Macroeconomics

A movement along the net export (NX) function can be caused by a change in 4) A) foreign prices. B) domestic national income. C) domestic prices. D) the exchange rate. E) foreign national income.

b

Jodie's Bakery generates a yearly revenue of $6000. Throughout the year Jodie spends $1500 on 4) flour, $1000 on fruit, $500 on sugar & spices, $1500 on butter, and employs an assistant whom she pays $1000. Calculate the value of the annual output produced by Jodie's Bakery using the value added method.

1500

A commercial bank's actual reserve ratio is the 12) A) fraction of its deposit liabilities that it actually holds as reserves, either as cash or as deposits with the Bank of Canada. B) ratio of chequable deposits to term deposits that it holds on its books. C) fraction of its deposit liabilities that are backed by gold. D) ratio of Canadian dollars to foreign currencies that it holds on its books. E) fraction of its deposit liabilities that it actually holds as gold, other precious metal or cash in its own vaults.

a

Consider a consumption function in a simple macro model with government and taxes. Given a 12) marginal propensity to consume out of disposable income of 0.9 and a net tax rate of 10% of national income, the marginal propensity to consume out of national income is A) 0.81. B) 0.72. C) 1.00. D) 0.09. E) 0.90.

a

Consider an economy with a relatively steep AS curve. If there is a shift to the right in the AD curve, 15) there will be a ________ in the price level and ________ in national output. A) large increase; a small increase B) small increase; a large increase C) small increase; a large decrease D) large increase; no change E) large increase; a small decrease

a

Consider the AD/AS model and suppose the economy begins at potential output. The effect of a 4) negative AS shock on real GDP will be reversed in the long run with a ________ shift in ________. A) rightward; AS B) leftward; Y* C) leftward; AS D) leftward; AD E) rightward; AD

a

Consider the AD/AS model. An increase in government purchases will have no impact on 5) equilibrium real GDP if A) the AS curve is vertical. B) the simple multiplier is very small. C) the AS curve slopes upward. D) the marginal propensity to spend is very small. E) the AS curve is horizontal.

a

Consider the AD/AS model. In the long run, after factor prices have fully adjusted to any output 1) gaps, real GDP A) is determined by potential output and the price level by aggregate demand. B) and the price level are determined by aggregate demand. C) and the price level are determined by "long-run aggregate supply." D) is determined by AD and the price level is determined by the AS curve. E) is determined by aggregate demand and the price level by potential output.

a

Consider the Neoclassical growth model. The effect of an increase in population (or the labour 12) force) in an economy, with everything else held constant, is A) a decrease in per capita output. B) an increase in per capita national income. C) a decrease in the capital-output ratio. D) an increasingly aging population. E) an inward shift of the production possibilities boundary.

a

Consider the basic AD/AS macro model. The simple multiplier is reflected by the 13) A) size of the rightward shift of the AD curve in response to a change in autonomous expenditure. B) horizontal distance between initial macroeconomic equilibrium and the new intersection of AD and AS in response to a change in autonomous expenditure. C) size of the leftward shift of the AD curve in response to a rise in autonomous expenditure. D) downward movement along the AD curve in response to a change in autonomous expenditure. E) upward movement along the AD curve in response to a change in autonomous expenditure.

a

Doug is saving money in order to purchase a new snowboard next winter. This represents using 2) money as A) a store of value. B) a medium of deferred payment. C) a medium of exchange. D) a unit of account. E) method of barter

a

Historically, nominal GDP has increased faster than real GDP because 13) A) the general price level has increased. B) the general price level has fallen. C) imports have risen more rapidly than exports. D) improvements in product quality have not been reflected in prices. E) exports have risen more rapidly than imports.

a

How does monetary equilibrium re-establish itself when there is an excess supply of money 16) balances? A) the price of bonds increases B) the price of bonds falls C) the interest rate rises D) the price level falls E) individuals attempt to sell bonds

a

How does the Bank of Canada set in motion the monetary transmission mechanism? 7) A) by altering its target for the overnight interest rate B) by influencing the exchange rate directly C) by altering the price level D) by influencing aggregate supply directly E) by influencing the demand for money directly

a

If 0.75 U.S. dollars can be exchanged for one Canadian dollar, we say that the Canadian-U.S. 13) exchange rate is A) 1.33. B) 0.75. C) 1.25. D) 75. E) 1.0.

a

In macroeconomics, the "output gap" is the difference between 3) A) potential real national income and actual real national income. B) real and nominal national income. C) output and employment. D) output in the current year and output in the base year. E) real GNP and real GDP.

a

Money is commonly defined as 1) A) a generally accepted medium of exchange. B) foreign-exchange reserves. C) gold. D) paper currency. E) the Canadian dollar.

a

Most central banks, implement monetary policy by A) influencing a short-term interest rate directly. B) controlling the money supply directly. C) controlling the process of deposit creation in the commercial banking system. D) influencing the demand for money directly. E) influencing investment demand directly.

a

One reason that the Bank of Canada does not try to influence the money supply directly is that 2) A) the slope of the money demand curve is not precisely known, and so the effect on the interest rate of a change in money supply is uncertain. B) the Bank of Canada does not have the mandate to change the money supply. C) the Bank of Canada has many other policy tools with which it can influence aggregate demand. D) because the money demand curve is almost horizontal, changes in the money supply would have little or no effect on the interest rate. E) because the investment demand curve is almost vertical, any change in the interest rate resulting from a change in money supply would have little or no effect on desired investment expenditure.

a

Other things being equal, a rise in the domestic price level 15) A) lowers the real value of all assets denominated in money units. B) causes a decrease in real saving. C) makes foreign goods less attractive to domestic residents. D) raises the real burden of repaying a fixed money value debt. E) makes domestic goods more attractive to foreigners

a

Refer to Figure 21-3. A shift in the aggregate expenditure function from AE0 to AE1 could be 13) caused by A) an increase in desired investment expenditures. B) a fall in the marginal propensity to consume. C) a rise in the multiplier. D) a rise in the marginal propensity to consume. E) a decrease in desired investment expenditures

a

Refer to Figure 22-3. Autonomous expenditures ________ as the AE curve rotates from AE1 to AE0 8) and equilibrium national income ________. A) remain constant; decreases B) remain constant; increases C) remain constant; remains constant D) decrease; decreases E) increase; decreases

a

Refer to Figure 23-2. Which of the following events could cause the upward shift of the AS curve? 10) A) a decrease in the world supply of oil as a result of a major hurricane B) rapid technological advances in mass production C) a decrease in the price of raw materials D) improved quality of the national education system E) an increase in consumption

a

Refer to Figure 24-5. If the economy is currently in equilibrium at E3, the concept of asymmetrical 7) adjustment of the AS curve suggests that A) the return of the economy to potential output may be very slow without government intervention. B) a decrease in the price level will induce a rightward shift of AS. C) the economy will never return to potential output. D) the economy will attain potential output faster if there is no intervention by the government. E) the price level is constant regardless of the level of equilibrium income.

