Question 1

When a country has a current account balance surplus, the country

Accepted Answer

A)  always has a large government budget deficit. 
B)  is always lending abroad. 
C)  is always borrowing from abroad. 
D)  always has a large government budget surplus. 
E)  is always borrowing from domestic residents. 
A)  always has a large government budget deficit. 
B)  is always lending abroad. 
C)  is always borrowing from abroad. 
D)  always has a large government budget surplus. 
E)  is always borrowing from domestic residents.

Question 2

When there is high inflation

Accepted Answer

A)  interest rates fall due to government policy. 
B)  the real interest rate is always greater than the nominal interest rate. 
C)  the nominal interest rate is always greater than the real interest rate. 
D)  the real interest rate is always negative. 
E)  the nominal interest rate is approximately equal to the real interest rate. 
A)  interest rates fall due to government policy. 
B)  the real interest rate is always greater than the nominal interest rate. 
C)  the nominal interest rate is always greater than the real interest rate. 
D)  the real interest rate is always negative. 
E)  the nominal interest rate is approximately equal to the real interest rate.

Question 3

What explains the trends in nominal interest rates?

Accepted Answer

A)  inflation rates 
B)  aggregate economic activity 
C)  standards of living 
D)  wages 
E)  consumer incomes 
A)  inflation rates 
B)  aggregate economic activity 
C)  standards of living 
D)  wages 
E)  consumer incomes

Question 4

Which of the following is a fundamental question of macroeconomics?

Accepted Answer

A)  What is the impact of government provided health care? 
B)  How should governments be elected? 
C)  What mechanism could force people to pollute less? 
D)  Where is the stock market heading? 
E)  Should governments act to smooth business cycles? 
A)  What is the impact of government provided health care? 
B)  How should governments be elected? 
C)  What mechanism could force people to pollute less? 
D)  Where is the stock market heading? 
E)  Should governments act to smooth business cycles?

Question 5

The relationship between the level of growth of an economic variable, gt, and its level, yt, is best approximated as

Accepted Answer

A)  gt = $ \frac{y_{t}}{y_{t-1}} $ 
B)  gt = log yt + log yt - 1. 
C)  log gt = yt - yt - 1. 
D)  gt = log yt - log yt - 1. 
E)  yt = log gt - log gt - 1. 
A)  gt = $ \frac{y_{t}}{y_{t-1}} $ 
B)  gt = log yt + log yt - 1. 
C)  log gt = yt - yt - 1. 
D)  gt = log yt - log yt - 1. 
E)  yt = log gt - log gt - 1.

Question 6

What is produced and consumed in the economy is determined jointly by

Accepted Answer

A)  standards of living and business cycles. 
B)  the economy's productive capacity and the preferences of consumers. 
C)  the behaviour of business managers and government policies. 
D)  government policies and the economy's productive capacity. 
E)  the preferences of consumers and the behaviour of business managers. 
A)  standards of living and business cycles. 
B)  the economy's productive capacity and the preferences of consumers. 
C)  the behaviour of business managers and government policies. 
D)  government policies and the economy's productive capacity. 
E)  the preferences of consumers and the behaviour of business managers.

Question 7

In a macroeconomic model, equilibrium is when

Accepted Answer

A)  the government has achieved an efficient allocation of resources. 
B)  the actions of consumers and firms are consistent. 
C)  everyone in the economy is happy. 
D)  nothing is changing. 
A)  the government has achieved an efficient allocation of resources. 
B)  the actions of consumers and firms are consistent. 
C)  everyone in the economy is happy. 
D)  nothing is changing.

Question 8

Explain why macroeconomists tend to use models to understand how economies work, rather than doing experiments.

Accepted Answer

In contrast to what occurs in some of th

Question 9

Countries gain from

Accepted Answer

A)  trading goods and assets with each other. 
B)  inflation. 
C)  long-run tradeoffs between aggregate output and inflation. 
D)  taxes. 
E)  productivity slowdown. 
A)  trading goods and assets with each other. 
B)  inflation. 
C)  long-run tradeoffs between aggregate output and inflation. 
D)  taxes. 
E)  productivity slowdown.

