Question 1

A country has a trade deficit when

Accepted Answer

A)  imports exceed exports. 
B)  imports equal exports. 
C)  exports exceed imports. 
D)  exports are zero. 
A)  imports exceed exports. 
B)  imports equal exports. 
C)  exports exceed imports. 
D)  exports are zero.

Question 2

Assumptions for economic theories and models should be

Accepted Answer

A)  rejected if they are not totally realistic. 
B)  logical rather than empirically testable. 
C)  simple and reasonable rather than complex. 
D)  maintained until overwhelming evidence to the contrary occurs. 
A)  rejected if they are not totally realistic. 
B)  logical rather than empirically testable. 
C)  simple and reasonable rather than complex. 
D)  maintained until overwhelming evidence to the contrary occurs.

Question 3

In 2001 the government of Anchovy collected receipts of $100 billion and had expenditures of $125 billion. Its GDP was $400 billion. The government's deficit was what percent of GDP in 2001?

Accepted Answer

A)  6.25% 
B)  12.50% 
C)  25.00% 
D)  100.00% 
A)  6.25% 
B)  12.50% 
C)  25.00% 
D)  100.00%

Question 4

A country is said to be experiencing inflation when

Accepted Answer

A)  prices of most goods and services are rising over time. 
B)  prices of most goods and services are falling over time. 
C)  total output is rising over time. 
D)  total output is falling over time. 
A)  prices of most goods and services are rising over time. 
B)  prices of most goods and services are falling over time. 
C)  total output is rising over time. 
D)  total output is falling over time.

Question 5

The two major reasons for the tremendous growth in output in the Canadian economy over the last 125 years are

Accepted Answer

A)  population growth and budget deficit. 
B)  population growth and increased productivity. 
C)  low unemployment and budget surplus. 
D)  low budget deficit and low trade deficits. 
A)  population growth and budget deficit. 
B)  population growth and increased productivity. 
C)  low unemployment and budget surplus. 
D)  low budget deficit and low trade deficits.

Question 6

Determine whether each of the following is a positive or normative statement.
a. The Bank of Canada should lower interest rates to increase economic growth, because we're in a recession.
b. Higher government budget deficits cause higher interest rates.
c. The trade deficit should decline because of the fall in the value of the dollar.
d. Because of our high inflation rate, we must reduce the rate of money growth.
e. A generous unemployment insurance system is a primary cause of high unemployment in Europe.
f. Increased average labour productivity in a country should lead to faster growth.
g. Government budget deficits are too high in Canada and should be reduced.

Accepted Answer

a. normative
b. posi

Question 7

Why were the Canadian government budget deficits of the 1980s and 1990s so unusual from a historical point of view?

Accepted Answer

A)  It was the first time the Canadian government had ever run deficits. 
B)  In the past, deficits were usually that large only in wartime. 
C)  It was the first time that deficits were accompanied by very high rates of inflation. 
D)  It was the first time that deficits diverted funds from other productive uses, such as investment in modern equipment. 
A)  It was the first time the Canadian government had ever run deficits. 
B)  In the past, deficits were usually that large only in wartime. 
C)  It was the first time that deficits were accompanied by very high rates of inflation. 
D)  It was the first time that deficits diverted funds from other productive uses, such as investment in modern equipment.

Question 8

Historical evidence shows that the unemployment rate in Canada has

Accepted Answer

A)  reached zero during wartime. 
B)  reached zero only during World War II. 
C)  reached zero during economic booms. 
D)  never reached zero. 
A)  reached zero during wartime. 
B)  reached zero only during World War II. 
C)  reached zero during economic booms. 
D)  never reached zero.

Question 9

How did Keynes propose to solve the problem of high unemployment?

Accepted Answer

A)  increase the growth rate of the money supply 
B)  allow wages to decline, so that firms will want to hire more workers 
C)  put on wage and price controls, so wages won't rise and firms won't have to lay people off to cut costs 
D)  have the government increase its demand for goods and services 
A)  increase the growth rate of the money supply 
B)  allow wages to decline, so that firms will want to hire more workers 
C)  put on wage and price controls, so wages won't rise and firms won't have to lay people off to cut costs 
D)  have the government increase its demand for goods and services

Question 10

A country that has many well-trained macroeconomic analysts will not necessarily have more beneficial macroeconomic policies because

Accepted Answer

A)  economists' understanding of the economy remains poor. 
B)  there are few ways in which economists' complex models can be applied to the real world. 
C)  economists agree on so few government policies. 
D)  economic policy is usually made by politicians, not economists. 
A)  economists' understanding of the economy remains poor. 
B)  there are few ways in which economists' complex models can be applied to the real world. 
C)  economists agree on so few government policies. 
D)  economic policy is usually made by politicians, not economists.

