Contemporary Economic Problems
Question Bank
Course Introduction
This course explores the major economic challenges facing modern societies, emphasizing the application of economic theory to real-world issues. Topics include unemployment, inflation, income inequality, globalization, environmental concerns, and the impact of technological change on labor markets. Through the analysis of case studies and current events, students will develop critical thinking skills and learn to assess policy responses to contemporary economic problems at both national and international levels. The course encourages informed debate and equips students with tools to understand and evaluate ongoing economic developments.
Recommended Textbook
Principles of Macroeconomics 7th Canadian Edition by N. Mankiw
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3576 Verified Questions
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Page 2
Chapter 1: Ten Principles of Economics
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Sample Questions
Q1) What are economists illustrating when they use the phrase "There is no such thing as a free lunch"?
A) how inflation increases prices
B) that to get one thing,we must give up something else
C) that nothing is free in a market economy
D) that if something looks too good to be true,it probably is
Answer: B
Q2) Why is the opportunity cost of gasoline in Canada higher than in the United States when measured by "Minutes Worked per Kilometre Driven"?
A) The fuel economy in the two countries is different.
B) Gas prices are lower and average wages are higher in the United States.
C) Both gas prices and average wages are higher in the United States.
D) Both gas prices and average wages are lower in the United States.
Answer: B
Q3) With careful planning,we can usually get something that we like without having to give up something else that we like.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) What are the roles of economists when trying to explain or to improve the world?
A) In trying to explain the world,economists are policy advisers; in trying to improve the world,they are scientists.
B) In trying to explain the world,economists are mathematicians; in trying to improve the world,they are policymakers.
C) In trying to explain the world,economists are mathematicians; in trying to improve the world,they are scientists.
D) In trying to explain the world,economists are scientists; in trying to improve the world,they are policy advisers.
Answer: D
Q2) Which statement best describes economic models?
A) Economic models attempt to mirror reality exactly.
B) Economic models are useful,but should not be used for policymaking.
C) Economic models omit many details to allow us to see what is truly important.
D) Economic models cannot be used in the real world because they omit details.
Answer: C
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Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) Refer to Table 3-5.Which country has an absolute or comparative advantage in each product?
A) Japan has a comparative advantage in airplanes,and Canada has an absolute advantage in cars.
B) Japan has a comparative advantage in cars,and Canada has an absolute advantage in airplanes.
C) Japan has a comparative advantage in cars,and Canada has an absolute advantage in neither good.
D) Japan has a comparative advantage in airplanes,and Canada has an absolute advantage in both goods.
Answer: B
Q2) What are exports?
A) limits placed on the quantity of goods brought into a country
B) goods produced abroad and sold domestically
C) a country's ability to produce a good
D) goods produced domestically and sold abroad
Answer: D
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Page 5
Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) What is the amount of the good buyers are willing and able to purchase?
A) demand
B) quantity supplied
C) quantity demanded
D) supply
Q2) Refer to the Figure 4-5.Which of the four graphs represents the market for toboggans in August?
A) graph A
B) graph B
C) graph C
D) graph D
Q3) If Francis receives a decrease in his pay,what would we expect?
A) Francis's demand for each good he purchases to remain unchanged
B) Francis's demand for normal goods to increase
C) Francis's demand for luxury goods to increase
D) Francis's demand for inferior goods to increase
Q4) If the demand for a good falls when income falls,the good is called an inferior good.
A)True
B)False
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Chapter 5: Measuring a Nations Income
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Sample Questions
Q1) Refer to the Table 5-1.What is the GNP for this economy?
A) $190
B) $193
C) $207
D) $215
Q2) Which market is the model of supply and demand most appropriate for?
A) markets in which there is one large seller and many buyers
B) markets in which there is one large buyer and many sellers
C) markets in which there are few sellers and few buyers
D) markets in which there are many sellers and many buyers
Q3) How is the estimated rental value of owner-occupied houses included in GDP?
A) as consumption,for new and old houses
B) as investment,for new and old houses
C) as consumption,only for new houses
D) as investment,only for new houses
Q4) Refer to the Table 5-2.What is the GNP for this economy?
A) $410
B) $435
C) $440
D) $460
Page 7
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Chapter 6: Measuring the Cost of Living
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Sample Questions
Q1) The CPI for 2015 is computed as 100 times the ratio of the price of the market basket in 2015 divided by the price of the market basket in the base year.
A)True
B)False
Q2) Refer to the Scenario 6-1.What was the approximate ratio of Grant's real income to Lisa's real income?
A) 1:2
B) 3:5
C) 7:10
D) 7.5:10
Q3) Ruth wants to save an amount of money to buy a new computer two years from now.She estimates that the price of the computer will be $800,and she wants to save the money in two tranches at the beginning of each of the next two years.For simplicity,suppose interest is computed only at the end of the year and Ruth wants to save equal amounts every year.If the interest rate is 10% per year,how much does Ruth need to save every year?