Question 10

Primarily, macroeconomists use microeconomic principles to study

Accepted Answer

A)  business cycles and trends in the stock market. 
B)  long-run economic growth and business cycles. 
C)  trends in the stock market and long-term economic growth. 
D)  long-run economic growth and employment policies. 
E)  short-run and long-run economic growth. 
A)  business cycles and trends in the stock market. 
B)  long-run economic growth and business cycles. 
C)  trends in the stock market and long-term economic growth. 
D)  long-run economic growth and employment policies. 
E)  short-run and long-run economic growth.

Question 11

According to real business cycle theory, the primary causes of business cycles are

Accepted Answer

A)  shocks to aggregate demand. 
B)  monetary factors. 
C)  waves of self-fulfilling optimism and pessimism. 
D)  fiscal shocks. 
E)  technology shocks. 
A)  shocks to aggregate demand. 
B)  monetary factors. 
C)  waves of self-fulfilling optimism and pessimism. 
D)  fiscal shocks. 
E)  technology shocks.

Question 12

Since World War II, deviations from trend real GDP per-capita are

Accepted Answer

A)  typically larger than ± 5%. 
B)  at most ± 5%. 
C)  at most ± 1%. 
D)  at least ± 10%. 
E)  typically < 0. 
A)  typically larger than ± 5%. 
B)  at most ± 5%. 
C)  at most ± 1%. 
D)  at least ± 10%. 
E)  typically < 0.

Question 13

Which of the following is a fundamental question of macroeconomics?

Accepted Answer

A)  What causes sustained economic growth? 
B)  How should a labour contract be structured? 
C)  How should governments be elected? 
D)  What causes the health care industry to prosper? 
E)  What is the effect of penalties on crime? 
A)  What causes sustained economic growth? 
B)  How should a labour contract be structured? 
C)  How should governments be elected? 
D)  What causes the health care industry to prosper? 
E)  What is the effect of penalties on crime?

Question 14

The Fisher relation is

Accepted Answer

A)  the negative relationship between unemployment and vacancies. 
B)  trend growth in real GDP. 
C)  a positive relationship between the nominal interest rate and inflation. 
D)  the Phillips curve. 
E)  of no interest to economists. 
A)  the negative relationship between unemployment and vacancies. 
B)  trend growth in real GDP. 
C)  a positive relationship between the nominal interest rate and inflation. 
D)  the Phillips curve. 
E)  of no interest to economists.

Question 15

Persistent current account deficits make sense if

Accepted Answer

A)  the capital account surplus is reduced. 
B)  government interest rates go down accordingly. 
C)  the associated foreign borrowing is used to finance increased productive capacity. 
D)  personal income taxes are reduced. 
E)  the government budgetary debt is not growing. 
A)  the capital account surplus is reduced. 
B)  government interest rates go down accordingly. 
C)  the associated foreign borrowing is used to finance increased productive capacity. 
D)  personal income taxes are reduced. 
E)  the government budgetary debt is not growing.

Question 16

The inflation rate has been low in Canada since 1990 because

Accepted Answer

A)  the Bank of Canada has a 2% inflation target. 
B)  oil prices have been low. 
C)  Canada is trading more with the rest of the world. 
D)  the government's budget deficit was brought under control. 
E)  employment insurance became less generous. 
A)  the Bank of Canada has a 2% inflation target. 
B)  oil prices have been low. 
C)  Canada is trading more with the rest of the world. 
D)  the government's budget deficit was brought under control. 
E)  employment insurance became less generous.

