CIA-Exam

= Macroeconomics – Final Examination= 
 * Part A: Multiple Choice**

1. A country's production-possibilities curve: a.  shows all the possible production combinations for two products b. shows the maximum amount of two products that can be produced c. cannot be drawn if some resources are underutilized d. shifts if more people become unemployed

2. A shift in the production-possibilities curve will occur if: a.  some land is not being used for production b. the productive population increases c. more workers become employed d.  factories are not used to capacity

3. An unemployment rate of 6% in Canada means that: a . six percent of Canadians cannot find a job WRONG b.  there are 6 people unemployed for every 100 people employed WRONG c. Canada is at a point inside its production-possibilities curve C IS CORRECT d. population increases are necessary in order to reach the maximum potential output

4. The science of economics has developed because: a. governments need more information in order to make decisions b. companies need to find more productive ways to make products c. individuals need advise on investing their money <span style="background-color: rgb(255, 255, 255);">d <span style="background-color: rgb(255, 255, 255);">. resources used to produce goods are scarce

5. If chicken and turkey are substitutes for each other, an increase in the price of chicken will: a. <span style="background-color: rgb(255, 255, 255);"> <span style="background-color: rgb(255, 255, 255);">decrease the demand for chicken <span style="background-color: rgb(255, 255, 255);">b <span style="background-color: rgb(255, 255, 255);">. decrease the quantity of chicken demanded c. decrease the quantity of turkey demanded d. decrease the demand for turkey

6. A shift to the right in the demand curve for product XYZ could be caused by: a. a decrease in consumer incomes <span style="background-color: rgb(255, 255, 255);">b. <span style="background-color: rgb(255, 255, 255);"> an increase in the price of a substitute for XYZ c. an increase in the price of product XYZ <span style="background-color: rgb(255, 255, 255);">d <span style="background-color: rgb(255, 255, 255);">. a decrease in the price of product XYZ

7. All of the following factors influence the supply of a product except: <span style="background-color: rgb(255, 255, 255);">a. <span style="background-color: rgb(255, 255, 255);"> prices of complementary goods b. technology c. raw material costs d. weather

8. If the demand for a product is elastic, the coefficient of elasticity is a. less than one b. equal to one <span style="background-color: rgb(255, 255, 255);">c. <span style="background-color: rgb(255, 255, 255);"> greater than one d. zero

9. Which of the following factors makes the demand for a product more inelastic? <span style="background-color: rgb(255, 255, 255);">a. <span style="background-color: rgb(255, 255, 255);"> few substitutes b. luxury item c. expenditures on the product account for a large portion of one's budget d. difficulty in supplying more of the product

10. Which of the following statements is correct? a. The main source of revenue for the federal government is the GST b. The main source of revenue for the provinces is property tax c. The marginal tax rate is the highest tax bracket under a progressive income tax system d. The property tax is a direct tax

11. If selected to be part of the Labour Force Survey, a household remains part of the survey for: a. one month b. one year c. three months d. six months

12. If you pay $1000 in taxes on an income of $10,000 and $1,600 in taxes on an income of $15,000, the income tax system is: <span style="background-color: rgb(255, 255, 255);">a <span style="background-color: rgb(255, 255, 255);">. progressive <span style="background-color: rgb(255, 255, 255);">? <span style="background-color: rgb(255, 255, 255);"> b. regressive c. proportional d. indirect

13. The unemployment rate refers to: a. the population minus the number of people employed b. the labour-force participation rate plus the employment rate <span style="background-color: rgb(255, 255, 255);">c. <span style="background-color: rgb(255, 255, 255);"> the proportion of the labour force that is without work and is looking for work d. the proportion of the population that is not working

14. The following item is not included in the calculation of GDP (income approach): a. indirect taxes b. rent c. investment d. interest

15. Which of the following statements about inflation is incorrect? <span style="background-color: rgb(255, 255, 255);">a. <span style="background-color: rgb(255, 255, 255);"> Inflation hurts those persons on fixed incomes. b. Inflation hurts borrowers and assists lenders. c. Inflation hurts imports and promotes exports. <span style="background-color: rgb(255, 255, 255);">d <span style="background-color: rgb(255, 255, 255);">. Inflation increases the purchasing power of the dollar. <span style="background-color: rgb(255, 255, 255);"> <span style="background-color: rgb(243, 255, 0);"><span style="background-color: rgb(255, 255, 255);"> <span style="background-color: rgb(255, 255, 255);">16. Assume that chartered banks keep 2% of their deposits as reserves. If a $10,000 deposit is made at a chartered bank, by how much can the banking system expand the money supply? a. $200 <span style="background-color: rgb(255,0,31);"><span style="background-color: rgb(255, 255, 255);">b. <span style="background-color: rgb(255, 255, 255);"> $9800 c. $49,00 d. $490,000