a

Refer to Figure 24-5. The economy is not in long-run equilibrium at E1 because the 8) A) AS will shift to the left due to an increase in wages. B) AS will shift to the left due to an increase in the price level. C) AS will shift to the right due to a decrease in the price level. D) AD1 curve will shift back to AD0 due to an increase in the price level. E) AD1 curve will shift back to the left due to a fall in current consumption.

a

Refer to Table 27-2. Assume that Bank North is operating with no excess reserves. What is their 2) actual reserve ratio? A) 15% B) 20% C) 25% D) 12% E) 13.67%

a

Refer to Table 27-2. What are the income-earning assets for Bank North? A) Loans B) Liabilities C) Deposits D) Capital E) Reserves

a

Suppose Appliance Mart buys a used refrigerator for $100, repairs it, and resells it for $250. The 2) result of this transaction is to A) increase the value of national product by $150. B) leave the value of national product unchanged. C) increase the value of national product by $250. D) decrease the value of national product by $100. E) There is insufficient information to know.

a

Suppose Bank ABC has a target reserve ratio of 2%. If Bank ABC receives a new deposit of $50 15) million it will immediately find itself with A) excess cash reserves of $49 million. B) no excess cash reserves. C) excess cash reserves of $1 million. D) excess cash reserves of $49.5 million. E) excess cash reserves of $10 million.

a

Suppose Canada's exchange rate with the U.S. dollar increases from 1.14 to 1.22. Which of the 15) following is likely to happen? A) Fewer Canadians will cross the border to shop in the U.S. B) The Canadian dollar value of Canada's exports to the U.S. will fall. C) It is less expensive for Canadians to shop online from U.S. retailers. D) More Canadians will cross the border to shop in the U.S. E) The Canadian dollar value of Canada's imports from the U.S. will fall.

a

Suppose the market interest rate falls from 3% to 2%. This will lead to ________ in bond prices and 7) ________ in bond yields. A) a rise; a fall B) a fall; a fall C) a fall; a rise D) a rise; a rise E) no change; no change

a

The curve that is sometimes called the "long-run aggregate supply curve" (vertical Y*) relates the 11) aggregate price level to real GDP A) after factor prices have fully adjusted to eliminate output gaps. B) when national income is at less than potential income. C) when wages are in adjustment but prices are unstable. D) when technology is allowed to change. E) in the short run.

a

The four major determinants of economic growth include all of the following EXCEPT 4) A) growth in financial capital. B) growth in the labour force. C) growth in human capital. D) growth in physical capital. E) technological improvement

a

The level of aggregate output is determined in the short run by ________ but in the long run by the 6) level of ________. A) the AD and AS curves; Y* B) the AD curve; interest rates C) the AD and AS curves; factor utilization D) the output gap; factor productivity E) the AS curve; potential output

a

The opportunity cost of holding money rather than bonds is 8) A) the rate of interest earned on bonds. B) forgone liquidity. C) the price level. D) forgone consumption. E) zero — there is no opportunity cost of holding money

a

The present value of an asset is 2) A) the most someone would be willing to pay today for the asset. B) the most someone would be willing to pay upon maturity of the asset. C) the amount someone would pay in the future for the current stream of payments from the asset. D) equivalent to the face value of the asset. E) the amount someone would pay in the future to have the asset today

a

The schedule that relates the level of desired total expenditures to the level of actual national 8) income is called the A) aggregate expenditure function. B) equilibrium function. C) dissaving function. D) desired aggregate demand function. E) consumption function

a

The so-called "Solow residual" 16) A) is an underestimate of the amount of technological change when embodied technological progress occurs. B) is an alternative to a measure of "total factor productivity." C) is an overestimate of the amount of technological change when embodied technological progress occurs. D) refers to the amount of GDP growth that cannot be explained by the growth in technological change. E) takes embodied technological change into consideration.

a

What is the present value of a bond that pays $121.00 one year from today if the interest rate is 10% 3) per year? A) $110.00 B) $100.00 C) $121.00 D) $133.10 E) $221.00

a

When an economy experiences sustained growth in real GDP, 5) A) potential GDP is likely to be increasing. B) actual GDP is greater than potential GDP. C) wage rates will decrease slowly as factor-utilization rates decrease. D) actual GDP is less than potential GDP. E) factor prices are likely to be decreasing.

a

Which of the following statements about national-income accounting is correct? A) The value of the expenditure on a nation's output is equal to the total income claims generated by producing that output. B) The total value added in the economy is equal to the sum of all components in the circular flow of expenditure and income. C) GDP on the expenditure side is calculated by adding up all the income claims generated by the act of production. D) GDP on the income side is calculated by adding up total expenditure for each of the main components of final output. E) GDP from the expenditure side and GDP from the income side differ by the amount of investment in the economy.

a

Which of the following was the most important initial step in the evolution of paper currency? 6) A) the acceptance of goldsmiths' receipts B) the acceptance of metallic coins C) the issuance of currency by governments D) the acceptance of bank notes E) the use of the Gold Standard

a

Why are illegal activities, unreported activities, and non-market activities excluded from GDP? 15) A) They are difficult to measure. B) They do not contribute to human welfare. C) The do not contribute to the true national output of goods and services. D) They are morally repugnant. E) They do not have an opportunity cost

a

"Embodied technical change" is said to occur when 15) A) techniques of managerial control are improved. B) older capital equipment is replaced with different, more productive, capital. C) the capital-labour ratio is increasing. D) the labour force acquires new skills that can be used across a wide range of industries. E) innovations in the organization of production take place which do not involve changes in the form of capital used.

b

A characteristic of the short run in macroeconomics is that 15) A) actual GDP is always less than potential GDP. B) the output gap opens or closes as the economy moves through the phases of the business cycle. C) actual GDP is always growing at the same rate as potential GDP. D) actual GDP is always greater than potential GDP. E) the output gap is constant because the capital stock cannot change

b

A decrease in aggregate supply in the short run is 14) A) shown by a shift to the right of the AS curve. B) shown by a shift to the left of the AS curve. C) caused by a decrease in the price level. D) interpreted to mean that more national output will be supplied at any given price level. E) caused by an increase in the price level

b

An inflationary output gap implies that 9) A) the intersection of AD and AS occurs at real GDP below potential output. B) the economy's resources are being used beyond their normal capacity. C) there is a pressure for wages to decrease. D) the demand for all factor services will be relatively low. E) there is excess supply of most factors of production.

