Principles of Macroeconomics Pre-Test
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Course Introduction
Principles of Macroeconomics introduces students to the fundamental concepts and analytical tools used to understand the functioning of an entire economy. The course explores topics such as national income determination, inflation, unemployment, economic growth, fiscal and monetary policy, and international trade. Emphasis is placed on the measurement and interpretation of key macroeconomic indicators and the role of government and central banks in managing economic stability and growth. Students will develop a foundational understanding of how economies operate on a broad scale and how macroeconomic theories apply to real-world issues and policymaking.
Recommended Textbook
Macroeconomics Canada in the Global Environment 8th Edition by Michael Parkin
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Chapter : 1 What Is Economics
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Q1) Refer to Figure 1A.2.3.Which of the graphs shows a positive relationship between x and y?
A)(a)
B)(b)
C)(c)
D)(d)
E)both (b)and (d)
Answer: B
Q2) "The rich should face higher income tax rates than the poor." This is an example of
A)a normative statement.
B)a positive statement.
C)a negative statement.
D)economic reasoning.
E)neither a normative nor a positive statement.
Answer: A
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Chapter 2: The Economic Problem
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Q1) The most anyone is willing to pay for another purse is $30.Currently the price of a purse is $40,and the cost of producing another purse is $50.The marginal benefit from a purse is ________.
A)$40
B)$50
C)$10
D)$20
E)$30
Answer: E
Q2) To gain from comparative advantage,countries must not only trade,they must also A)save.
B)invest.
C)engage in research and development.
D)engage in capital accumulation.
E)specialize.
Answer: E
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Chapter 3: Demand and Supply
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Sample Questions
Q1) Initially,the demand curve for good A is D2 in Figure 3.5.1.If income increases and A is a normal good,we would expect to see a movement from point A to point
A)B.
B)C.
C)D.
D)E.
E)C and back to point A.
Answer: B
Q2) At price P2 in Figure 3.4.1,which one of the following is not true?
A)This market is in equilibrium.
B)The quantity demanded is equal to the quantity supplied.
C)The quantity demanded is Q1.
D)There is no surplus.
E)The quantity supplied is Q3.
Answer: C
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Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper ________ part of GDP because the paper is ________ good.
A)is not; a final
B)is not; an intermediate C)is; an intermediate D)is; a final
E)is; a nonrenewable
Q2) Real GDP will increase only if the A)average level of prices rises.
B)quantity of goods and services produced increases.
C)unemployment rate rises.
D)employment rate rises.
E)employment rate falls.
Q3) Refer to Fact 20.1.1.Peter's gross investment in 2012 is A)$2,800.
B)$3,800.
C)$1,800.
D)$7,800.
E)$5,800.
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Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) If prices at Wendy's rise,more consumers buy their meals at McDonald's and fewer consumers buy their meals at Wendy's.This is an example of
A)consumers' action to boycott Wendy's.
B)outlet substitution.
C)commodity substitution.
D)both A and B.
E)both B and C.
Q2) The working-age population is the total number of people
A)in the labour force.
B)in the labour force who are employed.
C)aged 15 years and over.
D)in the labour force, aged 15 years and over.
E)in the labour force, aged 15 years and over, and employed.
Q3) Hyperinflation is defined as
A)declining inflation rates.
B)rising but low inflation rates.
C)very high inflation rates.
D)very low inflation rates.
E)an increase in the price level.
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Chapter 22: Economic Growth
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Sample Questions
Q1) Knowledge capital is different from physical capital because knowledge capital
A)does not experience diminishing returns.
B)experiences diminishing returns.
C)is free.
D)increases with investment.
E)none of the above.
Q2) If capital per worker increases,labour productivity
A)decreases for a given level of technology.
B)increases because the level of technology increases.
C)increases for a given level of technology.
D)decreases because the level of technology decreases.
E)does not change unless technology advances at the same time.
Q3) Which of the following is not a source of economic growth?
A)increasing stock market prices
B)better educated workers
C)growing physical capital
D)appropriate incentive system
E)advances in technology
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Chapter 23: Finance,saving,and Investment
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Sample Questions
Q1) The government of Greece is running a large budget deficit.With no Ricardo-Barro effect,which of the following events will occur?
I. The supply curve of loanable funds will shift leftward.
II. A higher real interest rate crowds out investment.
III. Saving increases.
A)I only
B)II only
C)III only
D)I and II only
E)I, II, and III
Q2) A small country is a net foreign borrower.Its real interest rate without foreign borrowing is ________ the world real interest rate.
A)higher than B)equal to C)lower than
D)not comparable to E)either higher than or equal to
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Chapter 24: Money,the Price Level,and Inflation
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Sample Questions
Q1) The amount of real money people want to hold will increase if either the amount they are spending increases or the
A)price level increases.
B)price level decreases.
C)interest rate increases.
D)interest rate decreases.
E)price of bond falls.
Q2) If the desired reserve ratio is 3 percent and deposits totaled $5.75 billion,banks hold
A)$172.5 million in reserves.
B)$0.1725 million in reserves.
C)$172.5 million in excess reserves.
D)$0.1725 million in excess reserves.
E)$192 million in reserves.
Q3) Anything can be money as long as it
A)has low transactions costs.
B)is not too bulky.
C)has intrinsic worth.
D)meets the double coincidence of wants.
E)is acceptable as a medium of exchange.
