Introduction to Canadian Economics
Exam Answer Key
Course Introduction
Introduction to Canadian Economics offers an overview of the fundamental principles and issues shaping Canadas economy. The course explores topics such as economic growth, resource allocation, national income, and the role of government, emphasizing the unique historical and structural factors that define the Canadian economic landscape. Students will examine the countrys major industries, trade relationships, labor markets, and fiscal and monetary policies, while also considering contemporary economic challenges faced by Canada within a global context. Through case studies and data analysis, learners will gain a foundational understanding of the forces influencing economic decision-making and policy in Canada.
Recommended Textbook
ECON Macro Principles of Macroeconomics 1st Canadian Edition by Moir OShaughnessy
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Which of the following are NOT economic decision makers?
A) governments
B) consumers
C) businesses
D) machines
Answer: D
Q2) Which of the following best describes when scarcity occurs?
A) when resources are unlimited
B) when there is a shortage, so buyers cannot obtain the goods they want
C) when there is a surplus, so sellers cannot sell the goods they produce
D) when resources are insufficient to satisfy unlimited wants
Answer: D
Q3) Why do economists use models?
A) to learn how the economy works
B) to make their profession appear to be more precise
C) to make economics accessible to the public
D) to make sure that all of the details of the economy are included in their analysis
Answer: A
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3
Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) Which scenario involves specialization?
A) a solo carpenter who builds a whole bedroom furniture set
B) a woman stranded on an island who must look after herself
C) someone who is a "jack of all trades"
D) professional mourners in Taiwan
Answer: D
Q2) Refer to the exhibit.Which statement explains why point g is efficient?
A) The only way to increase production of A is by decreasing production of B.
B) The economy can increase production of both A and B from point B.
C) It is impossible to move to any other point along the production possibilities frontier.
D) It is impossible to move to any other point inside the production possibilities frontier.
Answer: A
Q3) Refer to the exhibit.When would Hans and Maria both be better off?
A) if Hans specialized in typing and Maria specialized in doing laundry
B) if Hans specialized in doing laundry and Maria specialized in typing
C) if Maria did all of the typing and all of the laundry
D) if Hans did all of the typing and all of the laundry
Answer: A
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) What will be an impact on the Canadian economy of restricting imports of Brazilian shoes into Canada? How will the Canadian economy be impacted if imports of Brazilian shoes are restricted?
A) It will raise the price of both Brazilian and domestically produced shoes.
B) It will raise the price of Brazilian shoes but lower the price of domestically produced shoes.
C) It will lower the price of Brazilian shoes but raise the price of domestically produced shoes.
D) It will lower the price of both Brazilian and domestically produced shoes.
Answer: A
Q2) Which of the following is the most common form of business organization in Canada?
A) sole proprietorship
B) partnership
C) corporation
D) cooperative
Answer: A
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Chapter 4: Demand, Supply, and Markets
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Sample Questions
Q1) Saccharin and aspartame are both low-calorie substitutes for sugar.Suppose saccharin is found to cause cancer.What will likely occur?
A) The price of aspartame will increase.
B) The price of sugar will decrease.
C) The price of saccharin will increase.
D) The price of cakes will decrease.
Q2) Which of the following will cause a movement up along a market supply curve for corn?
A) a change in the price of corn
B) a change in the price of pesticides
C) a change in the number of producers
D) a change in a change in the number of hectares planted in corn
Q3) Wheat is the main input into the production of flour.All things being equal, if the price of wheat decreases, what would be expected to happen in the flour market?
A) The supply of flour will decrease.
B) The demand for flour will decrease.
C) The supply of flour will increase.
D) The demand for flour will increase.
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Chapter 5: Algebraic Approach to Demand, Supply, and Equilibrium
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Q1) Market demand is given as Qd = 200 - 3P.Market supply is given as Qs = 2P + 100.What would result if the market price were $30?
A) a shortage of 110
B) a surplus of 110
C) a surplus of 50
D) a shortage of 50
Q2) Market demand is given as QD = 100 - 2P.Market supply is given as QS = P + 10.Which legally imposed price would constitute a binding price ceiling?
