Economic Problems and Policies
Exam Answer Key
Course Introduction
This course explores the fundamental economic problems facing modern societies and examines the range of policy responses available to address them. Students will analyze key issues such as unemployment, inflation, poverty, income distribution, economic growth, and environmental sustainability. Emphasis is placed on understanding how governments use fiscal and monetary policies, regulation, and social programs to manage economic challenges. Through case studies and real-world examples, the course encourages critical thinking about the effectiveness, trade-offs, and unintended consequences of various policy approaches in both national and global contexts.
Recommended Textbook Economics Today The Macro View 5th Canadian Edition by Roger LeRoy Miller
Available Study Resources on Quizplus
17 Chapters
2077 Verified Questions
2077 Flashcards
Source URL: https://quizplus.com/study-set/3706
Page 2
Chapter 1: The Nature of Economics
Available Study Resources on Quizplus for this Chatper
171 Verified Questions
171 Flashcards
Source URL: https://quizplus.com/quiz/73781
Sample Questions
Q1) The assumption that "all other things remain constant" is also known as the A)rational self-interest assumption.
B)ceteris paribus assumption.
C)relationships assumption.
D)distinguishing characteristic of economics as a science.
Answer: B
Q2) The x axis on a graph is
A)the horizontal axis.
B)the vertical axis.
C)a line showing the relationship between an independent and a dependent variable.
D)the axis on which values of a dependent variable normally are recorded.
Answer: A
Q3) Microeconomics is the part of economic analysis that studies ________.
Answer: the decision making of individuals,households and firms.
Q4) "If A occurs then B will be the result" is a ________ statement.
Answer: positive
Q5) In economic language,when a resource is used to produce output it is referred to as a ________.
Answer: factor of production.
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Production Possibilities and Economic Systems
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/73782
Sample Questions
Q1) The opportunity cost of producing more capital goods today is
A)fewer consumer goods today.
B)fewer capital goods in the future.
C)more unemployed resources in the future.
D)fewer consumer goods in the future.
Answer: A
Q2) Explain the differences between a command economy,a pure capitalist economy and a mixed economy.
Answer: In a pure capitalist economy,answers to the basic economic questions of what,how,and for whom to produce,are provided by the outcomes of free markets based on private ownership of resources.In a command economy,those questions are decided by government.In a mixed economy,those decisions are made largely through market outcomes but with government intervention
Q3) Describe the three basic types of economic systems.
Answer: A pure command economy is an economic system characterized by public ownership of all property resources and centralized decision-making.A pure capitalist economy is characterized by private ownership of all resources and decisions made by the interaction of resource owners in markets.A mixed economy involves a mix of public and private ownership characteristics.
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Demand and Supply
Available Study Resources on Quizplus for this Chatper
177 Verified Questions
177 Flashcards
Source URL: https://quizplus.com/quiz/73783
Sample Questions
Q1) The quantity supplied of a particular good is the amount of the good that A)firms will actually end up buying at a particular price during a given time period.
B)households are willing to consume at each particular price.
C)households want firms to sell at each price during a particular time period.
D)firms are willing to sell at a specific price during a particular time period.
Answer: D
Q2) The expectation of a future increase in the price of gasoline is likely to A)make gasoline an inferior good.
B)increase gasoline demand now.
C)increase the supply of gasoline now.
D)decrease gasoline demand now.
Answer: B
Q3) In Figure 3-4,there would be a shortage at which price? A)P B)P
C)P
D)any price above P
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
5
Chapter 4: Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/73784
Sample Questions
Q1) If the rate of inflation is 4 percent and the real interest rate is 3 percent,the nominal interest rate should be
A)1 percent.
B)4 percent.
C)7 percent.
D)11 percent.
Q2) Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment.Matt would be
A)counted as still being employed.
B)included in the economy's "hidden employment."
C)counted as frictionally unemployed.
D)counted as cyclically unemployed.
Q3) An increase in the labour force participation rate
A)implies that the unemployment rate must fall.
