Social Sciences: Macroeconomics
Textbook Exam Questions
Course Introduction
This course introduces students to the fundamental principles of macroeconomics, exploring how economies function on a broad scale. Topics include national income and output, economic growth, unemployment, inflation, fiscal policy, monetary policy, and the role of government and central banking. By examining aggregate demand and supply, students will learn how different economic policies impact overall economic stability and growth. The course also discusses globalization, international trade, and the interconnectedness of economies, providing a comprehensive understanding of the forces shaping the modern world.
Recommended Textbook
Macroeconomics 14th Canadian Edition by Campbell R. McConnell
Available Study Resources on Quizplus
17 Chapters
661 Verified Questions
661 Flashcards
Source URL: https://quizplus.com/study-set/3444
Page 2
Chapter 1: Limits, Alternatives, and Choices
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/68416
Sample Questions
Q1) The production possibilities curve suggests that a nation cannot live beyond its means or production potential.Explain why international trade would cause this statement to be modified.
Answer: International trade allows for greater specialization and production.This activity has the effect of increasing the quantity and quality of resources,using resources more efficiently or improving output through the use of new production techniques.Thus,the gains from international specialization and trade are the equivalent of economic growth.
Q2) Define what is meant by an inverse relationship between two variables and describe the line graph depicting such a relationship.
Answer: An inverse relationship describes a situation where the two variables change in opposite directions.When the first variable increases,the second variable decreases and vice versa.An example would be product price and quantity demanded of the product.Other things being equal,the higher the product price,the less will be purchased.The line graph of an inverse relationship has a negative slope;that is,it is downward sloping from left to right.
Q3) What were the approximate average incomes of Canadians and Liberians in 2010?
Answer: $41950 and $330 ($US at market exchange rates).
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: The Market System and the Circular Flow
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/68406
Sample Questions
Q1) What are the economic advantages of the division of labour?
Answer: Specialization enables individuals to take advantage of existing differences in their abilities and skills.Other advantages come from increased productivity or output per worker as specialized workers gain skills in performing one task and avoid loss of time in switching from one task to another.Therefore,more is produced with the same amount of resources as before specialization.
Q2) What is the relationship between businesses and households in the circular flow model?
Answer: Households sell their resources to firms in return for money income.Businesses combine the households' labour with other resources to create products.They offer these products for sale to households and in return receive revenue.These revenues to firms enable them to pay for the cost of resources from households as the cycle begins again.
Q3) One of the characteristics of a modern market economy is an "active,but limited,government." How can the government "help" the economy?
Answer: The market is not always perfect.In some cases it directs the economy to an undesirable outcome.We call these instances market failures.When market failures exist,the governments can direct the economy to a more efficient outcome.
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Demand, Supply, and Market Equilibrium
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/68405
Sample Questions
Q1) In the spaces below each of the following,indicate the [increase (+),decrease (-),or indeterminate (ind)] on equilibrium price (P)and equilibrium quantity (Q)of each of these changes in demand and/or supply.
Answer: 11ea82f3_ff9b_8f19_9299_0b5d99370505_TB2474_00 (a)ind,+; (b)+,ind; (c)ind,-; (d)-,ind;
Q2) The Federal government is considering passing an excise tax that would increase the price of a pack of cigarettes by $1.00.What would be the likely effect of this change on the demand and supply of cigarettes? What is likely to happen to cigarette prices and the quantity consumed if the tax bill is enacted?
Answer: In the short run,the excise tax would decrease the supply of cigarettes because in essence it increases the cost of production.The decrease in supply would increase the price of cigarettes and decrease the quantity of cigarettes consumed.The demand for cigarettes would not change,but the quantity demanded would decrease.
Q3) What are the consequences for equilibrium price and quantity if there is an equal increase in the supply and demand for sushi?
Answer: The equilibrium quantity of sushi increases but the equilibrium price of sushi is unchanged.
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Market Failures: Public Goods and Externalities
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/68404
Sample Questions
Q1) What resource problem is created by negative externalities and what methods are suggested for dealing with this problem?
Q2) How does the market demand curve for a public good differ from the market demand curve for a private good?
Q3) Draw a market demand curve and indicate the following:
(a)The market price;
(b)The quantity demanded;
(c)The maximum amount that buyers are willing to pay for the quantity demanded; (d)The actual amount that buyers must pay for the quantity demanded; (e)The consumer surplus from obtaining the quantity demanded.
Q4) What resource problem is created by positive externalities and what methods are suggested for dealing with this problem?
