Survey of Economics Review Questions - 4505 Verified Questions

Course Introduction

Survey of Economics Review

Questions

Survey of Economics offers an introduction to the fundamental principles and concepts of microeconomics and macroeconomics, providing students with a comprehensive overview of how economies function on both individual and aggregate levels. Topics include supply and demand, market structures, consumer and producer behavior, national income, fiscal and monetary policy, inflation, unemployment, and the role of government in the economy. This course is designed to equip students with analytical tools and real-world applications to better understand contemporary economic issues and make informed decisions as citizens and consumers.

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Economics 15th Canadian Edition by Christopher T.S. Ragan

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Page 2

Chapter 1: Economic Issues and Concepts

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Sample Questions

Q1) Society's resources are often divided into broad categories.They are

A)goods and services.

B)factors of consumption.

C)land,labour,and capital.

D)population and natural resources.

E)tangible commodities and intangible commodities.

Answer: C

Q2) A basic underlying point in economics is that

A)people have unlimited wants in the face of limited resources.

B)there are unlimited resources.

C)governments should satisfy the needs of the people.

D)people have limited wants in the face of limited resources.

E)governments should never interfere in the workings of a market economy.

Answer: A

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Chapter 2: Economic Theories,Data,and Graphs

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Q1) Refer to Figure 2-5.What is the slope of this non-linear function when 200 units per month are being produced?

A)4

B)-4

C)0.25

D)-5.2

E)-0.25

Answer: B

Q2) Suppose economists at the World Bank develop a theory with a prediction that increased levels of foreign aid lead to increases in per capita GDP in the recipient developing countries.They find empirical evidence that is consistent with this theory.The economists are able to conclude that

A)the theory is valid,but should be subjected to continued scrutiny.

B)the theory has been proven correct.

C)the theory is always reliable.

D)the evidence is rejected by the theory.

E)the assumptions used in the theory have been proven correct.

Answer: A

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Chapter 3: Demand, Supply, and Price

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Q1) In which statement is the term "demand" used correctly? (1)An increase in the price of copper will lead to a decrease in the demand for copper.(2)An increase in the price of copper will lead to an increase in the demand for aluminum (a substitute for copper).

A)neither statement

B)the first statement only

C)the second statement only

D)both statements

E)more information is needed

Answer: C

Q2) "Excess demand" can also be described as A)excess supply.

B)the area to the left of the equilibrium price on a supply and demand diagram.

C)quantity demanded exceeding quantity supplied.

D)quantity supplied exceeding quantity demanded.

E)the area to the right of the equilibrium price on a supply and demand diagram.

Answer: C

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5

Chapter 4: Elasticity

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Q1) Normal goods

A)have positive income elasticity of demand.

B)have negative income elasticity of demand.

C)have negative elasticity of supply.

D)do not have elasticity of demand.

E)are sometimes also inferior goods.

Q2) During the 1970s,OPEC's output restrictions caused gasoline prices to increase sharply.Coincidentally,demand for gas-guzzling cars fell.A likely explanation for these observations is that gasoline and cars had a ________ elasticity of demand that was

A)cross; negative

B)cross; positive

C)income; negative

D)income; positive

E)price; negative

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Chapter 5: Price Controls and Market Efficiency

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Q1) If 10 000 snow tires are produced and purchased in the month of November,we can say that economic surplus is

A)the net value that society as a whole receives by producing and consuming those 10 000 snow tires.

B)the number of snow tires that are produced in excess of the equilibrium quantity.

C)the profit earned by the producers of those 10 000 snow tires.

D)the price at which the tires are sold multiplied by 10 000.

E)the net value to those consumers who purchased the 10 000 snow tires.

Q2) A binding minimum wage established by the government

A)is essentially a price ceiling that creates a shortage of workers.

B)will be effective only if the minimum wage is set below the free-market equilibrium wage.

C)will have no effect on the quantity of labour employed.

