Welcome to Macroeconomics Multiple Choice Questions! Please choose the best answer for each of the total of 178 multiple choice questions.
You are only required to highlight or underline the best answer for each question. No explanation work is necessary. However, you may not answer any of the questions by guessing as wrongly answered question(s) will be returned to you for correction(s) and detailed explanation(s). Please review the attached Macroeconomics Electronic Book Chapters.
Choose the best answer and highlight or underline it.
Please note only one answer is correct for each question. Examples: Example 1: Where is New York?In United StatesIn UKIn MexicoIn CanadaIn France Example 2: Where is New York?In UKIn USIn MexicoIn FranceIn Canada Which of the following events will not shift a nation’s PPF inward?;major civil and political unrestadvancements in technologystiffer environmental regulationsmajor interruptions in international tradenatural disasters, such as earthquakes or volcanoes;;;;In the circular flow model, consumption goods are bought and sold in the;goods market.
factor markets.government market.financial market.;;;In 2003, provincial and municipal governments in Canada spent about;$110 billion.
$500 billion$900 billion.$456 billion.$290 billion.;;A price ceiling;is effective only if the price ceiling is above the equilibrium price.
leads to a surplus if the price ceiling is below the equilibrium price.always leads to a shortage.leads to a shortage if the price ceiling is below the equilibrium price.always leads to a surplus.
;;The decisions of firms and households are;unexplainable by the circular flow model.made after intense negotiations.made independently of one another.coordinated by markets.
controlled by the government.;;Factors of production are the;goods that individuals buy and use to provide personal enjoyment.”gifts of nature” used to produce goods and services.productive resources used by government to increase the productivity.
goods that businesses buy and use to produce productive resources.productive resources used to produce goods and services.;;The personal distribution of income in Canada allows us to conclude that;the richest 20 percent of households earn 67 percent of total income.the richest 20 percent of households earn almost 43 percent of total income.
the poorest 60 percent of households earn almost 50 percent of total income.the poorest 20 percent of households earn approximately 20 percent of total income.income is distributed equally.;;Suppose you are trying to decide whether to study economics.
You should;make your decision by comparing the total benefit to the total cost.study economics only if the total benefits of taking the course equals the total costs.pick a more challenging course of study.make your decision by comparing the marginal cost to the marginal benefit.
definitely try it.;;;Economics is the study of how;the government makes choices for individuals and businesses.choices are made within the constraints of scarcity.choices are made with unlimited resources.
people choose to use their infinite resources.the government increases choices and reduces scarcity through government programs.;Canada possesses a large amount of human capital. Hence, in Canada, there is a;large amount of machinery and equipment.
large number of kind and generous people.highly skilled and educated labour force.large number of rich people.large number of people and a great deal of land.
;;Two goods are substitutes if;one can be consumed in place of the other.one good is unrelated to the other goodthey are consumed at the same time.all of the abovenone of the above;The study of the choices that individuals and businesses make and the way these choices interact at a smaller level is the subject matter of;business economics.microeconomics.
consumer economics.macroeconomics.abstract economics.;A study that describes the possible economic policies to deal with inflation falls under;normative economics.
pure economics.abstract economics.positive assumption.positive economics.
;A natural experiment examines;planned and staged situations where one factor of interest is different and all other things remain the same.;ordinary situations where one factor of interest is different and all other things remain the same.;environmental issues in an economic setting.;the effects of environmental policy on the economy.
;planned study where the variable of interest affects one or more factors.;If a person can produce more of any two goods than anyone else, that person;is able to produce all goods at the lowest opportunity cost.has an absolute advantage.has a comparative advantage in the production of both goods.
will be unable to gain from specialization and exchange.will always be employed.;;;The four phases of a business cycle occur in what order?;expansion, shutdown, peak, recoveryrecession, trough, expansion, peakexpansion, recession, trough, peakexpansion, trough, peak, recessionrecession, trough, peak, expansion;;Jerry’s plant can produce baseballs and softballs. If the price of a softball increases, other things remaining the same, the supply of softballs will decrease.
supply of baseballs will decrease.supplies of both baseballs and softballs will change.supply of softballs will increase.supply of baseballs will increase.
Opportunity cost of something is best defined as how much money is paid for it excluding any taxes.the cost of making it.how much money is paid for it.the benefit it gives the buyer.
none of the above Most of the people around the world live in countries with an average income of ________ per day. less than $5more than $32more than $95between $50 and $60less than $32 The business cycle includes all of the following phases except recession.inflation.expansion.
peak.trough. “Canada is not constrained by scarcity. Economic growth is strong, unemployment is low, and living standards are rising.