Question 17

The business cycle component of the log of real per capita GDP is equal to

Accepted Answer

A)  log of trend GDP divided by log of actual real GDP. 
B)  log of trend per capita GDP - log of actual real per capita GDP. 
C)  log of actual real GDP divided by log of trend GDP. 
D)  log of trend GDP - log of actual real GDP. 
E)  log of actual real per capita GDP - log of trend per capita GDP. 
A)  log of trend GDP divided by log of actual real GDP. 
B)  log of trend per capita GDP - log of actual real per capita GDP. 
C)  log of actual real GDP divided by log of trend GDP. 
D)  log of trend GDP - log of actual real GDP. 
E)  log of actual real per capita GDP - log of trend per capita GDP.

Question 18

Sometimes it is useful to separate economic movements into

Accepted Answer

A)  short-run growth from business cycle fluctuations. 
B)  short-run growth from income movements. 
C)  employment growth from business cycle fluctuations. 
D)  long-run growth from income movements. 
E)  long-run growth from business cycle fluctuations. 
A)  short-run growth from business cycle fluctuations. 
B)  short-run growth from income movements. 
C)  employment growth from business cycle fluctuations. 
D)  long-run growth from income movements. 
E)  long-run growth from business cycle fluctuations.

Question 19

Adam Smith's Wealth of Nations emphasized

Accepted Answer

A)  how free markets produce socially efficient outcomes. 
B)  that Scotland produced several key technological innovations. 
C)  that the government should intervene to smooth business cycles. 
D)  the existence of externalities. 
E)  mercantilism. 
A)  how free markets produce socially efficient outcomes. 
B)  that Scotland produced several key technological innovations. 
C)  that the government should intervene to smooth business cycles. 
D)  the existence of externalities. 
E)  mercantilism.

Question 20

Business cycles in macroeconomics are

Accepted Answer

A)  the increase in a nation's productive capacity over a long period of time. 
B)  the economic interrelationships among nations. 
C)  changes in the average standard of living over time. 
D)  short-run ups and downs in aggregate economic activity. 
E)  profits and losses of firms. 
A)  the increase in a nation's productive capacity over a long period of time. 
B)  the economic interrelationships among nations. 
C)  changes in the average standard of living over time. 
D)  short-run ups and downs in aggregate economic activity. 
E)  profits and losses of firms.

When a country has a current account balance surplus, the country

When there is high inflation

What explains the trends in nominal interest rates?

Which of the following is a fundamental question of macroeconomics?

The relationship between the level of growth of an economic variable, gt, and its level, yt, is best approximated as

What is produced and consumed in the economy is determined jointly by

In a macroeconomic model, equilibrium is when

Explain why macroeconomists tend to use models to understand how economies work, rather than doing experiments.

Countries gain from

Primarily, macroeconomists use microeconomic principles to study

According to real business cycle theory, the primary causes of business cycles are

Since World War II, deviations from trend real GDP per-capita are

Which of the following is a fundamental question of macroeconomics?

The Fisher relation is

Persistent current account deficits make sense if

The inflation rate has been low in Canada since 1990 because

The business cycle component of the log of real per capita GDP is equal to

Sometimes it is useful to separate economic movements into

Adam Smith's Wealth of Nations emphasized

Business cycles in macroeconomics are

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 1: Introduction

When a country has a current account balance surplus, the country

When there is high inflation

What explains the trends in nominal interest rates?

Which of the following is a fundamental question of macroeconomics?

The relationship between the level of growth of an economic variable, gt, and its level, yt, is best approximated as

What is produced and consumed in the economy is determined jointly by

In a macroeconomic model, equilibrium is when

Explain why macroeconomists tend to use models to understand how economies work, rather than doing experiments.

Countries gain from

Primarily, macroeconomists use microeconomic principles to study

According to real business cycle theory, the primary causes of business cycles are

Since World War II, deviations from trend real GDP per-capita are

Which of the following is a fundamental question of macroeconomics?

The Fisher relation is

Persistent current account deficits make sense if

The inflation rate has been low in Canada since 1990 because

The business cycle component of the log of real per capita GDP is equal to

Sometimes it is useful to separate economic movements into

Adam Smith's Wealth of Nations emphasized

Business cycles in macroeconomics are

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters