Canadian Economic Policy Test Bank
Course Introduction
This course examines the formulation, implementation, and impact of economic policies in Canada. Topics include fiscal and monetary policy, taxation, trade policy, regional development, social welfare initiatives, and regulatory frameworks affecting business and labor. Students will analyze the roles of various governmental institutions and stakeholders in shaping policy, while exploring the historical evolution and contemporary challenges of Canadian economic policy within both domestic and international contexts. Case studies and practical examples will highlight the effects of policy choices on economic growth, inequality, and sustainability.
Recommended Textbook
Macroeconomics 14th Canadian Edition by Campbell R. McConnell
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18 Chapters
3156 Verified Questions
3156 Flashcards
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Page 2
Chapter 1: Limits, Alternatives, and Choices
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257 Verified Questions
257 Flashcards
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Sample Questions
Q1) Which of the following would be most likely to shift the production possibilities curve to the right?
A) a sudden and substantial expansion of consumer wants
B) an improvement in the literacy level and general level of education
C) a decline in the size of the population and labour force
D) shifting resources from butter to gun production
Answer: B
Q2) Which of the following is assumed in constructing a typical production possibilities curve?
A) the economy is using its resources inefficiently.
B) resources are perfectly shiftable among alternative uses.
C) production technology is fixed.
D) the economy is engaging in international trade.
Answer: C
Q3) Normative statements are concerned with:
A) facts and theories.
B) what ought to be.
C) what is.
D) rational choice involving costs and benefits.
Answer: B
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Chapter 2: The Market System and the Circular Flow
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112 Flashcards
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Sample Questions
Q1) Which statement is correct?
A) In a market system,buyers and sellers must be in face-to-face contact with each other.
B) Prices affect the distribution of goods in a market system but not the allocation of resources.
C) In a market system,prices serve to ration goods and services to consumers.
D) The operation of a market system has little,if any,effect on the distribution of income in the economy.
Answer: C
Q2) Households and businesses are:
A) both buyers in the factor market.
B) both suppliers in the product market.
C) suppliers in the factor and product markets respectively.
D) suppliers in the product and factor markets respectively.
Answer: C
Q3) Property rights do not encourage people to cooperate.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Demand, Supply, and Market Equilibrium
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284 Verified Questions
284 Flashcards
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Sample Questions
Q1) Which will not cause a shift in the demand for product A?
A) a change in consumer preferences
B) a change in the price of A
C) a decline in consumer incomes
D) a decrease in the price of close-substitute product B
Answer: B
Q2) Which is a determinant of supply?
A) tastes and preferences
B) technology
C) consumer income
D) number of consumers
Answer: B
Q3) If two goods are substitutes in consumption,a decline in the price of one will cause an increase in the demand for the other.
A)True
B)False
Answer: False
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Chapter 4: Market Failures: Public Goods and Externalities
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Cost-benefit analysis attempts to:
A) compare the real worth,rather than the market values,of various goods and services.
B) compare the relative desirability of alternative distributions of income.
C) determine whether it is better to cut government expenditures or reduce taxes.
D) compare the benefits and costs associated with any economic project or activity.
Q2) Assume there is no way to prevent someone from using an inter-provincial highway,regardless of whether or not he or she helps pay for it.This characteristic is associated with:
A) rival goods.
B) complementary goods.
C) public goods.
D) capital goods.
Q3) The optimal quantity of a public good occurs where the marginal benefit of the citizen who has the highest preference for the good just equals the good's marginal cost.
A)True
B)False
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6
Chapter 5: Governments Role and Government Failure
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Public choice economists contend public bureaucracies are inefficient primarily because:
A) the value of public goods is more easily measured than is the value of private goods.
B) of the absence of competitive market pressures.
C) public sector workers are more security-conscious than are private sector workers.
D) relatively low pay in government attracts workers of lesser quality.
Q2) Regulatory capture is said to have occurred when which of the following is true?
A) Rules and enforcement in an industry are heavily influenced by the industry being regulated.
B) One firm controls an entire market,having captured customers away from other firms.
C) Government imposes excessive regulations in an industry,resulting in inefficiencies.
D) Consumers make all the rules for an industry,forcing firms into inefficient production methods.
Q3) Logrolling can either increase or diminish economic efficiency.
A)True
B)False
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Chapter 6: An Introduction to Macroeconomics
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) In response to an unexpected change in demand,if the prices are free to adjust quickly:
A) a firm could always operate at its optimal output level.
B) a firm would experience a decline in its output and employment.
C) a firm would not be able to adjust its output according to the plan.
D) a firm would not be able to change its employment accordingly.
Q2) If current prices are used to calculate the value of total output produced by a country during a specific period of time,the result is called:
A) real GDP.
B) nominal GDP.
C) full employment GDP.
D) constant dollar GDP.
Q3) Commodities such as airline tickets,and gasoline have sticky prices.
