Question 1

Which of the following best describes the fallacy of composition in macroeconomics?

Accepted Answer

What is true for one individual or part may not be true for the whole economy.

Question 2

According to the circular flow model, which of the following is NOT a direct participant in both input and output markets?

Accepted Answer

Banks

Question 3

Which of the following statements is consistent with the 'Markets Self-Adjust' (Hands-Off) camp?

Accepted Answer

Markets adjust quickly to shocks, and government failure is more likely than market failure.

Question 4

If real GDP per person increases from $$40,000 to 41$$,200 in one year, what is the economic growth rate? Use the formula: $$	ext{Growth Rate} = \frac{	ext{Real GDP per person this year} - 	ext{Real GDP per person last year}}{	ext{Real GDP per person last year}} 	imes 100$$

Accepted Answer

$$4\%$$

Question 5

Which of the following is NOT included in the calculation of real GDP per person?

Accepted Answer

The value of underground economic activity

Question 6

A country’s macro production possibilities frontier (PPF) shifts outward. Which of the following is the most likely cause?

Accepted Answer

An increase in technological innovation

Question 7

If the Consumer Price Index (CPI) rises from 120 to 126 in one year, what is the annual inflation rate? Use the formula: $$	ext{Inflation Rate} = \frac{	ext{CPI}_{	ext{this year}} - 	ext{CPI}_{	ext{last year}}}{	ext{CPI}_{	ext{last year}}} 	imes 100$$

Accepted Answer

$$5\%$$

Question 8

Which type of unemployment is considered unhealthy and requires policy intervention?

Accepted Answer

Cyclical unemployment

Question 9

Suppose the nominal interest rate on a savings account is $$4\%$$ and the inflation rate is $$2\%. $$What is the realized real interest rate?

Accepted Answer

$$2\%$$

Question 10

Which of the following best explains the concept of 'value added' in GDP accounting?

Accepted Answer

The value of output minus the value of intermediate products and services bought from other businesses

Question 11

If Canada’s real GDP is below its potential GDP, which of the following is true?

Accepted Answer

There is a recessionary gap and unemployment is above the natural rate.

Question 12

Which of the following would cause a leftward shift in the short-run aggregate supply (SAS) curve?

Accepted Answer

A negative supply shock that raises resource input prices

Question 13

According to the quantity theory of money, if the money supply ($$M) $$increases by $$10\%$$, velocity ($$V) $$and real output ($$Q) $$are constant, what happens to the price level ($$P$$)?

Accepted Answer

It increases by $$10\%$$

Question 14

Which of the following is a likely result of a negative demand shock in the aggregate demand/aggregate supply (AD/AS) model?

Accepted Answer

Falling average prices, decreased real GDP, and increased unemployment

Question 15

If the annual growth rate of real GDP per person is $$3.5\%$$, approximately how many years will it take for living standards to double? (Use the Rule of 70: $$	ext{Years to Double} = \frac{70}{	ext{Growth Rate}})$$

Accepted Answer

14 years

Question 16

Which of the following is NOT a limitation of real GDP per person as a measure of well-being?

Accepted Answer

It excludes the value of all final products and services

Question 17

Which of the following best describes the Phillips Curve in the short run?

Accepted Answer

An inverse relationship between inflation and unemployment

Question 18

Suppose the Bank of Canada raises interest rates. Which of the following is the most likely short-run effect on aggregate demand?

Accepted Answer

Aggregate demand decreases and shifts leftward

Question 19

Which of the following is an example of creative destruction?

Accepted Answer

A new technology that makes older products and production methods obsolete

Question 20

If the unemployment rate is 5%, involuntary part-time workers are 2%, and discouraged workers are 1%, what is the labour underutilization rate?

Accepted Answer

8%

Macroeconomics and Microeconomics: Foundations, Models, and Key Outcomes

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