Q5) Data on two individuals' preferences for a public good are reflected in the table below.P<sub>A</sub> and P<sub>B</sub> represent the prices individuals A and B,the only two people in the society,are willing to pay for an extra unit of a public good,rather than do without.
Q6) Evaluate.Economy in government requires that government minimize its spending.
Q7) How is consumer surplus derived from a demand curve?
Q8) How is producer surplus derived from a supply curve?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 6: An Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/68403
Sample Questions
Q1) What is modern economic growth?
Q2) "Most prices are not that sticky." Evaluate this claim.
Q3) What is the Great Recession? Describe its causes and also its impact on the Canadian Economy.
Q4) If households are typically the source of savings and businesses the source of investments,how then are savings and investments coordinated?
Q5) If prices are "stuck" and there is an unexpected demand increase,describe what happens in the economy.
Q6) In order to compare GDP across nations,economists typically make 3 adjustments.What are these adjustments and why are they carried out?
Q7) Why do economists use the term "sticky" prices rather than "stuck" prices?
Q8) What will happen to prices and output levels if there is an unexpected decrease in demand and prices are fully flexible?
Q9) Suppose that we are in a condition of fully flexible prices,but production of nails will not go above 200 chairs/month.What price will chairs sell for if market demand is characterized by: (a)P = 425 - 1.5Q, (b)P = 530 - 1.5Q,and (c)P = 400 - 0.5Q,where P is in $/chair and Q is in chairs/month?
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Measuring the Economys Output
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/68402
Sample Questions
Q1) What is the relationship between real GDP,nominal GDP,and the price index?
Q2) Firms A-E are involved in the production of some good.What is the total value added by all the firms in the production of this good? What did each firm add separately in value and what does it total?
Q3) Why do economists worry about "multiple counting" and calculate only the "value added" in the production process?
Q4) The expanding "underground" economy creates problems for economic policy makers.Explain.
Q5) If Canada doubled its real GDP,it would be a much less liveable society than it is today.Explain this view.
Q6) The following data show nominal GDP and the appropriate price index for several years.Compute real GDP for each year and indicate whether you have "inflated" or "deflated" nominal GDP in finding real GDP.All GDP are in billions.
Q7) What is the definition of GDP? How would the value of output produced at a Canadian-owned factory in Canada and a foreign-owned factory in Canada be treated in GDP accounting?
Q8) Explain the difference between final and intermediate goods,and give an example of each.
Page 8
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Economic Growth
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/68401
Sample Questions
Q1) Offer a skeptical perspective on the economics of the recent increase in the average rate of Productivity Growth.
Q2) How might poorer nations catch up to richer countries in terms of GDP per capita?
Q3) Suppose an economy's real GDP is $700 billion in year 1 and $718 billion in year 2.What is the growth rate of its GDP?
Q4) Define modern economic growth.When did it seem to start?
Q5) Suppose an economy's real GDP is $100,000 in year 1 and $110,000 in year 2.What is the growth rate of its GDP? Assume that population was 200 in year 1 and 205 in year 2.What is the growth rate in GDP per capita?
Q6) What are the economic implications from the current rise in the Average Rate of Productivity Growth?
Q7) Define worker-hours and labour productivity.What factors are behind labour productivity?
Q8) Identify the two major ways economic growth is measured.
Q9) Suppose an economy's real GDP is $125 billion in year 1 and $130 billion in year 2.What is the growth rate of its GDP?
Q10) Summarize the anti-growth view of economic growth.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Business Cycles, Unemployment, and Inflation
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/68400
Sample Questions
Q1) Evaluate the statement: "Inflation only benefits the rich."
Q2) What is meant by the term business cycle? List the four phases of the business cycle.
Q3) What phase of the business cycle is the Canadian and your provincial economy experiencing at the present time? Justify your answer.
Q4) Inflation is frequently described as "too much money chasing too few goods." Is this an acceptable definition?
Q5) What are the economic and non-economic costs of unemployment?
Q6) Some economists believe that moderate inflation cannot be accepted because a gradual increase in prices leads to an ever-rising rate of inflation.Other economists argue that in order to achieve rapid economic growth,some moderate price increases are necessary and that rigid price stability would cause considerable unemployment.Contrast and evaluate these two points of view.
Q7) How is the unemployment rate affected if employment increases from 9 million to 9.5 million and the labour force increases from 10 million to 11 million?
Q8) The table below shows the price index in the economy at the end of four different years.
Q9) What is Okun's law? Give an example of how it works.
