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1 | |
The aggregate demand curve shows the: |
| | A) | direct relationship between the CPI and real expenditures. |
| | B) | inverse relationship between the GDP deflator and real expenditures. |
| | C) | inverse relationship between the CPI and real output. |
| | D) | direct relationship between the CPI and real output. |
| | E) | inverse relationship between the GDP deflator and real output. |
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2 | |
Based on the wealth effect, a rise in the price level: |
| | A) | makes households feel richer, so they increase their spending. |
| | B) | reduces the real value of financial assets, so that households spend more. |
| | C) | reduces the real value of financial assets, so that households spend less. |
| | D) | makes households feel richer, so they increase their saving. |
| | E) | has no effect on whether households feel richer or poorer. |
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3 | |
A business will undertake an investment project when: |
| | A) | the project's real rate of return is positive. |
| | B) | the business has retained earnings to spend. |
| | C) | the project's real rate of return exceeds the real interest rate. |
| | D) | the business can raise the necessary investment funds in financial markets. |
| | E) | the project's real rate of return is zero or negative. |
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4 | |
An increase in aggregate demand may be caused by: |
| | A) | an increase in taxes. |
| | B) | a rise in the real interest rate. |
| | C) | a fall in government purchases. |
| | D) | an expansion in foreign incomes. |
| | E) | a rise in the value of the Canadian dollar in terms of the US dollar. |
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5 | |
A fall in the value of the US-dollar price of the Canadian dollar leads to: |
| | A) | a decrease in Canadian aggregate demand. |
| | B) | an increase in Canadian aggregate demand. |
| | C) | no change in Canadian aggregate demand, but a short-run decrease in American aggregate supply. |
| | D) | an increase in American aggregate demand. |
| | E) | a short-run increase in Canadian aggregate supply |
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6 | |
At low output levels, the aggregate supply curve is: |
| | A) | steep, because new output is available only if prices rise by a significant amount. |
| | B) | steep, because new output can be made available with small price rises. |
| | C) | flat, because new output is available only if prices rise by a significant amount. |
| | D) | flat, because new output can be made available with small price rises. |
| | E) | vertical, because output can never change. |
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7 | |
Which of the following will cause a short-run decrease in aggregate supply? |
| | A) | a decrease in the economy's capital stock |
| | B) | an increase in the wage rate |
| | C) | a cut in taxes |
| | D) | a fall in oil prices |
| | E) | a decrease in the economy's labour force |
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8 | |
Which of the following will result in a long-run increase in aggregate supply? |
| | A) | a decrease in the economy's capital stock |
| | B) | an increase in the wage rate |
| | C) | a cut in taxes |
| | D) | a fall in oil prices |
| | E) | a decrease in the economy's labour force |
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9 | |
If there is positive unplanned investment: |
| | A) | real output must exceed real expenditures. |
| | B) | the price level is below its equilibrium level. |
| | C) | the general price level will rise. |
| | D) | planned net investment must be positive. |
| | E) | planned net investment must be negative. |
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10 | |
When total injections exceed total withdrawals: |
| | A) | flows out of the income-spending stream are greater than flows into this stream. |
| | B) | the income-spending stream speeds up. |
| | C) | the result will be a contraction of real output and spending. |
| | D) | the sum of saving, taxes and imports exceeds the sum of investment, government purchases, and exports. |
| | E) | investment exceeds saving. |
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11 | |
An inflationary gap occurs when: |
| | A) | potential output exceeds equilibrium output. |
| | B) | the unemployment rate is above its natural rate. |
| | C) | equilibrium output exceeds potential output. |
| | D) | the price level is above its equilibrium level. |
| | E) | the price level is below its equilibrium level. |
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12 | |
The two main ways to measure economic growth are: |
| | A) | the increase in real GDP and the increase in nominal GDP. |
| | B) | the increase in nominal GDP and the increase in labour productivity. |
| | C) | the increase in real GDP and the increase in per capita real GDP. |
| | D) | the increase in per capita real GDP and the increase in labour productivity. |
| | E) | the increase in nominal GDP and the increase in per capita nominal GDP. |
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13 | |
Since 1914, Canada's per capita real output, measured in terms of GNP has approximately: |
| | A) | doubled. |
| | B) | increased threefold. |
| | C) | quadrupled. |
| | D) | increased over fivefold. |
| | E) | increased just less than tenfold. |
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14 | |
Which of the following statements about business cycles is false? |
| | A) | As a rule, recessionary and inflationary gaps occur in sequence. |
| | B) | Business cycles are measured in terms of real GDP rather than nominal GDP. |
| | C) | When an economy has reached its trough, its recessionary gap reaches its maximum value. |
| | D) | A peak occurs when the economy has reached its long-run trend of potential output. |
| | E) | A contraction that lasts 6 months or more is known as a recession. |
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15 | |
Expectations of the future can create a self-fulfilling prophecy when a drop in incomes and spending: |
| | A) | causes households to increase their consumption spending. |
| | B) | means that businesses increase their investment spending. |
| | C) | means that households reduce their consumption spending. |
| | D) | causes households to cut back on saving. |
| | E) | causes governments to increase their purchases. |
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16 | |
New growth theory, as developed by Paul Romer, states that: |
| | A) | economies are necessarily subject to the law of diminishing returns. |
| | B) | ideas should have a high price after they have been created. |
| | C) | an idea tends to have low upfront costs but is costly to reproduce. |
| | D) | knowledge is the most important factor of production. |
| | E) | governments have no role to play in the production of new ideas |
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2002 McGraw-Hill Higher Education