ECON Exam

if a country has a working age population of 20 million, 13.5 million people with jobs, 1 million people who were looking for jobs but have given up and 500,000 unemployed and seeking employment the labour force is...

14.0 million

over the last 27 years, on average the inflation rate has been...

2%

suppose the currency drain is 25 percent and the desired reserve ratio is 20 percent. The money multiplier equals...

2.5

in the foreign exchange market, the demand for dollars increases if the...

Canadian interest rate differential increases

gross domestic product is defined as...

consumer spending + government purchases + investment spending + exports - imports.

interest received from Canadian holdings of foreign assets and interest paid to foreigners for Canadian investments is recorded in the...

current account

with respect to the balance of payments, in 2017 Canada experienced...

current account deficit

in 2017 Canada experienced...

current account deficit and budget deficit

there are ____ "fixed dates" per year for the Bank of Canada to announce changes to the overnight rate

eight

if the economy is at its rate of full employment then the unemployment rate is...

equal to the natural rate

other things remaining the same, as Canadian imports increase, the quantity of...

foreign currency demanded increases

the size of the labour force is...

greater than the number of employed workers so long as there are some unemployed workers

the growth rate of real GDP per person equals the...

growth rate of real GDP minus the growth rate of the population

Jim makes a $1000 deposit in his chequing account at the Bank of Montreal. The immediate effect of this transaction on Bank of Montreal's balance sheet is a(n)...

increase in bank assets and liabilities by $1000

which of the following events will lead to an increase in demand for money? i. an increase in the level of aggregate output ii. a decrease in the price level iii. increase in interest rate iv. increase in supply for money

increase in interest rate

what is a budget deficit?

it is government spending of all types of excess of tax revenue

allocative efficiency is a situation in which...

it is impossible to make one person better off without making at least one other person worse off

productive efficiency is a situation in which...

it is impossible to produce more of any single product without producing less of another

If nominal gross domestic product fell while real gross domestic product rose, what must be true?

nominal interest rates rose by less than the rate of inflation

classical growth theory predicts that increases in real GDP per person will...

not last because higher income leads to a population explosion

the national debt is the amount...

of debt outstanding that arises from past budget deficits.

the current account is the record of...

payments for imports, receipts for exports, net interest and net transfers

banks create liquidity by borrowing ______ and lending ______.

short; long

economic growth is defined as equal to...

the increase in real GDP

the opportunity cost of holding money is determined by...

the interest rate

canada's national electronic payments system used between the chartered banks, the Bank of Canada and other big financial institutions is called...

the large value transfer system

a price floor is

the lowest legal price at which a good or service can be traded

Frictional unemployment is the result of

the normal process of jobs being created and destroyed

the foreign exchange rate is defined as...

the price at which one currency exchanges for another

an open market operation is...

the purchase or sale of the government of Canada bonds in the open market by the Bank of Canada

real gdp can increase if...

the quantities of goods and services produced increase

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, then the

the real price of the 1970 soda is in 2000 dollars is 52 cents

which of the following will definitely lead to an increase in the equilibrium interest rate? i. a decrease in the level of output(real GDP) ii. the purchase of government bonds by the Bank of Canada iii. an increase in the level of output(real GDP) and an increase in money supply iv. the sale of government bonds by the bank of canada

the sale of government bonds by the bank of canada

money is...

the value of all coins and currency in circulation at any time

a bank has $220 in chequing deposits, $796 in savings deposits, $740 in term deposits, $890 in loans to businesses, $300 in outstanding credit card balances, $534 in government bonds, $1 in currency in its vault, and $20 in deposits at the bank of canada. The bank's total deposits are equal to...

$1756

The MPC is 0.90 and there are no income taxes or imports. If government's purchases goods and services increase by $2.0billion, aggregate expenditure increases by...

$20billion

a ham and cheese sandwich at the local deli costs $3.99 in 1991. if the CPI in 1991 was 90.0 and the CPI today is 110.0, the equivalent price of the ham and cheese sandwich today is...

$4.88

the base year is 2000. A country only produces CD players. The price of a CD player in 2000 was $100. The price of a CD player was $90 in 2001. The quantity of CD players produced in 2000 was 10,000 units and in 2001 it was 10,500 units. Nominal GDP in 2001 equals...

$945,000

currently the bank rate in canada is...

1.50% (1.75%)

suppose the population is 220 million people, the labour force is 150 million people, the number of employed is 130 million and the working age population is 175 million. What is the unemployment rate?

13.3%

the largest chartered bank in canada is...

Royal Bank of Canada

the bank of canada conducts monetary policy which is best defined as...

changing the quantity of money and influencing interest rates to improve economic performance

all of the following will increase the economy's potential output except: i. an increase in human capital ii. an increase in physical capital iii. technological innovation iv. a decrease in aggregate price level

a decrease in aggregate price level

which of the following events shifts the short-run aggregate supply curve to the right? i. a decrease in the money supply ii. a drop in oil prices iii. an increase in government spending on military equipment iv. an increase in price expectations

a decrease in money supply

which of the following actions is an example of expansionary fiscal policy? i. a decrease in welfare payments ii. a purchase of government securities in the open market iii. a decrease in the Bank rate iv. a decrease in the corporate profits tax rates

a decrease in the corporate profits tax rates

an example of expansionary monetary policy would be

a reduction in the taxes banks pay on their profits

M1 is defined as a measure of money including, in part...

