Question 1

Which of the following best describes the opportunity cost of attending university full-time for one year?

Accepted Answer

The value of the next best alternative forgone, including both explicit costs (like tuition) and implicit costs (like foregone income).

Question 2

Suppose the Canadian government increases spending on highway construction. According to the expenditure approach, which component of GDP does this affect?

Accepted Answer

Government purchases (G)

Question 3

If nominal GDP in 2020 was $2,000 billion and the GDP deflator was 125, what was real GDP in 2020?

Accepted Answer

$$1,600 	ext{ billion}$$

Question 4

Which of the following transactions would be included in the calculation of GDP using the expenditure approach?

Accepted Answer

A new house built and sold in the current year.

Question 5

If the marginal propensity to consume (MPC) is $$0.8$$, what is the value of the simple spending multiplier?

Accepted Answer

$$5$$

Question 6

Which of the following would cause a rightward shift in the aggregate demand curve?

Accepted Answer

An increase in consumer confidence

Question 7

Suppose the Bank of Canada lowers the overnight interest rate. What is the most likely short-run effect on aggregate demand?

Accepted Answer

Aggregate demand will increase due to lower borrowing costs.

Question 8

Which of the following is NOT a function of money?

Accepted Answer

Source of government revenue

Question 9

If the reserve ratio is $$10\%$$, what is the maximum potential money multiplier?

Accepted Answer

$$10$$

Question 10

Which of the following best explains why GDP per capita is a better measure of economic well-being than total GDP?

Accepted Answer

GDP per capita adjusts for population size, allowing for better comparisons of living standards.

Question 11

Suppose the Canadian dollar appreciates relative to the US dollar. What is the most likely effect on Canadian net exports?

Accepted Answer

Net exports will decrease because Canadian goods become more expensive for Americans.

Question 12

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent university graduate is searching for their first job.

Question 13

If the price level increases while nominal GDP remains constant, what happens to real GDP?

Accepted Answer

Real GDP decreases.

Question 14

Which of the following would be considered an injection into the circular flow of income?

Accepted Answer

Government spending on infrastructure

Question 15

Suppose the marginal propensity to save (MPS) is $$0.25. If $$autonomous investment increases by $$100$$ million, what is the total change in equilibrium income?

Accepted Answer

$$400 	ext{ million}$$

Question 16

Which of the following best describes the difference between real and nominal GDP?

Accepted Answer

Real GDP is adjusted for inflation, while nominal GDP is not.

Question 17

If the government increases taxes, what is the most likely short-run effect on aggregate demand?

Accepted Answer

Aggregate demand will decrease due to lower disposable income.

Question 18

Which of the following is an example of a leakage from the circular flow of income?

Accepted Answer

Household savings

Question 19

Suppose the economy is operating inside its production possibilities frontier (PPF). What does this imply?

Accepted Answer

The economy is experiencing unemployment or underutilization of resources.

Question 20

Which of the following would shift the long-run aggregate supply curve to the right?

Accepted Answer

An increase in the labour force and technological progress

Chapter 1: Foundations of Macroeconomics – Study Guidance

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