Q4) If nominal interest rates rise,it must be because inflation rose.
A)True
B)False
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Chapter 7: Production and Growth
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Sample Questions
Q1) Which terms refers to the relationship between the quantity of output created and the quantity of inputs needed to create it?
A) the capital accumulation function
B) technological knowledge
C) the production function
D) human capital
Q2) How does productivity explain the differences in standard of living across countries?
A) Productivity tends to be lower in countries with high population,and therefore in those countries standards of living are lower.
B) Productivity explains very little of the differences across countries in the standard of living.
C) Productivity explains some,but not most,of the differences across countries in the standard of living.
D) Productivity explains most of the differences across countries in the standard of living.
Q3) What is the difference between human capital and technology?
Q4) How do inward-oriented policies affect a nation's growth?
Q5) Compare and contrast the population theories of Malthus and Kremer.
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9
Chapter 8: Saving, investment, and the Financial System
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Sample Questions
Q1) In the language of macroeconomics,what is considered "investment"?
A) the purchase of an annual pass to the gym
B) the purchase of new tools and machinery
C) the purchase of stocks,bonds,or mutual funds
D) the purchase of durable goods
Q2) Sylvia is interested only in the rate of interest and is willing to take a great deal of risk in exchange for a high return.Which bond should she look for?
A) federal bonds with short terms
B) territorial bonds with long terms
C) corporate bonds with short terms
D) corporate bonds with long terms
Q3) What is a dividend yield?
A) It is the dividend as a percentage of the stock price.
B) It is the stock price as a percentage of the dividend.
C) It is the dividend as a percentage of the retained earnings per share.
D) It is the retained earnings per share as a percentage of the dividend.
Q4) Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.
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Chapter 9: Unemployment and Its Natural Rate
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Sample Questions
Q1) What would be the most likely effect of an increase in the world price of oil,which would create a sectoral shift?
A) There would be a decrease in unemployment,and the decrease would be greater in a country with unemployment insurance than in one without.
B) There would be a decrease in unemployment,but the decrease would be smaller in a country with unemployment insurance than in one without.
C) There would be an increase in unemployment,and the increase would be greater in a country with unemployment insurance than in one without.
D) There would be an increase in unemployment,but the increase would be smaller in a country with unemployment insurance than in one without.
Q2) How is a college student who is not working or looking for a job counted?
A) as neither employed nor part of the labour force
B) as unemployed and in the labour force
C) as unemployed,but not in the labour force
D) as employed and in the labour force
Q3) Most spells of unemployment are short,and most unemployment observed at any given time is long term.How can this be?
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Chapter 10: The Monetary System
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Sample Questions
Q1) What is a characteristic of Scotiabank?
A) It can issue currency.
B) It is part of the "big 5" commercial banks group.
C) It acts as a central bank for Nova Scotia.
D) It is owned by the Canadian government.
Q2) What is a generally accepted medium of exchange?
A) a plane ticket
B) federal government bonds
C) diamonds
D) currency
Q3) A central bank raised the reserve requirement ratio from 8 percent to 10 percent.Other things the same,how does the money multiplier change?
A) It increases by 2.
B) It decreases by 2.
C) It increases by 2.5
D) It decreases by 2.5
Q4) Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent.
Q5) What is the difference between money and wealth?
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Chapter 11: Money Growth and Inflation
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Sample Questions
Q1) Even though monetary policy is neutral in the short run,it may have profound real effects in the long run.
A)True
B)False
Q2) Under which condition is wealth distributed from creditors to debtors?
A) when inflation is high,whether it is expected or not
B) when inflation is low,whether it is expected or not
C) when inflation is unexpectedly high
D) when inflation is unexpectedly low
Q3) If the money supply growth rate permanently increased from 5 percent to 30 percent,what would we expect to happen to inflation?
A) It would increase by more than 25 percentage points.
B) It would increase by 25 percentage points.
C) It would increase by less than 25 percentage points.
D) It would decrease by more than 25 percentage points.
Q4) In order to maintain stable prices,what must the central bank do?
A) maintain low interest rates
B) keep unemployment low
C) tightly control the money supply
D) sell indexed bonds
Page 13
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Chapter 12: Open-Economy Macroeconomics: Basic Concepts
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Sample Questions
Q1) If the Canadian dollar gets weaker relative to the Japanese yen,what might happen?
A) Canadian trade surplus will fall.
B) Canadian trade deficit will fall.
C) Japanese trade surplus will rise.
D) Japanese trade deficit will fall.
Q2) According to the theory of purchasing-power parity,what must the nominal exchange rate between two countries reflect?