” This statement is false, because Canada must make choices among goods and services to produce.true, because Canada has an increasing standard of living.true, because Canada is one of the richest countries in the world.true, because Canada has achieved an equitable distribution of income.
false, because some people remain unemployed. Which of the following is not a factor leading to economic growth? a technological improvementan increase in consumer wantsaccumulation of more human capitalwaste of natural resourcesan increase in the capital stock The economy is in recession if prices rise faster than normal.production and the number of jobs increase more rapidly than normal.production increases.
production increases and the number of jobs decrease.production and the number of jobs decrease. In the figure below, the demand curve for soft drink shifts from D1 to D2 if ____________. the price of a complement of soft drink rises.
consumers’ incomes decrease.the price of a substitute for soft drink rises.the price of a substitute for soft drink falls.the price of soft drinks falls.
;;;;The approximate number of people who live in the transition economies is;1 billion.5 million.5 billion.6 billion.
200 million.;;;In the figure below, moving from point E to point C;shows the idea of a tradeoff.shows the idea of a free lunch.is possible, but the quantity of fast food meals would have to be reduced.
is moving from an unattainable point to an attainable point.is impossible because point C is unattainable.;;;A country that has an absolute advantage;rarely gains from specialization and trade.only trades if forced to by an international trade organization.
will specialize in the production of all goods and not engage in trade.does not gain from specialization and trade.gains from specialization and trade.;;;Macroeconomics studies;the decisions made by individual firms.
the behaviour of individual economic units, such as an individual person or firm.how individual prices are determined.the choices of big businesses.the whole, or aggregate, economy.
;If there is a surplus in a market, the;price falls to bring the market back to equilibrium.supply curve shifts to the right to bring the market back to equilibrium.quantity decreases to bring the market back to equilibrium.price rises to bring the market back to equilibrium.
government steps in to bring the market back to equilibrium.;;The purchase of financial assets such as stocks and bonds is not included in GDP because;taxes are paid on them.;brokerage firms don’t want them to be included. they are too expensive.
when households buy stocks and bonds, they are making loans, not buying goods and services. the money spent to buy these assets does not influence the amount of expenditure on capital goods. The table below gives the production and prices for a small economy that produces only bread and pop. The base year is 2002.
What is nominal GDP in 2003? Data for 2002 Data for 2003Item Quantity Price Quantity PriceBread 40 $2.00 50 $2.50Pop 60 $4.00 50 $6.
00 (a) $300(b) $240(c )$320(d) $425(e)$125 If a good or service is not traded in a market, it is entered into GDP by estimating how much the good or service is worth to the economy.entered into GDP by imputing the usual market value.entered into GDP by entering the time used to produce it.entered into GDP by entering the cost of producing it.
not included in the calculation of GDP. When calculating GDP, depreciation is added to the factor cost to find the market price.subtracted from indirect taxes less subsidies.subtracted from investment.
added to net domestic product at factor cost.subtracted from net domestic product at factor cost When measuring GDP, only the federal government’s expenditure on goods and services is included.;the value of goods but not services purchased by all levels of government is included.;the government sector is included, and the value of the government sector is equal to total taxes collected.
;the government sector is not included because GDP counts expenditure on goods only by the private sector.;the expenditure on goods and services by all levels of government is included;;In 2003, consumption expenditure is $13 billion, interest payments are $1.5 billion, government expenditure on goods and services IS $3 billion, net exports are $2 billion, and investment is $8 billion. Total expenditure equals;$26 billion.
$20.5 billion.$24.5 billion.
$27.5 billion.$22.5 billion.
;;;In 2001, the government made adjustments to GDP calculations so that software purchases are now categorized as;an intermediate good.net exports because most software is developed abroad.investment.consumption expenditure.
inventory.;An increase in nominal GDP can result from an increase in;production.prices.depreciation.
a. and b.all of the above;;;Total expenditure equals consumption expenditure plus;investment plus government expenditure on goods and services plus net exports.stocks and bonds plus government expenditure on goods and services plus net exports.
investment plus government expenditure on goods and services minus net exports.money plus government expenditure on goods and services plus net exports.investment plus government expenditure on goods and services.;;;;Which of the following statements is correct?;If real GDP decreases, then nominal GDP must decrease.
If real GDP increases, then nominal GDP must increase.If nominal GDP decreases, then real GDP must increase.If nominal GDP increases, then real GDP must increase.Nominal GDP and real GDP can change in the same direction or in opposite directions.
;;;;;;Carol brags to her mother that her starting salary as a management trainee is $26,000, much higher than her mother’s starting salary of $18,000 as a management trainee several years ago. If the CPI the year Carol begins work is 160.5 and the CPI the year her mother started work was 107.6, Carol is wrong.
Adjusting for quantity changes, her salary is less than her mother’s salary.;wrong. Adjusting for quality of work done, her salary is probably equivalent to her mother’s salary. wrong.
Adjusting for price changes, her salary is less than her mother’s salary.;correct. Adjusting for price changes, her salary is more than her mother’s salary. correct.
Adjusting for quantity changes, her salary is more than her mother’s salary.;;;;If the CPI is used as a cost of living index, incomes that are adjusted to reflect the changes in the CPI will;decrease by more than the actual change in the cost of living.increase by more than the actual change in quantities.increase by more than the actual change in the quality of services.
decrease by more than the actual change in quantities.increase by more than the actual change in the cost of living.;;;;If the nominal wage rate is $20 an hour in 2002 and the GDP deflator is 145 (1997 = 100) in 2002, then the real wage rate in 1997 dollars;is $45 an hour.is $14.