A) $10
B) $30
C) $40
D) $60
Q3) Market demand is given as Qd = 60 - P.Market supply is given as Qs = 3P.What would result if the market price were $30?
A) a shortage of 60
B) a surplus of 60
C) a surplus of 30
D) a shortage of 30
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Chapter 6: Introduction to Macroeconomics
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Sample Questions
Q1) Suppose the government owes $3,500 billion and then borrows $300 billion more this year.What is the debt and the deficit?
A) The debt is $3,800 billion, and the deficit is $3,500 billion.
B) The debt is $3,800 billion, and the deficit is $300 billion.
C) The debt is $300 billion, and the deficit is $3,800 billion.
D) The debt is $300 billion, and the deficit is $3,200 billion.
Q2) Refer to the graph in the exhibit.Which line represents the price level?
A) line a
B) line b
C) line c
D) line d
Q3) Keynes advocated federal budget deficits.What did he believe that such a deficit would overcome?
A) inflation
B) unemployment
C) trade deficits
D) trade surpluses
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Chapter 7: Tracking the Canadian Economy
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Sample Questions
Q1) Which of the following would NOT be included in the measurement of GDP?
A) federal government purchases of automobiles
B) a purchase of Niagara region wine by a Canadian firm
C) a provincial government's purchase of personal computers
D) transactions in the underground economy
Q2) Refer to the table in the exhibit.Between 2001 and 2002, what happened to real GDP for this nation?
A) It increased by slightly less than $10 billion.
B) It increased by about $1 billion.
C) It remained constant.
D) It decreased by slightly more than $5 billion.
Q3) What is the immediate effect on GDP of Ibrahim's purchase of a government bond?
A) Consumption will decrease because Ibrahim has less money to spend.
B) Government spending will increase because governments will need to spend more.
C) Investment will increase because the purchase of a bond is a form of economic investment.
D) There will be no effect, because no real goods and services have been produced.
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Chapter 8: Unemployment and Inflation
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Sample Questions
Q1) Suppose Frank received a 5 percent increase in his nominal wage.Over the year, inflation ran about 2 percent.Which of the following describes how Frank's nominal and real wages were affected?
A) Frank's nominal wage increased and his real wage increased.
B) Frank's nominal wage decreased and his real wage decreased.
C) Frank's nominal wage increased and his real wage decreased.
D) Franks' nominal wage decreased and his real wage increased.
Q2) Suppose the interest rate decreases.Other things constant, how will the loanable funds market be affected?
A) The supply of loanable funds curve will shift to the left.
B) The supply of loanable funds curve will shift to the right.
C) The quantity of loanable funds demanded will decrease.
D) The quantity of loanable funds supplied will decrease.
Q3) Which of the following is cost-push inflation associated with?
A) It occurs when the aggregate demand curve shifts rightward.
B) It occurs when the aggregate supply curve shifts rightward.
C) It results in a decrease in the unemployment rate.
D) It results in a movement along the aggregate demand curve.
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Chapter 9: Productivity and Growth
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Sample Questions
Q1) Which of the following would NOT slow down productivity growth?
A) if the composition of the work force changes such that more young people are working but fewer middle-aged people are working
B) if the composition of the work force changes such that more women are included
C) if the quality of education decreases
D) if firms switch from providing services to producing goods
Q2) How is labour productivity measured?
A) as total output times total employment
B) as the total output of all workers employed
C) as total output divided by the number of units of labour employed
D) as total labour input divided by output
Q3) What is the difference between human capital and physical capital?
A) Human capital is used by humans whereas physical capital is NOT.
B) Human capital increases labour productivity, but physical capital does NOT.
C) Human capital is related to education whereas physical capital relates to machines.
D) Physical capital requires investment, but human capital does NOT.?.
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Chapter 10: Aggregate Expenditure and Aggregate
Demand
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Sample Questions
Q1) Other things constant, how would a smaller marginal propensity to save affect the marginal propensity to consume?
A) The marginal propensity to consume would become smaller.
B) The marginal propensity to consume would become larger.
C) The marginal propensity to consume would remain the same.
D) The marginal propensity to consume would be negative.
Q2) Suppose the level of autonomous spending decreases at a given price level.How does this relate to the aggregate expenditure line and the aggregate demand curve?