Question 11

An open economy is a national economy that

Accepted Answer

A)  has good relations with its neighbouring countries. 
B)  has a stock market that is open to traders from anywhere in the world. 
C)  has extensive trading and financial relationships with other national economies. 
D)  has established diplomatic relations with most other nations. 
A)  has good relations with its neighbouring countries. 
B)  has a stock market that is open to traders from anywhere in the world. 
C)  has extensive trading and financial relationships with other national economies. 
D)  has established diplomatic relations with most other nations.

Question 12

John Maynard Keynes disagreed with the classical economists because he assumed that

Accepted Answer

A)  wages and prices adjusted slowly. 
B)  international trade played a major role in the macroeconomy. 
C)  government intervention in the economy could not reduce business cycles. 
D)  unemployment would be eliminated quickly by the invisible hand of the market. 
A)  wages and prices adjusted slowly. 
B)  international trade played a major role in the macroeconomy. 
C)  government intervention in the economy could not reduce business cycles. 
D)  unemployment would be eliminated quickly by the invisible hand of the market.

Question 13

Historical evidence shows that consumer prices in Canada

Accepted Answer

A)  deflated between the 1920s and World War II, but inflated afterward. 
B)  inflated between the 1920s and World War II, but deflated afterward. 
C)  have shown a continuous inflationary pattern since the 1920s. 
D)  have displayed no clear-cut trend since the 1920s. 
A)  deflated between the 1920s and World War II, but inflated afterward. 
B)  inflated between the 1920s and World War II, but deflated afterward. 
C)  have shown a continuous inflationary pattern since the 1920s. 
D)  have displayed no clear-cut trend since the 1920s.

Question 14

Classical economists who assume the "invisible hand" works reasonably well do not argue that

Accepted Answer

A)  the government should have a limited role in the economy. 
B)  government policies will be ineffective and counterproductive. 
C)  the government should actively intervene in the economy to eliminate business cycles. 
D)  wages and prices adjust quickly to bring the economy back to equilibrium. 
A)  the government should have a limited role in the economy. 
B)  government policies will be ineffective and counterproductive. 
C)  the government should actively intervene in the economy to eliminate business cycles. 
D)  wages and prices adjust quickly to bring the economy back to equilibrium.

Question 15

The business cycle describes the

Accepted Answer

A)  progression of an industry's structure from monopoly to perfect competition. 
B)  progression of an industry's structure from perfect competition to monopoly. 
C)  expansion and contraction of an individual industry within the economy. 
D)  expansion and contraction of economic activity in the economy as a whole. 
A)  progression of an industry's structure from monopoly to perfect competition. 
B)  progression of an industry's structure from perfect competition to monopoly. 
C)  expansion and contraction of an individual industry within the economy. 
D)  expansion and contraction of economic activity in the economy as a whole.

Question 16

After World War II, Canadian exports generally ________ Canadian Imports, but in the early 1990s, immediately following the signing of free trade agreements, Canadian imports grew ________ than exports. However, after 1994, ________ emerged again as exports grew faster than imports.

Accepted Answer

A)  exceeded; faster; surpluses 
B)  exceeded; slower; surpluses 
C)  exceeded; faster; deficit 
D)  fell short of; faster; surpluses 
A)  exceeded; faster; surpluses 
B)  exceeded; slower; surpluses 
C)  exceeded; faster; deficit 
D)  fell short of; faster; surpluses

Question 17

Describe what are the two key assumptions in the "invisible hand" idea.

Accepted Answer

The first assumption in the invisible ha

Question 18

Discuss the major difference between classical and Keynesian economists. Be sure to explain how they differ with regard to how quickly equilibrium is restored in the economy as well as what role they see for government action in restoring equilibrium.

Accepted Answer

Classical and Keynesian economists diffe

Question 19

The classical approach to macroeconomics assumes that

Accepted Answer

A)  wages, but not prices, adjust quickly to balance quantities supplied and demanded in markets. 
B)  wages and prices adjust quickly to balance quantities supplied and demanded in markets. 
C)  prices, but not wages, adjust quickly to balance quantities supplied and demanded in markets. 
D)  neither wages nor prices adjust quickly to balance quantities supplied and demanded in markets. 
A)  wages, but not prices, adjust quickly to balance quantities supplied and demanded in markets. 
B)  wages and prices adjust quickly to balance quantities supplied and demanded in markets. 
C)  prices, but not wages, adjust quickly to balance quantities supplied and demanded in markets. 
D)  neither wages nor prices adjust quickly to balance quantities supplied and demanded in markets.

