If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity
demanded, the demand curve for this good
A) is vertical.
B) is horizontal.
C) has slope equal to 1.
D) is a straight line with slope equal to 10.
E) none of the above
At the beginning of the year, Tom’s Tubes had capital of 5 tube-inflating machines.
During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom’s
gross investment for the year is
A) 1 machine.
B) 2 machines.
C) 3 machines.
D) 6 machines.
E) 8 machines.
Refer to Figure 11.2.1 which illustrates Tania’s total product curve. Average product of
labour reaches its maximum for the ________ worker.
A) first
B) second
C) third
D) fourth
E) fifth
The group that faces the weakest incentive to work are
A) those who pay the highest income tax rate.
B) those who pay the lowest income tax rate.
C) the middle class.
D) households that benefit from welfare.
E) all of the above
From the data in Table 2.1.1, the production of 7 units of X and 28 units of Y is
A) unattainable.
B) attainable but leaves some resources unused or misallocated or both.
C) on the PPF between points C and D.
D) on the PPF between points B and C.
E) outside the PPF.
A technological advance occurs in a perfectly competitive market. Which of the
following statements is incorrect?
A) All old-technology firms exit in the long run.
B) In the long run, all firms make zero economic profit.
C) The technological advance brings permanent gains to producers and temporary gains
to consumers.
D) As more firms begin to use the new technology, market supply increases.
E) As more firms begin to use the new technology, the market price falls.
Use the figure below to answer the following questions.
Figure 9.1.2
Refer to Figure 9.1.2. Which budget line shows the greatest real income in terms of
compact discs?
A) AD
B) BD
C) CD
D) Real income is equal for all three budget lines.
E) Cannot be determined without studying the indifference curves.
Use the figure below to answer the following questions.
Figure 9.2.1
Which of the graphs in Figure 9.2.1 shows perfect substitutes?
A) (a)
B) (b)
C) (c)
D) (d)
E) (c) and (d)
As production of food increases, marginal benefit from food
A) increases and marginal cost increases.
B) increases and marginal cost decreases.
C) decreases and marginal cost increases.
D) decreases and marginal cost decreases.
E) decreases and marginal cost is zero.
To increase efficiency,
A) taxes are used to overcome both external benefits and external costs.
B) subsidies are used to overcome both external benefits and external costs.
C) subsidies are used to overcome external benefits, and taxes to overcome external
costs.
D) taxes are used to overcome external benefits, and subsidies to overcome external
costs.
E) public provision used to overcome external benefits, and vouchers to overcome
external costs.
If an economy’s real GDP increases from $100 billion to $150 billion, and at the same
time its imports increase from $40 billion to $50 billion, then the marginal propensity to
import
A) decreases from 0.4 to 0.2.
B) is greater than 0.2 and less than 0.4.
C) is 0.2.
D) is 0.36.
E) is 0.4.
Refer to Table 20.2.2. Net domestic income at market prices equals
A) $3,050.
B) $3,150.
C) $3,400.
D) $4,650.
E) $2,650.
Economies of scale are present when
A) the LRAC curve slopes downward.
B) average total cost remains constant as input increases.
C) average total cost rises as output increases.
D) the LRAC curve is horizontal.
E) total fixed cost increases.
When the actual unemployment rate is equal to the natural unemployment rate, then the
A) inflation rate must be zero.
B) long-run aggregate supply curve is upward sloping.
C) short-run aggregate supply curve is vertical.
D) economy is operating at potential GDP.
E) the money wage rate will rise.
In Figure 25.3.1, suppose the demand for dollars temporarily decreases so that the
demand curve shifts to D2. To maintain the target exchange rate, the Bank of Canada
A) sells dollars.
B) buys dollars.
C) must violate both interest rate parity and purchasing power parity.
D) must raise the target exchange rate.
E) must lower the target exchange rate.
In response to an inflationary gap, the Bank of Canada
A) waits until the price level falls before acting.
B) lowers the overnight loans rate by selling securities.
C) raises the overnight loans rate by selling securities.
D) lowers the overnight loans rate by buying securities.
E) raises the overnight loans rate by buying securities.
Choose the statement that is incorrect.
A) The growth rate of real GDP per person can be calculated approximately by
subtracting the population growth rate from the real GDP growth rate.
B) Real GDP per person grows only if real GDP grows faster than the population
grows.
C) The standard of living depends on real GDP per person.
D) Real GDP increases when the economy returns to full employment in an expansion
phase of the business cycle.
E) The return to full employment in an expansion phase of the business cycle is
economic growth.
Which of the following is FALSE?
A) Saving adds to wealth.
B) Income left after paying taxes can either be consumed or saved.