A) The aggregate expenditure line shifts upward, and the economy moves along the aggregate demand curve.
B) The aggregate expenditure line shifts downward, and the economy moves along the aggregate demand curve.
C) The aggregate expenditure line shifts upward, and the aggregate demand curve shifts to the right.
D) The aggregate expenditure line shifts downward, and the aggregate demand curve shifts to the left.
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Chapter 11: Aggregate Supply
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Sample Questions
Q1) Refer to the graph in the exhibit.Which of the following causes the shift in the curve?
A) a decrease in the size of the labour force
B) an increase in the price level
C) positive net investment
D) an increase in autonomous consumption
Q2) How are the various output levels produced at different price levels illustrated?
A) by the short-run aggregate supply curve
B) by the aggregate demand curve
C) by the labour demand curve
D) by the labour supply curve
Q3) In the short run, suppose the economy is operating below potential output and the aggregate supply curve shifts outward.What will be the effects on price level and output?
A) Price level will decrease, and output will increase.
B) Price level will decrease, and output will decrease.
C) Price level will increase, and output will increase.
D) Price level will increase, and output will decrease.
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Chapter 12: Fiscal Policy
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Sample Questions
Q1) Suppose there is a change in government purchases.Under what circumstances will such a change have the greatest effect on the economy in the short run?
A) if the aggregate demand curve is relatively flat
B) if the aggregate demand curve is relatively steep
C) if the short-run aggregate supply curve is relatively flat
D) if the aggregate demand curve is vertical
Q2) Refer to the table in the exhibit.Suppose government purchases increased to $300.By what amount would equilibrium real GDP demanded increase?
A) by $300
B) by $500
C) by $1,200
D) by $1,500
Q3) What does the steepness of the short-run aggregate supply curve depend on?
A) a larger-than-expected simple multiplier
B) a smaller-than-expected simple multiplier
C) the increase in labour costs as output expands
D) how sharply production costs increase as output expands
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Chapter 13: Money and the Financial System
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Sample Questions
Q1) The Canada Deposit Insurance Corporation insures bank deposits.As of 2015, what was the extent of the Corporation's insurance coverage?
A) $2,0000 per depositor per bank
B) $60,000 per depositor per bank
C) $100,000 per depositor per bank
D) $200,0000 per depositor per bank
Q2) What kind of reserve system do modern banks use?
A) a 100-percent reserve system
B) a fractional reserve system
C) a gold standard system
D) a partial reserve system
Q3) Which of the following is NOT a power of the Bank of Canada?
A) setting the prime interest rate
B) engaging in open market operations
C) buying and selling Canadian government securities
D) extending loans to chartered banks
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Chapter 14: Banking and the Money Supply
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Sample Questions
Q1) Suppose the desired reserve ratio is 15 percent.What is the simple money multiplier equal to?
A) 15
B) 1/0.15
C) 1/2.25
D) 1/15
Q2) Suppose a customer deposits $100 into her chequing account at the bank.What is the effect of the deposit on the bank?
A) The bank's liabilities increase.
B) The bank's liabilities decrease.
C) The bank's assets increase.
D) The bank's assets increase, and its liabilities increase.
Q3) Suppose the desired reserve ratio is 20 percent and a bank has $100,000 in chequable deposits.What are the bank's desired reserves?
A) $500,000
B) $100,000
C) $80,000
D) $20,000
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Chapter 15: Monetary Theory and Policy in an Open Economy
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Sample Questions
Q1) Refer to the graph in the exhibit.Suppose the Bank of Canada is targeting the money supply and the money demand shifts from Dm to Dm .How should the Bank of Canada react?
A) The Bank of Canada should do nothing and the interest rate will rise to i .
B) The Bank of Canada should do nothing and the interest rate will settle at i.
C) The Bank of Canada should decrease the money supply to restore its target of i.
D) The Bank of Canada should increase the money supply to restore its target of i.
Q2) Suppose the money supply is $300, the price level is $4, and real GDP is $1,500.What is the nominal value of output?
A) $1,200
B) $4,500
C) $6,000
D) $180,000
Q3) Which of the following would most likely lower the velocity of money?
