Exam Name___________________________________ MULTIPLE CHOICE.

Choose the one alternative that best completes the statement or answers the question. Use the table below to answer the following questions. Table 20.2.3

1)

Refer to Table 20.2.3. Consider the economy represented in the table. Total income, in millions of dollars, is

1) _______

A)

$850,000. B)

$1,350,000. C)

$1,050,000. D)

$800,000. E)

none of the above. 2)

Money market equilibrium occurs 2) _______ A)

when the level of real GDP is constant. B)

when bond prices are constant. C)

when interest rates are constant. D)

when the quantity of real money supplied equals the quantity of real money demanded. E)

only under a fixed exchange rate. 3)

Which one of the following newspaper quotations describes a movement along an LAS curve? 3) _______ A)

"The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." B)

"Growth has been unusually high the last few years due to more women entering the labour force." C)

"The decrease in consumer spending may lead to a recession." D)

"The recent tornadoes destroyed many factories in Calgary and Edmonton." E)

"Recent higher wage settlements are expected to cause higher inflation this year." 4)

The quantity of real GDP demanded is the sum of real consumption expenditure ( C), investment (I), 4) _______ A)

government expenditure (G), exports (X), and imports (M). B)

and government expenditure (G). C)

exports (X), and imports (M). D)

and exports (X) minus imports (M). E)

government expenditure (G), and exports (X) minus imports (M). Use the figure below to answer the following question.

Figure 26.3.4 5)

Refer to Figure 26.3.4. The changes represented 5) _______ A)

lead to an inflationary gap. B)

lead to a recessionary gap. C)

cause a proportionate increase in long run aggregate supply. D)

cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. E)

increase real GDP. 6)

The short-run aggregate supply curve indicates 6) _______ A)

the various quantities of real GDP producers supply at different income levels. B)

the relationship between the purchasing power of wages and the quantity of labour supplied by households. C)

the relationship between the price level and the natural unemployment rate. D)

the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. E)

the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. Use the figure below to answer the following questions.

Figure 26.2.1 7)

Refer to Figure 26.2.1. Which graph illustrates what happens when the quantity of money decreases? 7) _______ A)

(a) B)

(b) C)

(c) D)

(d) E)

None of the above Use the figure below to answer the following questions.

Figure 26.3.1 8)

Refer to Figure 26.3.1. As Econoworld automatically adjusts to long-run equilibrium, the 8) _______ A)

AD curve shifts rightward. B)

SAS curve shifts rightward. C)

SAS curve shifts leftward. D)

LAS curve shifts leftward. E)

AD curve shifts leftward. 9)

Which one of the following factors will not shift the aggregate demand curve? 9) _______ A)

an increase in the price level B)

an increase in the quantity of money C)

an increase in the expected inflation rate D)

an increase in the interest rate E)

an increase in expected future profits Use the figure below to answer the following questions.

Figure 26.3.1 10)

Refer to Figure 26.3.1. Consider statements (1) and (2) and select the correct answer. (1) The actual unemployment rate exceeds the natural unemployment rate. (2) Short-run aggregate supply will automatically shift leftward as the economy adjusts to long-run equilibrium. 10) ______

A)

(1) and (2) are true. B)

(1) is true; (2) is true if the money wage rate falls. C)

(1) is true; (2) is false. D)

(1) and (2) are false. E)

(2) is true; (1) is false. 11)

Short-run macroeconomic equilibrium always occurs when the 11) ______ A)

economy is above full employment. B)

quantity of real GDP demanded equals the quantity of real GDP supplied. C)

AD curve intersects the LAS curve. D)

economy is below full employment. E)

economy is at full employment. 12)

Which of the following statements about the Keynesian view of the macroeconomy is incorrect? 12) ______ A)

Technological change is the most significant influence on both aggregate demand and aggregate supply. B)

Expectations are the most significant influence on aggregate demand. C)

The money wage rate is extremely sticky in the downward direction so there is no automatic mechanism for eliminating a recessionary gap. D)

To achieve and maintain full employment, active help from fiscal policy and monetary policy is required. E)

Expectations are based on "animal spirits." 13)

According to the quantity theory of money, an increase in the quantity of money will increase the price level 13) ______