50 an hour.is $20 an hour.is $13.79 an hour.
cannot be calculated without information about the nominal wage rate in 2001.;;When calculating the GDP deflator, Statistics Canada;directly measures the physical quantities produced in Canada.;estimates some of the quantities produced by dividing expenditures on these goods and services by nominal GDP.;directly measures the prices of all final goods and services produced in Canada.
;estimates some of the quantities produced by dividing expenditures on these goods and services by real GDP.;estimates some of the quantities produced by dividing expenditures on these goods and services by the CPI.;;;;The bias in Canada’s CPI is smaller than the bias in the United States’ CPI because Statistics Canada tries to eliminate at least some of the biases in the CPI by making statistical adjustments. Statistics Canada updates the basket of goods and services that it uses for calculating the CPI about every 5 years.
Statistics Canada changes the base year for calculating the CPI periodically. both a. and b. none of the above Suppose a group of workers and a firm negotiate a wage increase based on their expectation of inflation.
Who gains or loses if the actual inflation rate is higher than expected? Neither the firm nor workers will gain because the wages rise as much as the cost of living.The firm gains at the expense of the workers.The workers gain at the expense of the firm.all of the abovenone of the above If the working-age population is 20 million and labour force is 13 million, the labour force participation rate is 61 percent.
35 percent.60 percent.65 percent.153 percent Cyclical unemployment includes people who become unemployed because of fluctuations of the business cycle.
the desire to search for better employment opportunities.normal changes in the labour force.seasonal weather patterns.technological change.
A mismatch between the skills or the location of workers compared to the skills or location required for available jobs is an example of seasonal unemployment.natural unemployment.cyclical unemployment.structural unemployment.
frictional unemployment. Full employment is the level of unemployment that occurs when cyclical unemployment is zero.when frictional unemployment, structural unemployment, and seasonal unemployment are zero.when frictional unemployment, structural unemployment, and cyclical unemployment are zero.
when frictional unemployment and structural unemployment are zero.when everyone who wants a job has a job. All of the following are reasons for the existence of an underground economy except to avoid paying taxes.to avoid regulations.
stricter jail sentences for illegal activities.the goods produced are illegal.only A and B Choose the correct equation. Y = C – I + G + NX.
Y = C – I – G – NX.Y = C + I – G + NX.Y= C + I – G – NX.Y = C + I + G + NX.
If in 2003 real GDP is greater than nominal GDP, then the GDP deflator in 2003 is negative.equal to the GDP deflator in 2002.less than the GDP deflator in 2002.greater than 100.
larger than the GDP deflator in 2002. All of the following lead to a bias in the CPI except index change bias.commodity substitution bias.outlet substitution bias.
new goods bias.quality change bias. The inflation rate that people forecast and use to make decisions is the ________ inflation rate. correctexpecteddecisionanticipatedforecast When potential GDP exceeds real GDP, the output gap is changed.
zero.negative.called an inflationary gap.positive.
National income minus undistributed profits minus net taxes is net national product.personal disposable incomegross national product.gross domestic product.personal income.
In 1990, the price of a Hershey candy bar was $0.85. In 2001, the price of the same Hershey candy bar was $1.25.
If the CPI was 130.7 in 1990 and 180.5 in 2001, the price of the 1990 Hershey candy bar in 2001 dollars is twice as much as the 2001 Hershey candy bar.greater than the price of the 2001 Hershey candy bar.
equivalent to the price of the 2001 Hershey candy bar.less than the price of the 2001 Hershey candy bar.unknown given the information in the question. The natural unemployment rate equals the sum of frictional unemployment, seasonal unemployment, and structural unemployment.
seasonal unemployment and cyclical unemployment.cyclical unemployment and structural unemployment.cyclical unemployment, seasonal unemployment, and structural unemployment.cyclical unemployment and frictional unemployment.
Real GDP is the value of the final goods and services produced in a given year when valued at constant prices.the average of prices that existed in a base year and the current year.future prices.prices that prevail in the same year.
prices that prevail in a chosen country, usually the United States. If the price level doubles in a given year, it will ________ the buying power of money. have no effect onincreasepossibly increase, decrease, or have no effect ondecreasenone of the above When the domestic price level increases, exports decrease and imports increase. Other things remaining the same, this change is illustrated by a movement up along the aggregate demand curve.
leftward shift of the aggregate demand curve.movement down along the aggregate demand curve.rightward shift of the aggregate demand curve.rightward shift of aggregate supply curve.
A country reports that in 2003, real GDP is $3,500 billion. If the country’s potential GDP is $3,900 billion, the country is;not at a macroeconomic equilibrium.;not producing the output at which the quantity of real GDP supplied equals the quantity of real GDP demanded.;producing at a level less than its full-employment level of output.
