Macroeconomic Analysis
Midterm Exam
Course Introduction
Macroeconomic Analysis explores the behavior and performance of an economy as a whole, focusing on aggregate indicators such as GDP, inflation, unemployment, and economic growth. The course examines the structure and role of governmental policies, the functioning of markets at the national and international levels, and the impact of fiscal and monetary policies on economic stability. Through theoretical frameworks and real-world data, students will analyze key economic issues and trends, develop a strong foundation in macroeconomic theory, and gain critical insights into how economies respond to external shocks and policy interventions.
Recommended Textbook
Principles of Macroeconomics 9th Edition by John Sayre
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13 Chapters
2035 Verified Questions
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Page 2
Chapter 1: The Economic Problem
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Sample Questions
Q1) In general,how to produce depends most on which of the following?
A)Demand for goods and services.
B)Distribution of income.
C)Opportunity costs and productivity of factors.
D)The scientific method.
Answer: C
Q2) Refer to the graph above to answer this question.What is the opportunity cost of producing the first 700 quarks?
A)It is 6 quirks.
B)It is 10 quirks.
C)It is 14 quirks.
D)The answer cannot be determined from the information given.
Answer: C
Q3) Why is economics relevant?
Answer: The study of economics helps us to understand better how the world functions.Analyzing issues from an economic dimension gives you the insight to the different arguments of many controversies in our society.
Q4) Productivity refers to which type of efficiency?
Answer: Productive efficiency.
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Chapter 2: Demand and Supply: an Introduction
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Sample Questions
Q1) What is the effect on product A of an increase in the price of substitute product B?
A)It will cause an increase in the quantity demanded.
B)It will cause an increase in demand.
C)It will cause a decrease in demand.
D)It will cause an increase in supply.
E)It will cause a decrease in supply.
Answer: B
Q2) Refer to the graph above to answer this question.What is the effect if the price is $1,200.
A)The quantity demanded is 120.
B)Price will rise.
C)The quantity supplied is 160.
D)The quantity traded is 120.
Answer: C
Q3) A decrease in supply causes the price to fall and the quantity traded to increase. A)True
B)False
Answer: False
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4
Chapter 3: Measuring the Economy 1: GDP and Economic Growth
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Sample Questions
Q1) Refer to the information above to answer this question.What is the value of Canadian imports?
A)$10
B)$3
C)$8
D)$20
Answer: D
Q2) What is national income?
A)It is the income of Canadians earned abroad.
B)It is the income earned in Canada.
C)It is the income of Canadians earned in Canada.
D)It is the income earned by Canadians.
Answer: D
Q3) Real GDP is the value of nominal GDP measured in base year prices.
A)True
B)False
Answer: True
Q4) What are the costs of productions?
Answer: Cost of production represents payments to those who supplied factors.The costs of productions are wage,rent,interest and profit.
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Chapter 4: Measuring the Economy 2: Unemployment and Inflation
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Sample Questions
Q1) Distinguish between demand-pull and cost-push inflation.
Q2) Etruria's nominal GDP rose from $420 billion in 2013 to $450 billion in 2016.During the same period,its inflation rate was 5 percent.By what percentage did its real GDP increase?
A)1.67%
B)2.14%
C)9.33%
D)30%
Q3) Which of the following are included in the consumer price index?
A)Capital goods.
B)Government spending.
C)Imports.
D)Exports.
Q4) Which two pieces of information would allow us to calculate a GDP deflator?
A)Prices and interest rates.
B)Nominal GDP and real GDP figures.
C)Unemployment rates and Okun's Law
D)Prices and the Rule of 70.
E)GDP rates and the Rule of 70.
Q5) Give two examples of the redistributive costs of inflation.
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Chapter 5: Aggregate Demand and Supply
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Sample Questions
Q1) Which of the following is true of a recessionary gap?
A)Firms will increase output because Real GDP is below Potential GDP.
B)Firms will decrease output because the price level is low.
C)Firms have no incentive to produce more because they can't sell additional output.
D)Firms have no incentive to produce more because it's very expensive to employ more labour.
E)It is correctly described as "too much money chasing too few goods."
Q2) Refer to the above graph to answer this question.What will happen in the long run if the price level is currently P1?
A)The price level will decrease but the nominal wage will increase.
B)The price level will increase but the nominal wage will decrease.
C)Both the price level and the nominal wage will decrease.
D)Both the price level and the nominal wage will increase.
Q3) The foreign-trade effect is the effect that a change in exports and imports has on the price level.
A)True
B)False
Q4) What are the three reasons for the downward slope of the aggregate demand curve?
Q5) What factors can cause an increase in aggregate supply?
Page 7
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Chapter 6: Aggregate Expenditures
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Sample Questions
Q1) What happens to the value of net exports as national income increase? Why?
Q2) Refer to the data above to answer this question.What is the equation for the saving function?
A)S = -200Y.
B)C = -200 + Y.
C)C = -200 + 0.2Y.
D)C = -200 + 0.8Y.
E)C = 200 + 0.8Y.
Q3) What is the effect of a decrease in the MTR?
A)The MLR will increase and the multiplier will increase.
B)The MLR will decrease and the multiplier will increase.
C)The MLR will increase and the multiplier will decrease.
D)The MLR will decrease and the multiplier will decrease.
E)The MLR will remain the same but the multiplier will increase.
Q4) Refer to the table above to answer this question.What is the value of the MPE?
A)0.1
B)0.4
C)0.5
D)0.6
E)2
Page 8
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Chapter 7: Fiscal Policy
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Sample Questions
Q1) What is fiscal policy?
A)It is the government's policy on spending.
B)It is the government's policy on taxation.
C)It is the government's policy on both spending and taxation.
D)It is the central bank's policy on interest rates.
Q2) Refer to the information above to answer this question.When would a counter-cyclical fiscal policy call for a decrease in government spending or a tax increase?
A)1 only.
B)1 and 4.
C)2 only.
D)2 and 4.
Q3) Refer to the graph above to answer this question.What does this graph indicate?
A)That net tax revenues,government spending and the government's budget all depend on the level of real GDP.
B)That the state of the government's budget depends on the level of real GDP as well as on tax rates and its own spending.
C)That the level of real GDP depends on the slope of the budget line.
D)That real GDP level Y2 is equilibrium GDP.
E)That real GDP level Y2 is both equilibrium GDP and a balanced budget.
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Chapter 8: Money and Banking
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Sample Questions
Q1) Assume the XYZ Company negotiates a loan for $100,000 from the Trusty Bank and takes out $10,000 in the form of cash,leaving the remainder in its account.What is the result?
A)The supply of money has increased by $100,000.
B)The supply of money has declined by $100,000.
C)The supply of money has increased by $10,000.
D)The supply of money has increased by $90,000.
E)The supply of money has not changed.
Q2) Which of the following is true regarding the purchasing power of the dollar?
A)It varies directly with the cost-of-living index.
B)It has been increasing in recent years because of higher standards of living.
C)It varies inversely with the level of aggregate demand.
D)It varies inversely with the price level.
E)It varies directly with the price level.
Q3) Canada's largest commercial bank is the Bank of Canada.
A)True
B)False
Q4) The most important characteristic of money is that it be portable.
A)True
B)False
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Chapter 9: The Money Market and Monetary Policy
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Sample Questions
Q1) What is the relationship between the economic policies of the Bank of Canada and those of the federal government?
A)They are always unrelated.
B)They are identical.
C)They are usually in conflict.
D)They usually have similar goals concerning the direction to move the economy.
E)They are both controlled by Parliament.
Q2) In the equation MV = PQ,what does Q stand for?
A)The quantity of goods and services sold.
B)The quantity of investment.
C)The quantity of money in circulation.
D)The quantity of domestic demand.
E)The quantity of consumption and investment.
Q3) What does the Keynesian transmission process involve?
A)Money demand,the exchange rate,investment and GDP.
B)Money supply,the interest rate,investment and GDP.
C)The interest rate,GDP and the asset demand for money.
D)Only the interest rate and GDP.
E)Only the level of investment and GDP.
Q4) Why is the money supply curve a vertical line?
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Chapter 10: International Trade
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Sample Questions
Q1) Which of the following statements about the impact of the introduction of free trade is correct?
A)It results in higher prices for domestic producers.
B)It results in lower prices for foreign consumers.
C)It results in lower prices for foreign producers.
D)It results in lower prices for domestic consumers.
Q2) Refer to the information above to answer this question.Assuming no trade,what are the equilibrium price and quantity of wine in Germany?
A)$6 and 10.
B)$7 and 5.
C)$8 and 7.
D)$9 and 7.
Q3) Refer to the information above to answer this question.Assume that France and Germany enter into a free trade agreement (and there are no extra transportation costs,etc. )what will Germany do?
A)Export 4 million litres of wine per month.
B)Export 1 million litres of wine per month.
C)Import 4 million litres of wine per month.
D)Import 1 million litres of wine per month.
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Page 12
Chapter 11: Exchange Rates and the Balance of Payments
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Sample Questions
Q1) If there is a surplus of Canadian dollars on the foreign exchange market,which of the following statements is true?
A)The Canadian dollar is over-valued.
B)The Canadian dollar is under-valued.
C)Canada must be on a flexible exchange rate system.
D)Demand for the currency could have recently fallen.
E)a)and d).
Q2) Why are governments often reluctant to announce that they may devalue a currency?
A)Because it will result in a higher exchange rate.
B)Because devaluation is only possible with flexible exchange rates.
C)Because devaluation is only possible under the gold standard.
D)Because it implies a lack of confidence which will discourage people from holding the currency.
Q3) Which of the following will result from an increase in the U.S.GDP?
A)Canadian exports would rise.
B)Both Canadian exports and imports would rise.
C)Canadian exports would rise,and imports would decrease.
D)Canadian exports would decrease,and imports would rise.
E)Canadian imports would rise.
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Chapter 12: Macroeconomic Policy Revisited
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Sample Questions
Q1) The rise of supply-side economics is rooted in the stagflation of the 1970s.
A)True
B)False
Q2) Monetary policy cannot be used effectively when a country has a fixed exchange rate.
A)True
B)False
Q3) Which one of the following is true about deflation?
A)It is associated with stagflation.
B)It occurs whenever an inflationary gap gets large enough.
C)It precedes periods of high investment.
D)It is a period of decreases in the general price level.
Q4) One of the major criticisms of the supply-side emphasis on tax cuts as a way to stimulate the economy is that such cuts affect aggregate demand more than they do aggregate supply.
A)True
B)False
Q5) Aggregate demand policies are effective in curing the problems of stagflation.
A)True
B)False
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Chapter 13: A Walk Through the Twentieth Century and Beyond
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Sample Questions
Q1) Explain why Canada had mainly budget deficits between 1970s and 1990s.
Q2) Explain the basis of the neoclassical economists argument that long-lasting recessions were impossible.
Q3) During the Great Depression,several changes in the economic performance occurred.What were these changes?
Q4) When did the Great Depression occur?
A)At the beginning of the twentieth century
B)In the seven years following World War I
C)During the decade of the 1930s
D)In the five years following World War II
Q5) According to the neoclassical economists,what would happen if production exceeded total spending in an economy?
Q6) There were two distinctive approaches with respect to priorities for meeting economic goals while in the recovery phase of the financial crisis.What were these priorities? Provide examples of countries which adopted each approach.
Q7) How did the supply-siders explain the high inflation and high unemployment rates of the 1970s?
Page 15
Q8) Why did post-World War I boom not last?
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