A)True
B)False
Q4) If the unexpected short-run fluctuations in demand begin to look permanent:
A) the firms would allow their prices to change accordingly.
B) the firms would be hesitant to allow their prices to change accordingly.
C) the firms would not allow their prices to change.
D) the firms would change the quality of their products but not the prices.
Page 8
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Chapter 7: Measuring the Economys Output
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) Net investment refers to:
A) the amount of machinery and equipment used up in producing GDP in a specific year.
B) the difference between the market value and book value of outstanding capital stock.
C) gross domestic investment less net exports.
D) gross investment less consumption of fixed capital.
Q2) Refer to the above data.The nominal GDP for year 4:
A) is $90.
B) is $55.
C) is $40.
D) is $35.
Q3) In determining real GDP economists adjust the nominal GDP by using the:
A) national productivity index.
B) wholesale (producer)price index.
C) GDP price index.
D) consumer price index.
Q4) Welfare payments to families with dependent children are included in GDP.
A)True
B)False
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Chapter 8: Economic Growth
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) If a nation's real GDP is growing by 3 percent per year,its real domestic output will double in approximately:
A) 21 years.
B) 23 years.
C) 29 years.
D) 42 years.
Q2) Productivity growth is a minor source of improvements in real wage rates and the standard of living.
A)True
B)False
Q3) During the last decade,the innovations in computers and telecommunications,together with global competition,have resulted in:
A) rational expectations theory.
B) lower growth in capital stock.
C) higher growth in labour force.
D) higher productivity growth.
Q4) Real GDP = worker-hours × labour productivity.
A)True
B)False
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Chapter 9: Business Cycles, Unemployment, and Inflation
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) If the actual GDP is less than potential GDP:
A) potential GDP will fall.
B) the price level will rise.
C) investment spending will fall.
D) the actual unemployment rate will be higher than the natural unemployment rate.
Q2) Which phase of the business cycle would be most closely associated with an economic contraction?
A) peak
B) recession
C) trough
D) expansion
Q3) The relationship between the size of the GDP gap and the unemployment rate is:
A) direct.
B) inverse.
C) undefined.
D) direct during recession,but inverse during expansion.
Q4) The natural rate of unemployment in Canada is thought to be about 6-7 percent.
A)True
B)False
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Chapter 10: Basic Macroeconomic Relationships
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187 Flashcards
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Sample Questions
Q1) If a consumption schedule shifts upward,this means that the:
A) MPC has increased.
B) MPS has decreased.
C) APC is now higher at each level of disposable income.
D) APC is now lower at each level of disposable income.
Q2) If business taxes are reduced and the real interest rate increases:
A) consumption and saving will necessarily increase.
B) the level of investment spending might either increase or decrease.
C) the level of investment spending will necessarily increase.
D) the level of investment spending will necessarily decrease.
Q3) Refer to the above data.At an income level of $40 billion,the average propensity to consume:
A) is highest in economy (1).
B) is highest in economy (2).
C) is highest in economy (3).
D) cannot be determined from the data given.
Q4) The wealth effect will tend to decrease consumption and increase saving.
A)True B)False
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Chapter 11: The Aggregate Expenditures Model
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230 Verified Questions
230 Flashcards
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Sample Questions
Q1) Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.6,what change in aggregate expenditures is needed to achieve full employment?
A) a decrease of $24 billion
B) an increase of $24 billion
C) a decrease of $16 billion
D) an increase of $16 billion
Q2) In which of the following situations for a private closed economy will the level of GDP expand?
A) when planned investment exceeds saving
B) when planned investment exceeds consumption
C) when saving exceeds consumption
D) when consumption exceeds investment
Q3) Refer to the above data.If gross investment is $120,the equilibrium level of GDP will be:
A) $380
B) $370
C) $360
D) $400
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Page 13
Chapter 12: Aggregate Demand and Aggregate Supply
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229 Flashcards
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Sample Questions
Q1) Describe the change in short-run aggregate supply that should result from each of the following changes in determinants.Assume that nothing else is changing besides the identified change.(Use "Decrease" or "Increase.")
(a)A rise in the average price of inputs;
(b)An increase in worker productivity;
(c)Government antipollution regulations become stricter;
(d)A new subsidy program is enacted for new business investment in productive equipment;
(e)Energy prices decline.
Q2) All else equal,an increase in imports will shift the aggregate expenditures curve:
A) upward and the aggregate demand curve rightward.
B) upward and the aggregate demand curve leftward.
C) downward and the aggregate demand curve rightward.
D) downward and the aggregate demand curve leftward.
Q3) Minimum wage laws tend to make the price level more flexible rather than less flexible.
A)True
B)False
Q4) How is the immediate short-run aggregate supply curve sloped? Explain.
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Chapter 13: Fiscal Policy, Deficits, Surpluses, and Debt
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223 Verified Questions
223 Flashcards
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Sample Questions
Q1) An increase in taxes would be an expansionary fiscal policy.