D)will affect adversely only those workers whose value of productivity is greater than this minimum wage.

E)is a price floor that will create a surplus of workers if the labour market is competitive.

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Chapter 6: Consumer Behaviour

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Q1) Refer to Figure 6-12.Sophie's movement from point A to point B is the A)substitution effect of a decrease in the price of paperback novels.

B)total effect of an increase in the price of paperback novels.

C)income effect of an increase in the price of paperback novels.

D)result of a change in her preferences between movies an paperback novels.

E)total effect of a decrease in income.

Q2) Refer to Figure 6-5.For both goods,the price increases from P₀ to P₁.The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C.Good X is certainly a(n)________ good.

A)normal

B)inferior

C)luxury

D)necessity

E)Giffen

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8

Chapter 7: Producers in the Short Run

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Sample Questions

Q1) Which of the following statements is NOT true of a corporation?

A)It can enter into contracts.

B)It is an entity separate from the individuals who own it.

C)It can incur debt that is an obligation of the corporation but not of its individual owners.

D)It has the right to sue and be sued.

E)It is legally obliged to distribute all profits to shareholders.

Q2) The period of time over which the firm can vary any of its inputs for a given production technology is called the

A)very-short run.

B)short run.

C)long run.

D)very-long run.

E)immediate run.

Q3) Marginal cost is defined as the

A)change in total cost resulting from an additional unit of output.

B)change in fixed cost resulting from an additional unit of output.

C)difference between average total cost and average variable cost.

D)cost per unit when the firm is operating at capacity.

E)cost of an additional unit of a variable factor of production.

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Chapter 8: Producers in the Long Run

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Q1) Refer to Figure 8-3.Each of the three SRATC curves shows

A)technically inefficient methods of production,given that they lie above the LRAC.

B)the lowest cost attainable,given that the plant size is the largest it can possibly be.

C)the output that is possible when all factors of production are fixed.

D)the lowest cost attainable,holding the plant size constant.

E)optimal plant sizes in the long run.

Q2) Although capital is a variable factor in the long run,once chosen it often becomes a fixed factor for a long time.A profit-maximizing firm must therefore select a method of production that is

A)economically efficient at current factor prices.

B)technologically advanced beyond methods currently used.

C)labour intensive,as labour is always a variable factor.

D)economically efficient at current factor prices and sufficiently flexible to adapt to changing factor prices over time.

E)adaptable to wide ranges of output over time.

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10

Chapter 9: Competitive Markets

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Q1) Comparing the short-run and long-run profit-maximizing positions of a perfectly competitive firm,which statement is true?

A)Price will equal marginal cost in the short run,but not necessarily in the long run.

B)Economic profit may exist in the short run and in the long run.

C)The firm will produce at minimum average cost in both the short and long run.

D)Price should equal average cost in the long run,but not necessarily in the short run.

E)The firm may have unexploited economies of scale in both the short run and the long run.

Q2) When economists say that a firm is a "price taker" they mean that

A)the firm initially takes price as given and tries to influence it through advertising.

B)the firm can alter its rate of production and sales without affecting the market price of the product.

C)at the price prevailing in the market,the firm will be willing to sell an infinite quantity.

D)the demand curve that the firm faces is perfectly inelastic.

E)the firm can alter the market price as it changes its rate of production.

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11

Chapter 10: Monopoly, cartels, and Price Discrimination

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Q1) Refer to Table 10-2.If the firm were to shut down in the short run its losses per day would be

A)zero.

B)$150.

C)equal to its average variable cost.

D)equal to its total revenue.

E)equal to its total cost.

Q2) Refer to Figure 10-6.Assume this pharmaceutical firm charges a single price for its drug.At its profit-maximizing level of output it will produce

A)Q₀ units and charge the perfectly competitive price.

B)Q₀ units and charge a price of p₀.

C)Q₁ units and charge a price of p₁.

D)Q₀ units and charge a price of p₂.

E)Q₁ units and charge a price greater than its average total variable cost.