b

As the macro economy adjusts from the short run to the long run, 14) A) potential output is adjusting to close inflationary or recessionary gaps. B) wages and other factor prices adjust to close output gaps. C) wages and other factor prices remain constant. D) aggregate supply shocks cause deviations from potential output. E) aggregate demand shocks cause deviations from potential output.

b

Consider the AD/AS macro model. The main source of increases in material living standards over 13) the long term is the A) continuous outward shift of aggregate demand. B) continual increase in potential national income. C) positive slope of the aggregate supply curve. D) continual avoidance of recessionary gaps. E) maintenance of a continuous inflationary gap.

b

Consider the equation: AE = C + I + G + (X - IM). Which of the following statements correctly 2) describes this sum? A) It is a summation of planned expenditures and is always equal to real GDP. B) It is a summation of the desired expenditures on domestically produced output. C) It is a summation of actual expenditures and is equivalent to GDP. D) It is a summation of planned expenditures and is equal to nominal GDP. E) It is a summation of the desired expenditures of domestic households, firms and government.

b

Consider the following information describing a closed economy with no government and where aggregate output is demand determined. All dollar figures are in billions. 1. the equilibrium condition is Y = C + I 2. the marginal propensity to consume is 0.90 3. the autonomous part of C is $300 4. investment is autonomous and is $100 10) Refer to Table 21-3. The equilibrium level of national income will be A) $3900. B) $4000. C) $3600. D) $4400. 10) 3 E) $3000

b

Consider the nature of macroeconomic equilibrium. If, at a particular price level, the total output 12) demanded is greater than that supplied by producers, then A) the price level will decline toward its equilibrium value. B) the price level will rise toward its equilibrium value. C) the aggregate supply curve will shift to the left, re-establishing equilibrium. D) the aggregate demand curve will shift to the left, re-establishing an equilibrium. E) the aggregate supply curve will shift to the right, re-establishing an equilibrium.

b

If the Canadian dollar exchange rate increases, the 12) A) Canadian dollar appreciates relative to foreign currencies. B) Canadian dollar depreciates relative to foreign currencies. C) external value remains unaffected. D) internal value of the dollar falls. E) internal value of the dollar rises.

b

In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the 2) tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1200 worth of shoes. The value added by the tanner is A) $0. B) $300. C) $500. D) $1200. E) $400

b

In macroeconomic analysis, the assumption that potential output (Y*) is changing is a characteristic 12) of A) the short run. B) the long run. C) the business cycle model. D) the adjustment process. E) the national accounts model.

b

In practise, the Bank of Canada uses monetary policy to reduce undesirable fluctuations in real 4) GDP by A) controlling business investment expenditures directly. B) influencing market interest rates through changes in its target for the overnight interest rate. C) controlling government spending. D) directly influencing the money supply which affects the interest rate and hence, consumption and investment. E) targeting the money supply directly.

b

On the basis of both theory and empirical evidence, most economists believe that changes in 13) monetary policy have A) no effect on real GDP or factor utilization in the short run. B) no long-run effect on real GDP but a substantial long-run effect on inflation. C) powerful effects on real GDP and factor prices both in the short run and in the long run. D) no effect on real GDP or inflation in the long run. E) important long-run effects by changing real interest rates.

b

Other things being equal, a country with a high national saving rate may have a ________ long-run 1) growth rate because more saving increases the ________. A) low; consumption in the long run B) high; availability of funds, thus lowering the interest rate C) low; unemployment and decreases wages in the long run D) high; interest rate and encourages more investment E) high; wealth of people and increases future consumption

b

Refer to Figure 21-2. If disposable income is $3000, desired consumption expenditure is equal to 3) A) $500. B) $2000. C) $1000. D) $1500. E) $0.

b

Refer to Figure 21-3. Assuming AE0 is the prevailing aggregate expenditure function, at a level of 9) national income equal to Y3 we can state that A) consumption is less than desired aggregate expenditure. B) desired aggregate expenditure is less than output. C) desired aggregate expenditure is greater than output. D) consumption is greater than desired aggregate expenditure. E) desired saving is less than zero.

b

Refer to Figure 22-3. The rotation from AE0 to AE1 could be caused by 9) A) lower government purchases. B) a lower net tax rate. C) a balanced budget. D) higher government purchases. E) a higher net tax rate.

b

Refer to Table 22-1. What are the correct values for the level of net exports (a, b, c, and d) at each 6) level of national income? A) a = $300, b = $300, c = $300, d = $300 B) a = $150, b = $50, c = -$50, d = -$150 C) a = -$150, b = -$50, c = $50, d = $150 D) a = $150, b = $250, c = $350, d = $450 E) not enough data to determine

b

The "transactions demand" for money arises from the fact that 9) A) there is uncertainty about the movement of interest rates. B) households decide to hold money in order to make purchases of goods and services. C) households want to keep cash on had to buy bonds if bond prices drop. D) households wish to have all their wealth in the form of money. E) there is uncertainty in the receipts of income.

b

In the basic AD/AS macro model, which of the following events would cause stagflation? 5) A) a large decrease in wages B) a large increase in labour productivity C) a large increase in the price of raw materials D) a large increase in business confidence E) a large increase in the net tax rate

c

The best description of the cause-and-effect chain of an expansionary monetary policy is that it 10) will A) raise the interest rate, increase investment spending, and increase real GDP. B) lower the interest rate, raise investment spending, and increase real GDP. C) raise the interest rate, decrease investment spending, and decrease real GDP. D) raise the interest rate, decrease investment spending, and increase real GDP. E) lower the interest rate, increase investment spending, and reduce real GDP.

b

The costs of long-run economic growth include: 5) 1) declining future average living standards; 2) that current consumption must be sacrificed to increase investment in capital goods; 3) current increases in investment may only generate greater consumption in the distant future. A) 1 and 2 B) 2 and 3 C) 3 only D) 1 only E) 2 only

b

The currency that is in circulation in Canada today is A) fully backed by gold held at the central bank. B) not officially backed by anything. C) backed by the euro. D) fractionally backed by gold. E) backed by the U.S. dollar.

b

The money supply in Canada is measured using M1, M2, M2+, and M3. The reason there are so 9) many measures of the money supply is that A) the Bank of Canada wants to confuse the general public. B) different kinds of bank accounts represent different functions of money, and so the various measures are used to reflect these different functions. C) only the newer and broader measurements are correct but the older measurements are still used so that historical comparisons are possible. D) it is a convenient way for provincial and federal governments to hide their budgetary surpluses. E) the money supply is too large to have only one measurement.

