Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Neo-Fisherism says 1)
A) the central bank should increase inflation by lowering the money supply.
B) the central bank should increase inflation by raising the nominal interest rate.
C) the central bank should increase inflation by lowering the real interest rate.
D) the central bank should increase inflation by lowering nominal interest rates.
E) that Fisherism is wrong.
2) Business cycles in macroeconomics are 2)
A) changes in the average standard of living over time.
B) short-run ups and downs in aggregate economic activity.
C) profits and losses of firms.
D) the economic interrelationships among nations.
E) the increase in a nation's productive capacity over a long period of time.
3) The 2007-8 recession in Canada 3)
A) was the most severe recession in the 1961-2018 period.
B) was worsened by fiscal policy actions.
C) originated in the United States.
D) was caused by tight monetary policy.
E) was the result of the failure of the Canadian banking system.
4) When a country has a current account deficit, the country 4)
A) always has a large government budget surplus.
B) always has a large government budget deficit.
C) is always lending abroad.
D) is always borrowing from abroad.
E) is always borrowing from domestic residents.
5) Business cycles 5)
A) cannot be prevented, according to the consensus among macroeconomists.
B) have potentially many causes, but regular comovements.
C) occur every five years in Canada.
D) have a single cause, and unpredictable comovements.
E) are always caused by the central bank.
6) Tax cuts 6)
A) will surely make the government default on its debts.
B) cause the government to borrow less.
C) may have no effect, if people take account of future taxes.
D) cause unemployment.
E) always stimulate economic activity.
1
, 7) Improvements in a country's standard of living are brought about in the long run by 7)
A) growth in the population.
B) constructing more machines and buildings.
C) technological progress.
D) immigration policy.
E) taxes.
8) The idea that government budget deficits do NOT matter under certain circumstances is 8)
A) called the Milton Friedman theory.
B) called the Ricardian equivalence theorem.
C) called the Friedman-Lucas theory.
D) preposterous.
E) attributed to Edward Prescott and Finn Kydland.
9) The basic structure of a macroeconomic model includes the description of this feature 9)
A) a herd of cows.
B) isotherms.
C) average annual rainfall.
D) the density of cities.
E) consumers' preferences over goods.
10) In a competitive equilibrium, we assume that markets are such that 10)
A) both consumers and firms are price takers.
B) firms are price takers while consumers set prices.
C) consumers behave strategically in setting their prices.
D) consumers are price takers while firms set prices.
E) firms behave strategically in setting their prices.
11) According to the Lucas critique, the effects of changes in economic policy 11)
A) are easy to predict.
B) cannot always be predicted by looking at historical macroeconomic relationships.
C) are known to the government.
D) do not require macroeconomic theory.
E) can be determined by looking at macroeconomic data.
12) New Keynesian Theory 12)
A) uses the same microeconomic foundations as other macro models.
B) includes microeconomic foundations and does not rely on sticky wages or prices.
C) relies on sticky wages and prices but does not include microeconomic foundations.
D) specifies shocks to technology cause business cycles.
E) specifies financial markets as the primary cause of business cycles.
2
,13) Gross Domestic Product is 13)
A) the aggregate quantity of income earned by consumers who have jobs during some specified
period of time.
B) the quantity of goods produced within a country's borders during some specific period of
time.
C) the quantity of goods and services produced by Canadian residents domestically and abroad
during some specific period of time.
D) the quantity of goods and services produced within a country's borders during some specified
period of time.
E) the quantity of goods produced by Canadian residents domestically and abroad during some
specific period of time.
14) Two key business cycle events in Canadian economic history were 14)
A) the productivity slowdown and the Great Depression.
B) the Great Depression and government budget deficits.
C) World War II and the Great Depression.
D) government budget deficits and World War II.
E) the Great Depression and stagflation.
15) Persistent current account deficits make sense if 15)
A) the capital account surplus is reduced.
B) the government budgetary debt is not growing.
C) the associated foreign borrowing is used to finance increased productive capacity.
D) personal income taxes are reduced.
E) government interest rates go down accordingly.
16) The government surplus is the same as 16)
A) private saving.
B) investment income.
C) government saving.
D) government deficit less government saving.
E) outlays less income.
17) More government spending 17)
A) reduces the current account deficit.
