Macroeconomics for Policy Analysis
Practice Questions
Course Introduction
This course provides an in-depth exploration of core macroeconomic theories and their application to real-world policy analysis. Students will examine national income determination, fiscal and monetary policy, inflation, unemployment, and international economic interdependence, with a focus on how policymakers utilize macroeconomic models and empirical data to address economic challenges. Through case studies and contemporary policy debates, the course equips students with analytical tools to evaluate the effectiveness of various policy interventions in achieving macroeconomic objectives such as growth, stability, and equity.
Recommended Textbook
Principles of Macroeconomics 4th Canadian Edition by Robert H. Frank
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16 Chapters
2776 Verified Questions
2776 Flashcards
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Page 2
Chapter 1: Measuring Macroeconomic Performance: Output and Prices
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) The cost-benefit principle indicates that an action should be taken
A) if the total benefits exceed the total costs.
B) if the extra benefits are positive.
C) if the average benefits exceed the average costs.
D) if the resulting economic surplus is zero.
E) if the extra benefits are greater than the extra costs.
Answer: E
Q2) To avoid spurious correlation,one must recognize that
A) what is true for a part must also be true for the whole.
B) what is true for a part is not necessarily true for the whole.
C) because one event precedes another,the first event necessarily caused the second.
D) because one event precedes another,the first event did not necessarily cause the second.
E) correlation implies causation.
Answer: D
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Chapter 2: Measuring Macroeconomic Performance:
Saving and Wealth
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) Jerry's production possibilities curve for goods W and Z is W = 20 - 2Z,where W is the quantity of good W produced and Z is the quantity of good Z produced.The combination of W and Z (11,5)is a(n)__________ point.
A) unattainable
B) inefficient
C) inefficient but attainable
D) efficient
E) efficient and unattainable
Answer: A
Q2) Because Bobby Jo and Mary Lou have __________ opportunity costs,they can experience __________ from specialization.
A) identical;a gain
B) unequal;a gain
C) unequal;no gain
D) equal;no gain
E) unequal;a loss
Answer: B
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Chapter 3: Measuring Macroeconomic Performance:
Wages, Employment and the Labour Market
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) The equilibrium price and quantity of any good or service are established by A) only consumers.
B) only firms.
C) government regulations.
D) both consumers and firms.
E) custom and tradition.
Answer: D
Q2) The market price of a hamburger is determined by the A) the cost of production
B) value to the consumer.
C) cost of production and the value to the consumer.
D) government
E) financial markets
Answer: C
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Page 5
Chapter 4: Short-Term Economic Fluctuations
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Changes in government spending and tax revenues for the purpose of achieving a full-employment and non-inflationary level of domestic output are called
A) industrial policy.
B) monetary policy.
C) fiscal policy.
D) trade policy.
E) supply side economics.
Q2) When a government moves from a centrally planned economy to a market economy,this is an example of ______ policy.
A) monetary
B) trade
C) fiscal
D) environmental
E) structural
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Chapter 5: Spending and Output in the Short Run
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) Over the period from 2003 to 2009,nominal GDP grew by ________ and real GDP grew by ________.
A) 83%;145%
B) 145%;83%
C) 83%;34%
D) 138%;78%
E) 145%;78%
Q2) Long-lived goods used for producing other goods and services are called
A) consumption goods.
B) non-market goods.
C) value-added goods.
D) publicly provided goods.
E) capital goods.
Q3) Net export spending is expenditures on
A) consumer durables,nondurables,and services.
B) stocks,bonds,and other financial instruments.
C) capital goods,residential housing,and changes in inventories.
D) goods and services by federal,provincial,and local governments.
E) goods and services sold abroad minus goods and services produced abroad.
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Page 7
Chapter 6: Fiscal Policy
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191 Verified Questions
191 Flashcards
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Sample Questions
Q1) All of the following are nominal quantities EXCEPT the A) price of a new car.
B) wages paid to workers in a restaurant.
C) cost of purchasing a new computer.
D) number of new houses built in one month.
E) salary offered to a new college graduatE.
