Question 1

Which of the following best describes Gross Domestic Product (GDP)?

Accepted Answer

The total value of all goods and services produced within a country's borders in a given period.

Question 2

Suppose the Canadian government increases its spending without raising taxes. According to the short-run aggregate demand and supply model, what is the most likely immediate effect on real GDP and the price level?

Accepted Answer

Real GDP increases and the price level increases.

Question 3

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Purchases of stocks and bonds

Question 4

If the unemployment rate is 7% and the natural rate of unemployment is 5%, what type of unemployment is most likely present in the economy?

Accepted Answer

Cyclical unemployment

Question 5

Which of the following equations correctly represents the relationship between GDP, consumption (C), investment (I), government spending (G), exports (X), and imports (M)?

Accepted Answer

$GDP = C + I + G + (X - M)$

Question 6

If the Bank of Canada lowers interest rates, what is the most likely effect on aggregate demand and why?

Accepted Answer

Aggregate demand increases because investment and consumption rise.

Question 7

Which of the following best explains why the Consumer Price Index (CPI) may overstate the true rate of inflation?

Accepted Answer

CPI ignores changes in the quality of goods and services.

Question 8

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

Accepted Answer

Exports decrease, imports increase.

Question 9

Which of the following is an example of expansionary fiscal policy?

Accepted Answer

The government increases its spending on infrastructure projects.

Question 10

If nominal GDP in 2024 is $1,200$ billion and the GDP deflator is $120$, what is real GDP for 2024?

Accepted Answer

$1,000$ billion

Question 11

Which of the following best describes the long-run effect of an increase in the money supply according to classical economic theory?

Accepted Answer

It increases the price level but does not affect real GDP.

Question 12

Suppose the marginal propensity to consume (MPC) is $0.8$. If the government increases spending by $100$ million, what is the total change in GDP according to the simple spending multiplier?

Accepted Answer

$500$ million

Question 13

Which of the following is a likely consequence of a persistent government budget deficit?

Accepted Answer

An increase in the national debt.

Question 14

If the unemployment rate falls below the natural rate of unemployment, what is the most likely effect on inflation?

Accepted Answer

Inflation will increase.

Question 15

Which of the following is an example of structural unemployment?

Accepted Answer

A worker's skills are no longer needed due to technological change.

Question 16

If the Bank of Canada wants to reduce inflation, which of the following actions is it most likely to take?

Accepted Answer

Raise the policy interest rate.

Question 17

Which of the following best describes the crowding-out effect?

Accepted Answer

Government spending leads to higher interest rates, reducing private investment.

Question 18

Suppose the economy is experiencing a negative output gap. Which policy mix is most appropriate to close the gap?

Accepted Answer

Expansionary fiscal policy and expansionary monetary policy.

Question 19

Which of the following is a component of the current account in the balance of payments?

Accepted Answer

Exports of goods and services

Question 20

If the inflation rate is $3\%$ and the nominal interest rate is $5\%$, what is the real interest rate?

Accepted Answer

$2\%$

ECON*1100 Introductory Macroeconomics – Course Syllabus and Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards