Refer to Table 27.1.1. The marginal propensity to consume is
A) increasing as YD increases.
B) equal to 1 when YD equals $600.
C) 0.75.
D) 0.25.
E) 1.33.
Refer to Fact 30.1.1. Choose the statement that is incorrect.
A) It is important to renew the agreement because the target provides an anchor for low
inflation expectations.
B) It is important to renew the agreement because knowing that the Bank of Canada is
striving to reach the target makes the short-run output-inflation tradeoff as favourable as
possible.
C) It is important to renew the agreement because with the agreement the inflation rate
will always remain between 1 and 3 percent a year.
D) Obstacles to the renewal of the agreement may occur because some critics argue that
by focusing on inflation, the Bank sometimes permits the unemployment rate to rise.
E) Obstacles to the renewal of the agreement may occur because some critics argue that
by focusing on inflation, the Bank sometimes permits real GDP growth to suffer.
Choose the statement that is incorrect.
A) The Bank of Canada’s choice of policy instrument is the overnight loans rate.
B) When the Bank of Canada wants to slow inflation, it raises the overnight loans rate.
C) The Bank has established 12 fixed dates each year on which it announces its
overnight rate target for the coming period.
D) Recently, the overnight loans rate has been at historically low levels because the
Bank is leaning in the direction of avoiding recession.
E) The overnight rate was a bit more than 8 percent a year in 1995.
Refer to Table 15.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each
optometrist can choose to advertise his service or not. The incomes of each optometrist,
in thousands of dollars, are given in the payoff matrix above. Which of the following
statements correctly categorizes the Nash equilibrium for the game?
A) The game has a Nash equilibrium in which both optometrists advertise.
B) The game has a Nash equilibrium in which both optometrists do not advertise.
C) The game has a Nash equilibrium in which Dr. Smith advertises and Dr. Jones does
not advertise.
D) The game has a Nash equilibrium in which Dr. Smith does not advertise and Dr.
Jones does advertise.
E) The game has no Nash equilibrium.
All of the following are sources of loanable funds EXCEPT
A) business investment.
B) private saving.
C) government budget surplus.
D) international borrowing.
E) none of the above
Use the table below to answer the following questions.
Table 12.2.1
Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of
a perfectly competitive firm. The short-run equilibrium price of one unit of the good is
A) $3.
B) $10.
C) $15.
D) $25.
E) $30.
Refer to Figure 13.4.2. Assume this monopolist practises perfect price discrimination.
How many tickets are sold?
A) 20 tickets
B) 60 tickets
C) 40 tickets
D) 100 tickets
E) 80 tickets
Table 6.2.1 gives the supply and demand schedules for teenage labour in Genoa City.
Suppose the Genoa City Council sets a minimum wage of $4 per hour. Teenage
unemployment is ________ hours a week.
A) 800
B) 600
C) 400
D) 200
E) zero
Use the information below to answer the following questions.
Fact 30.3.1 Growth Forecast Through 2016
With low interest rates, business investment and trade are expected to bring growth
through 2016.
Consider Fact 30.3.1. To stimulate business investment further, the Bank of Canada can
A) decrease the government budget deficit.
B) increase the government budget surplus.
C) commit to keeping the inflation rate low and steady.
D) lower the Canadian dollar exchange rate.
E) lower the natural unemployment rate.
If the overnight rate is below target, the Bank ________ securities to ________
reserves, which ________ the supply of overnight funds and ________ the overnight
rate.
A) buys; increase; decreases; raises
B) sells; increase; increases; lowers
C) buys; decrease; decreases; raises
D) sells; decrease; decreases; raises
E) buys; increase; increases; lowers
Table 6.2.1 gives the supply and demand schedules for teenage labour in Genoa City.
There is a minimum wage set at $6 per hour. Suppose a new fast food restaurant opens
and increases the quantity demanded of teenage labour by 400 hours per week at each
wage rate. The result is
A) elimination of teenage unemployment and a wage rate of $7 per hour.
B) elimination of teenage unemployment, but the wage rate remains at $6 per hour.
C) some teenage unemployment with the wage rate remaining at $6 per hour.
D) no change in teenage unemployment because the wage rate rises to $7 per hour.
E) none of the above
Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream
is a complement of coffee. Consider the market for coffee. Assume that all ceteris
paribus assumptions continue to hold except for the event listed.
Refer to Fact 3.5.1. If coffee is a normal good, then a decrease in income will
A) increase the price and the quantity demanded of coffee.
B) increase the price and the quantity supplied of coffee.
C) decrease the price and the quantity demanded of coffee.
D) decrease the price and the quantity supplied of coffee.
E) have no effect on the market for coffee.
In which one of the following situations will a perfectly competitive firm make an
economic profit?
A) MR > AVC
B) MR > ATC
C) ATC > MC
D) ATC > MR
E) MC > AVC
A perfect price-discriminating monopoly produces
A) less than a single-price monopoly.
B) more than a single-price monopoly but less than a perfectly competitive industry.
C) less than a monopoly that practices price discrimination but not perfect price
discrimination.
D) more than a perfectly competitive industry.
E) the same amount as a perfectly competitive industry.
Suppose the quantity of money is expected to remain unchanged but it actually
increases. The price level
A) rises and real GDP increases.
B) rises and real GDP decreases.
C) falls and real GDP increases.
D) falls and real GDP decreases.
E) rises and real GDP stays the same.
A firm with a single owner who has unlimited liability is
A) a corporation.
B) a sole proprietorship.
C) a limited partnership.
D) an unlimited partnership.
E) a cooperative.
Import quotas ________ the price of imported goods and ________ the quantity
consumed in the country imposing the quota.