B)implies that the unemployment rate must rise.
C)means there are more discouraged workers.
D)is consistent with either a rise or a fall in the unemployment rate.
Q4) How are the effects of anticipated and unanticipated inflation different on individuals and the economy?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Measuring the Economys Performance
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/73785
Sample Questions
Q1) The total factor payments to all resource owners is
A)net domestic product.
B)personal income.
C)national income at factor cost.
D)gross domestic income.
Q2) Calculating GDP by the expenditure approach requires summing the value of
A)all income paid to individuals.
B)all transactions in the economy.
C)all final goods and services produced in the economy.
D)all expenditures by individuals.
Q3) Goods that are used up entirely in the production of final goods are known as A)durable goods.
B)value added goods.
C)intermediate goods.
D)consumer goods.
Q4) Social Security payments are
A)included in GDP.
B)not included in GDP,but are included in Gross Domestic Income accounts.
C)not included in GDP.
D)not included in GDP,but are included in Net Domestic Product.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Modelling Real Gdp and the Price Level in the Long Run
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73786
Sample Questions
Q1) A reduction in the quantity demanded of interest-rate-sensitive goods as a result of an increase in the price level,if other factors are held constant,is known as
A)the interest rate effect.
B)the real-balance effect.
C)the open-economy effect.an outward shift of the aggregate demand curve.
D)the open-money balance effect.
Q2) An individual holds $20 000 in an interest-earning checking account earning 10% interest,and the overall price level rises by 12%.Other things constant,we would expect A)the individual's real wealth to decrease and consumption to diminish.
B)the individual's stock of real wealth to decrease but real national income to increase.
C)no change in the individual's real wealth but a decline in real national product. D)real wealth has gone down by 12%.
Q3) Compare and contrast the demand and supply side of inflation.Which is preferable?
Q4) Explain how aggregate demand fluctuations create price level increases in the long run only.
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Economic Growth and Development
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/73787
Sample Questions
Q1) Economic growth is best measured by increases in
A)nominal personal income.
B)nominal GDP.
C)per capita real GDP.
D)per capita nominal GDP.
Q2) Other things constant,a higher savings rate
A)leads to higher interest rates.
B)means higher standards of living in the future.
C)means higher standards of living today.
D)is associated with a decline in the rate of growth of the population.
Q3) If real per capita GDP growth is greater than the growth of GDP then
A)population growth is greater than growth of real output
B)there can be no economic growth.
C)population growth is less than growth of real output
D)real per capita GDP and GDP will be growing at the same rate.
Q4) Productivity is ________ if we produce less output with the same labour hours.
A)increasing
B)not changing
C)decreasing
D)proportional
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Modelling Real Gdp and the Price Level in the
Short Run
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73788
Sample Questions
Q1) As the price level increases,the short-run aggregate supply curve
A)becomes increasingly steep.
B)begins to level out.
C)shifts inward.
D)does not change.
Q2) The ________ between the short-run aggregate supply function and the price level suggests that,in the short run,firms produce more output as the price levels rises.
A)negative relationship
B)positive relationship
C)inverse relationship
D)demand relationship
Q3) A decrease in long-run aggregate supply could be caused by
A)fewer regulatory impediments to business.
B)the discovery of new oil reserves in another country.
C)decreased competition.
D)a decrease in taxes.
Q4) Explain the problem of "sticky wages" and the implications for the long-run equilibrium.Can something be done to eliminate this problem?
Q5) Explain what is meant by cost-push inflation?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Consumption, investment, and the Multiplier
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/73789
Sample Questions
Q1) At the break-even point for the consumption function
A)saving is positive.
B)saving is negative.
C)saving is zero.
D)the marginal propensity to consume equals l.
Q2) In a closed economy,the equilibrium national income occurs where
A)the C + I + G line crosses the 45-degree line.
B)planned expenditures exceed national income.
C)savings will exceed planned investment.
D)all of these.