B) lowers the government deficit.
C) increases the government surplus.
D) can compete with private spending and cause crowding out.
E) is always beneficial.
18) Which of the following is a fundamental question of macroeconomics? 18)
A) What is the impact of government provided health care?
B) Where is the stock market heading?
C) How should governments be elected?
D) Should governments act to smooth business cycles?
E) What mechanism could force people to pollute less?
3
, 19) The Fisher relation is 19)
A) the Phillips curve.
B) trend growth in real GDP.
C) a positive relationship between the nominal interest rate and inflation.
D) the negative relationship between unemployment and vacancies.
E) of no interest to economists.
20) During the Global Pandemic, the government deficit 20)
A) decreased.
B) was reduced by the Bank of Canada.
C) would have increased if the government had intervened.
D) stayed roughly constant.
E) increased.
21) Since 1870, the typical Canadian 21)
A) became ten-times as rich.
B) became more than sixteen-times as rich.
C) remained equally as rich.
D) became twice as rich.
E) remained as rich as the typical American.
22) The development most responsible for the wide-spread introduction of macroeconomic models 22)
built upon solid microeconomic foundations was the
A) popularization of the Solow growth model.
B) rational expectations revolution.
C) development of the Keynesian coordination failure model.
D) work of John Maynard Keynes.
E) the work of Milton Friedman.
23) For the study of economic growth, it is most helpful to examine movements in ________; for the 23)
study of business cycles, it is most helpful to examine movements in ________.
A) trend income; deviation from trend in income
B) deviations from trend in GDP; trend GDP
C) trend GDP; deviations from trend in GDP
D) deviations from trend in GDP; deviations from trend in GDP
E) trend GDP; trend GDP
24) To be useful, macroeconomic models 24)
A) must be complete, accurate descriptions of the world.
B) provides a lot of intricate details.
C) must be extremely realistic.
D) must be simple.
E) never generate testable hypothesis.
25) In a macroeconomic model, equilibrium is when 25)
A) the actions of consumers and firms are consistent.
B) the government has achieved an efficient allocation of resources.
C) everyone in the economy is happy.
D) nothing is changing.
4
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Neo-Fisherism says 1)
A) the central bank should increase inflation by lowering the money supply.
B) the central bank should increase inflation by raising the nominal interest rate.
C) the central bank should increase inflation by lowering the real interest rate.
D) the central bank should increase inflation by lowering nominal interest rates.
E) that Fisherism is wrong.
2) Business cycles in macroeconomics are 2)
A) changes in the average standard of living over time.
B) short-run ups and downs in aggregate economic activity.
C) profits and losses of firms.
D) the economic interrelationships among nations.
E) the increase in a nation's productive capacity over a long period of time.
3) The 2007-8 recession in Canada 3)
A) was the most severe recession in the 1961-2018 period.
B) was worsened by fiscal policy actions.
C) originated in the United States.
D) was caused by tight monetary policy.
E) was the result of the failure of the Canadian banking system.
4) When a country has a current account deficit, the country 4)
A) always has a large government budget surplus.
B) always has a large government budget deficit.
C) is always lending abroad.
D) is always borrowing from abroad.
E) is always borrowing from domestic residents.
5) Business cycles 5)
A) cannot be prevented, according to the consensus among macroeconomists.
B) have potentially many causes, but regular comovements.
C) occur every five years in Canada.
D) have a single cause, and unpredictable comovements.
E) are always caused by the central bank.
6) Tax cuts 6)
A) will surely make the government default on its debts.
B) cause the government to borrow less.
C) may have no effect, if people take account of future taxes.
D) cause unemployment.
E) always stimulate economic activity.
1
, 7) Improvements in a country's standard of living are brought about in the long run by 7)
A) growth in the population.
B) constructing more machines and buildings.
C) technological progress.
D) immigration policy.
E) taxes.
8) The idea that government budget deficits do NOT matter under certain circumstances is 8)
A) called the Milton Friedman theory.
B) called the Ricardian equivalence theorem.
C) called the Friedman-Lucas theory.
D) preposterous.
E) attributed to Edward Prescott and Finn Kydland.
9) The basic structure of a macroeconomic model includes the description of this feature 9)
A) a herd of cows.
B) isotherms.
C) average annual rainfall.