17. Assume that chartered banks keep 2% of their deposits as reserves. If a chartered bank has $50 billion in deposits and reserves of $2.5 billion, by how much could the banking system expand the money supply? a. $1 billion b. $2.5 billion <span style="background-color: rgb(255,0,31);"><span style="background-color: rgb(255, 255, 255);">c. <span style="background-color: rgb(255, 255, 255);"> $75 billion d. $2500 billion <span style="background-color: rgb(255, 255, 255);">

18. The largest component of the Canadian money supply is: a. bank deposits b. notes in circulation c. coins d. Bank of Canada reserves

19. Which of the following is not a possible shortcoming of monetary policy? a. timing b. interest rate inelasticity c. velocity of money <span style="background-color: rgb(255,0,31);"><span style="background-color: rgb(255, 255, 255);">d. <span style="background-color: rgb(255, 255, 255);">crowding out <span style="background-color: rgb(255, 255, 255);"> <span style="background-color: rgb(255, 255, 255);"> 20. Which of the following is not cited as a reason for trade barriers? a. unequal benefits from trade b. crowding out c. dumping d. diffusion of technology

**<span style="background-color: rgb(255, 255, 255);">Part B. Short Answers **<span style="background-color: rgb(255, 255, 255);"> Answer questions in the space provided on the examination.

(10) 1. Using demand and supply curves in your answer, show and describe the impact of the following: a. an increase in the price of wheat on the market for bread. (5 marks) b. an increase in consumer incomes on the market for new cars. (5 marks)

(10) 2. Fill in the blanks a. The imposition of a price ceiling always results in a <span style="background-color: rgb(255, 255, 255);">? <span style="background-color: rgb(255, 255, 255);">. . b. Jane has just graduated from college and is looking for her first job. At the present time, Jane is ? <span style="background-color: rgb(255, 255, 255);"> <span style="background-color: rgb(255, 255, 255);">unemployed. c. The concept of opportunity cost can be shown using a <span style="background-color: rgb(255, 255, 255);"> ? <span style="background-color: rgb(255, 255, 255);"> curve. d. The price of money is the ? <span style="background-color: rgb(255, 255, 255);"> e. The main method of regulating the money supply by the Bank of Canada is called ? <span style="background-color: rgb(255, 255, 255);">. f. After the imposition of an excise tax the price will increase the most under conditions of a(n) ? demand. g. Two factors held constant in drawing the demand curve are ? and ? <span style="background-color: rgb(255, 255, 255);">. h. Individuals require money for emergency situations. This demand for money is referred to as a ? <span style="background-color: rgb(255, 255, 255);"> demand. i. Because of a downturn in the economy, Fred is temporarily laid off from General Motors. This is an example of ? <span style="background-color: rgb(255, 255, 255);"> unemployment.

(5) 3a. What decrease in taxes is necessary to increase the level of GDP by $2 billion? Assume the MPC = 0.80.

(5) 3b. List 5 essential characteristics of any commodity that serves as money.

(5) 4a. What increase in GDP results from an increase in consumer spending of $800 million? Assume the MPC = 0.80.

(5) 4b. List two types of inflation. 1. 2.

In Canada, inflation is measured by annual changes in the <span style="background-color: rgb(255, 255, 255);"> _ <span style="background-color: rgb(255, 255, 255);">. This survey is conducted every <span style="background-color: rgb(255, 255, 255);">_ <span style="background-color: rgb(255, 255, 255);">.

Extremely large increases in prices is referred to as

(5) 5a. Using a diagram in your answer, show the impact of government imposing a price floor on beef.

(5) 5b. What variables are included in the expenditure approach to calculating GDP?

(5) 6a. List five reasons for the increase in the participation rate for women.

(5) 6b. When the Bank of Canada sells bonds to the public, (circle the appropriate answer)

(i) the money supply decreases / increases (ii) interest rates decrease / increase (iii) consumer spending increases / decreases (iv) GDP decreases / increases (v) the unemployment rate decreases / increases

(20) 7. Define each of the following terms: Each definition is worth 4 marks a. flexible exchange rate b marginal tax rate c. bank rate d. dumping e. Phillips Curve