Question 20

Fiscal policy determines ________ while monetary policy determines ________.

Accepted Answer

A)  government spending and taxation; the growth of the money supply 
B)  government's capital; government's investment 
C)  the rate of growth of the economy; the rate of growth of prices 
D)  the inflation rate; the rate of growth of prices 
A)  government spending and taxation; the growth of the money supply 
B)  government's capital; government's investment 
C)  the rate of growth of the economy; the rate of growth of prices 
D)  the inflation rate; the rate of growth of prices

A country has a trade deficit when

Assumptions for economic theories and models should be

In 2001 the government of Anchovy collected receipts of $100 billion and had expenditures of $125 billion. Its GDP was $400 billion. The government's deficit was what percent of GDP in 2001?

A country is said to be experiencing inflation when

The two major reasons for the tremendous growth in output in the Canadian economy over the last 125 years are

Why were the Canadian government budget deficits of the 1980s and 1990s so unusual from a historical point of view?

Historical evidence shows that the unemployment rate in Canada has

How did Keynes propose to solve the problem of high unemployment?

A country that has many well-trained macroeconomic analysts will not necessarily have more beneficial macroeconomic policies because

An open economy is a national economy that

John Maynard Keynes disagreed with the classical economists because he assumed that

Historical evidence shows that consumer prices in Canada

Classical economists who assume the "invisible hand" works reasonably well do not argue that

The business cycle describes the

After World War II, Canadian exports generally Canadian Imports, but in the early 1990s, immediately following the signing of free trade agreements, Canadian imports grew than exports. However, after 1994, emerged again as exports grew faster than imports.

Describe what are the two key assumptions in the "invisible hand" idea.

Discuss the major difference between classical and Keynesian economists. Be sure to explain how they differ with regard to how quickly equilibrium is restored in the economy as well as what role they see for government action in restoring equilibrium.

The classical approach to macroeconomics assumes that

Fiscal policy determines while monetary policy determines .

The Measurement and Structure of the Canadian Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LMAD-AS Model: A General Framework for Macroeconomic Analysis

Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Keynesian Business Cycle Analysis: Non-Market-Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

Exam 1: Introduction to Macroeconomics

A country has a trade deficit when

Assumptions for economic theories and models should be

In 2001 the government of Anchovy collected receipts of $100 billion and had expenditures of $125 billion. Its GDP was $400 billion. The government's deficit was what percent of GDP in 2001?

A country is said to be experiencing inflation when

The two major reasons for the tremendous growth in output in the Canadian economy over the last 125 years are

Why were the Canadian government budget deficits of the 1980s and 1990s so unusual from a historical point of view?

Historical evidence shows that the unemployment rate in Canada has

How did Keynes propose to solve the problem of high unemployment?

A country that has many well-trained macroeconomic analysts will not necessarily have more beneficial macroeconomic policies because

An open economy is a national economy that

John Maynard Keynes disagreed with the classical economists because he assumed that

Historical evidence shows that consumer prices in Canada

Classical economists who assume the "invisible hand" works reasonably well do not argue that

The business cycle describes the

After World War II, Canadian exports generally ________ Canadian Imports, but in the early 1990s, immediately following the signing of free trade agreements, Canadian imports grew ________ than exports. However, after 1994, ________ emerged again as exports grew faster than imports.

Describe what are the two key assumptions in the "invisible hand" idea.

Discuss the major difference between classical and Keynesian economists. Be sure to explain how they differ with regard to how quickly equilibrium is restored in the economy as well as what role they see for government action in restoring equilibrium.

The classical approach to macroeconomics assumes that

Fiscal policy determines ________ while monetary policy determines ________.

The Measurement and Structure of the Canadian Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LMAD-AS Model: A General Framework for Macroeconomic Analysis

Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Keynesian Business Cycle Analysis: Non-Market-Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

After World War II, Canadian exports generally Canadian Imports, but in the early 1990s, immediately following the signing of free trade agreements, Canadian imports grew than exports. However, after 1994, emerged again as exports grew faster than imports.

Fiscal policy determines while monetary policy determines .