Principles of Macroeconomics
Exam Questions
Course Introduction
Principles of Macroeconomics offers an introduction to the fundamental concepts and theories of macroeconomic analysis. The course explores the behavior and performance of entire economies by examining topics such as national income, gross domestic product (GDP), unemployment, inflation, and economic growth. Students learn about the role of government in the economy, including fiscal and monetary policy, and consider how global events and policies impact economic stability and development. Emphasis is placed on understanding key economic indicators, the business cycle, and the policymaking process, equipping students with the analytical tools needed to interpret real-world economic issues.
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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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 additional cost of consuming three rather than two units of activity is A) $10.
B) $20.
C) $30.
D) $40.
E) $50.
Answer: B
Q2) If the activity in question is yearly fishing trips,which of the following is the most appropriate example of Cost A?
A) A new,durable sun hat and a new fishing rod.
B) Worms and tackle for fishing.
C) Food and drinks during trips.
D) Cold beer and bottled water bought during trips.
E) Expenses on boat launching and marine gasolinE.
Answer: A
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Page 3
Chapter 2: Measuring Macroeconomic Performance:
Saving and Wealth
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) At the most basic level,the benefit of specialization is
A) greater total output.
B) greater interest in work.
C) less job related stress.
D) less diversity in output.
E) less detailed knowledgE.
Answer: A
Q2) Good W is on the vertical axis and good Z is on the horizontal axis of a production possibilities curve.An increase in the amount of training received only by workers producing good Z would cause the production possibilities curve to A) become steeper.
B) shift away from the origin.
C) become flatter.
D) shift towards the origin.
E) change in an unpredictable way.
Answer: C
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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) A decrease in supply,holding demand constant,will always result in a(n)
A) higher equilibrium price.
B) lower equilibrium price.
C) higher equilibrium quantity.
D) greater quantity demanded.
E) indeterminate change in the equilibrium quantity.
Answer: A
Q2) Given that demand shifts from D1 to D2,the equilibrium quantity will
A) rise to 6 units.
B) fall to 6 units.
C) rise to 9 units.
D) fall to 5 units.
E) remain unchanged.
Answer: A
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5
Chapter 4: Short-Term Economic Fluctuations
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131 Flashcards
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Sample Questions
Q1) The unemployment rate is the
A) percentage of the labour force who would like to be employed but cannot find work.
B) number of people who would like to be employed but cannot find work.
C) percentage of the population who are not working.
D) number of people who are not working.
E) the number of unemployed peoplE.
Q2) If average labour productivity decreases while the population and the number of employed workers remain constant,then output per person
A) increases.
B) decreases.
C) remains constant.
D) may increase or decrease.
E) cannot be determined.
Q3) When government revenue exceeds government spending,the nation has a A) budget surplus.
B) budget deficit.
C) trade balance.
D) trade surplus.
E) trade deficit.
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Page 6
Chapter 5: Spending and Output in the Short Run
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207 Flashcards
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Sample Questions
Q1) Which of the following would increase the net export component of Canada's GDP?
A) A car produced in Japan is purchased in British Columbia.
B) A bottle of British Columbia wine is purchased in California.
C) A bottle of French wine is purchased in Quebec.
D) A car produced in Cambridge,Ontario is purchased in Winnipeg,Manitoba.
E) A bottle of French wine is purchased in London,England.
Q2) Data for an economy show that the unemployment rate is 10%,the participation rate is 80%,and 200 million people 15 years or older are not in the labour force.How many people are in the labour force in this economy?
A) 80 million.
B) 200 million.
C) 800 million.
D) 1,000 million.
E) 1,600 million.
Q3) Private-sector investment includes spending on
A) 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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Chapter 6: Fiscal Policy
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191 Flashcards
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Sample Questions
Q1) The Bank of Canada's target inflation rate is _________ per year.
A) 3%
B) 2%
C) 4%
D) 1%
E) 5%
Q2) The annual percentage increase in the purchasing power of a financial asset is called the
A) market interest rate.
B) real interest rate.
C) nominal interest rate.
D) inflation rate.
E) deflation ratE.
Q3) The price of a specific good or service in comparison to the prices of other goods and services is called
A) a relative price.
B) the price level.
C) a real price.
D) indexing.
E) inflation.
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Chapter 7: Money, Prices and the Reserve Bank
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) The difference between the economy's actual output and its potential output at a point in time is called the
A) budget deficit.
B) trade deficit.
C) output gap.
D) full-employment rate.
E) cyclical peak.
Q2) Workers in ________ industries are more likely than workers in ________ industries to lose their jobs during a recession.
A) automotive;manufacturing
B) manufacturing: automotive
C) service;durable
D) durable;non-durable
E) non-durable;durable
Q3) From 1947 - 2010,the longest recession in Canada lasted _________ months.
A) 3
B) 6
C) 13
D) 19
E) 24
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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) Dave's Mirror Company expects to sell $1,000,000 worth of mirrors and to produce 1,250,000 worth of mirrors in the coming year.The company purchases $300,000 of new equipment during the year.Sales for the year turn out to be $1,000,000.Actual investment by Dave's Mirror Company equals ________ and planned investment equals
A) $250,000;$250,000
B) $300,000;$300,000
C) $550,000;$550,000
D) $300,000;$550,000
E) $550,000;$300,000
Q2) Based on the Keynesian cross diagram above,at short-run equilibrium output,autonomous planned aggregate expenditure equals _________ and induced planned aggregate expenditure equals ________.
A) 500;4,500
B) 500;5,000
C) 500;5,900
D) 5,450;5,500
E) 5,900;6,000
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10
Chapter 9: The Aggregate Demand - Aggregate Supply
Model
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124 Flashcards
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Sample Questions
Q1) The identity stating that money times its velocity equals the price level times real output is called the
A) quantity equation.