;producing at a level above its full-employment level of output.;producing at its full-employment level of output.;;Aggregate demand;increases if government expenditure decreases.increases if the expected inflation rate increases.
increases if the exchange rate rises.decreases if expected future income rises.decreases if expected future profit increases.;;Moving along the AS curve, as the price level rises, the;money wage rate rises and there is a decrease in the quantity of real GDP supplied.
real wage rate falls and there is an increase in the quantity of real GDP supplied.money wage rate remains constant but there is an increase in the quantity of real GDP supplied.real wage rate rises and there is an increase in the quantity of real GDP supplied.money wage rate falls and there is an increase in the quantity of real GDP supplied.
;;;;In the graph below, curve A is the ________ and curve C is the ________.;;aggregate supply curve / aggregate demand curveaggregate demand curve / potential GDP lineaggregate supply curve / potential GDP linepotential GDP line / aggregate demand curveaggregate demand curve / aggregate supply curve;;;In the figure below, the aggregate demand curve shifts from AD0 to AD1 when there is;;a decrease in the quantity of money.an increase in government expenditure on goods and services.a fall in the price level.
an increase in taxes.a decrease in quantity of money.;;;Moving along the potential GDP line, as the price level rises,;the potential GDP line shifts rightward.the quantity of real GDP supplied increases.
the quantity of real GDP supplied decreases.there is no change in potential GDP.the potential GDP line shifts leftward.;;;When the foreign exchange rate of the Canadian dollar rises,;Canada’s aggregate demand curve shifts rightward.
there is a movement up along Canada’s aggregate demand curve.there is a movement down along Canada’s aggregate demand curve.Canada’s aggregate demand curve shifts leftward.both a and d occur.
;;;;The quantity of real GDP demanded is the total amount of final goods and services produced in Canada that ________ plan to buy.;governmentsforeignersbusinessespeopleall of the above;;$800 billion$600 billion$900 billion$1000 billion$700 billionEconomic growth occurs because;aggregate supply and aggregate demand fluctuate around their trends.real GDP increases.aggregate supply grows more rapidly than aggregate demand.
aggregate demand grows more rapidly than aggregate supply.potential GDP increases.;;;;Because the potential GDP depends only on the economy’s resources and is independent of the price level, the potential GDP line is horizontal.slopes downward.
slopes upward.slopes upward at first, and then becomes horizontal.is vertical. The change in potential real GDP and aggregate supply shown in the graph can be a result of an increase in the quantity of capital.
a fall in the money wage ratea decrease in the quantity of labour.an increase in business failure.a rise in the money wage rate. Which of the following factors does not change aggregate demand? a change in foreign real incomea change in potential GDPa change in the quantity of moneya change in the interest ratea change in expectations about future inflation.
Faster economic growth occurs when we increase the growth rate of human capital.the growth rate of capital per hour of labour.the pace of technological advance.all of the abovenone of the above Holding capital per hour of labour constant, labour productivity increases when quality of education decreases.
the one third-rule increases.technology advances.on-the-job training decreases.human capital decreases.
If a country experiences annual real GDP growth of 6 percent, real GDP will double in 10 years.17.5 years.14 years.
11.67 years.15 years. New growth theory’s comparison of the economy to a perpetual motion machine implies that;the economy will forever create and destroy jobs.
people will always enjoy less leisure time and less consumption goods and services.technology changes just happen.overpopulation will eventually overtake the resources of the planet.permanent growth is not possible.
;;;The change in a country’s standard of living is measured by the change in real GDP per person.the nation’s capital stock.populationreal GDP.wages per person.
;;;The economic growth rate is the annual percentage change of;real GDP.unemployment.population.inflation.
wage rates.;;A condition necessary for a country to achieve economic growth is;government control of the banking system.the ability for firms to hire and fire workers as they wish.a unique political system.
strict environmental regulations.economic freedom.;;A change in the price level;shifts the aggregate supply curve to the right.changes the quantity of real GDP supplied.
shifts the aggregate supply curve to the left.shifts the potential GDP line to the right.shifts the potential GDP line to the left.;;In the graph below, curve A is the ________ and curve B is the ________.
;aggregate supply curve / aggregate demand curveaggregate demand curve / potential GDP lineaggregate supply curve / potential GDP linepotential GDP line / aggregate supply curveaggregate demand curve / aggregate supply curve;;;The aggregate demand curve;shifts rightward when potential GDP increases.is downward sloping.shows the relationship between the quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same.all of the aboveboth b.
and c.;;At full employment, the quantity of real GDP supplied;equals potential real GDP.is either less than or greater than potential real GDP, depending upon the inflation rate.is greater than potential real GDP.
is unrelated to potential real GDP.is less than potential real GDP.;Sources of growth in labour productivity include all of the following, except;discovery of new technologies.education and training.
on-the-job experience.saving and investment in physical capital.an increase in the value of the dollar.;;Using the data in the table below, real GDP per person in 2002 is _________.