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Basic Macroeconomic Relationships
Available Study Resources on Quizplus for this Chatper
26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/68415
Sample Questions
Q1) What are the relationships between the multiplier and the marginal propensities to consume and save?
Q2) What are the marginal propensity to consume (MPC)and marginal propensity to save (MPS)? How are the two concepts related? How are the two concepts related to the consumption and saving functions?
Q3) Use the graphs below to answer the following questions:
Q4) Complete the following table assuming that (a)MPS = 1/5, (b)there is no government and all saving is personal saving.
Q5) Complete the following table assuming that (a)MPS = 1/3, (b)there is no government and all saving is personal saving.
Q6) List six events that could cause a shift in the investment demand curve to the right.
Q7) Define the multiplier.How is it related to real GDP and the initial change in spending? How can the multiplier have a negative effect?
Q8) What are two key facts that serve as the rationale for the multiplier effect?
Q9) Explain the economic impact of an increase in the multiplier.
Q10) Describe the relationship between the Great Recession of 2008-2009 and the Investment Riddle.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 11: The Aggregate Expenditures Model
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/68414
Sample Questions
Q1) Answer the following questions using the aggregate expenditures model of the economy described below.
C = 90 + .7Y<sub>d</sub>
T = 50 + .2Y
I<sub>a</sub> = 36
G<sub>a</sub> = 45
X<sub>a</sub> = 62
M = .16Y
(a)What are the marginal propensity to consume,the marginal tax rate,and the marginal propensity to import?
(b)What is the saving function? What is the marginal propensity to save?
(c)What is the aggregate expenditure function? What is autonomous expenditure? What is the marginal propensity to withdraw?
(d)What is the equilibrium level of real GDP?
(e)What is the size of the multiplier?
(f)Suppose the full employment level of real GDP is $350.Does a recessionary gap or an inflationary gap exist? How can the government eliminate the gap by altering government expenditures?
Q2) Explain why saving equals planned investment at equilibrium GDP.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 12: Aggregate Demand and Aggregate Supply
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/68413
Sample Questions
Q1) Explain the relationship between the aggregate expenditures model in graph (A)below and the aggregate demand model in graph (B)below where aggregate demand is shifting.
Q2) In the table below are aggregate demand and aggregate supply schedules.
Q3) Economists think of three different aggregate supply curves based upon the time frame of observation.Briefly describe each.
Q4) List four government tax or spending policy options that would shift the short-run aggregate supply curve rightward.
Q5) List three events that would shift the short-run aggregate supply curve leftward.
Q6) The determinants of aggregate demand "determine" the location of the aggregate demand curve.Explain the four basic determinants of aggregate demand.
Q7) Using the aggregate demand-aggregate supply (short-run)model,explain the impact of the public's expectations of severe inflation on real GDP and the price level.
Q8) Differentiate between "demand-pull" and "cost-push" inflation using the aggregate demand-aggregate supply (short-run)model.
Q9) How is the long-run aggregate supply curve sloped? Explain.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 13: Fiscal Policy, Deficits, Surpluses, and Debt
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/68412
Sample Questions
Q1) What are four real and potential problems with the public debt?
Q2) What fiscal policy is most likely to be invoked during a period of rapid inflation? A period of severe unemployment? What political,investment,and international problems might the government encounter in enacting these policies and putting them into effect?
Q3) Which fiscal policy,government spending or taxes,is preferable?
Q4) Explain how the below graph illustrates the built-in stability of the tax structure.
Q5) Explain the aspects of expansionary and contractionary fiscal policy.During which phases of the business cycle would each be appropriate?
Q6) If the government is not implementing a discretionary expansionary fiscal policy,how can its budget move into a deficit?
Q7) If the public debt is a debt that we owe to ourselves,then there are obviously no problems connected with such a debt.Critically evaluate.
Q8) How does the public debt contribute to income inequality?
Q9) In 2011,the public debt was $617 billion.Put this number in perspective by relating the debt to GDP,to other countries' debt,to the amount of interest payments on the debt,and to ownership of the debt.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Money, Banking, and Money Creation
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/68411
Sample Questions
Q1) How does deterioration in the quality of borrowers affect multiple-deposit expansion?
Q2) Suppose a fraction of any new loan was kept as cash and not deposited into a bank.How would this currency drain affect multiple-deposit expansion?
Q3) The following is the consolidated balance sheet for the chartered banking system.Assume the desired reserve ratio is 33%.Show the new consolidated balance sheet after maximum loan expansion has occurred.
Q4) Define the desired reserve ratio.