A) commercial innovations that facilitate exchange
B) a lower inflation rate
C) a decline in the effectiveness of money as a store of wealth
D) paying workers once a week instead of once a month
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Chapter 16: Macro Policy Debate: Active or Passive
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Sample Questions
Q1) Which of the following statements supports the passive approach to a recessionary gap?
A) It is likely that policies will be subject to time lags.
B) Prolonged unemployment may cause the economy's potential real GDP to fall.
C) Workers' skills may grow rusty during a prolonged recession.
D) Unemployed workers may drop out of the labour force during a prolonged recession.
Q2) In the event of a recession, which of the following is the most likely policy stance of people who advocate a passive approach to economic policy?
A) cut taxes
B) increase government spending
C) reduce interest rates
D) do nothing
Q3) According to policymakers who favour a passive approach to policy, why will a recessionary gap be eliminated by a passive approach?
A) because prices and wages will rise rapidly
B) because prices and wages are flexible
C) because the aggregate demand curve will shift to the right
D) because the aggregate demand curve will shift to the left
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Page 18
Chapter 17: International Finance
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Sample
Questions
Q1) Refer to the graph in the exhibit.Imagine that only two countries exist, Mexico and Canada.Suppose Mexico's central bank wants to protect its currency from depreciating in response to the demand shift shown.Which policy would Mexico's central bank most likely choose?
A) increase the supply of Mexican pesos
B) decrease the supply of Canadian dollars
C) purchase Canadian dollars with newly issued Mexican pesos
D) purchase Mexican pesos with reserves of Canadian dollars
Q2) During what period did the international financial system operate under a gold standard?
A) from the 1500s to the present
B) from 1879 to the present
C) from 1879 to 1914
D) from 1914 to 1939
Q3) What does the current account reflect?
A) trade in tangible products
B) trade in goods as well as services
C) the purchase of securities from foreigners
D) the sale of securities to foreigners
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Chapter 18: International Trade
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Sample Questions
Q1) What is an import quota?
A) a tax on imports
B) a legal limit on the amount of a specific good that can be imported into a particular country
C) a tax on import quantities above the legal limit
D) a way to increase tariff revenues
Q2) What is the basis of the benefits of specialization?
A) comparative advantage
B) absolute advantage
C) size of country
D) identical production costs between two countries
Q3) What is the definition of dumping?
A) the practice of selling a lower quality product abroad
B) the practice of selling a commodity abroad at a price that is lower than the price in the country of manufacture
C) the practice of selling a commodity abroad at a price that is higher than the price in the country of manufacture
D) the practice of flooding a foreign market with large quantities of a good
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Chapter 19: Economic Development
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Sample Questions
Q1) How many countries in the world have failed to come up with the rules of the game that lead to sustained economic growth?
A) none
B) one
C) half
D) most
Q2) Sjen Mavago, the economics minister of the country of X-Marks-the-Spot, has concluded that entrepreneurs are unable to generate the kind of growth the country needs.Which of the following may have motivated her decision to create state enterprises?
A) the desire to limit government's role in the economy
B) the desire to provide jobs for friends and relatives of government officials
C) the desire to take risks
D) the desire to encourage a free market
Q3) What is the yardstick most often used to compare living standards across nations?
A) average production cost per unit
B) sales revenue per month
C) output per capita
D) imports per year
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Chapter 20: Understanding Graphs
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Sample Questions
Q1) Refer to the exhibit.For any value of x, what is the value of y?
A) It is larger on curve A than on curve B.
B) It is smaller on curve A than on curve B.
C) It is the same on both curves.
D) It is indeterminate.
Q2) Refer to the exhibit.At x = 12, what is the value of y?
A) It is larger on curve A than on curve B.
B) It is smaller on curve A than on curve B.
C) It is the same on both curves.
D) It is indeterminate.
Q3) Which of the following is the best definition of a slope of a line?
A) the rise divided by the run
B) the change in the rise divided by the change in the run
C) the run divided by the rise
D) the change in run divided by the change in the rise
Q4) Which of the following is an economic application of the slope of a line?
A) the measurement of unlimited wants
B) behavioural analysis
C) marginal analysis
D) rational analysis
Page 22
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