Chap19 14thed

Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Macroeconomics is mainly concerned with the study of
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.
1)
2) Suppose Appliance Mart buys a used refrigerator for $100, repairs it, and resells it for $250. The
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.
2)
3) In macroeconomics, the "output gap" is the difference between

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.
3)
4) Economic booms can cause problems as well as create benefits because they are often accompanied
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.
4)
The table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant -dollar terms.
Year
2006
2007
2008
2009
2010
2011
2012
Actual Output
(billions of $)
402
408
415
420
422
420
425
Potential Output
(billions of $)
404
411
415
418
420
423
425
Unemployment Rate
(% of labour force)
7.1
7.2
6.3
5.9
6.0
7.0
6.3
TABLE 19-1
5) Refer to Table 19-1. In which years was this economy experiencing a recessionary gap?
A) 2008, 2012
B) 2006, 2007, 2008
C) 2010, 2011, 2012
D) 2006, 2007, 2011
E) 2009, 2010
5)
6) If a country's population is 15 million people, and 1 million of those are unemployed, the country's
unemployment rate is
A) 2.5%.
B) 7.1%
C) 3.3%.
D) 6.7%.
E) There is not enough information to know.
6)
7) Which of the following is the best example of frictional unemployment?

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.
7)
8) The three main reasons that Canada's real GDP has increased steadily for many years are
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.
8)
9) Inflation, the rate of change of average prices in the economy, generally

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.
9)
10) If the Consumer Price Index changes from 120 in year one to 122 in year two, the rate of inflation in
the intervening year is
A) 0%.
B) 20%.
C) 1.67%.
D) 22%.
E) 2.0%.
10)
11) Suppose that at the end of a given year there has been unanticipated inflation of 4%. Who is better
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
11)
12) If the Canadian dollar exchange rate increases, the

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.
12)
13) If 0.75 U.S. dollars can be exchanged for one Canadian dollar, we say that the Canadian-U.S.
exchange rate is
A) 1.33.
B) 0.75.
C) 1.25.
D) 75.
E) 1.0.
13)
14) It is important for policy makers to recognize that most macroeconomic variables are characterized
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.
14)
15) Suppose Canada's exchange rate with the U.S. dollar increases from 1.14 to 1.22. Which of the
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.
15)
Answer Key
Testname: CHAP19_14THED
1) E
ID: econ14cr 19.1-1
Diff: 1
Topic: 19.1a. the study of macroeconomics
Skill: Recall
2) A
ID: econ14cr 19.1-14
Diff: 1
Topic: 19.1b. national output/national income
Skill: Applied
3) A
Diff: 1
Topic: 19.1c. potential output and output gaps
Skill: Recall
4) D
Diff: 2
Skill: Applied
5) D
Diff: 2
Skill: Applied
6) E
Diff: 3
Topic: 19.1d. employment, unemployment and the labour force
Skill: Applied
7) B
Diff: 2
Topic: 19.1e. frictional, structural and cyclical unemployment
Skill: Applied
8) C
Diff: 2
Topic: 19.1f. productivity
Skill: Recall
9) C
Diff: 2
Topic: 19.1g. inflation and the price level
Skill: Applied
10) C
Diff: 3
Skill: Applied
Answer Key
Testname: CHAP19_14THED
11) E
Diff: 2
Skill: Applied
12) B
ID: econ14cr 19.1-104
Diff: 2
Topic: 19.1i. the exchange rate and depreciation/appreciation
Skill: Applied
13) A
ID: econ14cr 19.1-106
Diff: 2
Skill: Applied
14) D
ID: econ14cr 19.2-1
Diff: 1
Topic: 19.2. growth vs. fluctuations
Skill: Recall
15) A
ID: econ14cr 19.1-109
Diff: 2
Skill: Applied

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3) In macroeconomics, the "output gap" is the difference between

7) Which of the following is the best example of frictional unemployment?

9) Inflation, the rate of change of average prices in the economy, generally

12) If the Canadian dollar exchange rate increases, the

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