$14,257.43.;;Which of the following does not shift the aggregate supply curve?;an increase in potential GDP but not a decrease in potential GDPa change in the price levelan increase in the money wage ratea decrease in the money wage ratea decrease in potential GDP but not an increase in potential GDP;;;;If real GDP is $6,460 billion, the population is 184.6 million people, and total labour hours are 170 billion, labour productivity is;$35,000.
$42.00 an hour.$2.86 an hour.
$2.63 an hour.$38.00 an hour.
;;Actions taken by the Bank of Canada influence the inflation rate with a time lag of about;one year.two years.six months.eight months.
two months.;;The required reserve ratio for banks in Canada is4 percent.2 percent.between the target range of 1 percent to 3 percent.
zero.6 percent.;;;A medium of exchange is defined as;barter.an object that is generally accepted in return for goods and services.
the exchange of goods and services directly for other goods and services.a measure by which prices of goods are expressed.a credit card.;;;In Canada in May 2003, currency held outside banks was $40 billion, chequable bank deposits were $100 billion, personal savings deposits at chartered banks were $382 billion, nonpersonal notice deposits at other depository institutions were $249 billion.
What was the value of M1 in Canada in May 2003?;$140 billion$684 billion$522 billion$302 billion$153 billion;;;;;Canada’s national electronic payments system, which is used for very large transactions between the chartered banks, the Bank of Canada, and a few other big financial institutions, is called the Large Value Transfer System.Chartered Transfer System.National Money Transfer System.Bank of Canada Settlement System.
Federal Reserve System. A bank’s cash assets consist of;bonds.its reserves and funds that can be converted into reserves very quickly.loans and bonds.
Treasury bills.none of the above;;;;If Joe transfers $100 from his chequing account to his savings account at the Royal Bank, by how much will M1 and M2+ change?;M1 will increase and M2+ will increase.M1 will decrease but M2+ will remain the same.M1 will remain the same but M2+ will increase.
M2+ will decrease by $100.Both M1 and M2+ will remain the same.;;;;The objects we use as money today include;coins outside the banks and bank deposits.currency outside the banks and bank deposits.
only currency outside the banks.only deposits inside the banks.currency inside the banks and bank deposits.;;;;A currency drain occurs when the;non-bank public buys Canadian government securities from the Bank of Canada.
Bank of Canada increases the reserve ratio for banks.banks reduce the number of loans they create with their excess reserves.non-bank public increases its holdings of currency outside the banking system.Bank of Canada sells Canadian government securities.
;;Suppose the currency drain is 33.33 percent and the desired reserve ratio is 10 percent. The money multiplier equals;2.5.
;;;When the a Chartered bank makes a loan, it;decreases the quantity of money.prints money.borrows the money from the Bank of Canada.creates a chequable deposit.
none of the above;;Cindy writes a $100 cheque drawn on the Bank of Montreal. Angela deposits the $100 cheque in her chequing account at the Royal Bank. The quantity of money;decreases by $100.decreases by $200.
increases by $200.increases by $100.does not change.;;;The Bank of Canada buys $1,000,000 of government securities from banks.
If the desired reserve ratio is 10 percent, the banks’ excess reserves will increase by $900,000.increase by $1,000,000.increase by $100,000.decrease by $10,000.
increase by $10,000. Banks count among their assets government securities and high-speed Internet connection.only government securities.government securities and chequable deposits.
only government securities and reserves at the Bank of Canada.government securities, loans, and office equipment. Inflation at a rate that exceeds 50 percent per month is called hyperinflation.extreme inflation.
megainflation.deflation.super inflation. The opportunity cost of holding money increases as the quantity of money demanded increases.
is the actual inflation rate.is the expected inflation rate.is the nominal interest rate.is the real interest rate.
The nominal interest rate in the money market is determined by the interaction of the bond traders and mutual funds traders.demand for money and supply of money.Bank of Canada and the chartered banks.Minister of Finance and the Bank of Canada.
none of the above Suppose the quantity of money is $1,000, the velocity of circulation is 6, and real GDP is $4,000. The price level is 3.02.0.
1.5. Which statement about money is correct? Money is any commodity or token that is generally accepted as a means of payment.Money became an acceptable means of payment in the 18th century.
Currency in a bank is money.Credit cards are money.Money includes only bank notes and coins. The monetary base is the sum of Bank of Canada notes and banks’ reserves at the Bank of Canada.
;coins, Bank of Canada notes, and individual’s deposits at the Bank of Canada. banks’ reserves at the Bank of Canada, coins, and government of Canada securities.;Bank of Canada notes, Treasury bills owned by the Bank of Canada, banks’ reserves at the Bank of Canada, and coins. coins, Bank of Canada notes, and banks’ deposits at the Bank of Canada.