A)True
B)False
Q2) You are given the following information about aggregate demand at the existing price level for an economy: (1)consumption = $400 billion; (2)investment = $40 billion; (3)government purchases = $90 billion;and (4)net export = $25 billion.If the full-employment level of GDP for this economy is $600 billion,then what combination of actions would be most consistent with the goal of achieving full employment?
A) increase government spending and taxes
B) decrease government spending and taxes
C) decrease government spending and increase taxes
D) increase government spending and decrease taxes
Q3) A contractionary fiscal policy shifts the aggregate demand curve leftward and may or may not reduce real GDP.
A)True
B)False
Q4) The net export effect may partially counteract an expansionary fiscal policy.
A)True
B)False
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Chapter 14: Money, Banking, and Money Creation
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) The granting of a $10,000 loan and the purchase of a $10,000 government securities from a securities dealer by a chartered bank have the same effect on the money supply.
A)True
B)False
Q2) The value of money varies inversely with the price level.
A)True
B)False
Q3) Chartered banks create money in the form of chequable deposits when they make loans.
A)True
B)False
Q4) The main goal of a chartered bank is liquidity. A)True
B)False
Q5) The higher desired reserve ratio,the lower is the monetary multiplier. A)True
B)False
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Page 16
Chapter 15: Interest Rates and Monetary Policy
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238 Verified Questions
238 Flashcards
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Sample Questions
Q1) The two main tools of the monetary policy are:
A) tax rate changes,and the bank rate.
B) open-market operations,and the bank rate & overnight lending rate.
C) tax rate changes,and the changes in government expenditures.
D) changes in government expenditures,and the bank rate.
Q2) Notes in circulation are:
A) an asset as viewed by the Bank of Canada.
B) a liability as viewed by the Bank of Canada.
C) neither an asset nor a liability as viewed by the Bank of Canada.
D) part of M1,but not of M2 or M2+.
Q3) All else equal,when the Bank of Canada engages in a restrictive monetary policy,the price of government securities tends to:
A) fall.
B) rise.
C) remain constant.
D) move in the same direction as the bonds' interest rate yield.
Q4) Other things being equal,monetary policy will be more effective the flatter the investment-demand curve.
A)True
B)False
Page 17
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Chapter 16: Long-Run Macroeconomic Adjustments
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Adverse aggregate supply shocks would result in:
A) a lower rate of inflation and a higher rate of unemployment.
B) a higher rate of inflation and a lower rate of unemployment.
C) a lower rate of inflation and a lower rate of unemployment.
D) a higher rate of inflation and a higher rate of unemployment.
Q2) The economy enters the long run once:
A) nominal wages become real wages.
B) real wages become nominal wages.
C) input prices start to change from being inflexible to fully flexible.
D) sufficient time has elapsed for real GDP to increase and unemployment to decrease.
Q3) In the conventional view,outward shifts of the Phillips Curve in the 1970s and early 1980s were caused by:
A) adverse shocks to aggregate supply.
B) adverse shocks to aggregate demand.
C) an increase in the misery index.
D) the Vietnam War.
Q4) The long-run Phillips Curve is vertical at the natural rate of unemployment.
A)True
B)False
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Chapter 17: International Trade
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181 Flashcards
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Sample Questions
Q1) Refer to the above data.Beta:
A) should specialize in catching fish and trade with Alpha for chips.
B) should specialize in producing chips and trade with Alpha for fish.
C) will not realize gains from specialization and trade.
D) will export both fish and chips to Alpha.
Q2) Refer to the above data.With free trade,that is,assuming no tariff,the outputs produced by domestic and foreign producers respectively would be:
A) 1 unit and 15 units.
B) 4 units and 7 units.
C) 7 units and 0 units.
D) 4 units and 6 units.
Q3) Which of the following is the best description of a quota?
A) an excise tax that is designed to place foreign producers at a competitive disadvantage in selling in domestic markets
B) a specification of the maximum amount of a product that may be imported in any period of time
C) regulations and licensing related to the quality or safety of imported products
D) agreements adopted by exporting nations to limit exports to another country
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Chapter 18: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) Which of the following would contribute to a Canadian balance of payments surplus?
A) Canada makes a unilateral tariff reduction on imported goods
B) Canadian Pacific pays a dividend to a Swiss stockholder
C) Canada cuts back on Canadian military personnel stationed in Germany
D) Russian vodka becomes increasingly popular in Canada
Q2) Refer to the above data.In 2008 Transylvania realized a $1 billion surplus on goods and services.
A)True
B)False
Q3) The foreign demand curve for a nation's currency is considered to be a derived demand because:
A) it stems from the willingness of consumers in one country to buy goods and services from another country.
B) it stems from the willingness of consumers within their country to buy goods and services that are produced within their country.
C) it is derived from the demand of governments.
D) it is derived by a nation's central bank.
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