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Chapter 11: Imperfect Competition and Strategic Behaviour

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Q1) Refer to Table 11-3.From the payoff matrix we can infer that A)it is optimal for Firm A to produce 1000 units of output regardless of what Firm B is doing.

B)both firms are indifferent between an equilibrium (Produce 1000 units,Produce 1000 units)and (Produce 2000 units,Produce 2000 units).

C)it is optimal for Firm A to produce 2000 units of output regardless of what Firm B is doing.

D)it is optimal for Firm B to produce 1000 units of output regardless of what Firm A is doing.

E)there is no Nash equilibrium in the game.

Q2) Refer to Table 11-2.If Firm A is indifferent between cheating or cooperating when Firm B chooses to cooperate,x must be equal to A)0.

B)10.

C)20.

D)30.

E)40.

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Chapter 12: Economic Efficiency and Public Policy

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Sample Questions

Q1) The Canadian economy is achieving allocative efficiency if

A)price equals average cost in all industries.

B)there are no idle resources in the economy.

C)marginal product is equal for all factors of production.

D)marginal cost equals price in all industries.

E)marginal cost is equalized across industries.

Q2) We can safely say that each point on a country's production possibilities boundary (PPB)is

A)allocatively efficient.

B)one at which P = MC for all goods.

C)productively efficient.

D)Pareto optimal.

E)not productively efficient.

Q3) Refer to Figure 12-7.Suppose this firm is being regulated using a pricing policy of average-cost pricing.In this case,economic profits are equal to

A)$10 000.

B)$6000.

C)$126 000.

D)$28 000.

E)$0.

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Chapter 13: How Factor Markets Work

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Q1) Other things equal,if a particular province has some non-monetary advantages,such as a temperate climate,the wage rate in that province will be

A)higher than national average and the market will be in equilibrium.

B)higher than national average and the market will be in disequilibrium.

C)lower than national average and the market will be in equilibrium.

D)lower than national average and the market will be in disequilibrium.

E)the same as any other province.

Q2) The term "economic rent" refers to

A)a payment for use of land.

B)transfer earnings plus opportunity cost.

C)the opportunity cost of land.

D)economic profit.

E)factor payments in excess of transfer earnings.

Q3) Refer to Figure 13-4.In diagrams 1 and 4,the marginal worker is earning

A)transfer earnings only.

B)economic rent only.

C)both transfer earnings and economic rent.

D)a wage greater than the equilibrium market wage.

E)a wage greater than the worker should receive for the product produced.

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Page 15

Chapter 14: Labour Markets and Income Inequality

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Q1) If competitive labour market E discriminates against one group of workers and market O does not,we can predict an increase in

A)employment in market E.

B)wages in market E.

C)wages in market O.

D)the welfare of the average worker.

E)economy-wide wage rates.

Q2) The diagonal line on a Lorenz curve diagram represents

A)the degree of inequality in the distribution of income.

B)the percentage of income received by the bottom 50% of families.

C)the dollar incomes of the bottom 50% of families.

D)the percentage of income received by the top 50% of families.

E)where the Lorenz curve would be if there were complete income equality.

Q3) Refer to Figure 14-7.Which point shows that 20% of families earn almost 40% of total income?

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Chapter 15: Interest Rates and the Capital Market

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Sample Questions

Q1) The textbook presentation of present value involves an important simplification of reality in order to analyze the concept.That simplification is in assuming that

A)the future stream of MRPs lasts for one period only.

B)the future stream of MRPs of a unit of capital is known with certainty.

C)all units of capital generate an identical stream of MRPs.

D)the future stream of MRPs is constant over time.

E)the interest rate is constant over time.

Q2) The law of diminishing marginal returns tells us that,generally,the more capital the firm uses,the

A)lower is the firm's interest rate.

B)lower is the MRP of the firm's capital.

C)higher is the MRP of the firm's capital.

D)higher is capital's purchase price.

E)lower is capital's rental price.