;;;;Between 1972 and 2002, currency has become;the largest component of M1.a larger portion of the money we use.the largest component of M2+.a smaller portion of the money we use.
none of the above;;An open market purchase of securities by the Bank of Canada will create all of the following except;an increase in excess reserves.an increase in the monetary base.a decrease in the quantity of money.an increase in banks’ reserves.
an increase in bank lending. Ancient goldsmiths became bankers when they accepted deposits of gold for safe storage.each goldsmith obtained a charter from the government to operate as a bank.they issued receipts for the gold stored with them.
they issued gold receipts in excess of the amount of gold stored with them.their receipts for deposited gold were used as paper money. In the graph below, a movement from point A to point B represents a decrease in the quantity of money demanded.an increase in the quantity of money demanded.
a decrease in the demand for money.an increase in the demand for money.none of the above A chartered bank is a firm that obtains funds by selling shares and uses these funds to buy assets such as Treasury bills and other securities. a private firm that is chartered by the federal government to accept deposits and make loans.
any institution that accepts deposits. a cooperative organization that receives deposits from and makes loans to its members. an institution that sets regulations for commercial activities. Like modern banks, ancient goldsmiths made loans to the public.
Under such a system, the goldsmiths were able to decrease the quantity of money.borrow from each other.produce coins.create money.
double the quantity of money. The demand for money increases and the demand for money curve shifts rightward if real GDP increases.the inflation rate falls.the nominal interest rate rises.
nominal GDP increases.the real interest rate rises. When banks “pool risk,” it means that banks hold reserves to make sure enough money is available when customers want their money.share loan information about customers with other banks.
invest in only the highest grade business securities.loan funds only to their depositors.loan funds to many different types of businesses and individuals. If the multiplier is 5, the slope of the aggregate expenditure (AE) curve is 0.
6. The consumption function shows the relationship between disposable income and net taxes.disposable income and consumption expenditure, other things remaining the same.consumption expenditure and saving.
disposable expenditure and saving.disposable income and saving. If autonomous expenditure increases by $50 billion and, as a result, equilibrium real GDP increases by $200 billion, the MPC is greater than 1.multiplier is 0.
25.multiplier is 2.5.multiplier is 4.
0.MPC equals 1. The x-axis on a graph measures disposable income and the y-axis on a graph measures consumption expenditure. The 45° line on the graph shows the amounts households plan to consume at each level of disposable income.
all points at which consumption expenditure and disposable income are equal.all points at which disposable income is saved and consumption expenditure is zero.the amounts housholds plan to save at each level of disposable incomeall points at which saving and disposable income are equal. The formula 1 / (1- slope of the AE curve) is the formula for the marginal propensity to consume.
marginal propensity to import.multiplier.marginal tax rate.marginal propensity to export.
If the real interest rate increases, there is a movement up along the consumption function.a movement along the consumption function and a downward shift of the consumption functiona movement down along consumption function.an upward shift of the consumption function.a downward shift of the consumption function.
In the graph, when disposable income equals $400 billion, consumption expenditure is greater than disposable income, so consumers are saving.consumption expenditure is equal to disposable income, so there is zero saving by consumers.consumption expenditure is less than disposable income, so consumers are saving.consumption expenditure is less than disposable income, so consumers are dissaving.
consumption expenditure is greater than disposable income, so consumers are dissaving. When investment increases by $200 billion, real GDP increases by $800 billion. The multiplier is 1/4.2.
6.1/2.4. When aggregate planned expenditure is less than GDP, firms decrease production until the economy reaches equilibrium expenditure.
the economy definitely is at its equilibrium expenditure.the economy might be at its equilibrium expenditure.firms increase production until the economy reaches equilibrium expenditure.none of the above Unplanned inventories increase when real GDP is less than aggregate planned expenditure.
actual aggregate expenditure is equal to real GDP.aggregate planned expenditure is less than real GDP.actual aggregate expenditure is less than real GDP.none of the above b.
When GDP equals $1000 billion, the 450 line is below the AE curve b. consumption expenditure is greater than disposable income, so consumers are dissaving Inventories are best defined as goods that are not for sale.not yet produced.produced and put on layaway.
produced, but not yet sold.defective and returned to the producer. Which of the following situations leads to an unplanned increase in inventories of $200 billion? real GDP = $500 billion, and aggregate planned expenditures = $500 billionreal GDP = $800 billion, and aggregate planned expenditures = $1,100 billionreal GDP = $800 billion, and aggregate planned expenditures = $500 billionreal GDP = $500 billion, and aggregate planned expenditures = $700 billionreal GDP = $600 billion, and aggregate planned expenditures = $400 billion Compared to the magnitude of the multiplier in an economy without imports, the multiplier in an identical economy with imports is smaller only if imports exceed exports by a large amount.always smaller.
always larger.larger only if exports exceed imports.smaller only if imports exceed exports. To curb inflation, the Bank of Canada will ________ the quantity of money and ________ the interest rate.
decrease / lowerincrease / lowerdouble / doubleincrease / raisedecrease / raise When real GDP falls below potential GDP, what do the Keynesians suggest as a government remedy? Keep inflation in check. Take swift action to stimulate the economy by cutting the interest rate and, perhaps, increasing government expenditure. Keep the price level constant regardless of the state of real GDP. Take no action to stimulate the economy.
