The monetary base consists of the sum of
A) Bank of Canada notes held within the Bank of Canada, bank deposits at the Bank of
Canada, and coins held by banks.
B) Bank of Canada notes held outside the Bank of Canada, the desired reserves of
chartered banks, and coins held by banks.
C) Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of
Canada, and coins held by banks and the public.
D) Bank of Canada notes held within the Bank of Canada, bank deposits at the Bank of
Canada, and coins held by banks and the public.
E) Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of
Canada, and notes and coins held by banks.
The law of demand for foreign exchange tells us that other things remaining the same,
A) the higher the exchange rate, the greater is the quantity of Canadian dollars
demanded.
B) the higher the exchange rate, the greater is the demand for Canadian dollars.
C) the higher the exchange rate, the greater is the supply of Canadian dollars.
D) the higher the exchange rate, the smaller is the quantity of Canadian dollars
demanded.
E) the lower the exchange rate, the greater is the supply of Canadian dollars.
Refer to Figure 26.3.1. If Econoworld automatically adjusts to a long-run equilibrium,
then in the long-run macroeconomic equilibrium,
A) the price level is 70.
B) real GDP is $440 billion.
C) actual unemployment exceeds the natural unemployment rate.
D) potential GDP is greater than in the short run.
E) Both A and B
Which one of the following statements is not true?
A) A production process is technologically efficient only if it is producing a given
output at the lowest possible cost.
B) If a process is economically efficient, it must be technologically efficient as well.
C) Economic efficiency depends on the relative price of inputs, while technological
efficiency does not.
D) Economically efficient firms will be more likely to survive than economically
inefficient firms.
E) Technologically efficient firms are more likely to survive than technologically
inefficient firms.
Which of the following can lead to an inefficient outcome?
I. Price regulations
II. Increasing marginal cost
III. Monopoly
A) I only
B) II only
C) I and III
D) III only
E) I, II, and III
Refer to Figure 16.3.2.The figure shows the market for good B. What is the efficient
quantity of good B?
A) 0 units
B) 3 units
C) 5 units
D) 6 units
E) 9 units
Use the information below to answer the following questions.
Fact 27.1.1
In an economy, when disposable income increases from $400 billion to $500 billion,
consumption expenditure increases from $480 billion to $540 billion.
Consider Fact 27.1.1. The marginal propensity to consume is
A) 0.75.
B) 0.80.
C) 0.60.
D) 0.40.
E) 0.25.
Refer to Figure 31.3.1. The tariff ________ the domestic production of shirts in Canada
by ________ per year.
A) increases; 8 million
B) decreases; 16 million
C) increases; 4 million
D) decreases; 8 million
E) increases; 24 million
Which theory of economic growth argues that population growth lowers the real wage
rate and stops economic growth?
A) classical growth theory
B) neoclassical growth theory
C) new growth theory
D) all of the theories
E) none of the theories
Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA
and PB stand for the price of goods A and B, respectively. Which statement must hold
for consumer equilibrium?
A) MUA = MUB
B) MUA = MUB and PA = PB
C) MUA/MUB = PB/PA
D) MUA/MUB = PA/PB
E) MUAPA = MUBPB
Refer to Fact 25.4.1. What is the amount of saving by the people of Ecoland?
A) 8 billion turkeys
B) 10 billion turkeys
C) 20 billion turkeys
D) 6 billion turkeys
E) 12 billion turkeys
Choose the statement that is incorrect.
A) Expenditure on a plant that has no resale value is a sunk cost.
B) A sunk cost is irrelevant to a firm’s current decisions.
C) A cost that influences a firm’s current decisions is the short-run cost of changing its
labour inputs.
D) A cost that influences a firm’s current decisions is the long-run cost of changing its
plant.
E) The short run is a time frame in which a firm can change its plant.
Team production is
A) a production process with decreasing costs per unit as production increases.
B) a production process with individuals specializing in mutually supportive tasks.
C) the production that results from market activity.
D) the cost of organizing an assembly line.
E) the lower costs resulting from organizing a firm versus using the market to
coordinate production.
Consider the following information on cola sales by number of cases for a typical
university residence floor:
Temp. Price (dollars per case)
(C) 10.00 12.50 15.00 17.50
15 50 40 30 20
20 60 50 40 30
25 70 60 50 40
30 80 70 60 50
35 90 80 70 60
Cola sales and temperature are
A) inversely related.
B) positively related.
C) not affected by the price.
D) unrelated.
E) negatively related at low prices, but positively related at high prices.
Which of the following creates an incentive to increase the amount of an activity?
A) an increase in the marginal cost of the activity and a decrease in the marginal benefit
from the activity
B) a decrease in the marginal cost of the activity and an increase in the marginal benefit
from the activity
C) constant marginal cost and constant marginal benefit from the activity
D) an increase in the marginal cost of the activity and an equal increase in the marginal
benefit from the activity
E) a decrease in the marginal cost of the activity and an equal decrease in the marginal
benefit from the activity
________ increases households’ saving.
A) A decrease in the real interest rate
B) A tax cut that increases disposable income
C) Higher expected future income
D) An increase in wealth
E) An increase in default risk
Which one of the following would economists classify as land?
