 14
B) 24
C) 32
D) 44
Answer: C
Q3) National income equals net national product:
A) minus depreciation.
B) plus depreciation.
C) minus indirect business taxes.
D) plus indirect business taxes.
Answer: C
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4
Chapter 5: The Open Economy
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) In a small open economy,if domestic investment exceeds domestic saving,then the extra investment will be financed by:
A) borrowing from abroad.
B) lending from abroad.
C) the domestic government.
D) the World Bank.
Q2) Protectionist policies implemented in a small open economy with a trade deficit have the effect of ______ the trade deficit and ______ the quantity of imports and exports.
A) decreasing; decreasing
B) not changing; decreasing
C) decreasing; not changing
D) not changing; not changing
Q3) Which of the following would decrease the real exchange rate in the basic model of a small open economy in the long run?
A) a personal income tax cut
B) a reduction in government spending
C) a tariff on imports
D) an increase in investment
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Page 5
Chapter 6: Unemployment
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) 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.
Q2) I: Skill-biased technical change has lowered the demand for unskilled labour in both Europe and North America.
II: Unemployment has risen more in Europe as a result,because this shift in demand has been bigger there.
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) Discouraged workers are counted as:
A) part of the labour force.
B) out of the labour force.
C) employed.
D) unemployed.
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6
Chapter 7: Economic Growth I
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) The formula for the steady-state ratio of capital to labour (k*)with population growth at rate n but no technological change,where s is the saving rate,is s:
A) divided by the sum of the depreciation rate plus n. B) multiplied by the sum of the depreciation rate plus n. C) divided by the product of f(k*)and the sum of the depreciation rate plus n.
D) multiplied by f(k*)divided by the sum of the depreciation rate plus n.
Q2) The production function y = f(k)means:
A) labour is not a factor of production.
B) output per worker is a function of labour productivity.
C) output per worker is a function of capital per worker.
D) the production function exhibits increasing returns to scale.
Q3) If the Canadian production function is Cobb-Douglas with capital share 0.3,output growth is 3 percent per year,depreciation is 4 percent per year,and the Golden Rule steady-state capital-output ratio is 4.29,to reach the Golden Rule steady state,the saving rate must be:
A) 17.5 percent.
B) 25 percent.
C) 30 percent.
D) 42.9 percent.
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Page 7
Chapter 8: Economic Growth II
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) The Solow model with population growth and labour-augmenting technological progress predicts balanced growth in the steady state.Growth rates of which variables are predicted to be balanced (i.e.,will be equal)in the steady state?
Q2) When capital increases by \(\Delta\)K units and labour increases by \(\Delta\)L units,output (\(\Delta\)Y)increases by:
A) \(\Delta\)K + \(\Delta\)L units.
B) MPL + MPK units.
C) (MPK × \(\Delta\)K)+ (MPL × \(\Delta\)L)units.
D) (MPL × \(\Delta\)K)+ (MPK × \(\Delta\)K)units.
Q3) In the Solow growth model with population growth and technological change,the break-even level of investment must cover:
A) depreciating capital.
B) depreciating capital and capital for new workers.
C) depreciating capital and capital for new effective workers.
D) depreciating capital,capital for new workers,and capital for new effective workers.
Q4) What is the difference between convergence and conditional convergence with respect to predictions of the Solow growth model? Explain.
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Chapter 9: Introduction to Economic Fluctuations
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) A 5 percent reduction in the money supply will,according to most economists,reduce prices 5 percent:
A) in both the short and long runs.
B) in neither the short nor long run.
C) in the short run but lead to unemployment in the long run.
D) in the long run but lead to unemployment in the short run.
Q2) Explain the meaning of monetary neutrality and illustrate graphically that there is monetary neutrality in the long run in the aggregate demand-aggregate supply model.Be sure to label:
i.the axes
ii.the curves
iii.the initial equilibrium values
iv.the direction to which the curves shift
v.the short-run equilibrium values
vi.the long-run equilibrium values.Explain in words what your graph illustrates.
Q3) Most economists believe that the classical dichotomy:
A) holds approximately in both the short run and the long run.
B) holds approximately in the long run but not at all in the short run.
C) holds approximately in the short run but not at all in the long run.
D) does not hold even approximately in either the long run or the short run.
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Chapter 10: Aggregate Demand I
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) An explanation for the slope of the LM curve is that as:
A) the interest rate increases,income becomes higher.
B) the interest rate increases,income becomes lower.
C) income rises,money demand rises,and a higher interest rate is required.
D) income rises,money demand rises,and a lower interest rate is required.
Q2) (Exhibit: Market for Real Money Balances)Based on the graph,if the interest rate is r<sub>3</sub>,then people will ______ bonds and the interest rate will ______.
A) sell; rise
B) sell; fall
C) buy; rise
D) buy; fall
Q3) Two identical countries,Country A and Country B,can each be described by a Keynesian-cross model.The MPC is .9 in each country.Country A decides to increase spending by $2 billion,while Country B decides to cut taxes by $2 billion.In which country will the new equilibrium level of income be greater?