b

Transfer payments made by the government affect its net tax revenues 2) A) indirectly through the investment function. B) directly. C) indirectly through net exports. D) indirectly through government purchases. E) indirectly through the consumption function.

b

Which of the following are the defining assumptions of the short run in macroeconomics? 10) A) Factor prices are exogenous, and technology and factor supplies are changing. B) Factor prices are exogenous, and technology and factor supplies are constant. C) Factor prices adjust to output gaps, and technology and factor prices are changing. D) Factor prices adjust to output gaps, and technology and factor supplies are constant. E) Factor prices are exogenous, technology and factor prices are endogenous.

b

Which of the following is the best example of frictional unemployment? 7) A) A worker is laid off because his firm has to reduce production due to reduced demand. B) A worker quits her current job to search for a better one. C) Bank tellers are unable to find jobs due to technological advances in the banking system. D) Inflationary pressures have led to higher wages for all jobs. E) An ironworker cannot find a job in Ottawa because all job vacancies are in Alberta.

b

Which of the following statements must be true in the simple macro model ? 7) A) APC increases as income rises. B) The sum of MPC and MPS is one. C) APS decreases as income rises. D) MPS and MPC are both negative. E) MPC is negative below a certain level of income.

b

8) The three main reasons that Canada's real GDP has increased steadily for many years are 8) A) an increasing stock of physical capital, increasing exports and rising employment. B) the increase in life expectancy, the rise in employment and increasing productivity. C) rising employment, increasing stock of physical capital and increasing productivity. D) increasing productivity of labour, increasing productivity of land and increasing productivity of the capital stock. E) rising employment, increasing levels of education of the labour force and the increase in the participation rate of women in the labour force.

c

A common measure of a country's level of productivity is 2) A) the capital-output ratio. B) the average efficiency of capital. C) output per unit of labour input. D) output per capita. E) per capita GDP

c

Any central bank, including the Bank of Canada, can implement its monetary policy by directly 1) influencing either ________ or ________, but not both. A) aggregate supply; aggregate demand B) money supply; money demand C) the money supply; the interest rate D) aggregate demand; the interest rate E) the price level; the interest rate

c

Assume there are just two assets, money and bonds. We can expect that an individual with a given 14) level of wealth will A) not hold money as long as bonds pay a positive rate of interest. B) hold less money when the current interest rate is very low. C) hold more money when the current interest rate is very low. D) hold less money when bond prices rise. E) hold lots of money even at very high interest rates.

c

Because of the volatility of food and energy prices, the Bank of Canada pays more attention in the 14) short run to changes in ________ than to changes in ________. A) total CPI inflation; core inflation B) inflation of the GDP deflator; total CPI inflation C) core inflation; total CPI inflation D) the nominal exchange rate; the real exchange rate E) total CPI inflation; inflation of the GDP deflator

c

Changes in the money supply in an open economy, as compared to a closed economy, 19) A) affect investment to a greater degree because foreign investors can create new investment in an open economy. B) are the same in either situation. C) are likely to have a greater effect on AD because of the secondary effect that exchange rates have on exports. D) are likely to have a smaller effect on AD because the secondary effect of exchange rates will offset the changes created by monetary disturbances. E) cannot be determined with the available information.

c

Consider a new deposit of $10 000 to the Canadian banking system. The bank that initially receives 13) this deposit will find itself with A) no excess reserves if there is no reserve requirement. B) $10 000 of excess cash reserves if its target reserve ratio is 100%. C) $8000 of excess cash reserves if its target reserve ratio is 20%. D) $1000 of excess cash reserves if its target reserve ratio is 10%. E) $2000 of excess cash reserves if its target reserve ratio is 10%.

c

Consider a simple macro model with a constant price level and demand-determined output. The 13) equations of the model are: C = 120 + 0.86Y, I = 300, G = 520, T = 0, X = 180, IM = 0.12Y. The vertical intercept of the AE function is A) 600.0. B) 420.0. C) 1120.0. D) 828.8. E) 120.0.

c

Consider a simple macro model with a constant price level and demand-determined output. Using 14) this model, if economists want to estimate the effect of a given change in desired investment on equilibrium national income, they would multiply the change in desired investment by the A) marginal propensity to save. B) reciprocal of the marginal propensity to spend. C) simple multiplier. D) average propensity to save. E) equilibrium level of national income.

c

Consider a simple macro model with demand-determined output. At the equilibrium level of 11) national income, A) desired aggregate expenditures will equal total output minus inventory holdings. B) consumers' purchases of goods and services equal firms' purchases of investment goods. C) desired aggregate expenditures will equal total output. D) consumers' purchases of goods and services equals their saving. E) firms will hold no inventories of raw materials or final goods.

c

Consider the basic AD/AS model. In the short run, a shift of the aggregate supply curve would lead 2) to a change in real GDP by mostly changing A) the productivity of capital. B) the level of investment. C) the amount of labour employed. D) the amount of land (natural resources) available to the economy. E) the prices of factors of production.

c

Consider the equation GDP = F · FE · GDP . What is the significance of this equation? 7) F FE A) The three components on the right-hand side provide a better understanding of all of the short-run changes in GDP. B) It allows us a better understanding of how changes in factor supply, the utilization of factors, and productivity affect changes in the output gap. C) It shows us how any change in real GDP can be decomposed into changes in factor supply, the utilization of factors, and productivity. D) It allows for a more accurate accounting of actual GDP in any given year. E) The three components on the right-hand side provide a better understanding of the long-run changes in GDP.

c

Consider the government's budget balance. Suppose G = 300 and the government's net tax revenue 11) is equal to 0.14Y. When Y = 2000, the government is running a budget A) surplus of 40. B) surplus of 20. C) deficit of 20. D) balance. E) deficit of -20.

c

Consuming fewer goods today in order to invest resources in capital goods can be considered the 6) ________ of economic growth. A) social cost B) total cost C) opportunity cost D) external cost E) investment cost

c

Doug compares the unit price of chocolate bars in order to get the "best buy." This represents using 3) money as A) a unit of deferred payment. B) a money substitute. C) a unit of account. D) a store of value. E) a medium of exchange

c

If the Consumer Price Index changes from 120 in year one to 122 in year two, the rate of inflation in 10) the intervening year is A) 0%. B) 20%. C) 1.67%. D) 22%. E) 2.0%.

c

If the economy in the short run is experiencing a recessionary gap, we are likely to see 6) A) severe and widespread labour shortages. B) consumers optimistic about the future. C) many workers receiving employment-insurance benefits. D) the number of employment-insurance recipients the lowest ever. E) quickly rising output prices.