C) Saving equals wealth minus consumption expenditure.
D) Saving is the source of funds used to finance investment.
E) Saving supplies funds in loan markets, bond markets, and stock markets.
Suppose initially Canada has all its international payments accounts in balance (no
surplus or deficit). Then Canadian firms increase the amount they import from Japan,
financing that increase by borrowing from Japan. Everything else remaining the same,
there will now be a current and financial account
A) surplus and a capital account surplus.
B) surplus and a capital account deficit.
C) deficit and a capital account surplus.
D) deficit and a capital account deficit.
E) surplus and a capital account balance.
The price of pizza increases. Everything else remaining the same, the consumer surplus
from pizza
A) increases.
B) is greater than the producer surplus from pizza.
C) is less than the producer surplus from pizza.
D) does not change.
E) decreases.
Fiscal policy is
A) the use of the federal budget to achieve macroeconomic objectives.
B) any policy by the Bank of Canada.
C) budgeting policy by aggregate households.
D) any attempt by the federal government or Bank of Canada to control inflation.
E) effective only when the federal government has a budget surplus.
Which of the following is an example of a fiscal policy designed to counter a
recessionary gap?
A) increasing debt interest payments
B) increasing taxes
C) decreasing transfer payments
D) increasing transfer payments
E) decreasing government expenditures on goods and services
If the equation of a straight line is y = 8 – 2x, then the slope is
A) -2 and the x-intercept is -4.
B) -2 and the x-intercept is 4.
C) -2 and the x-intercept is 8.
D) 2 and the x-intercept is -4.
E) 2 and the x-intercept is 4.
If the price of the good measured on the vertical axis increases, the budget line
A) becomes steeper.
B) becomes flatter.
C) shifts leftward and parallel to the original budget line.
D) shifts rightward and parallel to the original budget line.
E) shifts leftward and becomes steeper.
Refer to Figure 19.3.5. This figure shows the labour supply curves and the value of
marginal product curves for high-skilled and low-skilled workers. If there is an increase
in the supply of high-skilled workers and the supply of high-skilled workers is now
equal to the supply of low-skilled workers, then
A) wages paid to high-skilled workers would fall to $4 an hour.
B) wages paid to high-skilled workers would fall to $5 an hour.
C) wages paid to high-skilled workers would fall to $6 an hour.
D) there would be no change in the wages of high-skilled workers, because high-skilled
workers always earn more than low-skilled workers.
E) there would be no change in the wages of high-skilled workers, because their value
of marginal product is unchanged.
Public choice theory predicts that government
A) acts to promote the redistribution of wealth and income.
B) acts to maximize the amount of campaign contributions.
C) acts to eliminate waste and promote an efficient allocation of resources.
D) makes choices that result in efficient provision of public goods.
E) makes choices that result in inefficient overprovision of public goods.
Which of the following statements is true?
A) International trade raises wages in developing countries.
B) International trade with rich industrial countries forces people in the developing
countries to work for lower wages.
C) International trade leads to job losses in both import competing industries and
exporting industries.
D) Unlike other types of international trade, offshore outsourcing does not bring any
gains from trade.
E) International trade encourages lax environmental standards.
Gene plays another hour of computer games rather than study for the hour even though
he knows that the next day when he takes his test he will regret his decision. Gene is
showing
A) the endowment effect.
B) bounded rationality.
C) bounded self-interest.
D) bounded willpower.
E) bad judgment.
The price of gasoline rises by 25 percent and remains fixed at the new higher level.
Choose the correct statement.
A) The demand for gasoline will increase after consumers adjust their consumption
behaviour to the new higher price.
B) The demand for gasoline will decrease after consumers adjust their consumption
behaviour to the new higher price.
C) Initially after the price change, the price elasticity of demand will be less elastic than
it will be a few years after the price change.
D) The price elasticity of demand for gasoline will decrease in the future.
E) Initially after the price change, the price elasticity of demand will be more elastic
than it will be a few years after the price change.
The fundamental force that drives international trade is
A) absolute advantage.
B) importation duties.
C) the advantage of execution.
D) export advantage.
E) comparative advantage.
Consumption expenditure minus imports, which varies with real GDP, is
A) aggregate expenditure.
B) autonomous expenditure.
C) planned consumption.
D) induced expenditure.
E) unplanned consumption.
An advantage of monopolistic competition over perfect competition is
A) economic profit.
B) product variety.
C) excess capacity.
D) efficiency.
E) economies of scale.
Farm land can be used to produce either cattle or corn. If the demand for cattle
increases, then the
A) demand for corn increases.
B) supply of corn increases.
C) demand for corn decreases.
D) supply of corn decreases.
E) both B and C