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 year.

Question 2

Suppose the Canadian government increases its spending without raising taxes. According to the concept of fiscal policy, what is the most likely short-run effect on aggregate demand?

Accepted Answer

Aggregate demand will increase because government spending is a component of aggregate demand.

Question 3

If the unemployment rate in Canada rises while GDP falls, which phase of the business cycle is the economy most likely experiencing?

Accepted Answer

Recession

Question 4

Which of the following equations correctly represents the expenditure approach to calculating GDP?

Accepted Answer

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

Question 5

A country has a nominal GDP of $500$ billion and a GDP deflator of $125$. What is its real GDP?

Accepted Answer

$\frac{500}{1.25} = 400$ billion

Question 6

Which of the following is NOT considered a component of aggregate demand?

Accepted Answer

Transfer payments

Question 7

If the Bank of Canada lowers the interest rate, what is the most likely effect on the Canadian dollar in the foreign exchange market?

Accepted Answer

The Canadian dollar will depreciate because lower interest rates reduce demand for Canadian assets.

Question 8

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

Accepted Answer

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

Question 9

Suppose Canada’s inflation rate is higher than that of its major trading partners. What is the most likely effect on Canada’s net exports?

Accepted Answer

Net exports will decrease because Canadian goods become relatively more expensive.

Question 10

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

Accepted Answer

The Bank of Canada lowers the overnight rate.

Question 11

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

Accepted Answer

$\frac{1}{1 - 0.8} = 5$

Question 12

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

Accepted Answer

A technological advancement

Question 13

Canada is experiencing a budget deficit. Which of the following best describes this situation?

Accepted Answer

Government spending exceeds government revenue.

Question 14

If the unemployment rate is $6\%$ and the natural rate of unemployment is $4\%$, what type of unemployment is most likely present?

Accepted Answer

Cyclical unemployment

Question 15

Which of the following is a likely consequence of contractionary fiscal policy?

Accepted Answer

A decrease in aggregate demand

Question 16

Suppose the Canadian economy is operating below its potential output. Which policy would be most appropriate to close the output gap?

Accepted Answer

Increase government spending

Question 17

Which of the following best describes the role of the Bank of Canada in the Canadian economy?

Accepted Answer

It manages the money supply and sets interest rates.

Question 18

If Canada’s exports increase while imports remain unchanged, what is the effect on net exports and GDP?

Accepted Answer

Net exports increase and GDP increases.

Question 19

Which of the following is most likely to cause demand-pull inflation?

Accepted Answer

An increase in aggregate demand

Question 20

Suppose the Canadian government implements a policy that increases productivity across all sectors. What is the most likely long-run effect on the economy?

Accepted Answer

An increase in real GDP and a decrease in the price level

ECON*1100 Introductory Macroeconomics Syllabus Study Guide

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