Intermediate Macroeconomics
Test Preparation
Course Introduction
Intermediate Macroeconomics builds upon foundational economic principles to analyze the broader functioning of national and global economies. This course explores key topics such as economic growth, business cycles, unemployment, inflation, monetary and fiscal policy, and the role of government intervention. Through theoretical models and empirical data, students will develop a deeper understanding of aggregate demand and supply, national income determination, and the interplay between different macroeconomic variables. The course also examines contemporary policy debates and real-world applications, preparing students to critically assess economic events and trends.
Recommended Textbook
Macroeconomics 8th Canadian Edition by Andrew
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15 Chapters
1394 Verified Questions
1394 Flashcards
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Page 2
B. Abel
Chapter 1: Introduction to Macroeconomics
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60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/24413
Sample Questions
Q1) Which of the statements below is primarily normative in nature?
A)There is an unequal distribution of income in Canada.
B)The distribution of income is more unequal in Canada than it is in Japan.
C)The inequality of income that exists in Canada is partly caused by an unequal distribution of wealth.
D)The distribution of income in Canada should be more equal than it is.
Answer: D
Q2) You are asked to analyze the effect of the Bank of Canada's new interest rate policy on housing prices.Using a comparative static experiment,describe the steps you need to follow to produce a sound theoretical macroeconomic analysis.
Answer: First,we need to set up a macroeconomic model that includes all relevant variables and is assumed to be in equilibrium.Second,we change the interest rate,keeping all other variables constant,and examine the change in housing prices.Third,we observe how our macroeconomic model responds to the interest rate changes.
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Chapter 2: The Measurement and Structure of the Canadian Economy
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) One problem with using market values to measure GDP is that
A)you cannot compare completely heterogeneous goods by using their dollar values.
B)some useful goods and services are not sold in markets.
C)prices for some goods change every year.
D)market values of export goods are usually priced in foreign currencies.
Answer: B
Q2) What is the main conceptual difference between GDP and GNP? How different are GDP and GNP for Canada? For countries with many citizens who work abroad?
Answer: GDP represents output produced within a country,while GNP represents output produced by a country's factors of production;the difference is net factor payments from abroad.For Canada there's a three percent difference,but for countries that have many citizens working abroad,there may be a much bigger difference.
Q3) Explain why in agricultural countries the official GDP are often underestimated.
Answer: Since in agricultural countries many people grow their own food,make their own clothes,and provide services for each other within a family or village group,these non-market activities are not counted in the official GDP.
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Page 4
Chapter 3: Productivity, output, and Employment
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) A decrease in the real wage would result in a
A)movement along the labour demand curve,causing an increase in the number of workers hired by the firm.
B)shift of the labour demand curve,causing an increase in the number of workers hired by the firm.
C)movement along the labour demand curve,causing a decrease in the number of workers hired by the firm.
D)shift of the labour demand curve,causing a decrease in the number of workers hired by the firm.
Answer: A
Q2) A skill-biased technological change
A)increases the MPN of unskilled workers,but reduces the MPN of skilled workers.
B)changes the MPN of unskilled and skilled workers proportionately.
C)increases the MPN of skilled workers,but reduces the MPN of unskilled workers.
D)is a main cause of unemployment.
Answer: C
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Chapter 4: Consumption, saving, and Investment
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95 Flashcards
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Sample Questions
Q1) Describe how the market value of a firm's shares can determine the value of the firm's capital stock.
Q2) A decrease in the real interest rate will
A)increase the desired capital stock.
B)decrease the desired capital stock.
C)have no effect on the desired capital stock.
D)have the same effect on the desired capital stock as an increase in corporate taxes.
Q3) Calculate the after-tax user cost of capital of a machine that costs $5000 and depreciates at a 25% rate,when the interest rate is 5% and the tax rate on revenue is 25%.
A)$200
B)$275
C)$2000
D)$2750
Q4) A lump-sum increase in current taxes would cause interest rates to
A)fall if Ricardian equivalence held.
B)fall if Ricardian equivalence did not hold.
C)fall regardless of whether Ricardian equivalence held.
D)rise.
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Chapter 5: Saving and Investment in the Open Economy
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94 Flashcards
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Sample Questions
Q1) Suppose desired consumption is $10 billion and desired investment is $3 billion.If GDP is $25 billion and government purchases are $2 billion,the desired foreign lending is
A)$10 billion.
B)$12 billion.
C)$13 billion.
D)$15 billion.