A) raise; increase
B) raise; decrease
C) lower; increase
D) lower; decrease
E) raise; do not change
R2 is
A) long-term unemployment.
B) the official unemployment rate.
C) comparable to the official U.S. rate.
D) short-term unemployment.
E) the unemployment rate that adds discouraged searchers to the official rate.
Diminishing marginal utility means that
A) Ralph will enjoy his second hamburger less than the first one.
B) the utility from one hamburger is greater than the utility from two hamburgers.
C) the price of two hamburgers is less than twice the price of one.
D) the utility from eating two hamburgers will be more than twice the utility from
eating the first one.
E) hamburgers seem smaller as you eat more of them.
Import quotas ________ the price of imported goods and ________ the quantity
consumed in the country imposing the quota.
A) raise; increase
B) raise; decrease
C) lower; increase
D) lower; decrease
E) raise; do not change
The Bank of Canada can lower the overnight loans rate by
A) raising the bank rate.
B) lowering the bank rate.
C) raising the settlement balances rate.
D) lowering the settlement balances rate.
E) both B and D
Which of the following statements is correct?
A) Canada produces more manufactured goods than services.
B) Canada produces more agricultural goods than services.
C) Canada produces more services than goods.
D) The percentage of the Canadian population that produces goods is greater than the
percentage of the Chinese population that produces goods.
E) Canada produces more agricultural goods than manufactured goods.
In the absence of government intervention, a profit-maximizing firm producing a good
with an external cost will produce a quantity at which
A) price is greater than marginal private cost.
B) price is less than marginal revenue.
C) price is less than marginal private cost.
D) price equals marginal private cost.
E) marginal revenue equals marginal social cost.
Which of the following statements by a restaurant owner refers to the law of
diminishing marginal returns?
A) “The higher the quality of the ingredients we use, the higher the cost of producing
each meal.”
B) “If we double the size of our premises and double everything else kitchen staff,
serving staff, equipment we can increase the number of meals we serve, but not to
double the current levels.”
C) “We can increase the number of meals we serve by just adding more kitchen staff,
but each additional worker adds less meals than the previous worker because traffic in
the kitchen will get worse.”
D) “We can serve the same number of meals with fewer kitchen staff, but we would
have to buy more labour-saving kitchen equipment.”
E) “We can serve the same number of meals with less kitchen equipment, but we would
have to hire more kitchen staff.”
Choose the statement that is incorrect.
A) The Bank of Canada’s strategy of inflation rate targeting that keeps the inflation rate
low and stable makes the maximum possible contribution towards achieving full
employment and sustained economic growth.
B) The Bank of Canada’s strategy of inflation rate targeting has resulted in an inflation
rate that is 0.3 percent per year below the core CPI inflation rate since 2000.
C) The last time the Bank of Canada created a recession was at the beginning of the
1990s when it was faced with the threat of ongoing double-digit inflation.
D) The Bank of Canada’s monetary policy is sensitive to the state of employment while
maintaining its focus on achieving its inflation target.
E) The inflation-control target uses the Consumer Price Index as the measure of
inflation.
You are given the following information about the Canadian economy. Autonomous
consumption expenditure is $50 billion, investment is $200 billion, and government
expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are
$250 billion. Net taxes are assumed to be constant and not vary with income. Exports
are $500 billion and imports are $450 billion.
The consumption function in billions of dollars is
A) C = 50 + 0.7Y.
B) C = 0.7(Y – 250).
C) C = 50 + 0.7(Y – 250).
D) C = 50 + 0.7(YD – 250).
E) C = 50 + 0.7Y – 250.
In 2011, the 20 percent of households with the highest incomes received what
percentage of the total after-tax income?
A) 14 percent
B) 2 percent
C) 71 percent
D) 44.2 percent
E) 55.8 percent
Refer to Figure 16.2.3. In this market there is a marginal external
A) cost of $14 a tonne.
B) cost of $12 a tonne.
C) cost of $2 a tonne.
D) benefit of $2 a tonne.
E) benefit of $12 a tonne.
Which of the following would cause the aggregate demand curve to keep shifting
rightward year after year?
A) a one-time tax cut
B) a one-time increase in government expenditures on goods and services
C) inflation
D) excess wage demands
E) a persistent increase in the quantity of money
Core inflation is the percentage change in
A) the Consumer Price Index including the eight most volatile prices.
B) an inflation rate that ranges between 1 percent and 3 percent annually.
C) the Consumer Price Index excluding the eight most volatile prices.
D) the average of the 8 most volatile prices in the Consumer Price Index.
E) the target midpoint inflation rate of 2 percent per year.
If a sales tax is imposed on food, who is likely to pay most of the tax?
A) mostly the buyer
B) mostly the seller
C) neither the seller nor the buyer
D) the buyer and the seller equally
E) The burden of the tax depends on the size of the tax.
The economy’s natural unemployment rate is 4 percent. Table 28.4.2 gives some points
on the economy’s short-run Phillips curve. If the expected inflation rate rises to 8
percent a year,
A) the long-run Phillips curve shifts leftward.
B) the short-run Phillips curve shifts upward.
C) the short-run Phillips curve shifts downward.
D) Both A and B are correct.
E) Both A and C are correct.
Flora’s Flowers bought a new van last year for $10,000. It can now sell the car for
$8,500. To buy this year’s model it would have to pay $11,000. Flora’s also had to take
out a $9,000 loan to buy the van which had to be paid back in yearly installments of
$3,300 per year over three years. What is the implicit rental rate of the first year’s use of
the van?
A) $2,800
B) $1,300
C) $1,800
D) $13,300
E) $4,800
Refer to Fact 20.1.1. Peter’s depreciation in 2014 is
A) $2,300.
B) $800.
C) zero.
D) $1,000.
E) $3,000.