c

If the economy is currently in monetary equilibrium, an increase in the money supply will 15) A) cause an increase in the demand for money, leading to a lower rate of interest. B) cause a reduction in the demand for money, leading to a higher rate of interest. C) lead to a movement down the money demand curve to a lower rate of interest. D) cause an excess demand for money and a decrease in the rate of interest. E) not change the equilibrium conditions.

c

In a simple macro model, it is generally assumed that a country's exports 1) A) and imports are induced. B) are always equal to investment. C) are autonomous whereas imports are induced. D) are induced whereas imports are autonomous. E) and imports are autonomous.

c

In national-income accounting, a reduction of inventories counts as 7) A) saving. B) consumption. C) negative investment. D) positive investment. E) depreciation.

c

In national-income accounting, the term "fixed investment" refers to 8) A) the existing capital stock. B) total gross investment minus depreciation. C) the creation of new plant and equipment. D) investment in stocks and bonds. E) capital stock that has been repaired.

c

In the Neoclassical growth model, if capital and labour grow at the same rate, we will observe 14) A) rising GDP and increasing living standards. B) increasing living standards but only for workers using capital-intensive production. C) rising GDP but no change in living standards. D) increasing living standards but only for workers using labour-intensive production. E) rising GDP but falling living standards.

c

Inflation, the rate of change of average prices in the economy, generally 9) A) benefits creditors if it is unanticipated. B) increases the real value of fixed money incomes. C) reduces the real value of existing nominal debt. D) has no real effects if it is unanticipated. E) increases the purchasing power of money.

c

One reason that real GDP tends to overstate the economic well-being of the country's residents is 14) that it ignores A) illegal activities, such as the drug trade. B) the costs of increased leisure time. C) the economic "bads" associated with production, such as pollution. D) the market-based activity done from the home. E) non-market activities, such as teenaged-babysitting services.

c

Other things being equal, bond prices 1) A) vary proportionally with interest rates. B) vary directly with interest rates. C) vary inversely with interest rates. D) are unaffected by changes in the demand for money. E) are unaffected by interest-rate changes.

c

Refer to Figure 23-2. The shift from AS1 to AS2 shown in the diagram is referred to as a(n) 11) A) positive aggregate supply shock. B) decrease in unit costs. C) negative aggregate supply shock. D) increase in unit costs. E) increase in aggregate supply.

c

Refer to Figure 24-3. A negative shock to the economy shifts the AD curve from AD1 to AD2. The 2) initial effect is A) a recessionary output gap of 550. B) an inflationary output gap of 100. C) a recessionary output gap of 100. D) an inflationary output gap of 200. E) a recessionary output gap of 300.

c

Refer to Figure 26-3. The equilibrium interest rate in this market is ________% and the equilibrium 11) flow of investment and saving is ________ billion dollars. A) 5; 90 B) 1; 50 C) 3; 70 D) 2; 60 E) 4; 80

c

Refer to Figure 28-1. Given the money demand curve, MD, an increase in the quantity of money 13) demanded from M1 to M0 can be caused by A) an increase in the price level. B) an increase in the rate of interest. C) a decrease in the rate of interest. D) a decrease in the price level. E) an increase in real GDP.

c

Refer to Table 27-2. Assume that Bank North is operating at its target reserve ratio and has no 4) excess reserves. If Bank North receives a new deposit of $400, it can immediately expand its loans by ________ while maintaining its target reserve ratio. A) $260 B) $700 C) $340 D) $272 E) $400

c

Suppose Y=400 and the government's net tax rate is 10%. If we are told that the government has a 15) budget surplus, then government purchases must be A) greater than 40. B) less than 30. C) less than 40. D) greater than 30. E) Not enough information to know.

c

Suppose aggregate output is demand-determined. If the business community decreases its planned 15) investment expenditures by $4 billion, causing equilibrium national income to fall by $8 billion, the marginal propensity to spend must be A) 2/5. B) 1/3. C) 1/2. D) 2/3. E) 4/5.

c

Suppose national accounting was done by adding up the market values of all outputs of all firms. 1) This approach would A) obtain gross domestic product. B) underestimate the value of production in the economy. C) overestimate the value of production in the economy. D) accurately reflect the value of production in the economy. E) obtain gross national product.

c

Suppose the Canadian economy had a recessionary gap. To increase the level of desired aggregate 11) expenditure, the Bank of Canada could A) reduce the reserve requirements of the commercial banks. B) raise the bank rate. C) reduce its target for the overnight interest rate. D) increase its spending. E) sell securities in the open market.

c

The largest element of the Canadian money supply today is A) paper money. B) coins. C) bank deposits. D) the debt of the federal government. E) gold.

c

The main properties of a Neoclassical aggregate production function are ________ when all factors 13) are increased proportionally and ________ when any one factor is increased on its own. A) decreasing returns to scale; diminishing marginal returns B) increasing returns to scale; diminishing marginal returns C) constant returns to scale; diminishing marginal returns D) constant returns to scale; constant marginal returns E) increasing returns to scale; increasing marginal returns

c

The marginal propensity to consume is defined to be A) the change in desired consumption divided by the change in saving. B) total desired consumption divided by the change in disposable income. C) the change in desired consumption divided by the change in disposable income. D) total desired consumption divided by total disposable income. E) the change in desired consumption divided by total disposable income.

c

The simple macro model that is considered in Chapters 21 and 22 of the textbook is characterized by 5) A) a given (constant) price level, and equilibrium national income determined by demand and supply. B) an open economy with an endogenous exchange rate. C) a given (constant) price level, and national income that is solely demand determined. D) an endogenous price level, and equilibrium national income determined by demand and supply. E) an endogenous price level, and national income that is solely demand determined.

c

A central bank can "create" money by 1) A) selling government Treasury bills to the commercial banks. B) issuing its own Central Bank bonds. C) increasing the rate of inflation. D) purchasing government securities on the open market. E) selling some of its foreign-currency reserves for domestic currency.

d

An expansionary monetary policy would ________ and would eventually increase the money 8) supply. A) involve increasing the target for the overnight interest rate. B) increase short-term interest rates C) involve selling foreign-currency reserves in the foreign-exchange market D) reduce short-term interest rates E) involve selling government bonds on the open market

d

Consider a Hydro Quebec bond with a face value of $1000, and a present value of $1175. If this 6) bond is offered for sale at $1025, then A) individuals will purchase the bond at the offer price which will drive down the price further. B) Hydro Quebec will be forced to change the face value of the bond. C) excess supply of this bond will drive the price down until it reaches its face value. D) excess demand for this bond will drive the price up until it reaches its equilibrium market price of $1175. E) the equilibrium market price of this bond has been achieved.

d

Consider the creation of deposit money in the banking system. One implication of an increase in 5) the cash drain to the public is that the A) amount of new money that can be created from a new source of reserves is increased. B) desired ratio is reduced. C) banking system cannot create any additional money following a new deposit. D) banking system's ability to create new money following a new deposit is reduced. E) desired reserve ratio is increased.