Take actions to slow the growth of aggregate demand and eliminate the deflationary gap. The federal budget is a monthly statement that shows if the government of Canada has a surplus or deficit.an annual statement of government violations of international laws.a monthly statement of payment laws passed by the government of Canada.
a monthly statement of receipts and debt of the government of Canada.an annual statement of payments, receipts, and surplus or deficit of the Government of Canada. When the price of the dollar falls on the foreign exchange market, imports ________ and exports ________. increase / decreaseincrease / do not changedecrease / increaseincrease / increasedecrease / decrease When the Bank of Canada fears recession, it will ________ the quantity of money and ________ the interest rate.
increase / lowerincrease / raisedouble / doubledecrease / raisedecrease / lower To eliminate a deflationary gap, the government can ________ government expenditure or ________ taxes. decrease / increasedecrease / decreaseincrease / decreaseincrease / increasenone of the above The White Paper of 1945 states that the federal government should lower its expenditure on goods and services and raise taxes to combat unemployment. people should find work on their own without the help of Parliament. Parliament should attempt to employ many people in government jobs.
the federal government should work to maintain a high and stable level of employment. firms are obligated to employ people to reach maximum employment. When disposable income increases, the economy moves up along the consumption function, but the consumption function does not shift. the consumption function shifts upward.
dissaving increases. households decrease their planned consumption expenditure and move down along the consumption function. the consumption function shifts downward. In Germany, expected future disposable income increased during 2003.
This increase leads to ________ the consumption function. a movement down alonga movement up alongan upward shift ofa downward shift of the consumption function and a movement down alonga downward shift of During 2003, a country reported that its real GDP increased by $3.0 billion. If the slope of its aggregate planned expenditure curve is 0.
9, which of the following might have led to the increase in real GDP? Imports increased by $0.3 billion.Exports decreased by $0.3 billion.
Net exports decreased by $0.3 billion.Exports increased by $0.3 billion.
Imports decreased by $0.3 billion. Autonomous expenditure is the components of aggregate expenditure that are automatically created by real GDP.are directly related to real GDP.
do not change when real GDP changes.change when real GDP changes.automatically respond to changes in real GDP. The supply-side effects of a decrease in government expenditure on productive services and capital or a tax increase shifts the AS curve to the left but does not change potential GDP.
shifts the AS curve to the right.shifts the AS curve to the left.shifts the AS curve to the right but does not change potential GDP.has no effect on either potential GDP or the AS curve.
In the short run, if the Bank of Canada wants to raise the short-term interest rate, it tells chartered banks to raise their interest rates.sells some of its assets in the bond market.instructs Parliament to sell government securities in the foreign exchange market.sells government securities in the open market.
instructs chartered banks to sell government securities in the open market. A country reports that when real GDP is $300 billion, aggregate planned expenditure is $400 billion. When real GDP is $300 billion, unplanned inventories change by $100 billion.planned inventories change by $100 billion.
planned inventories change by $50 billion.planned inventories change by -$100 billion.unplanned inventories change by -$100 billion. Between 1926 and 2002, government receipts as a percentage of GDP ________ and government payments as a percentage of GDP ________.
decreased slightly / increased sharplyincreased / increaseddecreased / increaseddecreased / decreasedincreased / decreased If Canada imposes a quota on the amount of salmon imported from Chile, the price of salmon in Canada ________ and the quantity of salmon demanded in Canada ________. falls / increasesrises / decreasesdoes not change / does not changefalls / decreasesrises / increases If the government decides to impose a new tariff on orange juice from Brazil, the tariff leads to ________ the tariff revenue collected by the Canadian government. an elimination ofno change ina decrease inan increase innone of the above Learning-by-doing is comparative advantage achieved by repetition. having a lower opportunity cost of producing something.
having a comparative advantage in the production of a good. repeatedly doing the same task and becoming more productive at producing a particular good or service. a country taking advantage of its low wages. Canada imports T-shirts from Asia.
As a result, Canadian consumers pay a ________ price than without trade and Asian producers receive a ________ price than without trade. higher / lowermore competitive / fairerlower / lowerhigher / higherlower / higher In 2003, exports accounted for ________ of Canada’s GDP and imports accounted for ________ of Canada’s GDP. 38 percent / 31 percent17 percent / 18 percent40 percent / 34 percent30 percent / 40 percent50 percent / 50 percent Resource and agricultural products make up about ________ percent of all goods imported into Canada. 104055020 The figure below shows the production possibilities frontiers for the United Kingdom and France.
What is the United Kingdom’s opportunity cost of producing one tonne of wheat?;;1/2 of a kilogram of fish100 kilograms of fish1 kilogram of fish200 kilograms of fish1/4 of a kilogram of fish;;;Country A imports 1,000 cars a month with free trade. After imposing a $50 per car tariff, imports decrease to 800 cars a month. How much does Country A’s government collect in tariff revenue each month? $50,000$40,000$90,000$60,000$10,000 A quota is any non-tariff barrier that restricts imports.a specified maximum amount of a good that may be imported in a given period of time.
a tax on imports.a health or safety regulation that restricts international trade.both c and d. A tariff is a tax on a good that is imposed by the importing country when an imported good crosses its international boundary.
any non-tax action that is imposed by the importing country when an imported good crosses its international boundary. any non-tax action that is imposed by the exporting country when an exported good crosses its international boundary. a tax on a good that is imposed by the exporting country when an exported good crosses its international boundary. all of the above The figure below shows Canada’s demand curve for cherries and Canada’s supply curve of cherries.