Q3) Suppose the equilibrium level for an economy occurs when C + I + G + X - M = $600.If the real national income is $500,then unplanned inventories are
A)increasing,and output will expand.
B)increasing,and output will contract.
C)decreasing,and output will expand.
D)decreasing,and output will contract.
Q4) What effect does a higher aggregate price level have on TPE and aggregate demand in regards to the open economy effect?
Q5) What are the simplifying assumptions that are made in the Keynesian Model?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Public Sector
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/73790
Sample Questions
Q1) Rational ignorance refers to the idea that
A)decision-makers do not understand what it means to be rational.
B)information is costly,so decision-makers normally will act less than perfect information.
C)bureaucrats take advantage of voter ignorance.
D)dollar votes and political votes will lead to different outcomes.
Q2) Transfer payments are payments
A)for in-kind services provided to the government.
B)made to people who are needy.
C)for which no services or goods are rendered.
D)made by the government to its current workers.
Q3) The marginal tax rate applies to
A)the income received by people above the national average.
B)all income earned by a family.
C)the income in the highest tax bracket reached.
D)the income of the richest Canadians.
Q4) What is the free-rider problem and how is it related to public goods?
Q5) Suppose the marginal tax rate and the average tax rate are identical at all income levels.What kind of a tax system would this be? Explain.
Page 12
Q6) How do public goods differ from a merit goods?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Fiscal Policy and the Public Debt
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/73791
Sample Questions
Q1) Explain,along with an appropriate graphical representation,what a fiscal policy is and how it is implemented through a change in government spending and a change in taxes.
Q2) A bill is submitted to Parliament in January 2001 that is designed to stimulate the economy and increase employment.The legislation is passed in September 2001,and the spending occurs from October 2001 to March 2002.Consequently
A)the full effect of the fiscal policy change will not be felt until after March 2002 because of the effect time lag.
B)the full effect of the fiscal policy change will not be felt until after March 2002 because of the recognition time lag.
C)the full effect of the fiscal policy change will be felt by March 2002 because people anticipate the spending and change their behaviour accordingly.
D)the full effect of the fiscal policy change will be felt when the last of the monies are spent by the government.
Q3) List and describe in detail the 5 possible offsets to fiscal policy.
Q4) Describe in detail what automatic stabilizers are and their effect on the economy in times of recession and boom.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Money and the Banking System
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/73792
Sample Questions
Q1) A nonpersonal notice deposit is
A)a liability to a commercial bank.
B)an asset to a commercial bank.
C)a liability to the household or firm that has the account.
D)an asset for the Bank of Canada.
Q2) The significance of currency in the Canadian money supply has
A)increased in recent years.
B)decreased in recent years.
C)remained the same in recent years.
D)been made legal by the Depository Institutions Deregulation and Monetary Control Act of 1980.
Q3) Non-personal notice deposits are
A)chequing accounts.
B)Eurodollar deposits.
C)funds deposited by firms.
D)corporate bonds.
Q4) Are credit cards considered money?
Q5) If you have $50 in cash,a balance of $635 in your chequing account at the Royal Bank,and a jar with $15.75 in coins,how much M1+ do you have?
Q6) What are the functions of money?
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Money Creation and Deposit Insurance
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73793
Sample Questions
Q1) Following a new deposit of $50 when the desired reserve ratio is 10 percent,the maximum increase in the assets of commercial banks will be
A)$50.
B)$400.
C)$500.
D)$40,000.
Q2) "An increase in the reserve requirement is a tax increase on banks." Do you agree or disagree with this statement? Why?
Q3) The required ratio is 10 percent of their deposits as reserves.Currently,there are $200 billion in deposits.The Bank of Canada raises the reserve requirement to 20 percent.Consequently,
A)the money supply remains unchanged,but there are now no excess reserves.
B)the money supply falls by $100 billion.
C)the money supply falls by $200 billion.
D)the money supply falls by $400 billion.
