Suppose that the Reserve Bank of New Zealand is following the Taylor rule. In 2009, it
sets the official cash rate (the N.Z. equivalent of the overnight loans rate) at 4.0 percent
a year. If the inflation rate in New Zealand is 2.0 percent a year, what is its output gap?
A) 0 percent
B) 1 percent
C) 2 percent
D) 3 percent
E) 0.5 percent
Refer to Table 26.3.3. When the economy is at its short-run macroeconomic
equilibrium, the economy
A) is also in a long-run macroeconomic equilibrium.
B) has an inflationary gap.
C) has a recessionary gap.
D) has neither an inflationary nor a recessionary gap.
E) Both A and D are correct.
Goods and services that we buy from other countries are our
A) balance of payments.
B) exports.
C) imports.
D) terms of trade.
E) comparative goods and services.
Refer to Fact 20.1.3. Choose the statement that is incorrect.
A) Expenditure on the cars is part of consumption expenditure in calculating Canada’s
GDP.
B) Expenditure made by Toyota on building the assembly plant in Ontario is recorded
as investment.
C) If any parts for the cars come from Japan, they are Canadian imports.
D) If any parts for the cars come from Japan, they are recorded as a positive entry in
calculating Canada’s GDP.
E) The assembly line components and robots appear as exports in Japan’s GDP.
Use the figure below to answer the following questions.
Figure 6.2.1
Refer to Figure 6.2.1. What is the equilibrium wage rate per hour in an unregulated
market?
A) $2
B) $3
C) $4
D) $5
E) $30
The opportunity cost of pushing the production possibilities frontier outward is
A) capital accumulation.
B) technological change.
C) reduced current consumption.
D) the gain in future consumption.
E) all of the above
A monopoly ________ make positive economic profit in the long run because
________.
A) can; barriers to entry prevent other firms from entering the market and sharing the
profit
B) cannot; eventually demand will decrease and prices will fall
C) cannot; other firms will enter the market until all firms are making zero economic
profit
D) can; new technology constantly lowers costs for the monopoly firm and for its
competitors
E) can; demand constantly increases and price constantly rises
Refer to Figure 16.3.1. The figure shows the marginal private benefit curve, the
marginal social benefit curve, and the market supply curve. If production is left to the
private market, then the price is
A) P1.
B) P3.
C) P2.
D) greater than P4.
E) P4.
The long-run aggregate supply curve is vertical because
A) potential GDP is independent of the price level.
B) actual output can never exceed, even temporarily, the output rate implied by the
economy’s long-run aggregate supply curve.
C) a vertical long-run aggregate supply curve indicates the maximum output rate that an
economy can ever reach.
D) a vertical long-run supply curve indicates that an increase in aggregate demand will
lead to a larger real GDP, but not a larger nominal GDP.
E) potential GDP never changes.
A firm’s value of marginal product of labour curve is also its
A) marginal cost curve of labour.
B) demand curve for labour.
C) supply curve of labour.
D) supply curve of output.
E) marginal product curve.
Refer to the figure below to answer the following question.
Figure 7.3.2
Refer to Figure 7.3.2. The supply of peanuts in Canada is made up of Canadian grown
peanuts and imported peanuts. Initially, Canada engages in free trade in the peanut
market. Then Canada puts a quota on peanut imports. The graph shows the Canadian
market for peanuts when the Canadian government puts a quota on peanut imports. The
Canadian consumer surplus that is redistributed to Canadian producers is ________ and
the quota creates a deadweight loss equal to ________.
A) area B + C + D + E; zero
B) area B + C + F; area D
C) area B; area D + E
D) area B; area C + E
E) area B + C + D; area E + F
According to the fair result view of fairness, a fair outcome in the housing market
A) is the one that blocks voluntary exchange of housing.
B) cannot be created in the housing industry.
C) is one that allocates scarce housing resources to those who are willing and able to
pay.
D) is one that allocates scarce housing resources by lottery.
E) is one that allocates scarce housing resources to the poorest.
Canada imports cars from Japan. If Canada imposes a tariff on cars imported from
Japan, Canadian
A) consumers will lose and Japanese producers will gain.
B) tariff revenue will equal the loss of Canadian consumers.
C) consumers will lose and Canadian producers will gain.
D) car manufacturers will gain revenue equal to the revenue lost by Japanese car
manufacturers.
E) producers will lose and Japanese consumers will gain.
An incentive
A) could be a reward but could not be a penalty.
B) could be a penalty but could not be a reward.
C) could be either a reward or a penalty.
D) is the opposite of a tradeoff.
E) occurs in the macroeconomy but not in the microeconomy.
If the Bank of Canada is concerned with recession it will ________ the overnight loans
rate to ________.
A) raise; increase aggregate demand
B) lower; increase aggregate demand
C) raise; decrease aggregate demand
D) lower; decrease aggregate demand
E) lower; increase potential GDP
Bounded self-interest
A) is limited by the computing power of the human brain.
B) prevents us from making a decision that we know, at the time of implementing the
decision, we will later regret.
C) is the tendency for people to value something more highly simply because they own
it.
D) results in sometimes suppressing our own interests to help others.
E) is the tendency for people to value something more highly simply because a friend
owns it.