In the absence of trade, cherry farmers would receive ________ per kilogram of cherries.;;$1.50$2.00$1.
00$2.50$0.50;;;;In 2002, the United States was the destination of more than ________ of Canada’s exports and the source of ________ of Canada’s imports.;85 percent / 72 percent60 percent / 50 percent75 percent / 75 percent50 percent / 50 percent90 percent / 80 percent;;;;Most T-shirts bought by Canadians are made in Asia.
This occurs because producers in Asia have ________ opportunity cost of producing T-shirts than producers in Canada.;a higherthe identicala lowera much highera similar;;When a tariff is imposed on a good, the domestic price;falls, the domestic quantity supplied decreases, and the quantity demanded increases.rises, and the supply curve of the good shifts rightward.rises, the supply curve of the good shifts leftward, and the quantity demanded increases.
falls, the demand curve for the good shifts rightward, and consumers buy more of the good.rises, the quantity demanded decreases, and the domestic quantity supplied increases;;;;Between 1973 and 2002, the;Canadian dollar exchange rate shows a downward trend in terms of the US dollar.Canadian dollar exchange rate shows an upward trend in terms of the US dollar.Canadian dollar has remained relatively constant in terms of the US dollar.
value of the Canadian dollar in terms of the U.S. dollar has fluctuated around 95 cents per US dollar, but has never dipped below 90 cents per US dollar.Canadian dollar initially appreciated against the US dollar and then depreciated;;;;;Which of the following statements are correct?;Persistent intervention on one side of the foreign exchange market by the Bank of Canada cannot be sustained.
;The Bank of Canada can buy Canadian dollars to decrease supply and raise the exchange rate of the Canadian dollar.;The Bank of Canada can sell Canadian dollars to increase supply and lower the exchange rate of the Canadian dollar.;all of the above;none of the above;;;A country’s balance of payments accounts show a detailed record of the country’s international;borrowing.trading.
lending.borrowing and trading.borrowing, trading, and lending.;;;In the foreign exchange market, the higher the exchange rate, the;greater the quantity of dollars supplied.
smaller the quantity of dollars supplied.greater the quantity of dollars demanded.the smaller the quantity of dollars demanded.both a and d;;;If the Canadian interest rate differential rises, the;quantity of dollars demanded increases.
demand for dollars decreases.demand for dollars increases.demand for dollars may increase or decrease depending on the value of internationally traded goods.quantity of dollars demanded decreases.
;;;The capital account balance is;always less than the official settlements account balance.almost a mirror image of the current account balance.equivalent to the inverse of the current account balance.almost a mirror image of the official settlements account balance.
always greater than the official settlements account balance.;;;;A country reports net exports of $300 billion, net interest income of $30 billion, net transfers of $50 billion, and no change in official reserves. The country is a;net investor.net borrower.net debtor.net liability.net lender.;;A quota shifts the ________ by the amount of the quota.;supply curve and the demand curve simultaneously rightwarddemand curve leftwarddemand curve rightwardsupply curve rightwardsupply curve leftward;;;A fatally flawed argument for protection from foreign trade is that protection;maintains national security.penalizes lax environmental standards.protects national culture.brings about diversity and stability.all of the above;;;Dumping occurs when;(a) a firm’s export price is equal to the price it charges in its domestic market. (b) domestic producers sell a good at a higher price than the price at which the product is normally sold in the domestic market. (c )a foreign firm sells its exports at a lower price than the price in the foreign firm’s domestic market.;(d) a foreign firm sells its exports at a lower price than the world price.;(e) domestic producers cut production to drive up domestic prices.;;;When a government specifies the maximum amount of a good that may be imported in a given period of time, they are establishing a;tax.dynamic tariff.quota.labelling standard.tariff.;;;In the foreign exchange market, the;supply of dollars increases as the exchange rate rises.quantity of dollars supplied increases as the exchange rate falls.quantity of dollars supplied increases as the value of Canadian exports increases.supply of dollars decreases as the exchange rate rises.quantity of dollars supplied increases as the exchange rate rises.;;;The government sector balance equals;the private sector balance plus net exportssaving minus investment.net taxes plus government expenditure.saving plus investment.net taxes minus government expenditure.;;;A tariff imposed on imports of Japanese cars into Canada does not;raise the prices of cars in Canada.cut Japanese car imports.harm Canadian consumers.increase the production of cars in Canada.increase sales of imported Japanese cars in Canada.;;The higher the expected future exchange rate, other things remaining the same, the;the smaller the demand for dollars.greater the demand for dollars.the smaller the supply of dollars.the greater the supply of dollars.greater the demand and the smaller the supply of dollars.
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