Q5) Arrange the following items in the form of a chartered bank's balance sheet,and explain how each might come into being. Capital stock,$300,000;Cash Reserves,$60,000;Property,$290,000;Demand deposits,$150,000;Securities,$40,000;Loans,$60,000
Q6) How does a decrease in the desired reserve ratio affect multiple-deposit expansion?
Q7) What is the effect on the money supply when a chartered bank sells government securities to the public?
Q8) When would money that is declared legal tender be worthless?
Q9) What is the function of the Canadian Payments Association (CPA)?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 15: Interest Rates and Monetary Policy
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/68410
Sample Questions
Q1) Use the graph below to answer the following questions.D<sub>t</sub> is the transactions demand for money,D<sub>m</sub> is the total demand for money,and S<sub>m</sub> is the supply of money.
Q2) Use the below graphs to answer the following questions assuming the nominal GDP in the economy is given.
Q3) Identify two key tools of monetary policy.
Q4) Use the table below to answer the questions:
Q5) What are the two instruments the Bank of Canada has for influencing the money supply? Which instrument is more important?
Q6) The Bank of Canada is the bankers' bank.Explain.
Q7) How does an increase in nominal GDP affect the equilibrium rate of interest?
Q8) What is the relationship between the overnight lending rate and the prime interest rate? Why doesn't the Bank of Canada target the prime interest rate?
Q9) How do the lags associated with monetary policy differ from those associated with fiscal policy?
Q10) Explain how the net export effect strengthens the effects an easy money and a tight money policy.
Page 16
Q11) Differentiate between expansionary and restrictive monetary policies.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Long-Run Macroeconomic Adjustments
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/68409
Sample Questions
Q1) If the Phillips Curve exists in reality,what dilemma does this create for fiscal and monetary policies? Explain.
Q2) What are three significant generalizations regarding the inflation-unemployment relationship that are supported by results from the long-run AD-AS model?
Q3) Explain the basic arguments for supply-side economics.
Q4) What is stagflation and what was one of its causes in the 1970s and early 1980s?
Q5) In general,the Canadian economy has experienced ongoing inflation.Explain how this is possible.
Q6) Use the following diagram to answer the next three questions.
Q7) Suppose the potential level of real GDP for a hypothetical economy is $250 and the price level (P)initially is 100.Use the following short-run aggregate supply schedules below to answer the questions.
Q8) Why is the difference between the actual and expected rates of inflation important for explaining falling inflation?
Q9) What are three severe criticisms of the Laffer Curve?
Q10) What contributed to stagflation's demise between 1982 and 1989? How did these events affect aggregate supply and the Phillips Curve?
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: International Trade
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/68408
Sample Questions
Q1) Of all the reason for protests against the WTO,which are most substantive?
Q2) Evaluate the validity of the argument that a new industry in a nation needs protection from foreign competition if it is to prosper.
Q3) Suppose that by devoting all of its resources to the production of X,nation L can produce 40 X.By devoting all of its resources to Y it can produce 20 Y.Comparable figures for nation M are 15 X and 15 Y.According to the principle of comparative advantage,which nation will specialize in which product? What are the limits to the terms of trade?
Q4) What is the problem with protecting industries in Canada from the dumping of foreign products on the domestic market?
Q5) Identify the four basic types of trade barriers and describe each of them.
Q6) How can Canada compete successfully with relatively low-wage nations such as India and China?
Q7) Who gains and who loses from a protective tariff? Explain.
Q8) "The international flow of goods helps compensate for the international immobility of resources." Analyze and explain.
Q9) In what ways are national economies linked?
Q10) What are the economic benefits of free trade?
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Exchange Rates and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/68407
Sample Questions
Q1) Answer the next five questions on the basis of the following hypothetical data for a hypothetical nation Economia.All numbers are in billions of dollars.Assume that there is no Statistical Discrepancy.
Q2) What domestic macroeconomic adjustments would be necessary to maintain fixed exchange rates when there are persistent balance of payments deficits? What are the problems with these adjustments?
Q3) What is the "managed float"?
Q4) Answer the next five questions on the basis of the following hypothetical data for a nation Malthusia.All numbers are in billions of dollars.Assume that there is no Statistical Discrepancy.
Q5) What is the official settlement account and how is it used in the balance of payments?
Q6) Explain the relationship between the current account and the capital account in the balance of payments.
Q7) What happens in the foreign exchange market when there is a Canadian import transaction?
Q8) In the table below are the supply and demand schedules for Malaysian ringgits.
Page 19
Q9) What role does the foreign exchange market play in facilitating the trade of goods?
To view all questions and flashcards with answers, click on the resource link above.