A) the different price levels in those countries
B) the different resource endowments in those countries
C) the different income levels in those countries
D) the different standards of living between those countries
Q3) Suppose the nominal exchange rate is 95 yen / dollar,the price of beef in Japan is ¥1200,and the price of beef in Canada is $14.Using the purchasing-power parity theory,approximately how much should you expect the exchange rate to change by?
A) -9 yen / dollar
B) -1.1 yen / dollar
C) 1.1 yen / dollar
D) 9 yen / dollar
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Chapter 13: A Macroeconomic Theory of the Small Open Economy
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Sample Questions
Q1) If Canada imposes an import quota on bicycles,which statement would best predict the consequences?
A) Canadian exports increase,imports increase,and net exports are unchanged.
B) Canadian exports increase,imports decrease,and net exports increase.
C) Canadian exports decrease,imports increase,and net exports decrease.
D) Canadian exports decrease,imports decrease,and net exports are unchanged.
Q2) What does a lower real interest rate decrease the quantity of?
A) loanable funds demanded
B) loanable funds supplied
C) domestic investment
D) net capital outflow
Q3) What is the effect of an increase in the Canadian real interest rate above the world interest rate?
A) Canadians buy more foreign assets,which increases Canadian net capital outflow.
B) Canadians buy more foreign assets,which reduces Canadian net capital outflow.
C) Foreigners buy more Canadian assets,which reduces Canadian net capital outflow.
D) Foreigners buy more Canadian assets,which increases Canadian net capital outflow.
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Page 15
Chapter 14: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?
Q2) What is an important determinant of the price at which Canadian producers can sell their oil?
A) their ability to ship oil to the U.S.and to overseas markets
B) their ability to ship oil to the U.S.market only
C) their ability to ship oil to overseas markets only
D) their ability to ship oil domestically
Q3) What are the effects of a decrease in the price level?
A) People hold less money,so they lend less,and the interest rate rises.
B) People hold less money,so they lend more,and the interest rate falls.
C) People hold more money,so they lend more,and the interest rate rises.
D) People hold more money,so they lend less,and the interest rate falls.
Q4) A decrease in the money supply causes the interest rate to rise so that investment rises.
A)True
B)False
Q5) Explain how an increase in the price level changes interest rates.How does this change in interest rates lead to changes in investment and net exports?
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Chapter 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand
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Sample Questions
Q1) If expected inflation is constant and the nominal interest rate increased 3 percentage points,what would happen to the real interest rate?
A) It would increase 3 percentage points.
B) It would increase,but by fewer than 3 percentage points.
C) It would decrease,but by fewer than 3 percentage points.
D) It would decrease by 3 percentage points.
Q2) In the long run,what determines the level of output?
A) the money supply
B) the price level
C) supply of capital and labour
D) policies aimed at stabilizing the economy
Q3) Stock prices often rise when the Bank of Canada raises interest rates.
A)True
B)False
Q4) Which of the following shifts money demand to the left?
A) an increase in the price level
B) a decrease in the price level
C) an increase in the interest rate
D) a decrease in the interest rate
Q5) Explain how unemployment insurance acts as an automatic stabilizer.
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Chapter 16: The Short-Run Tradeoff Between Inflation and Unemployment
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Sample Questions
Q1) How will an adverse supply shock shift the short-run Phillips curve,and how does inflation change?
A) It will shift the short-run Phillips curve right,and inflation will rise.
B) It will shift the short-run Phillips curve right,and inflation will fall.
C) It will shift the short-run Phillips curve left,and inflation will rise.
D) It will shift the short-run Phillips curve left,and inflation will fall.
Q2) If there is an adverse supply shock,what will most likely happen?
A) The aggregate supply curve and the short-run Phillips curve will both shift right.
B) The aggregate supply curve and the short-run Phillips curve will both shift left.
C) The aggregate supply curve will shift right,and the short-run Phillips curve will shift left.
D) The aggregate supply curve will shift left,and the short-run Phillips curve will shift right.
Q3) Which of the following data supported A.W.Phillips' findings?
A) data from 1861-1957 for the United Kingdom
B) data from 1861-1957 for the United States
C) data mostly from the post-World War II period in the United Kingdom
D) data mostly from the post-World War II period in the United States
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Chapter 17: Five Debates Over Macroeconomic Policy
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Sample Questions
Q1) Why should monetary policy be made by rule rather than discretion?
A) The economy is subject to a variety of random shocks.
B) Monetary policymakers are now allowed undisciplined discretion.
C) It is not clear how important political business cycles have been in the past.
D) Central banks can achieve credibility over time by backing up their words with deeds.
Q2) What is a significant cost of inflation?
A) printing more money
B) lower nominal interest rates
C) unintended changes in tax liabilities
D) higher unemployment
Q3) Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year.Suppose also that it has nominal GDP of about 100 billion units of currency.What is the highest deficit it can have without raising the debt-to-income ratio?
A) just under 1 billion units
B) just under 3 billion units
C) just under 6 billion units
D) just under 8 billion units
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