Chapter 3: The Canadian Financial System
Q1) An increase in interest rates
A) increases the prices of existing financial assets.
B) increases the prices of existing financial assets and of newly issued financial assets.
C) reduces the prices of existing financial assets.
D) reduces the prices of existing financial assets and of newly issued financial assets.
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Q2) An increase in interest rates
A) increases the prices of existing financial assets.
B) increases the prices of existing financial assets and of newly issued financial assets.
C) reduces the prices of existing financial assets.
D) reduces the prices of existing financial assets and of newly issued financial assets.
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Q3) What is the difference between a bank run and a bank panic? How might a bank run
and asymmetric information lead to a bank panic?
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Chapter 6: The Labour Market
Q1) Daniel was just laid off from his teaching job at the local high school due to budget
cuts resulting from the reduction in tax revenue during the recent economic
[Link] would best be categorized as
A) frictionally unemployed.
B) structurally unemployed.
C) cyclically unemployed.
D) seasonally unemployed.
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Q2) In countries with very restrictive labour laws,many firms are reluctant to hire
[Link] reluctance can
A) reduce cyclical unemployment and the natural rate of unemployment.
B) reduce structural unemployment and the natural rate of unemployment.
C) reduce frictional unemployment and the natural rate of unemployment.
D) increase the natural rate of unemployment.
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Q3) How does a real wage above the equilibrium wage cause unemployment?
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Chapter 8: Long-Run Economic Growth
Q1) Changes in the saving rate,labour-force growth rate,and depreciation rate will
________ the steady-state level of real GDP per capita and will ________ the
steady-state growth rate.
A) affect; affect
B) affect; not affect
C) not affect; affect
D) not affect; not affect
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Q2) Describe the steady state in the Solow growth model.
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Q3) Suppose y = k¹/²,total factor productivity is constant and equal to 1,s = 0.40,and d =
[Link] the economy reaches the steady state,consumption per worker is ________.
A) $1.20
B) $2.40
C) $4.80
D) $13.60
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Chapter 9: Business Cycles
Q1) Figure 9.1
<b>Refer to Figure 9.1</b>.Assume the economy is initially at point [Link] initial change
from a shock that increases investment expenditure is best represented by which
short-run equilibrium combination of price level and real GDP?
A) P; Y
B) P; Y
C) P; Y
D) P; Y
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Q2) If households spend $0.95 of each additional dollar of increased income,the
expenditure multiplier will be
A) 1.05.
B) 5.
C) 20.
D) 9.5.
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Q3) Explain the relationship between business cycles in different countries.
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Chapter 14: Aggregate Demand, aggregate Supply, and
Monetary Policy
Q1) Many economists believe the central banks were in large part responsible for
bringing about the Great Moderation,especially by the focus of the Bank of Canada and
the Federal Reserve on
A) monetary policy.
B) low and stable inflation.
C) discretionary rules.
D) targeting unemployment.
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Q2) What is stagflation,and how does it occur? How is stagflation represented in the
aggregate demand-aggregate supply model?
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Q3) Figure 14.1
<b>Refer to Figure 14.1.</b>Other things equal,an increase in government spending on
infrastructure projects is best represented as a movement from
A) point X to point Y.
B) point Z to point X.
C) point Z to point Y.
D) point Y to point X.
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Chapter 1: Introduction to Macroeconomics and the Great
Recession
Q1) A hypothesis in an economic model is a statement that ________ about an
economic variable.
A) is correct
B) is incorrect
C) may be either correct or incorrect
D) cannot be proven either correct or incorrect
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Q2) Economic models do all of the following,except
A) simplify some aspect of economic life.
B) answer economic questions.
C) make economic ideas explicit and concrete for use by decision makers.
D) portray reality in all its minute details.
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Q3) What is the key macroeconomic issue of the short run and what is the key
macroeconomic issue of the long run?
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Chapter 15: Fiscal Policy and the Government Budget in the
Long Run
Q1) For each of the following scenarios,state the effect on the debt-to-GDP ratio:
a. The growth rate of the labour force increases.
b. The primary deficit increases.
c. Total factor productivity decreases.
d. Seigniorage decreases.
e. The nominal interest rate is constant and the growth rate of the money supply
increases.
f. The nominal interest rate is not constant and the growth rate of the money supply
increases.
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Q2) From 1995 through 2015,the debt-to-GDP ratio in Canada
A) has slowly increased.
B) has more than quadrupled.
C) has declined steadily.
D) has remained about average compared to other G7 countries.
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Q3) What is necessary for fiscal policy to be sustainable? Why is fiscal policy in countries
like Greece,Ireland,Spain,Italy,and Portugal not considered sustainable?
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Chapter 2: Measuring the Macroeconomy
Q1) ________ is/are the main category of expenditure in Canada,amounting to over
55% of GDP.
A) Consumption
B) Investment
C) Government purchases
D) Net exports
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Q2) The ________ refers to the production and sale of goods and services that are not
recorded,either to avoid tax payments or because they are illegal.
A) black market
B) underwater economy
C) underground economy
D) hidden economy
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Q3) If we subtract depreciation from GNP,we are left with
A) disposable income.
B) net national product.
C) gross domestic product
D) gross national income.
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Chapter 13: Fiscal Policy in the Short Run
Q1) If the MPC is 0.5 and the tax rate is 10%,a $500 increase in autonomous government
purchases will increase equilibrium income by
A) $225.
B) $280.
C) $910.
D) $1110.
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Q2) Figure 13.2
<b>Refer to Figure 13.2.</b>Assume the economy is initially in equilibrium with real GDP
equal to potential [Link] things equal,if the economy enters a recession and the
government underestimates the severity of the recession when implementing fiscal
policy,the output gap will ________ and the rate of inflation will ________ than if the
government had correctly estimated the recession's severity.
A) decrease less; decrease less
B) decrease more; decrease more
C) decrease more; decrease less
D) not change; not change
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Chapter 7: The Standard of Living Over Time and Across
Countries
Q1) Figure 7.1
<b>Refer to Figure 7.1</b>.All else equal,an increase in the number of workers will cause a
A) shift from PF to PF.
B) shift from PF to PF.
C) movement up and to the right along PF.
D) movement down and to the left along PF.
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Q2) Suppose that the production function for the economy is Y = AK¹/³/.Assume that
real GDP is $8000 billion,capital stock is $32 000 billion,and the labour supply is 120
million (or 0.120 billion)[Link] factor productivity for this economy is
A) 16.50
B) 1016.52
C) 2083.33
D) 2933.65
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Q3) Explain how a well-functioning financial system can increase total factor
productivity and promote economic growth.
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Chapter 11: The Is-Mp Model: Adding Inflation and the Open
Economy
Q1) Explain three shocks that the Canadian economy experienced during the Great
Recession,and how these shocks affect the IS curve,the MP curve,and the Phillips curve.
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Q2) Explain three shocks that the Canadian economy experienced during the Great
Recession,and how these shocks affect the IS curve,the MP curve,and the Phillips curve.
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Q3) Positive demand shocks have a tendency to ________ real GDP relative to
potential GDP and ________ the inflation rate.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
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Page 11