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17

Chapter 16: Market Failures and Government Intervention

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Q1) Consider an industry producing good X.The quantity of good X produced in a competitive free market will be greater than the socially optimal level if

A)the production of good X generates a positive externality.

B)the consumption of good X generates a positive externality.

C)the production of good X generates a negative externality.

D)the government has imposed a tax on the production of good X.

E)good X is a public good.

Q2) One part of the "informal defence" of the market system is the argument,made forcefully by the late Milton Friedman,that free markets provide for the

A)greatest equality in income distribution.

B)decentralization of economic power.

C)greatest security for members of society.

D)government with the highest tax revenues.

E)greatest scope for international trade.

Q3) Which of the following are characteristics of a common-property resource?

A)rivalrous and excludable

B)non-rivalrous and non-excludable

C)non-rivalrous and excludable

D)rivalrous and non-excludable

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Page 18

Chapter 17: The Economics of Environmental Protection

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Q1) Refer to Figure 17-2.The net social benefit derived from the production and use of disposable diapers is

A)at a minimum at Q₀,because MC_S exceeds MC_P.

B)at a maximum at Q₀,because that is where MC_S equals MB_S.

C)at a maximum at Q₁,because that is where MC_S equals MB_S.

D)zero at Q₀,because that is where MC_S equals MB_S.

E)zero at Q₂,because that is where the externality is internalized.

Q2) Refer to Table 17-1.Suppose a public authority has the mandate to maximize social welfare by choosing the appropriate amount of pollution abatement.Compared to the optimal level of abatement,pollution abatement of 7 units would ________ total social welfare by ________.

A)increase; $15

B)increase; $110

C)decrease; $110

D)decrease; $125

E)decrease; $160

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Page 19

Chapter 18: Taxation and Public Expenditure

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Q1) Which of the following best describes the policy implications of a Laffer curve?

A)Policymakers should eliminate tax deductions and maximize revenue at any given tax rate.

B)Policymakers should eliminate tax loopholes and maximize revenue at any given tax rate.

C)Policymakers should carefully consider whether a given increase in tax rates would increase or decrease tax revenues.

D)Policymakers should avoid imposing taxes on income as they decrease the work incentive.

E)Policymakers should set the tax rate as low as possible to maximize tax revenue.

Q2) The Employment Insurance (EI)system operates whereby

A)Canadians contribute during their working years and then receive payments when they are retired.

B)the federal government transfers funds to provincial governments.

C)any unemployed worker is paid while searching for employment.

D)the federal and provincial governments allow income-tax deductions for contributions made to special retirement funds.

E)eligible unemployed workers are paid while searching for new employment.

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Page 20

Chapter 19: What Macroeconomics Is All About

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Sample Questions

Q1) Refer to Table 19-1.In which years was this economy experiencing an inflationary gap?

A)2012,2013

B)2009,2010

C)2013,2014

D)2011,2015

E)2009,2010,2014

Q2) Most economists believe that the single largest cause of rising material living standards over long periods of time is

A)productivity growth.

B)rising employment.

C)growth in the capital stock.

D)real GDP growth.

E)rising real wages.

Q3) The Canadian exchange rate is defined to be the

A)number of Canadian dollars needed to buy one unit of foreign currency.

B)number of ounces of gold it takes to buy one hundred Canadian dollars.

C)system of quotas imposed on the international exchange of goods.

D)term for foreign currencies or claims on foreign currencies.

E)value of one Canadian dollar in terms of foreign currencies.

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Chapter 20: The Measurement of National Income

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Q1) Refer to Table 20-3.What is the value of net domestic income at factor cost?

A)$9244

B)$9494

C)$8292

D)$8331

E)$8167

Q2) When calculating GDP from the expenditure side,"actual consumption expenditures" includes

A)the purchase of a new house.

B)American tourists travelling to and spending in Canada.

C)increases in automobile inventories.

D)the construction of an apartment building.