chequing deposits and currency

Which one of the following statements is correct? i. if general price level increases, aggregate demand will eventually increase also ii. a reduction of general price level results in aggregate demand iii. when adjusted for inflation there is no relationship between the general price level and the level of real aggregate demand iv. a shift of the aggregate demand curve will eventually change both the price level and level of output

a shift of the aggregate demand curve will eventually change both the price level and level of output

GDP is measured by...

adding the market value of total final production

if the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur? i. aggregate demand will be unchanged ii. aggregate demand will increase iii. interest rates will decrease iv. money supply will decrease

aggregate demand will be unchanged

which of the following would close a deflationary gap? i. an increase in government spending ii. increase in taxes iii. decrease in exports iv. decrease in investments v. decrease in consumer spending

an increase in government spending

which growth theory predicts that even with technology advances, real GDP per person always returns to a subsistence level of income?

classical growth theory

which of the following will most likely occur as a result of an increase in labour productivity in an economy? i. an increase in output and a decrease in inflation ii. an increase in interest rates and a decrease in investment iii. a decrease in money demand and money supply iv. a decrease in exports and an increase in unemployment

an increase in output and a decrease in inflation

the upward sloping aggregate supply curve indicates that...

as firms increase their level of output, the cost of producing an extra unit increases

which of the following statements about the demand for money is incorrect? i. the amount of money that people hold is negatively related with the interest rate ii. as the level of national income rises, the amount of money balances that individuals hold decreases iii. both the level of national income and the interest rate affect the demand for money balances iv. other things constant, an increase in the real interest rate reduces the demand for real money balances

as the level of national income rises, the amount of money balances that individuals hold decreases

if the bank of canada reduces the money supply the reduce inflation, a flexible exchange rate will aid the bank of canada in fighting inflation because...

as the money supply is decreased, the interest rate will increase, and the exchange rate will rise, causing canadian exports to fall, and canadian imports to rise

what is the most important role of the Bank of Canada

conducting monetary poliy

how can an iflationary gap be closed?

by an increase in taxes

if the required reserve ratio is 25 percent and banks hold no excess reserves, an open market sale of $400,000 of government securities by the central bank will...

decrease the money supply by up to $1.6 million

chartered bank assets are primarily divided into three categories that include all of the following except... i. cash ii. bonds iii. loans iv. deposits

deposits

which on of the following is not a source of market failure? i. public goods ii. externalities iii. diminishing returns to scale iv. air pollution

diminishing returns to scale

to say money is a store of value means...

it is a way of saving purchasing power to be used when needed

if real GDP exceeds potential GDP, to move the economy to potential GDP, the Bank of Canada will...

increase the interest rate to decrease real GDP

if the desired reserve ratio is lowered from 20% to 10%, the deposit multiplier...

increases to 10

the Bank of Canada's monetary policy includes...

inflation targeting and flexible exchange rate

direct investments in the context of balance payments relates to...

investment in shares of overseas companies

the interest rate...

is determined in the money market and has influence on the goods market

a price ceiling

is the maximum price that can legally be charged

what is the immediate affect of expansionary policy on a small open economy with fixed exchange rate

leftward shift of aggregate demand with decrease in nominal GDP

what is the immediate affect of a contractionary monetary policy on a small open economy with fixed exchange rate

leftward shift of money supply with with decrease in interest rate

which of the following products are non-rivial in consumption? i. subway rides ii. lighthouse iii. congested highway iv. ocean fisheries v. oil deposits

lighthouse

the functions of money are...

medium of exchange, unit of account, store of value

which of the following product are non-excludable? i. transportation services ii. water supply iii. private health iv. military protection v. postal services

military protection

which of the following is an example of a public good/service? i. a prescription drug ii. electricity iii. police protection iv. cable tv

police protection

neoclassical growth theory predicts that growth in real GDP is determined by...

population growth and the pace of technological change

according to the model of aggregate supply and aggregate demand, in the long run, an increase in money supply should cause...

prices to rise and output to rise

a good for which one person's consumption decreases the quantity available for others is...

private good

a good that can be consumed simultaneously by everyone and from which no one can be excluded is...

public good

portfolio investment in the context of balance of payments relates to...

purchase of shares in foreign company

if the Canadian interest rate differential rises, then the effect in the foreign exchange market on the demand for dollars is that the...

quantity of dollars demanded increases

In growth theory, the standard of living is measured using the growth rate of

real GDP per person

what is the immediate impact of an expansionary monetary policy in a small open economy with flexible exchange rate?

rightward shift in money supply with increase in interest rate

the CPI measures the price of the...

same basket of goods and services in different years

which of the following represents an action by the bank of canada that is designed to decrease money supply? i. an increase in federal taxes ii. selling government bonds in the open market iii. a decrease in the overnight rate iv. a transfer of government funds from the Bank of Canada to a chartered private bank

selling government bonds in the open market

Money performs all of the following functions EXCEPT serving as a i. medium of exchange. ii. unit of account. iii. store of value iv. store of things

store of things

if an individual cannot find a job because his or her job skills have become obsolete this is an example of...

structural unemployment

the new growth theory asserts that profits are...

temporary, because the discoveries that lead to profits are eventually used by all

expansionary monetary policy

tends to lead to a depreciation of a nation's currency

What are externalities?

the benefit or costs of a product experienced by people who neither consume nor produce that product

the monetary base is the sum of...

the chartered banks' deposits at the Bank of Canada plus coins and Bank of Canada notes

the classic dichotomy is a discovery that states...

throughout the business cycle, the forces that determine the real variables are independent of those that determine nominal variables