B) velocity equation.
C) hyperinflation equation.
D) money supply equation.
E) nominal equation.
Q2) The banking system can increase chequing deposits by more than a single bank,because
A) the banking system must keep reserves equal to 100% of its chequing deposits.
B) the central bank follows policies that prevent reserves from falling below the level required by law.
C) excess reserves loaned out by any particular bank will be deposited in some other bank.
D) borrowers often retain a portion of a loan in cash.
E) excess reserves loaned out by any particular bank will be taken out of circulation.
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Chapter 10: Macroeconomic Policy
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128 Flashcards
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Sample Questions
Q1) Which of the following is NOT a difference between the Bank of Canada's explanation of how monetary policy works and the Keynesian cross explanation?
A) The Keynesian cross explanation assumes that interest rate actions of the Bank have no effect on the exchange rate or on net exports.
B) The Keynesian cross explanation does not make it explicit that there are time lags between changes in the interest rate by the Bank and their ultimate effects on the economy.
C) The Keynesian cross explanation assumes that prices are fixed.
D) The Keynesian cross explanation assumes that the inflation rate is zero.
E) The Keynesian cross explanation does not allow interest rates to affect consumption or investment.
Q2) While ________ are the two major types of stabilization policy,________ is used most often to help stabilize the economy.
A) fiscal policy and monetary policy;monetary policy
B) fiscal policy and monetary policy;fiscal policy
C) tax policy and spending policy;tax policy
D) tax policy and spending policy;spending policy
E) monetary policy and structural policy;monetary policy
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Page 12
Chapter 11: The Economy in the Long Run: an Introduction to Economic Growth
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Sample Questions
Q1) The AD-AS model in the diagram above shows that at the initial short-run equilibrium point A,the economy is experiencing ___________ gap.Starting from point A,a decrease in government purchases that shifts the aggregate demand curve from AD to AD' will lead to the long-run equilibrium at point C,thus decreasing output at a ___________ price level and eliminating the output gap.
A) a recessionary;constant B) an expansionary;constant
C) a recessionary;lower D) an expansionary;higher E) an expansionary;lower
Q2) 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%
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Page 13
Chapter 12: The Production Function Approach to Understanding Growth
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Sample Questions
Q1) An increase in the interest rate by the Bank of Canada based on a given monetary policy rule represents a ________ the aggregate demand (ADI)curve,but an increase in the interest rate resulting from an upward shift in the Bank of Canada's monetary policy rule represents 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 left of
E) movement down;shift to the left of
Q2) To achieve long-run equilibrium in an economy with a recessionary gap,output will __________ and the inflation rate will _________.
A) increase;increase
B) increase;decrease
C) increase;not change
D) decrease;decrease
E) decrease;increase
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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) One plausible reason for the relative __________ of the Canadian dollar during the late 1980s and the early 1990s may have been the __________ of the __________ in pursuit of long-term price stability.
A) appreciation;tight monetary policy;U.S.Federal Reserve
B) depreciation;tight monetary policy;U.S.Federal Reserve
C) appreciation;tight monetary policy;Bank of Canada
D) depreciation;tight monetary policy;Bank of Canada
E) weakness;tight monetary policy;Bank of Canada
Q2) The foreign exchange market is the market in which ___________ of various nations are traded for one another.
A) goods and services
B) stocks and bonds
C) currencies
D) international financial securities
E) government debt
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Page 15
Chapter 14: International Trade
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175 Flashcards
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Sample Questions
Q1) The rate of economic growth is best defined as the A) percentage increase in real GDP over time.
B) increase in investment as a percentage of GDP over time.
C) percentage increase in consumption expenditures over time.
D) percentage increase in the quality of capital,human,and natural resources which occurs over time.
E) percentage increase in government spending over timE.
Q2) An abundance of natural resources,such as arable land,raw materials,and energy A) within a country's borders is necessary to achieve economic growth.
B) increases the productivity of workers who use them.
C) results in economic growth only if the population increases at least as rapidly.
D) result in economic growth only if an economy obtains them through international trade.
E) seldom contributes to economic growth,as measured by percentage increases in real GDP per person.
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16
Chapter 15: Exchange Rates and the Open Economy
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Sample Questions
Q1) The two institutions responsible for Canada's international trade policy are the
A) Bank of Canada and the Department of Foreign Affairs and International Trade.
B) Canada Revenue Agency and the Department of Foreign Affairs and International Trade.
C) Department of Finance and the Department of Foreign Affairs and International Trade.
D) Bank of Canada and the Department of Finance.
E) Canada Revenue Agency and the Department of FinancE.
Q2) A common market with a single currency but made up of any number of member countries is called
A) a free trade area.
B) a customs union.
C) a common market.
D) an economic and monetary union.
E) a political union.
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Chapter 16: The Balance of Payments: Net Exports and International Capital Flows
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Sample Questions
Q1) Personal saving is equal to
A) the sum of household saving and unincorporated (small)business saving.
B) household saving.
C) corporate saving.
D) government saving.
E) public saving.
Q2) Assets minus liabilities equal
A) saving.
B) investment.
C) wealth.
D) current income minus spending on current needs.
E) stocks,bonds,and credit card balances.
Q3) When the Bank of Canada's actions cause interest rates on newly-issued bonds to increase from 5% to 6%,the prices of existing bonds
A) increase.
B) decrease.
C) remain unchanged.
D) increase only if the coupon rate is less than 6%.
E) increase only if the coupon rate is greater than 6%.
Page 18
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