E)the monthly rental of an apartment.

Q3) Which of the following would be classified as "investment" in the national income and product accounts?

A)the purchase of a government bond

B)the purchase of Telus stock

C)the construction of a new factory

D)the payment of real-estate fees

E)the holding of money

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Chapter 21: The Simplest Short-Run Macro Model

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Q1) Consider a simple macro model with a constant price level and demand-determined output.Using this model,if economists want to estimate the effect of a given change in desired investment on equilibrium national income,they would multiply the change in desired investment by the

A)average propensity to save.

B)marginal propensity to save.

C)equilibrium level of national income.

D)simple multiplier.

E)reciprocal of the marginal propensity to spend.

Q2) The marginal propensity to save refers to the

A)additional saving that occurs out of an additional dollar of income.

B)additional saving that occurs out of an additional dollar of investment.

C)total saving divided by a change in income.

D)change in saving divided by total income.

E)additional saving that occurs over time.

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23

Chapter 22: Adding Government and Trade to the Simple Macro Model

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Q1) Refer to Figure 22-1.The function for desired imports for this economy can be expressed as

A)NX = 450 - Y.

B)IM = 450 - 0.5(Y).

C)NX = 0.5(Y).

D)IM = 0.5(Y).

E)IM = 0.2(Y).

Q2) Consider a simple macro model with government and demand-determined output.If the government wants to reduce equilibrium national income by $20 billion,G must be

A)raised by $20 billion times the simple multiplier.

B)raised by $20 billion divided by the simple multiplier.

C)lowered by $20 billion times the simple multiplier.

D)lowered by $20 billion divided by the simple multiplier.

E)lowered by $20 billion.

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24

Chapter

23: Output and Prices in the Short Run

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Q1) Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

A)1.2

B)1.5

C)4.0

D)5.0

E)not enough information to know

Q2) The economy's aggregate supply (AS)curve shows the relationship between the price level and the total

A)investment that firms wish to make,with input prices given.

B)investment that firms wish to make,as input prices vary.

C)output that firms wish to produce and sell,with input prices given.

D)output that firms wish to produce and sell,as input prices vary.

E)wealth accumulated by households,with national income given.

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Chapter 24: From the Short Run to the Long Run: The Adjustment of Factor Prices

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Q1) Refer to Figure 24-7.The government could close the existing output gap by

A)increasing the net tax rate.

B)decreasing the net tax rate.

C)increasing government purchases.

D)decreasing government transfer payments.

E)implementing an expansionary fiscal policy.

Q2) Refer to Table 24-1.Which of the economies are experiencing an inflationary gap?

A)Economies A and B

B)Economies B and C

C)Economies C and D

D)Economies D and E

E)none of the economies

Q3) A reduction in the net tax rate might lead to an increase in the growth rate of potential output if

A)the simple multiplier is large.

B)the tax cuts stimulate private investment.

C)firms are operating at their normal capacity.

D)households are not forward looking.

E)the marginal propensity to consume is large.

Page 26

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Chapter 25: Long-Run Economic Growth

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Q1) Refer to Figure 25-2.Suppose national saving is reflected by NS₀ and investment demand is reflected by I₀^D.Now suppose there is a reduction in government purchases.What is the effect on investment demand?

A)National saving shifts to NS₁,causing an increase in the quantity of investment demanded from I* to I₂.

B)There is no effect on NS or I^D,and the quantity of investment demanded remains at I*.

C)Investment demand shifts to I₁^D,causing an increase in the quantity of investment demanded from I* to I₁.

D)Investment demand shifts to I₁^D,causing an increase in the quantity of investment demanded from I* to I₃.

E)National saving shifts to NS₁,and investment demand shifts to I₁^D,causing an increase in the quantity of investment demanded from I* to I₃.

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Chapter 26: Money and Banking

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Q1) In order to be considered "money," paper currency must be

A)convertible into a precious metal.

B)impossible to counterfeit.

C)issued by a chartered bank.