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Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) Which one of the following transactions would be recorded as a positive entry in the Canadian balance of payment accounts?
A)A Canadian tourist spends $3,000 while visiting France.
B)A Canadian tourist spends $3,000 while visiting Banff.
C)A Canadian citizen purchases a U.K. government bond.
D)A Canadian corporation sends interest payments on outstanding bonds to U.S. citizens.
E)A French tourist spends $3,000 while visiting Banff.
Q2) Between 2002 and 2007,the Canadian dollar
A)depreciated against the U.S. dollar.
B)appreciated against the U.S. dollar.
C)remained constant against the U.S. dollar.
D)was not able to vary against the U.S. dollar, because the exchange rate was fixed against the Japanese yen.
E)bought the same number of U.S. dollars as the Euro.
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Chapter 26: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) Consider an economy starting from a position of full employment.Which one of the following changes does not occur as a result of a decrease in aggregate demand?
A)The price level decreases.
B)The level of real GDP decreases in the short run.
C)A recessionary gap arises.
D)Factor prices decrease in the long run, shifting the short-run aggregate supply curve rightward.
E)The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium.
Q2) The defining feature of the Keynesian view of macroeconomics is that the economy is
A)rarely at full employment.
B)self-regulating and always at full employment.
C)that the quantity of money is the most significant influence on aggregate demand.
D)constantly bombarded by shocks that arise from the uneven pace of technological change.
E)no active stabilization is needed to offset changes in aggregate demand.
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Chapter 27: Expenditure Multipliers: the Keynesian Model
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Sample Questions
Q1) In a recent study,the University of Underfunded argued that it created four times as many jobs as people that it hired directly.This argument illustrates the idea
A)of the marginal propensity to consume.
B)of the multiplier.
C)of government spending.
D)of the tax multiplier.
E)that universities are wasting taxpayers' dollars.
Q2) As real GDP increases
A)autonomous consumption increases.
B)planned investment increases.
C)exports increase.
D)imports increase.
E)imports decrease.
Q3) Refer to Figure 27.2.1.When real GDP is equal to Yc,then
A)actual expenditure is less than planned expenditure.
B)actual expenditure is greater than planned expenditure.
C)planned expenditure is equal to actual expenditure.
D)the economy is in equilibrium.
E)real GDP increases.
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Q1) According to real business cycle theory,an increase in productivity ________ the demand for loanable funds,________ the demand for labour,and ________ the supply of labour.The real interest rate will ________.
A)increase; increases; does not change; fall
B)increase; increases; does not change; rise
C)decrease; decreases; decreases; fall
D)increases; increases; increases; rise
E)increases; increases; increases; fall
Q2) In real business cycle theory,the supply of labour
A)increases if the nominal interest rate rises.
B)is independent of the real interest rate.
C)decreases if the real interest rate rises.
D)decreases if the real interest rate falls.
E)decreases if the real wage rate decreases.
Q3) In real business cycle theory,the supply of labour
A)increases if the real interest rate falls.
B)increases if the real interest rate rises.
C)increases if the demand for labour decreases.
D)is not influenced by changes in the real interest rate.
E)increases if the demand for loanable funds decreases.
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Chapter 29: Fiscal Policy
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Sample Questions
Q1) Refer to Figure 29.3.1,which shows the outlays and revenues for the government of Pianoland.A discretionary fiscal restraint policy would be shown as
A)a movement from left to right along the revenues curve.
B)a movement from left to right along the outlays curve.
C)an upward shift of the revenues curve.
D)an upward shift of the outlays curve.
E)both A and C.
Q2) A cyclical deficit occurs when
A)government outlays are greater than revenues.
B)government outlays are less than revenues.
C)there is a deficit due to the fact real GDP is greater than potential GDP.
D)there is a deficit due to the fact real GDP is less than potential GDP.
E)there is a deficit even when real GDP equals potential GDP.
Q3) Discretionary fiscal policy
A)requires action by Parliament.
B)is triggered by the state of the economy.
C)involves only a change in government outlays and no change in revenues.
D)involves only a change in personal income tax rates.
E)occurs during recessions but not during expansions.
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Chapter 30: Monetary Policy
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Q1) Which of the following benefits flow from the application of an inflation-control target?
A)If actual inflation exceeds the target range, the Bank of Canada can induce a recession to correct the matter.
B)The monetary authorities can change the target range whenever they feel it is appropriate.
C)People can make decisions with an understanding that inflation rates will remain relatively low.
D)Financial market traders have a clearer understanding of the Bank of Canada's intentions.
E)Both C and D.
Q2) The Bank of Canada can lower the overnight loans rate by
A)raising the bank rate.
B)lowering the bank rate.
C)raising the settlement balances rate.
D)lowering the settlement balances rate.
E)both B and D.
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Chapter 15: International Trade Policy
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Sample Questions
Q1) Increasing a tariff ________ the domestic quantity consumed of the good and ________ the domestic production of the good.
A)increases; increases
B)increases; decreases
C)decreases; increases
D)decreases; decreases
E)decreases; does not change
Q2) ________ occurs when a foreign firm sells its exports at a lower price than its cost of production.
A)Comparative advantage
B)Learning-by-doing
C)A tariff
D)An infant industry
E)Dumping
Q3) Tariffs
A)generate revenue for consumers.
B)generate revenue for the government.
C)encourage domestic consumers to buy more imports.
D)encourage domestic producers to produce less.
E)lower prices for consumers.
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