d

Consider the general form of the consumption function in a simple macro model. Once government 14) and taxes are included in the model, desired consumption can be expressed as ________, where a = autonomous consumption, t = net tax rate, Y = national income, YD = disposable income, and MPC = marginal propensity to consume. A) C = a + MPC · t · YD B) C = a + MPC(1 - t)YD C) C = a - (1 - t)YD D) C = a + MPC(1 - t)Y E) C = a + MPC · Y

d

Credit cards are considered to be "money substitutes" instead of money because 10) A) the only function of money they can perform is to serve as a store of value. B) credit card accounts are not chequable. C) they cannot serve as a temporary medium of exchange. D) money must eventually be used to pay for the transaction. E) they are not acceptable to pay for purchases.

d

Economic booms can cause problems as well as create benefits because they are often accompanied 4) by A) pressure on the government budget deficit to rise. B) rising real interest rates. C) deflationary pressures. D) inflationary pressures. E) excessive labour-force participation.

d

For a given level of national income, a decrease in private consumption or government purchases 10) will cause the equilibrium interest rate to A) increase and the flow of investment to decrease. B) increase and the flow of national saving to fall. C) increase and the flow of investment to increase. D) decrease and the flow of investment to increase. E) decrease and the flow of investment to decrease.

d

GDP can be represented by the equation: GDP = L × [E/L] × [GDP/E] where L is the total supply of 8) labour and E is the level of employment. In this equation, the term [GDP/E] represents A) the ratio of the population unemployed. B) one minus the unemployment rate. C) the unemployment rate. D) the productivity of labour. E) output per unit of capital.

d

If all the commercial banks in the banking system collectively have $300 million in cash reserves 14) and are satisfying their target reserve ratio of 20%, what is the amount of deposits they have? A) $2000 million B) $600 million C) $60 million D) $1500 million E) $0

d

If real income grows at approximately 4% per year, the number of years it will take for real income 3) to double is approximately A) 12. B) 36. C) 5. D) 18. E) 72.

d

If the Bank of Canada were to increase the money supply, other things being equal, we would 18) expect the aggregate expenditure curve to shift A) downward and the aggregate demand curve to shift to the left. B) downward and the aggregate demand curve to shift to the right. C) upward and the aggregate demand curve to shift to the left. D) upward and the aggregate demand curve to shift to the right. E) downward but the aggregate demand curve will remain unchanged

d

If the target reserve ratio in the banking system is 10%, there is no cash drain, and there are no 8) excess reserves, a new deposit of $1 will lead to an eventual expansion of the money supply of A) $0.01. B) $0.10. C) $1.00. D) $10.00. E) $100.00.

d

In Canada, open-market operations are 6) A) loans made by the Bank of Canada to the commercial banks. B) government actions aimed at creating competition within the banking industry. C) conducted to enforce the reserve requirements of commercial banks. D) the buying and selling of government securities by the Bank of Canada. E) no longer carried out.

d

In a competitive financial market, the equilibrium price of an asset will equal the A) future value of the asset multiplied by the interest rate. B) future value of the asset. C) sum of present value of the asset multiplied by the interest rate. D) present value of the asset. E) issue price of the asset.

d

In the long run, many economists argue that fiscal policy is ineffective because it has little effect on 14) A) the price level. B) nominal interest rates. C) the inflation rate. D) potential GDP. E) nominal GDP.

d

In the short run, aggregate demand and aggregate supply shocks cause output gaps, which in turn, 11) cause fluctuations in A) the natural rate of unemployment. B) the normal factor utilization rate. C) productivity. D) the factor utilization rate. E) factor supply.

d

Inflation targeting 15) A) creates output gaps that must be then offset with fiscal policy stabilizers. B) is irrelevant to the stability of the economy because of the long-run neutrality of money. C) should be replaced with fiscal policy targeting because of the long-run neutrality of money. D) is a stabilizing policy because the Bank of Canada's policy adjustments act to stabilize real GDP growth. E) is a destabilizing policy because it requires the Bank of Canada to engage in inappropriate policy responses.

d

It is important for policy makers to recognize that most macroeconomic variables are characterized 14) by A) long-run economic growth. B) gradual increases over long periods of time. C) the impacts of the business cycle. D) long-run trends and short-run fluctuations. E) short-run fluctuations that need to be smoothed for a well-functioning economy.

d

Refer to Figure 28-1. A rightward shift of the money demand curve can be caused by 12) A) a decrease in the rate of interest. B) a decrease in real GDP. C) an increase in the rate of interest. D) an increase in the price level. E) a decrease in the price level.

d

Refer to Table 19-1. In which years was this economy experiencing a recessionary gap? 5) A) 2008, 2012 B) 2006, 2007, 2008 C) 2010, 2011, 2012 D) 2006, 2007, 2011 E) 2009, 2010

d

Refer to Table 22-1. The net export function can be expressed as 7) A) 0 = 300 - 0.5Y B) 0 = 300 - IM C) NX = 300 - 0.1Y D) NX = 350 - 0.1Y E) NX = 350 - 0.5Y

d

The consumption function is based on the assumption that as real disposable income rises, 1) aggregate desired consumption A) remains constant and desired saving will fall. B) remains constant and desired saving will rise. C) will rise and desired saving will fall. D) and desired saving will both rise. E) will fall and desired saving will rise.

d

The economy's aggregate supply curve is drawn under two main assumptions. They are 4) A) firms' unit costs are constant; prices of all factors of production are constant. B) the prices of all factors of production are constant; productivity improves as the price level rises. C) firms' unit costs are constant; the state of technology is constant. D) the prices of all factors of production are constant; the state of technology is constant. E) firms will produce more output only if prices rise; technology improves only if prices rise.

d

The linkage between changes in monetary equilibrium and changes in aggregate demand is called 17) the A) equilibrium mechanism. B) simple multiplier. C) liquidity preference function. D) monetary transmission mechanism. E) transactions mechanism.

d

The long-run neutrality of money implies that 20) A) the economy's level of potential output will adjust to accommodate any change in the money supply. B) in response to any change in the money supply, the demand for money will adjust to cancel out its effects on all macroeconomic variables. C) changes to the money supply have no effect on either the price level or real GDP. D) in response to any change in the money supply, the economy's adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply. E) changes to the money supply never have any effect on real GDP.