Q2) If the Bank of Canada buys $3 billion worth of Japanese yen,$4 billion of German marks,and $2 billion of French francs,and sells $5 billion of British pounds,how does this affect the official settlements balance?
A)falls by $4 billion
B)rises by $4 billion
C)rises by $9 billion
D)falls by $5 billion
Q3) For a small open economy,an increase in the world real interest rate would necessarily
A)increase net foreign lending.
B)decrease net exports.
C)decrease the current account balance.
D)worsen the balance of payments.
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Page 7
Chapter 6: Long-Run Economic Growth
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) What is the empirical evidence on whether or not rich and poor countries converge?
Q2) The government-backed Canadian Pension Plan (CPP) A)increases national saving and therefore economic growth. B)may not increase national saving as people may cut other forms of saving. C)has a higher rate of return than RRSPs.
D)helps the government reduce its budget deficit.
Q3) Country A has a capital-labour ratio that is initially twice as big as that of country B,but neither is yet in a steady state.Both countries have the same production function,f(k)= 6 k¹/².Country A has a 10% saving rate,10% population growth rate,and 5% depreciation rate,while country B has a 20% saving rate,10% population growth rate,and 20% depreciation rate.
a.Calculate the steady-state capital- labour ratio for each country.Does the initial capital-labour ratio affect your results?
b.Calculate output per worker and consumption per worker for each country.Which country has the highest output per worker? The highest consumption per worker?
c.In general,do all the fundamental characteristics of different countries need to be identical for convergence of output per worker?
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Chapter 7: The Asset Market, money, and Prices
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) When the interest rate rises from 2 percent to 3 percent,it means that
A)it has increased by 1 percent.
B)it has increased by 50 percent.
C)it has increased by 0.1 percent.
D)it has increased by 33 percent.
Q2) Which of the following assets is more liquid?
A)Your car.
B)Your money in the savings account.
C)Your money in the chequing account.
D)Your stock of a company.
Q3) Income elasticity of money demand
A)is larger than the interest elasticity of money demand.
B)is smaller than the interest elasticity of money demand.
C)is the same as the interest elasticity of money demand.
D)is greater than one.
Q4) For something to satisfy the medium of exchange function of money,it must be
A)backed by gold.
B)readily exchangeable for other goods.
C)issued by a Central Bank.
D)an inherently valuable commodity.
Page 9
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Chapter 8: Business Cycles
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58 Flashcards
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Sample Questions
Q1) The tendency of many different economic variables to have regular and predictable patterns across industries over the business cycle is called A)persistence.
B)comovement.
C)periodicity.
D)recurrence.
Q2) An economic variable that moves in the opposite direction as aggregate economic activity (down in expansions,up in contractions)is called A)procyclical.
B)countercyclical.
C)acyclical.
D)a leading variable.
Q3) For each outcome below,tell what type of shift must have taken place in either the aggregate demand curve or the long-run aggregate supply curve.
a.In the short run,the price level is unchanged and output rises.
b.In the long run,the price level declines and output is unchanged.
c.In the long run,the price level rises and output declines.
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10
Chapter 9: The Is-Lm-Fe Model: a General Framework for
Macroeconomic Analysis
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Suppose the intersection of the IS and LM curves is to the right of the FE line.An increase in the price level would most likely eliminate a disequilibrium among the asset,labour,and goods markets by
A)shifting the LM curve up.
B)shifting the IS curve up.
C)shifting the IS curve down.
D)shifting the FE curve to the left.
Q2) A rise in expected future output that doesn't affect labour supply would shift the IS curve ________ and the FE line ________.
A)down;is unchanged
B)down;right
C)up;is unchanged
D)up;right
Q3) The full-employment (FE)line shifts right if
A)unemployment declines.
B)technology advances.
C)net exports increase.
D)GDP rises.
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Chapter 10: Exchange Rates, business Cycles, and Macroeconomic Policy
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) A decrease in government purchases
A)shifts the IS curve up and to the right,leading to a higher interest rate and an appreciation of the exchange rate.
B)shifts the IS curve down and to the left,leading to a lower interest rate and a depreciation of the exchange rate.
C)shifts the LM curve left,leading to a lower interest rate and a depreciation of the exchange rate.
D)shifts the LM curve right,leading to a lower interest rate and a depreciation of the exchange rate.
Q2) The Canadian interest rate is 4 percent and the U.S.interest rate is 6 percent.If the interest parity condition holds,we expect
A)the Canadian dollar to appreciate by 2 percent.
B)the Canadian dollar to depreciate by 6 percent.