A) an automotive plant in British Columbia
B) rich agricultural soil in Saskatchewan
C) an oil rig in the Atlantic Ocean
D) an elementary school in Nova Scotia
E) automobiles parked in a parking lot in Manitoba
Choose the correct statement.
A) Canada produces more services than goods.
B) Canada produces more goods than services.
C) Canada produces an equal quantity of goods and services.
D) China’s production of services is a greater percentage of its total production than
Canada’s.
E) Canada’s production of manufacturing is a greater percentage of its total production
than China’s.
Choose the correct statement about firms in monopolistic competition.
A) A firm must lower its price to sell a greater quantity.
B) A firm can never incur an economic loss.
C) Price is never more than marginal cost.
D) Firms offer identical products.
E) The most a firm can make is zero economic profit.
Long-run supply is
A) more elastic than momentary supply but less elastic than short-run supply.
B) less elastic than momentary supply but more elastic than short-run supply.
C) less elastic than both momentary and short-run supply.
D) more elastic than both momentary and short-run supply.
E) equal in elasticity to short-run supply.
Suppose that a bond promises to pay its holder $100 a year forever. If the price of the
bond increases from $1,000 to $1,250, then the interest rate on the bond
A) rises from 8 percent a year to 10 percent a year.
B) falls from 10 percent a year to 6 percent a year.
C) falls from 10 percent a year to 8 percent a year.
D) rises because the bond becomes a better investment.
E) does not change because the purchaser buys the bond knowing that interest rates will
be adjusted.
Refer to Table 20.2.6. Consider the data in this table. What is current real GDP in terms
of base-year prices?
A) $189,900
B) $192,000
C) $95,000
D) $93,000
E) 75,000 loaves of bread and 25,000 computer disks
Caven and John have been arrested by the police, who have evidence that will convict
them of robbing a bank. If convicted, each will receive a sentence of 6 years for the
robbery. During questioning, the police suspect that Caven and John are responsible for
a series of bank robberies. If both confess to the series, each will receive 12 years in
jail. If only one confesses, he will receive 4 years and the one who does not confess will
receive 14 years. What is the equilibrium for this game?
A) Both deny.
B) Caven confesses and John denies.
C) John confesses and Caven denies.
D) Both confess.
E) Both serve 8 years in jail.
Consider the revenue and cost curves in Figure 13.3.3. If this is a single-price
monopoly, what is consumer surplus?
A) EADH
B) EABH
C) ABD
D) ACD
E) KEA
Use the table below to answer the following questions.
Table 4.2.2
Refer to Table 4.2.2. The cross elasticity of demand for Jolt with respect to the price of
Coke is
A) 0.75.
B) 1.5.
C) 0.40.
D) 10.
E) It cannot be calculated because income is not constant.
The Bank of Canada is the lender of last resort. This means banks may borrow money
from the Bank of Canada
A) whenever they are short of reserves.
B) overnight.
C) if they have sufficient securities to support the loan.
D) if the banking system as a whole is short of reserves.
E) to finance a sudden and dramatic increase in overseas reserves.
When an effective production quota is applied in the market for wheat, the quantity
produced ________ and the price ________. The marginal social benefit ________
marginal social cost.
A) increases; rises; exceeds
B) decreases; falls; is less than
C) decreases; rises; exceeds
D) increases; falls; is less than
E) decreases; rises; is less than
A decrease in the government budget deficit decreases the ________ loanable funds and
an increase in the government budget surplus increases the ________ loanable funds.
A) demand for; demand for
B) demand for; supply of
C) supply of; demand for
D) supply of; supply of
E) demand for loanable funds and the supply of; supply of loanable funds and the
demand for
Quantecon is a country in which the quantity theory of money operates. The country
has a constant population, capital stock, and technology. In year 1, real GDP was $400
million, the price level was 200, and the velocity of circulation was 20.
In year 2 the quantity of money was 20 percent higher than in year 1.
The quantity of money in year 1 was ________.
The quantity of money in year 2 was ________.
The price level in year 2 is ________.
A) $20 million; 24 million; 240
B) $20 million; $24 million; 220
C) $40 million; $48 million; 240
D) $40 million; $48 million; 220
E) $80 million; $88 million; 200
Which of the following does not change aggregate demand?
A) an increase in expected future income
B) a change in fiscal policy
C) a change in monetary policy
D) an advance in technology
E) a rise in the exchange rate
Which one of the following newspaper quotations describes a movement along an LAS
curve?
A) “The decrease in consumer spending may lead to a recession.”
B) “The increase in consumer spending is expected to lead to inflation, without any
increase in real GDP.”
C) “Recent higher wage settlements are expected to cause higher inflation this year.”
D) “Growth has been unusually high the last few years due to more women entering the
labour force.”
E) “The recent tornadoes destroyed many factories in Calgary and Edmonton.”
Use the figure below to answer the following question.
Figure 1A.5.5
Refer to Figure 1A.5.5. The graph shows the relationship between two variables, x and
y. Which of the following equations describes this relationship?
A) y = 3x + 15
B) y = -3x + 15
C) y = -3x2 + 15
D) y = 15x + 3
E) x = 15y + 3