d

The monetary transmission mechanism describes how changes in the the money market (possibly 9) caused by monetary policy) cause changes in the interest rate, which then cause changes in 1) aggregate demand and real GDP; 2) desired investment and net exports; 3) the price level. A) 1 and 2 B) 3 only C) 1 only D) 1, 2, and 3 E) 2 only

d

The principle difference between GDP and GNP is that GNP measures ________, while GDP 11) measures ________. A) the value of total output produced by Canada; wages and salaries received by Canadian residents B) total income generated by Canadians, both domestic and abroad; total income generated by Canadians, domestic only C) total factor incomes in the economy; total expenditure in the economy D) the total amount of income received by Canadian residents; the value of total output produced in Canada E) wages and salaries, plus world-wide investment income received by Canadian residents; the value of total output produced in Canada

d

The use of money in an economy does which of the following? 5) A) solves the problem of inflation B) promotes the use of barter C) creates the necessity for a double coincidence of wants D) promote specialization and the division of labour E) creates a problem of trading a portion of indivisible commodities such as a ship

d

Which of the equations is a correct expression for national saving in the long run when real GDP 7) equals potential output? A) NS = Y* - C + T - G B) NS = Y* - T - C C) NS = T - G D) NS = Y* - C - G E) NS = T - G - C

d

Which of the following is an example of "near money"? 11) A) mortgage on a house B) car loan C) American Express card D) 30-day Treasury bill E) Scotiabank credit card

d

Which of the following represents a positive aggregate supply shock? 8) A) an outbreak of war among oil-exporting countries B) an increase in exports C) bad weather which cripples telecommunications for one month D) improved computer literacy for the typical worker E) a general labour strike across the country

d

Other things being equal, an exogenous increase in the price level causes the aggregate wealth of 1) holders and issuers of private-sector bonds to A) increase. B) rise in nominal terms, but fall in real terms. C) decrease. D) not change since the changes in the wealth of bondholders and bond issuers offset each other. E) either increase or decrease depending on other factors. Consider the basic AD/AS model. Suppose firms are currently producing beyond their normal 2) capacity. A change in AD leads to a relatively A) large change in price level and a small change in real GDP. B) small change in price level and a large change in real GDP. C) small change in price level and a small change in real GDP. D) large change in price level and a large change in real GDP. E) no change in both price and output.

d,a

An economy's current GDP is $100 billion, the labour force is composed of 2.2 million people, and 2 12) million people are employed. What is this economy's labour utilization rate? A) 0.22 B) 4.4 C) 0.2 D) 0.45 E) 0.91

e

An increase in potential GDP would most likely be caused by a (an) 3) A) decrease in factor-utilization rates. B) increase in the unemployment rate. C) decrease in saving in the short run. D) increase in interest rates. E) increase in factor productivity

e

An upward shift and flattening of the net export (NX) function can be caused by 3) A) a decrease in foreign national income. B) an increase in domestic national income. C) a decrease in domestic prices relative to foreign prices. D) an increase in the Canadian-dollar price of foreign currency. E) both C and D are correct

e

Assume that Bank ABC has a target reserve ratio of 10%. If Bank ABC receives a new deposit of 7) $100 000, the largest new loan this bank could initially make, and maintain its target reserve ratio, is A)$100000. B)$900000. C)$ 1000. D)$10000. E)$90000.

e

Basic functions of the Bank of Canada include 1) acting as lender of last resort to private non-financial corporations; 2) acting as banker for the chartered banks. 3) regulating the money supply.A) 3 only B) 1 only C) 2 only D) 1, 2, and 3 E) 2 and 3

e

Consider a bond that promises to make coupon payments of $100 each year for three years 5) (beginning in one year's time) and also repays the face value of $2000 at the end of the third year. If the market interest rate is 6%, what is the present value of this bond? A) $267.30 B) $283.02 C) $1854.67 D) $1763.22 E) $1946.53

e

Consider a closed economy with real GDP in the long run of $400, consumption expenditures of 8) $250, government purchases of $75, and net tax revenue of $20. What is the level of national saving? A) $55 B) $230 C) $95 D) $225 E) $75

e

Consider a simple macro-model with demand-determined output. An exogenous increase in the 7) domestic price level will ________ the real value of the private sector's wealth, which leads to ________ in autonomous consumption and thus ________ shift in the AE function. A) increase; an increase; an upward B) increase; an increase; a downward C) reduce; an increase; an upward D) increase; a decrease; a downward E) reduce; a decrease; a downward

e

Consider a small economy where factor supply is 4000 units, the factor utilization rate is 0.8 and a 10) simple measure of productivity (GDP per factor employed) is $50. This economy's GDP is A) $200 000. B) $320 000. C) $40 000. D) $500 000. E) $160 000.

e

Consider the demand for money. If real GDP falls, other things being equal, we can expect 10) A) an increase in the speculative demand for money. B) an increase in transactions demand for money. C) an increase in the total demand for money. D) an increase in precautionary demand for money. E) a decrease in transactions demand for money.

e

Consider the equation GDP = F × (FE/F) × (GDP/FE). Which component describes the fraction of the 9) available factors actually employed at any time? A) F B) (GDP/FE) C) GDP D) FE E) (FE/F)

e

Consider the following news headline: "Information technology costs for Canadian firms continue 6) to drop." Choose the statement below that best describes the likely macroeconomic effect. A) the AD curve shifts to the left; the price level falls and real GDP falls B) the AD curve shifts to the right; the price level rises and real GDP rises C) the AS curve shifts to the left; the price level rises and real GDP falls D) the AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises E) the AS curve shifts to the right; the price level falls and real GDP rises

e

Consider the simplest macro model with demand-determined output. If desired aggregate 12) expenditure is greater than actual national income, then A) inventories will likely begin to fall, causing firms to increase production. B) actual national income must be less than the equilibrium level. C) inventories will likely begin to rise, causing firms to reduce production. D) actual national income must be greater than the equilibrium level. E) both A and B are correct.

e

GDP from the expenditure side is equal to the sum of A) Ca + Ia + Ga + (IMa - Xa). B) Ca + Ia + Ga. C) Ca + Ia + Ga - net exports. D) Ca + Ia + net exports. E) Ca + Ia + Ga + (Xa - IMa)

e

Given its existing policy regime of "inflation targeting," the Bank of Canada would likely react to a 13) large negative AD shock by A) raising the bank rate. B) ignoring the shock and allowing the economy to adjust. C) selling bonds on the open market. D) increasing its target for the overnight interest rate. E) decreasing its target for the overnight interest rate

e

Gross investment expenditure $402.00 Wages and salaries $1741.00 Consumption expenditure $1302.40 Interest and investment income $99.40 Business profits $70.40 Depreciation $199.20 Indirect taxes less subsidies $175.20 Net exports $94.00 Refer to Table 20-3. What is the value of GDP? 10) A) $2010.00 B) $1986.00 C) $1982.60 D) $2584.40 E) $2285.20

e

In an open economy with government and demand-determined output in the short run, a specific 10) "target" level of national income A) can be achieved only by changing both G and T at the same time. B) can be achieved by changing G, but not T. C) can be achieved by changing T, but not G. D) cannot be achieved by any of the government's fiscal policy tools. E) can be achieved by changes in G, T, or both.