D)issued by a government agency.

E)generally acceptable as a medium of exchange.

Q2) In reality,the reserve ratio for Canadian commercial banks is approximately ________%,which means that the deposit creation process is ________.

A)0.1; extremely powerful

B)1.5; powerful

C)20; similar to that discussed in the text

D)50; weak

E)100; very weak

Q3) The main distinction between M2 and M2+ is that M2+ also includes

A)deposits at trust companies,caisse populaires and foreign-currency accounts.

B)coins in circulation.

C)money market mutual funds held by the Bank of Canada.

D)paper currency.

E)deposits at financial institutions other than the chartered banks.

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Page 28

Chapter 27: Money, Interest Rates, and Economic Activity

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Q1) Which one of the following statements best describes the monetary transmission mechanism?

A)An increase in personal consumption leads to an upward shift in the AE curve and thereby increases real GDP.

B)An increase in government spending causes the AE curve to shift upwards,leading to a higher GDP.

C)A decrease in imports causes the AE curve to shift upwards,leading to a higher interest rate.

D)An increase in the money supply leads to a lower interest rate,higher desired investment,an upward shift in the AE curve and a higher GDP.

E)A decrease in the money supply leads to a lower interest rate,higher desired investment,an upward shift in the AE curve and a higher GDP.

Q2) When there is an excess supply of money,monetary equilibrium is restored through A)interest rates rising.

B)individuals attempting to sell bonds.

C)the price of bonds falling.

D)the price of bonds increasing.

E)the price level falling.

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Chapter 28: Monetary Policy in Canada

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Q1) To remove an inflationary gap,the Bank of Canada would probably seek to

A)increase its target for the money supply.

B)decrease its target for the overnight interest rate.

C)increase its target for the overnight interest rate.

D)decrease the bank rate.

E)buy government securities through open-market operations.

Q2) If the Bank of Canada chooses to expand the money supply directly,it could

A)sell government securities on the open market.

B)sell some of its foreign currency assets.

C)reduce its deposits at commercial banks.

D)buy government securities on the open market.

E)change the price level.

Q3) Loans from the Bank of Canada are

A)made only to the Canadian federal government and to provincial governments.

B)made to commercial banks at the bank rate.

C)made to commercial banks at the prime rate and are short-term in nature.

D)made to large non-bank corporations.

E)the Bank's major policy instrument.

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Chapter 29: Inflation and Disinflation

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Q1) Suppose the Canadian economy is booming due to rising net exports and there is political pressure to maintain the "good times." If the Bank of Canada does so by implementing an expansionary monetary policy,it would

A)cause a temporary drop in inflation.

B)decrease the actual inflation rate.

C)cause a permanent recessionary gap.

D)be acting to de-stabilize the economy.

E)decrease employment.

Q2) Refer to Figure 29-4,part (ii).The upward shift of the AS curve in Phase 2 is normally caused by

A)workers accepting a reduction in their wages.

B)an increase in the productivity of workers.

C)the Bank of Canada engaging in an expansionary monetary policy.

D)an increase in the unemployment rate.

E)inflationary expectations that cause wages to continue rising.

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Chapter 30: Unemployment Fluctuations and the Nairu

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Q1) What economists call "involuntary unemployment" occurs when

A)a job is available but the worker has not yet found it.

B)the level of real GDP is at or above the economy's potential output.

C)a person is willing to accept a job at the going wage rate but cannot find one.

D)a person enters the job market for the first time.

E)a person is not willing to accept an available job at the going wage rate.

Q2) Refer to Figure 30-2.Suppose the economy is in a recession at equilibrium E₁ that is very long lasting.As a result,many young workers are unable to enter the labour market for the first time and are unable to gain experience.These workers continue to have higher than average unemployment rates when the recession is over,causing the NAIRU to rise.This is an example of A)discrimination.

B)hysteresis.

C)inflexible labour markets.

D)demographic unemployment.

