Question 1

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies the behavior of individual markets, while macroeconomics studies the economy as a whole and the connections between markets.

Question 2

Suppose the nominal GDP in 2025 is $2,000 billion and the GDP deflator (price index) is 125 (base year = 100). What is the real GDP in 2025?

Accepted Answer

$\$1,600$ billion

Question 3

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

Accepted Answer

It includes underground economic activity.

Question 4

If the Consumer Price Index (CPI) was 100 in 2002 and 151.2 in 2022, what was the average annual inflation rate over this period (rounded to the nearest tenth)?

Accepted Answer

2.1\%

Question 5

Which of the following best explains why imports are subtracted in the calculation of GDP using the expenditure approach?

Accepted Answer

Imports are not produced domestically, so including them would overstate domestic production.

Question 6

Which of the following would be considered an injection in the circular flow model of the economy?

Accepted Answer

Government spending

Question 7

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

Accepted Answer

Cyclical unemployment

Question 8

Suppose the Bank of Canada increases the money supply, but the velocity of money falls sharply. According to the Quantity Theory of Money, what is the likely effect on the price level?

Accepted Answer

The price level may not increase significantly because the decrease in velocity offsets the increase in money supply.

Question 9

Which of the following scenarios best illustrates a negative demand shock?

Accepted Answer

A sudden increase in consumer pessimism leads to reduced spending.

Question 10

If the inflation rate is higher than expected, who benefits and who loses between borrowers and lenders?

Accepted Answer

Borrowers benefit and lenders lose because the real value of repayments is lower.

Question 11

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

Accepted Answer

A decrease in the price of raw materials

Question 12

According to the Phillips Curve, what is the typical short-run relationship between unemployment and inflation?

Accepted Answer

There is a trade-off: lower unemployment is associated with higher inflation.

Question 13

Which of the following is an example of a positive external shock to the Canadian economy?

Accepted Answer

A major trading partner reduces tariffs on Canadian exports.

Question 14

If real GDP is below potential GDP, which of the following is most likely true?

Accepted Answer

The economy is experiencing a recessionary gap.

Question 15

Which of the following best describes the law of aggregate demand (AD)?

Accepted Answer

As the price level rises, the aggregate quantity demanded of real GDP decreases.

Question 16

A country’s real GDP per capita increases, but its population grows faster than real GDP. What happens to the standard of living as measured by real GDP per capita?

Accepted Answer

It decreases.

Question 17

Which of the following is a leakage in the circular flow of income?

Accepted Answer

Household savings

Question 18

Suppose the CPI in 2021 is 140 and in 2022 is 151.2. What is the inflation rate from 2021 to 2022?

Accepted Answer

$\frac{151.2 - 140}{140} 	imes 100 = 8\%$

Question 19

Which of the following would most likely shift the aggregate demand (AD) curve to the right?

Accepted Answer

An increase in government spending

Question 20

If the government implements a policy that increases the quality of education and worker skills, what is the likely long-run effect on the economy?

Accepted Answer

Potential GDP will increase due to higher quality inputs.

Macroeconomics Review: Key Concepts from Micro to Aggregate Supply & Demand

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