e

In the basic AD/AS macro model, it is assumed that, for any given interest rate, the demand for 11) money depends on the A) rate of growth of real GDP. B) level of government spending. C) level of taxes. D) aggregate demand for goods and services. E) level of real GDP and the price level.

e

In the long run, changes in average material living standards are best shown by 1) A) growth in real GDP. B) improvements in monetary policy. C) population growth. D) improvements in fiscal policy. E) growth in real per capita GDP.

e

In the short run, the aggregate supply curve has a positive slope because, as the price level rises, 3) producers can A) experience rising factor prices. B) accumulate inventories. C) increase output at unchanged unit costs. D) produce less in response to falling profits. E) be compensated for the extra costs incurred to produce more output.

e

Macroeconomics is mainly concerned with the study of 1) A) individual households and how they deal with problems like inflation and unemployment. B) governments and their intervention in individual markets. C) fluctuations and trends in disaggregated data. D) large economic units such as General Motors or Molson Breweries. E) fluctuations and trends in aggregated data.

e

Modern or "new" theories of long-run economic growth are based on the assumptions that 17) technological change is mainly ________ to an economy and that investment yields ________ marginal returns. A) exogenous; increasing B) exogenous; constant C) endogenous; decreasing D) exogenous; diminishing E) endogenous, increasing

e

Refer to Figure 21-2. The amount of desired consumption expenditure that is unrelated to the level 5) of disposable income is A) $1000. B) $0. C) $2000. D) $1500. E) $500.

e

Refer to Figure 21-2. Which of the following is the correct equation for the consumption function 4) depicted in the figure? A) C = 500 + (2/3)YD B) C = (0.5)YD C) C = 2000 + (2/3)YD D) C = 1000 + (2/3)YD E) C = 500 + (0.5)YD

e

Refer to Figure 24-3. Following the negative AD shock shown in the diagram (from AD1 to AD2), 3) the adjustment process will take the economy to a long-run equilibrium where the price level is ________ and real GDP is ________. A) 90; 1250 B) 90; 900 C) 110; 800 D) 110; 1000 E) 60; 1000

e

Suppose that at the end of a given year there has been unanticipated inflation of 4%. Who is better 11) off at the end of the year? A) a consumer who borrowed money at the end of the year B) a bank that lent money at the beginning of the year C) a consumer who lent money at the end of the year D) a bank that lent money at the end of the year E) a consumer who borrowed money at the beginning of the year

e

Suppose the Bank of Canada announces its target for the overnight interest rate at 2.5%. In that 5) case, the Bank of Canada is willing to lend to commercial banks at ________% and is willing to pay ________% on deposits it receives from commercial banks. A) 2.5; 2.0 B) 2.5; 2.5 C) 3.5; 1.5 D) 2.25; 2.5 E) 2.75; 2.25

e

Suppose the government has a budget deficit of $400. If the country's level of national saving is 9) $200, then private saving must be A) $200. B) -$400. C) $400. D) $800. E) $600.

e

Suppose you found a $100 bill that was lost for many years under your grandmother's mattress. If 6) the banking system has a cash drain of 5%, its target reserve ratio is 20%, and all excess reserves were lent out, your new deposit of the $100 bill would lead to an eventual expansion of the money supply of A) $25. B) $500. C) $200. D) $20. E) $400.

e

The Bank of Canada conducts its open-market operations directly in response to 12) A) orders from Parliament. B) its announced changes in the money supply. C) changes in aggregate demand. D) changes in the price level. E) the changing demand for cash reserves from the commercial banks.

e

The biggest disadvantage of a barter system compared to one that uses money is that 4) A) it is difficult to find goods to trade in a barter system that satisfy the needs of society. B) a standardized unit of account cannot exist in a barter system. C) commodities are difficult to use as a store of value. D) commodities are difficult to transport and therefore inefficient for exchange. E) each trade requires a double coincidence of wants.

e

To calculate GDP from the income side, one must add together wages, 9) A) net exports, depreciation, and profits. B) consumption and depreciation. C) government income, interest, and profits. D) investment, rent, depreciation, profits and indirect taxes net of subsidies. E) interest, rent, depreciation, profits and indirect taxes net of subsidies

e

What is a bank run? 11) A) The collapse of a commercial banks as a result of the devaluation of their assets. B) A situation where all commercial banks in the system are simultaneously short of reserves. C) The collapse of a non-commercial bank as a result of non-payment of loans. D) A situation where a commercial bank is holding zero reserves. E) A panic situation where many depositors rush simultaneously to withdraw their deposit money in the form of cash.

e

When calculating GDP from the expenditure side, Ga comprises 6) A) only purchases of goods and not services. B) only expenditures made by provincial and local governments. C) government expenditures on goods and services, including transfer payments. D) only expenditures made by the federal government. E) government purchases of goods and services, excluding transfer payments

e

Which of the following entries would appear on the liabilities side of the Bank of Canada's balance 10) sheet? A) advances to commercial banks B) shareholders' equity C) Government of Canada securities D) savings deposits E) deposits of commercial banks

e

Which of the following examples constitutes a new deposit to the Canadian commercial banking 12) system? A) the Bank of Canada buys foreign currency from abroad B) an individual puts cash in a safety-deposit box C) an individual transfers money from ShipShape Credit Union to Scotiabank D) the Bank of Canada sells government securities to an individual or a firm E) an individual immigrates to Canada and deposits money from abroad

e

Which of the following is the most appropriate measure for evaluating the average material living 12) standards of Canadian residents? A) per capita Gross Domestic Product B) per capita Net National Product C) disposable income D) Net Domestic Income at Factor Cost E) per capita Gross National Product

e

Which of the following may increase real GDP in the short run but may actually decrease the 4) long-run growth rate of GDP? A) increase in the unemployment rate B) increase in factor-utilization rates in the short run C) increase in factor supplies D) decrease in factor productivity E) decrease in households' desired saving

e

Which of the following would likely cause an upward parallel shift in the AE curve and a 9) rightward shift in the AD curve? A) a decrease in the price level B) an increase in the MPC C) an increase in the price level D) a reduction in government purchases E) an increase in the business confidence of firms

e

f a country's population is 15 million people, and 1 million of those are unemployed, the country's 6) unemployment rate is A) 2.5%. B) 7.1% C) 3.3%. D) 6.7%. E) There is not enough information to know.

e