Q4) What are the maximum and minimum values the deposit multiplier can potentially take on.
Q5) What is the difference between adverse selection and moral hazard?
Q6) Why did the federal government set up CDIC?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: The Bank of Canada and Monetary Policy
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/73794
Sample Questions
Q1) If the money multiplier is 2.4 and the Bank of Canada buys $8 million in securities on the open market,demand deposits could potentially
A)increase by $19.2 million.
B)increase by $8 million.
C)decrease by $19.2 million.
D)decrease by $16.5 million.
Q2) Currently there are zero excess reserves in the Canadian banking system.If the required reserve ratio is 20 percent and the Bank of Canada sells 20 million in bonds,the maximum amount that the money supply can change is
A)$20 million.
B)$40 million.
C)$100 million.
D)$400 million.
Q3) The central bank for Canada is
A)the Bank of Montreal.
B)the Parliamentary Bank.
C)the Bank of Canada.
D)the First National Bank of Canada.
Q4) How can the Bank of Canada direct the money supply?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Issues in Stabilization Policy
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/73795
Sample Questions
Q1) New Keynesian economists believe that
A)both wages and prices are "sticky."
B)wages are flexible in the short run but prices are not.
C)prices are fully flexible in the short run.
D)wages are fully flexible in the short run.
Q2) During the 1960s many Keynesian economists felt that,by studying the Phillips curve,
A)policymakers could dispense with the Bank of Canada's open market operations.
B)policymakers could fine-tune the economy by selecting policies that would produce the exact mix of unemployment and inflation that suited current government objectives.
C)the Prime Minister and Parliament did not need to attempt to balance the budget.
D)policymakers could eliminate even frictional unemployment in the economy.
Q3) The rational expectations hypothesis is associated with the
A)classical model of economics.
B)new classical model of economics.
C)Keynesian model of economics.
D)neo-Keynesian model of economics.
Q4) What is meant by the natural rate of unemployment?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Comparative Advantage and the Open Economy
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/73796
Sample Questions
Q1) When one country "dumps" some of its products in another country,it A)creates an environmental hazard in the receiving country.
B)sells its products abroad at a price lower than it costs to produce the goods.
C)increases the aggregate level of employment in the receiving country.
D)indirectly reduces its national income.
Q2) An assumption behind the infant industry argument for tariff protection is that A)foreign competitors are selling output below average cost.
B)the domestic industry will be facing an upward adjustment in its average cost. C)the domestic industry will eventually gain comparative advantage in producing the good.
D)the market needs additional competition to satisfy consumer demand.
Q3) Of the countries below,the one with the highest imports-to-GDP ratio is A)Canada.
B)France.
C)Luxembourg.
D)Norway.
Q4) What is the difference between a quota and a tariff in restricting foreign trade?
Q5) Construct a descriptive example of your demonstrating the gains from trade.
Q6) What are the effects of a tariff on a good?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Exchange Rates and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/73797
Sample Questions
Q1) An exchange rate target zone is
A)a range of floating exchange rates.
B)a range of permitted exchange rate variations between upper and lower exchange rates bands that a central bank defends by selling or buying foreign exchange reserves.
C)a range of fixed exchange rates.
D)a range of dirty floats.
Q2) If the foreign exchange rate for euros is 20 cents,then
A)a dinner that costs 400 euros will cost $20.
B)a wine that costs 600 euros will cost $3,000.
C)a candy bar that costs 2 euros will cost $1.
D)a hotel room that costs 1,000 euros will cost $200.
Q3) Many economists doubt that G-7 nations cannot "manage" exchange rates because
A)the central banks do not know how to intervene in the exchange rate markets.
B)the world economy is inherently unstable.
C)Japan does not abide by the rules of the IMF.
D)exchange rate interventions are trivial relative to the size of the foreign exchange market.
Q4) How did the International Monetary Fund operate? What brought about the end of the Bretton Woods Agreement?
To view all questions and flashcards with answers, click on the resource link above. Page 19