C)the U.S.dollar to depreciate 2 percent.
D)the U.S.dollar to appreciate by 2 percent.
Q3) List three factors which cause the exchange rate to rise.Explain the reasons for the effects.
Q4) Describe the pros and cons of the fixed exchange rate system.
Page 12
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Chapter 11: Classical Business Cycle Analysis:
Market-Clearing Macroeconomics
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Which of the following is NOT part of calibration method used by the RBC theorists to analyze the business cycles?
A)Write a specific classical model of the economy.
B)Use the previous studies to assign the parameters of the model.
C)Examine the effects of random shocks on the main variables of the model.
D)Estimate the parameters of the model to predict the future values of the model.
Q2) An increase in government purchases in the classical model would
A)shift the production function.
B)shift the marginal product of labour curve.
C)shift the labour demand curve.
D)shift the labour supply curve.
Q3) When,because of hiring and firing costs,firms retain workers in a recession that they would otherwise lay off,there is said to be
A)labour hoarding.
B)a decline in capacity utilization.
C)voluntary unemployment.
D)involuntary unemployment.
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Page 13
Chapter 12: Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) In the Keynesian model,the difference between no intervention by the government during a recession and intervention using expansionary monetary or fiscal policy is that no intervention will return the economy to its equilibrium level of output ________ than intervention will and at a ________ price level.
A)faster;lower B)slower;higher C)slower;lower D)faster;higher
Q2) The reason for disequilibrium in the short run in the Keynesian model of nominal-wage rigidity is
A)employers and employees do not know about the actual relative prices.
B)the contracts according which wages are set for a specific period and can be negotiated only when the contract term ends.
C)unions which supports fixed wages during the contracts.
D)that prices and wages move together in the long run.
Q3) What type of expectations hypothesis do the Keynesian and the classical models use to explain the impact of the fiscal and monetary policy on the full-employment output? Discuss.
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Chapter 13: Unemployment and Inflation
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101 Flashcards
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Sample Questions
Q1) The main determinant of how quickly expected inflation adjusts to changes in monetary policy is
A)the slope of the Phillips curve.
B)the slope of the short-run aggregate supply curve.
C)the credibility of the Central Bank.
D)the degree of indexation in the economy.
Q2) The employment insurance has increased the size of the benefit to unemployed.This will cause
A)the natural rate of unemployment to increase and the Phillips curve to shift left.
B)the expected inflation to increase and the Phillips curve to shift left.
C)the natural rate of unemployment to increase and the Phillips curve to shift right.
D)the expected inflation to decrease and the Phillips curve to shift left.
Q3) A COLA is
A)a centre of labour activity.
B)a cost of living adjustment.
C)a contract on long-term assets.
D)a crisis of labour analysis.
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15
Chapter 14: Monetary Policy and the Bank of Canada
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Monetarists suggest doing which of the following?
A)maintain a steady growth rate of the money supply
B)use fiscal policy to combat unemployment in the short run
C)use monetary policy to combat unemployment in the long run
D)use fiscal policy to combat inflation in the long run
Q2) If people hold more currency,other things remaining constant
A)the money multiplier will decrease.
B)the money multiplier will increase.
C)the money multiplier will remain unchanged.
D)the monetary base will decrease.
Q3) Suppose the Bank of Canada strictly followed a rule of keeping money supply at $900 billion.This level of money is consistent with the economy's initial general equilibrium.
a.Assume that GDP has increased.How will the interest rate change?
b.Assume that banks have introduced chequing accounts that pay interest.How will the interest rate change?
c.What are the effects of the Bank's money targeting policy on the economy?
Q4) What types of rules for monetary policy may be sensible for policymakers to consider? What is the advantage of using rules over discretion? What problems might there be with rules?
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Chapter 15: Government Spending and Its Financing
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Suppose that all workers place a value on their leisure of 75 goods per day.The production function relating output per day Y to the number of people working per day N is Y = 500N - 0.4N²,and the marginal product of labour is MPN = 500 - 0.8N.A 25% tax is levied on wages.
a.How much is output per day?
b.In terms of lost output,what is the cost of the distortion introduced by this tax?
Q2) In an economy with a 10 percent inflation rate and a $560 billion real money supply,the real inflation tax revenue is equal to
A)$56 billion.
B)$17.857 million.
C)$5600 billion.
D)$5600 million.
Q3) Which of the following is NOT an argument against the Ricardian equivalence theorem?
A)the lack of the central bank's independency
B)failure to leave bequests
C)non-lump-sum taxes
D)shortsightedness
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