Q2) The consumer price index for Planet Econ consists of only two items: books and hamburgers.In 2011,the base year,the typical consumer purchased 10 books for $20 each and 200 hamburgers for $1 each.In 2012,the typical consumer purchased 12 books for $23 each and 300 hamburgers for $1.15 each.The consumer price index for 2012 on Planet Econ equals
A) 100.
B) 115.
C) 125.
D) 135.
E) 155.
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8
Chapter 7: Money, Prices and the Reserve Bank
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) If actual output equals potential output,but potential is growing very slowly,then an economy
A) is in a recession.
B) is in an expansion.
C) has an output gap.
D) has a recessionary gap.
E) is experiencing deflation.
Q2) If the actual rate of unemployment equals the natural rate of unemployment,then
A) potential output is greater than real GDP.
B) potential output equals real GDP.
C) potential output is less than real GDP.
D) there is a recessionary gap.
E) there is an expansionary gap.
Q3) The unemployment duration is the length of a period during which an individual A) remains seasonally unemployed before becoming cyclically unemployed.
B) remains frictionally unemployed before becoming cyclically unemployed.
C) is continuously unemployed.
D) stays out of the labour force.
E) does not actively seek employment.
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Chapter 8: The Reserve Bank and the Economy
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202 Flashcards
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Sample Questions
Q1) Although economists usually focus on the role of fiscal policy as a stabilization tool for closing a recessionary gap,in practice,fiscal policy may also influence
A) the economy's potential output and the distribution of income.
B) the distribution of income and the level of private capital formation.
C) the economy's potential output,the distribution of income,and the level of private capital formation.
D) the economy's potential output,the distribution of income,and the economic behaviour of firms and households.
E) the economy's potential output,the distribution of income,the level of private capital formation,and the economic behaviour of firms and households.
Q2) In the basic Keynesian model,all of the following are true EXCEPT
A) planned consumption always equals actual consumption.
B) planned private-sector investment always equals actual investment.
C) planned government spending always equals actual government spending.
D) planned net exports always equal actual net exports.
E) planned total spending equals planned aggregate expenditurE.
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Chapter 9: The Aggregate Demand - Aggregate Supply
Model
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) During hyperinflation,because real GDP and the velocity of money can be assumed to be constant,the rate of ________ equals the rate of ________.
A) growth of the money supply;growth of real GDP
B) growth of consumption;inflation
C) growth of the money supply;inflation
D) growth of consumption;growth of real GDP
E) growth of real GDP;change of the exchange rate
Q2) Money is
A) the same as income.
B) all financial assets.
C) any asset used to make purchases and to settle debts.
D) the sum of assets minus liabilities.
E) the market value of all final goods and services produced in a country in a year.
Q3) Money serves as a unit of account when
A) it is used to purchase goods and services.
B) there is direct trade of goods and services.
C) it is a basic measure of economic value.
D) it is a means of holding wealth.
E) there is a double coincidence of wants.
Page 11
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Chapter 10: Macroeconomic Policy
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) In Econland,the components of planned aggregate expenditure are given by:
C = 500 + 0.75(Y - T)- 500r
I = 300 - 500r
G = 400
NX = 30
If potential output equals 4,520,net taxes equal 40 and the central bank sets the interest rate at 0.05 (5%),then at the short-run equilibrium,there is a(n)_______ gap of _______.
A) expansionary;40
B) expansionary;80
C) recessionary;100
D) recessionary;80
E) recessionary;40
Q2) A lower real interest rate _________ private-sector investment spending and _________ consumption spending.
A) increases;increases
B) increases;decreases
C) does not change;does not change
D) decreases;increases
E) decreases;decreases
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Chapter 11: The Economy in the Long Run: an Introduction to Economic Growth
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) The goal of monetary policy in Canada is to maintain inflation within a range of ___________,with the mean target rate of inflation of ___________.
A) 1% to 3%;2%
B) 2% to 4%;3%
C) 0% to 3%;1.5%
D) 1% to 4%;2.5%
E) 0% to 4%;2%
Q2) The leftward shift in the aggregate demand (AD)curve,from AD1 to AD2,shown in the diagram above may be caused by a(n)
A) increase in autonomous consumption.