A)

and increase real GDP and the velocity of circulation. B)

and increase real GDP but decrease the velocity of circulation. C)

but have no effect on real GDP and will decrease the velocity of circulation. D)

and decrease real GDP and increase the velocity of circulation. E)

but have no effect on real GDP or the velocity of circulation. 14)

The money creation process begins when 14) ______ A)

desired reserves increase because of an increase in deposits. B)

bank deposits increase. C)

banks have excess reserves. D)

the quantity of money increases. E)

banks lend reserves. 15)

Which of the following statements about depository institutions is false? 15) ______ A)

They keep reserves to meet cash withdrawals. B)

They borrow at lower interest rates and lend at higher rates. C)

They pool, and therefore reduce, risk. D)

A credit union is an example of a depository institution. E)

They create liquidity by borrowing long and lending short. 16)

Money's function as a unit of account can best be described as 16) ______ A)

an agreed measure for stating the prices of goods and services. B)

a method of recording transactions. C)

a generally accepted medium of exchange. D)

an entry in an accounting ledger. E)

a commodity that can be exchanged for another commodity. Use the information below to answer the following questions. Fact 24.6.1 The Bank of Speedy Creek has chosen the following initial balance sheet

17)

Refer to Fact 24.6.1. Suppose all the banks in the banking system have the same desired reserve ratio as the Bank of Speedy Creek. If the currency drain ratio is 32 percent, what is the size of the money multiplier? 17) ______ A)

4.0 B) 3.3 C) 2.7 D) 1.25 E) 5.0 18)

Which one of the following would not be considered a depository institution? 18) ______ A)

a trust and mortgage loan company B)

The Bank of Montreal C)

a credit union D)

The Bank of Canada. E)

a caisse populaire 19)

The Bank of Canada is the lender of last resort. This means banks may borrow money from the Bank of Canada 19) ______

A)

whenever they are short of reserves. B)

to finance a sudden and dramatic increase in overseas reserves. C)

if the banking system as a whole is short of reserves. D)

overnight. E)

if they have sufficient securities to support the loan. 20)

The Canadian currency drain ratio for M1 is approximately ________ percent in 2010. 20) ______ A)

24 B) 75 C) 34 D) 11 E) 15 21)

The quantity of money that the banking system can create is limited by 21) ______ A)

the credit ratings of the consumers who are applying for loans. B)

bank managers' decisions. C)

the quantity of bank notes released by the Bank of Canada. D)

the monetary base, desired reserves, and desired currency holdings. E)

the number of consumers who apply for loans. 22)

Gross domestic product is 22) ______ A)

the final value of all goods produced in a country in a given time period. B)

the market value of all the intermediate goods and services produced in a country during a given time period. C)

the market value of all goods and services produced in a country during a given time period. D)

the average value of output produced in a country in a given time period. E)

the market value of all the final goods and services produced in a country during a given time period. 23)

To obtain the factor cost of a good from its market price 23) ______ A)

subtract both indirect taxes and subsidies. B)

add both indirect taxes and subsidies. C)

subtract depreciation. D)

subtract indirect taxes and add subsidies. E)

add indirect taxes and subtract subsidies. 24)

Which one of the following is true? 24) ______ A)

I+G+X=Y+I+M B)

Y=C+I+G+X-M C)

Y+M=C+I+G D)

Y=C+I+G+M-X E)

Y=C+S+I 25)

Which of the following items would be included in a current measure of GDP? 25) ______ A)

The illegal sale of a bag of marijuana. B)

A professional gardener who regularly cuts your lawn. C)

The value of safety on the streets of your community. D)

Your labour in fixing a leaky pipe under your sink. E)

All of the above. 26)

The largest component of GDP using the expenditure approach is 26) ______ A)

imports B)

government expenditure C)

investment D)

consumption expenditure E)

exports Use the table below to answer the following questions. Table 20.2.4 Other factor incomes Indirect taxes Depreciation Wages, salaries and supplementary labour income Consumption expenditure Government expenditure on goods and services Government transfer payments Net exports Subsidies 27) $57 0 230 250 1,35 0 1,40 0 500 50 40 0

Refer to Table 20.2.4. Gross domestic product is equal to 27) ______ A)