In calculating GDP, economists use the value of final goods and services because
A) by using final goods and services, they avoid double counting.
B) final goods can be exported to other countries.
C) intermediate goods are imported from other countries.
D) GDP is underestimated if intermediate goods are used instead.
E) final goods and services do not depreciate.
Bill consumes apples and bananas. Apples are measured on the vertical axis and
bananas are measured on the horizontal axis. Bill’s income doubles, the price of apples
doubles, and the price of bananas triples. Bill’s budget line
A) remains unchanged.
B) shifts rightward and the slope does not change.
C) shifts rightward and becomes steeper.
D) shifts rightward and becomes flatter.
E) becomes steeper.
In 2011, the median household income in Canada was
A) $5,000.
B) $25,000.
C) $50,700.
D) $59,700.
E) $63,000.
A rise in the price of good A shifts the
A) demand curve for good B rightward if the cross elasticity of demand between A and
B is negative.
B) demand curve for good B rightward if the cross elasticity of demand between A and
B is positive.
C) supply curve of B rightward if the cross elasticity of demand between A and B is
negative.
D) supply curve of B rightward if the cross elasticity of demand between A and B is
positive.
E) demand curve for B rightward if the income elasticity of demand for B is positive.
Which of the following is a Canadian service export?
A) a Canadian buys dinner while travelling in Switzerland
B) a Swiss buys dinner while travelling in Canada
C) a Canadian buys a clock made in Switzerland
D) a Swiss buys a computer made in Canada
E) a Canadian buys a Canadian computer in Switzerland
If Wolfgang transfers $1,000 out of his non-chequable deposit account and places it in
his chequable deposit account,
A) M1 and M2 fall.
B) M1 falls and M2 rises.
C) M1 falls and M3 rises.
D) M1 falls and M2 remains the same.
E) M1 rises and M2 remains the same.
Use the table below to answer the following questions.
Table 23.3.6
The table shows an economy’s demand for loanable funds schedule and supply of
loanable funds schedule when the government’s budget is balanced.
Consider Table 23.3.6. If the Ricardo-Barro effect occurs, and if the government’s
budget becomes a deficit of $2.0 trillion, what is the real interest rate?
A) 4 percent a year
B) 5 percent a year
C) 6 percent a year
D) 6.5 percent a year
E) 7 percent a year
In 2003, when music downloading first took off, Universal Music slashed the average
price of a CD from $21 to $15. The company expected the price cut to boost the
quantity of CDs sold by 30 percent, other things remaining the same. What was
Universal Music’s estimate of the price elasticity of demand for CDs?
A) 0.9
B) 90
C) 1.11
D) 0.011
E) 0.2
Use the figure below to answer the following questions.
Figure 1A.3.10
Refer to Figure 1A.3.10. The figure shows a relationship between two variables, x and
y. The slope at point A is
A) 2.
B) -2.
C) 0.25.
D) -0.25.
E) -4.
If the quantity of chicken demanded increases by 1.25 percent when the price of beef
increases by 2.5 percent, the cross elasticity of demand between chicken and beef is
A) 3.125.
B) -3.125.
C) -0.5.
D) 2.0.
E) 0.5.
If there is a 5 percent increase in the CPI, then there will most likely be
A) a 5 percent rise in the cost of living.
B) a less than 5 percent rise in the cost of living because of consumers substituting
away from goods whose relative prices rise towards other goods.
C) a more than 5 percent rise in the cost of living because of consumers substituting
away from goods whose relative prices rise towards other goods.
D) a less than 5 percent rise in the cost of living because of falling quality of goods over
time.
E) a more than 5 percent rise in the cost of living because of the introduction of new
goods.
Natural resources that are depleted as they are used
A) should not be used.
B) are called nonrenewable natural resources.
C) should be used for only highly valued purposes.
D) should be conserved for future generations.
E) are called renewable natural resources.
A private cost of production is a cost that is borne by the ________ of a good or service.
A social cost of production is a cost that is ________.
A) consumer; borne by the producer and by everyone else on whom the cost falls
B) consumer; not borne by the producer but borne by other people
C) producer; not borne by the producer but borne by other people
D) producer; borne by the producer and by everyone else on whom the cost falls
E) producer; borne by the consumer
In an expansion, typically
A) unemployment increases.
B) the labour force participation rate increases.
C) the employment-to-population ratio decreases.
D) employment decreases.
E) the number of discouraged searchers increases.
If a 10 percent increase in income results in a 5 percent increase in quantity demanded,
what is the income elasticity of demand?
A) 0.5
B) -0.5
C) 2.0
D) -2.0
E) 1.5
The sum of the marginal propensity to save and the marginal propensity to consume
A) always equals 1.
B) sometimes equals 1.
C) always equals 0.
D) never equals 1.
E) is greater than zero but less than 1.
Government debt is
A) equal to revenues minus outlays.
B) always increasing.
C) a phenomena that occurs only during times of war.
D) the total amount of government borrowing.
E) the result of a rising price level.
The fact that some people can afford to live in beautiful homes while others are
homeless is an example of an economy facing the ________ question.
A) “what”
B) “how”
C) “for whom”
D) “where”
E) “when”