E)voluntary unemployment.

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Chapter 31: Government Debt and Deficits

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Q1) A simple equation describing the government's budget constraint is

A)government expenditure = tax revenue - borrowing.

B)government expenditure = tax revenue + borrowing.

C)government expenditure = tax revenue + debt-service payments.

D)tax revenue = government expenditure + borrowing.

E)tax revenue = borrowing - government expenditure.

Q2) Suppose the government's actual budget deficit is equal to the structural budget deficit.Then it must be the case that

A)the primary budget deficit is zero.

B)the overall government budget is balanced.

C)the debt-to-GDP ratio is stable.

D)real GDP is equal to potential GDP.

E)the government is not reporting all of its expenses.

Q3) In an open economy like Canada's,a policy-induced increase in the government's budget deficit tends to

A)attract foreign capital and reduce interest rates.

B)crowd out public consumption.

C)crowd out net exports and reduce interest rates.

D)attract foreign capital and crowd out net exports.

E)depreciate the domestic currency.

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Chapter 32: The Gains From International Trade

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Q1) Refer to Table 32-3.If Canada were to transfer half a unit of resources from oil to soybeans and Mexico were to transfer one unit of resources from soybeans to oil,the effect on the total output of the two countries would be as follows:

A)soybean production would increase by 30 bushels.

B)soybean production would increase by 6 bushels and oil production would increase by 3 barrels.

C)soybean production would increase by 36 bushels and oil production would decrease by 2 barrels.

D)oil production would increase by 8 barrels.

E)soybean production would increase by 6 bushels and oil production would increase by 2.02 barrels.

Q2) Refer to Figure 32-5.If Paperland does not engage in international trade,the equilibrium quantity of newsprint produced domestically will be

A)Q₁.

B)Q₂.

C)Q₃.

D)Q₄.

E)Q₅.

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Chapter 33: Trade Policy

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Q1) Refer to Figure 33-1.Suppose P₀ is the world price and Canada imports refrigerators.Suppose the Canadian government then responds to political pressure from domestic refrigerator manufacturers and imposes a tariff high enough that all imports are eliminated.As a result of this tariff,the price and quantity of refrigerators in Canada will be,respectively,

A)P₀ and Q₁.

B)P₀ and Q₅.

C)P₁ and Q₂.

D)P₁ and Q₃.

E)P₂ and Q_3.

Q2) Canada is a net importer of durable consumer goods (washing machines,refrigerators,etc.).If Canada,a small country in global markets,imposes a 15% tariff on these goods,it will cause

A)a reduction in the consumption of these goods in Canada.

B)an increase in the quantity imported of these goods.

C)an upward shift in the demand curve for these goods.

D)a decrease in the price consumers pay for these goods in Canada.

E)a reduction in tariff revenue collected by the Canadian government.

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Chapter 34: Exchange Rates and the Balance of Payments

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Q1) A rise in the Canadian-dollar price of foreign currency is

A)a decrease in the exchange rate.

B)an appreciation of the Canadian dollar.

C)a depreciation of the Canadian dollar.

D)a gain in the relative value of the Canadian dollar.

E)a rise in the external value of the Canadian dollar.

Q2) Which of the following would appear as a debit item in the trade account of the Canadian balance of payments?

A)dividends payable to Canadians on Canadian-owned assets located in Australia

B)sales of Canadian steel to European importers

C)Canadian purchases of Colombian coffee

D)purchases by a Japanese pension fund of CN Rail shares

E)purchases by General Motors of Canadian-made auto parts

Q3) Which one of the following transactions would appear as a debit in the current account of the Canadian balance of payments?

A)The Arabian Capital Investment Corporation makes a loan to a Canadian firm.

B)A Canadian subsidiary exports raw materials to its Dutch parent company.

C)Canadians receive dividends on U.S.investment in Latin America.

D)Canadian tourists in France purchase cases of wine.

E)The Bank of Canada purchases euros to hold in its official reserves.

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