Q4) Explain why a decrease in planned investment,which is a change in the goods market,will upset the equilibrium in the money market.
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Chapter 13: Aggregate Supply and the Short-Run
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) All of the following events represent a supply shock except:
A) a change in the minimum wage.
B) the repeal of government controls on prices.
C) the introduction of automatic teller machines.
D) a decrease in world oil prices.
Q2) According to the imperfect-information model,when the price level rises and the producer expects the price level to rise,the producer:
A) increases production.
B) does not change production.
C) decreases production.
D) hires more workers.
Q3) a.What is the sacrifice ratio?
b.What factor could possibly lower the sacrifice ratio for an economy?
c.What factor could possibly increase the sacrifice ratio for an economy?
Q4) Assume that an economy is initially operating at the natural rate of output.Use the model of aggregate demand and aggregate supply (using the upward-sloping short-run aggregate supply curve)to illustrate graphically the short-run and long-run effects on price and output of a reduction in government spending that produces a budget surplus.
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Chapter 15: Stabilization Policy
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98 Verified Questions
98 Flashcards
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Sample Questions
Q1) According to the Lucas critique,when economists evaluate alternative policies they must take into consideration:
A) how the policies will affect expectations and behaviour.
B) whether the policy will offset the impact of automatic stabilizers.
C) the stage of the political business cycle in which the policy is to be implemented.
D) the length of the inside lags associated with the policies.
Q2) A time-inconsistency problem in macroeconomic policy can occur when the policymaker:
A) is made to follow a strict and an inflexible rule.
B) has discretion in the short run but follows a rule in the long run.
C) has discretion to act as it seems best in each situation,based on his or her own knowledge and experience.
D) has no discretion.
Q3) Compare two procedures for conducting monetary policy:
Method 1: Maintain a steady money growth of 6 percent per year.Method 2: Maintain a steady inflation rate of 3 percent per year.Be sure to consider whether the methods involve: active or passive monetary policy and rules or discretion.Discuss why one method might be preferred over the other.
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Chapter 16: Government Debt and Budget Deficits
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) A strict balanced-budget rule would:
A) permit the use of fiscal policy for stabilization.
B) allow the use of tax smoothing to reduce tax distortions.
C) redistribute tax burdens across generations.
D) restrain political incompetence and opportunism.
Q2) An estimate of what government spending and tax revenue would be if the economy were operating at its natural level of output and employment is called the ______ budget.
A) cyclically adjusted
B) inflation adjusted
C) capital asset
D) generational accounting
Q3) Assume that the nominal interest rate is 11 percent,the inflation rate is 8 percent,and government debt at the beginning of the year equals $4 trillion.By how much is the government budget deficit overstated as a result of inflation?
A) $0.12 trillion
B) $0.32 trillion
C) $0.44 trillion
D) $0.80 trillion
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Chapter 18: Investment
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103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/76215
Sample Questions
Q1) According to the efficient-market hypothesis,changes in stock prices are:
A) driven by irrational waves of optimism.
B) driven by irrational waves of pessimism.
C) rational reflections of underlying economic fundamentals.
D) possible to predict from available information.
Q2) In the long run,credit crunches:
A) have no lasting economic effects.
B) are offset by periods of credit ease.
C) improve the allocation of national saving,improving potential output.
D) misallocate national saving,reducing potential output.
Q3) When banks make rules on maximum permissible mortgage payments for borrowers,they use:
A) nominal interest rates,and economists feel that this practice is appropriate.
B) real interest rates,and economists feel that this practice is appropriate.
C) real interest rates,but economists feel that this practice is inappropriate.
D) nominal interest rates,but economists feel that this practice is inappropriate.
Q4) Give at least two reasons why a decline in stock prices might lead to a slowdown in economic activity.Be sure to connect your reasons to economic models.
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Page 14
Chapter 19: Money Supply and Money Demand
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) The preferences of households determine the:
A) reserve-deposit ratio.
B) currency-deposit ratio.
C) size of the monetary base.
D) loan-deposit ratio.
Q2) The banking system creates:
A) liquidity.
B) wealth.
C) reserves.
D) currency.
Q3) The use of borrowed funds to supplement existing funds for purposes of investment is called:
A) arbitrage.
B) leverage.
C) convergence.
D) intermediation.
Q4) Why does the Bank of Canada not have complete control over the size of the money supply? Give at least two reasons.
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Page 15
Chapter 20: The Financial System
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108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/76212
Sample Questions
Q1) The government making loans that are secured by collateral of dubious value to prop up the financial system is an example of:
A) a giveaway of public funds.
B) risky lending.
C) a capital injection.
D) conventional monetary policy.
Q2) When dealing with failing financial institutions I: policymakers should avoid having depositors suffer losses
II: policymakers should avoid having shareholders suffer losses.
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) A key obstacle facing regulators who want to prevent financial institutions from taking excessive risks is the difficulty in:
A) finding diversified pools of assets to reduce risk.
B) drawing the line between excessive and appropriate risk taking.
C) eliminating idiosyncratic risk through diversification.
D) distinguishing between equity and debt financing.
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Page 16