D) the density of cities.
E) consumers' preferences over goods.
10) In a competitive equilibrium, we assume that markets are such that 10)
A) both consumers and firms are price takers.
B) firms are price takers while consumers set prices.
C) consumers behave strategically in setting their prices.
D) consumers are price takers while firms set prices.
E) firms behave strategically in setting their prices.
11) According to the Lucas critique, the effects of changes in economic policy 11)
A) are easy to predict.
B) cannot always be predicted by looking at historical macroeconomic relationships.
C) are known to the government.
D) do not require macroeconomic theory.
E) can be determined by looking at macroeconomic data.
12) New Keynesian Theory 12)
A) uses the same microeconomic foundations as other macro models.
B) includes microeconomic foundations and does not rely on sticky wages or prices.
C) relies on sticky wages and prices but does not include microeconomic foundations.
D) specifies shocks to technology cause business cycles.
E) specifies financial markets as the primary cause of business cycles.
2
,13) Gross Domestic Product is 13)
A) the aggregate quantity of income earned by consumers who have jobs during some specified
period of time.
B) the quantity of goods produced within a country's borders during some specific period of
time.
C) the quantity of goods and services produced by Canadian residents domestically and abroad
during some specific period of time.
D) the quantity of goods and services produced within a country's borders during some specified
period of time.
E) the quantity of goods produced by Canadian residents domestically and abroad during some
specific period of time.
14) Two key business cycle events in Canadian economic history were 14)
A) the productivity slowdown and the Great Depression.
B) the Great Depression and government budget deficits.
C) World War II and the Great Depression.
D) government budget deficits and World War II.
E) the Great Depression and stagflation.
15) Persistent current account deficits make sense if 15)
A) the capital account surplus is reduced.
B) the government budgetary debt is not growing.
C) the associated foreign borrowing is used to finance increased productive capacity.
D) personal income taxes are reduced.
E) government interest rates go down accordingly.
16) The government surplus is the same as 16)
A) private saving.
B) investment income.
C) government saving.
D) government deficit less government saving.
E) outlays less income.
17) More government spending 17)
A) reduces the current account deficit.
B) lowers the government deficit.
C) increases the government surplus.
D) can compete with private spending and cause crowding out.
E) is always beneficial.
18) Which of the following is a fundamental question of macroeconomics? 18)
A) What is the impact of government provided health care?
B) Where is the stock market heading?
C) How should governments be elected?
D) Should governments act to smooth business cycles?
E) What mechanism could force people to pollute less?
3
, 19) The Fisher relation is 19)
A) the Phillips curve.
B) trend growth in real GDP.
C) a positive relationship between the nominal interest rate and inflation.
D) the negative relationship between unemployment and vacancies.
E) of no interest to economists.
20) During the Global Pandemic, the government deficit 20)
A) decreased.
B) was reduced by the Bank of Canada.
C) would have increased if the government had intervened.
D) stayed roughly constant.
E) increased.
21) Since 1870, the typical Canadian 21)
A) became ten-times as rich.
B) became more than sixteen-times as rich.
C) remained equally as rich.
D) became twice as rich.
E) remained as rich as the typical American.
22) The development most responsible for the wide-spread introduction of macroeconomic models 22)
built upon solid microeconomic foundations was the
A) popularization of the Solow growth model.
B) rational expectations revolution.
C) development of the Keynesian coordination failure model.
D) work of John Maynard Keynes.
E) the work of Milton Friedman.
23) For the study of economic growth, it is most helpful to examine movements in ________; for the 23)
study of business cycles, it is most helpful to examine movements in ________.
A) trend income; deviation from trend in income
B) deviations from trend in GDP; trend GDP
C) trend GDP; deviations from trend in GDP
D) deviations from trend in GDP; deviations from trend in GDP
E) trend GDP; trend GDP
24) To be useful, macroeconomic models 24)
A) must be complete, accurate descriptions of the world.
B) provides a lot of intricate details.
C) must be extremely realistic.
D) must be simple.
E) never generate testable hypothesis.
25) In a macroeconomic model, equilibrium is when 25)
A) the actions of consumers and firms are consistent.
B) the government has achieved an efficient allocation of resources.
C) everyone in the economy is happy.
D) nothing is changing.
4