$1,940. B) $1,920. C) $2,350. D) $2,150. E) $2,400. 28)

Refer to Table 20.2.4. Net investment is equal to 28) ______ A)

$210. B) $150. C) $510. D) $560. E) $250. 29)

The sum of wages, salaries and supplementary labour income, and other factor incomes is 29) ______ A)

net domestic product. B)

gross domestic income. C)

gross domestic product. D)

net domestic income at factor cost. E)

total output of the economy. 30)

Suppose the economy's capital increases over the year. It must be true that 30) ______ A)

net investment was positive. B)

depreciation was greater than gross investment. C)

net investment was greater than gross investment. D)

depreciation is less than zero. E)

depreciation was greater than net investment. 31)

If the inflation rate is positive, the price level in an economy is 31) ______ A)

constant. B)

falling slowly. C)

rising. D)

falling rapidly. E)

zero. 32)

In a country with a working-age population of 30 million, 18 million are employed, 2 million are unemployed, and 2 million of the employed are working part-time, half of whom wish to work full-time. The employment-to-population ratio is 32) ______ A)

53.3 percent. B)

73.3 percent. C)

66.7 percent. D)

60 percent. E)

none of the above. 33)

The price indexes that are alternatives to the CPI are ________. 33) ______ A)

the chained price index for consumption and the CPI deflator B)

the unbiased CPI and the unbiased GDP deflator C)

the GDP deflator and the CPI deflator D)

the core GDP deflator and the CPI deflator E)

the GDP deflator and the chained price index for consumption Use the table below to answer the following questions. Table 21.3.1 Suppose a simple economy produces three goods only. The price and output data for some selected years are shown below. Price (dollars) 2002 0.75 1.25 2.00 Price (dollars) 2012 1.10 2.10 3.00 Quantity (number) 2002 100 300 200 Quantity (number) 2012 120 280 190

Pop Crackers Cucumbers 34)

Refer to Table 21.3.1. The reference base period is 2002. The CPI in 2012 is 34) ______ A)

158. B) 100. C) 1,340. D) 96. E) 63. 35)

If the CPI was 180 at the end of 2011, and 216 at the end of 2012, the inflation rate in 2012 was 35) ______ A)

20 percent. B)

216 percent. C)

36 percent. D)

16.67 percent. E)

18 percent. 36)

In a recession, typically 36) ______ A)

unemployment rises. B)

the employment-to-population ratio decreases. C)

the labour force participation rate rises. D)

the employment-to-population rate rises. E)

both A and B are correct. 37)

In a dynamic economy under ideal conditions, the unemployment rate 37) ______ A)

should be zero. B)

decreases as the price level falls. C)

increases as the price level rises. D)

averages 6 percent. E)

is greater than zero percent due to natural unemployment. 38)

If the number of discouraged workers decreases because many of them start to look for work, everything else remaining the same, then the 38) ______

A)

unemployment rate will increase. B)

employment-to-population ratio will decrease. C)

labour force participation rate will increase. D)

labour force participation rate will decrease. E)

both A and C. 39)

Suppose the working-age population in Tiny Town is 100 people. If 25 of these people are not in the labour force, the ________ equals ________. 39) ______

A)

unemployment rate; 33 percent B)

employment-to-population ratio; 75 percent C)

unemployment rate; 25 percent D)

employment-to-population ratio; 25 percent E)

labour force; 75 people 40)

A zero percent unemployment rate 40) ______ A)

is not consistent with the notion of full employment. B)

was last achieved during World War II when everyone was willing to work at the going wage rate to end the war. C)

would alleviate scarcity. D)

is one of the economic goals of the Canadian government. E)

is the only efficient unemployment rate.

1)

C 2)

D 3)

A 4)

E 5)

E 6)

D 7)

D 8)

B 9)

A 10)

C 11)

B 12)

A 13)

E 14)

C 15)

E 16)

A 17)

B 18)

D 19)

C 20)

D 21)

D 22)

E 23)

D 24)

B 25)

B 26)

D 27)

E 28)

A 29)

D 30)

A 31)

C 32)

D 33)

E 34)

A 35)

A 36)

E 37)

E 38)

E 39)

E 40)