B) increase in government expenditure on roads and bridges.
C) decrease in autonomous private investment.
D) increase in autonomous net exports.
E) decrease in the interest ratE.
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13
Chapter 12: The Production Function Approach to Understanding Growth
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) An upward shift of the Bank of Canada's monetary policy rule function corresponds to a _________ the aggregate demand (ADI)curve,and an increase in autonomous aggregate demand corresponds to a _________ the aggregate demand (ADI)curve.
A) shift to the left of;movement up
B) shift to the left of;shift to the right of C) movement up;movement down D) movement up;shift to the right of E) shift to the right of;shift to the left of
Q2) Starting from long-run equilibrium,a large increase in government purchases will result in a(n)_________ gap in the short run,and ________ inflation and ________ output in the long run.
A) expansionary;higher;potential
B) expansionary;lower;potential
C) expansionary;higher;higher
D) recessionary;higher;potential
E) recessionary;lower;lower
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14
Chapter 13: Savings, Capital Formation and Comparative Economic Growth
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203 Verified Questions
203 Flashcards
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Sample Questions
Q1) From January 2003 to January 2008,the Canadian dollar _____________;by the end of the period,it was worth approximately ______________ than at the beginning.
A) appreciated;US$0.40 less
B) appreciated;US$0.10 more
C) appreciated;US$0.40 more
D) depreciated;US$0.40 less
E) depreciated;US$0.10 more
Q2) One plausible cause of the "Asian currency crisis" of 1997 is that,from mid-1995 to 1997,the U.S.dollar appreciated against the Japanese yen and other currencies,and this __________ the currencies of the East Asian countries whose currencies were fixed to the U.S.dollar.The result was larger ___________ in these countries under fixed rate regimes,which triggered speculative attacks against the currencies because currency traders anticipated an eventual ___________ of the currencies.
A) strengthened;trade deficits;depreciation
B) strengthened;trade surpluses;depreciation
C) strengthened;trade deficits;devaluation
D) strengthened;trade surpluses;devaluation
E) weakened;trade deficits;devaluation
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Chapter 14: International Trade
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Managers contribute to increased average labour productivity in each of the following ways,EXCEPT by
A) developing new products.
B) obtaining financing.
C) assigning workers to jobs.
D) dealing with suppliers.
E) motivating workers.
Q2) Low-income countries often face the resource curse because they have
A) few natural resources.
B) highly diversified economies.
C) high levels of capital per worker.
D) domestic conflict associated with control over natural resources.
E) fixed exchange rates.
Q3) High rates of investment in the private sector promote economic growth by A) increasing human capital.
B) increasing physical capital.
C) improving technology.
D) improving the social and legal environment.
E) increasing the availability of natural resources.
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Page 16
Chapter 15: Exchange Rates and the Open Economy
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Consumers of imported goods are _________ as a result of trade and consumers of exported goods are _________ as a result of trade.
A) winners;losers
B) winners;winners
C) losers;winners
D) losers;losers
E) unaffected;unaffected
Q2) If the economy in the diagram above is open to trade and the world price of oil is $30 per barrel,then this economy will ________ million barrels of oil.
A) export 6
B) export 8
C) export 10
D) import 10
E) import 6
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Chapter 16: The Balance of Payments: Net Exports and International Capital Flows
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247 Verified Questions
247 Flashcards
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Sample Questions
Q1) You expect a share of EconNews.com to sell for $65 a year from now and to pay a $2 dividend per share in one year.What should you pay (rounded to the nearest dollar)for the stock today if you require a 4% return?
A) $60.
B) $62.
C) $64.
D) $67.
E) $70.
Q2) In 2000,gross saving in Canada was
A) $186.1 billion.
B) $216.2 billion.
C) $113.0 billion.
D) $143.1 billion.
E) $276.3 billion.
Q3) An economy with positive net capital outflows must also have A) a current account deficit.
B) a budget surplus.
C) a budget deficit.
D) a current account surplus.
E) positive net capital inflows.
Page 18
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