TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

1) The article about “Canadian Companies Deal With Supply-Chain

Bottlenecks” suggests that many supply-chain problems during the pandemic
were due to difficulties in forecasting demand.

2) The sum of all value added equals the sum of all incomes.

3) In calculating Canadian GDP, imports are subtracted from aggregate

spending because these products and services are produced in other
countries.

4) Government failure can occur if policymakers make "honest mistakes."

5) In Drakeville the economic growth of real GDP per person averages 5 percent
per year. The Rule of 70 suggests that real GDP per person will double in 14
years.

6) In the article about “Business Quest to do More with Fewer Works Confronts
Productivity Puzzle,” the puzzle is why Canadian workers are much less
productive than U.S. workers.

7) Business investment spending includes buying stocks and bonds.

8) Increases in real GDP per person might be due to decreases in the population.

9) Imports always equal exports.

10) Involuntary part-time employment is counted as unemployment.

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Answer Key
Testname: F22_MACRO_TERMTEST_TF

1) TRUE
2) TRUE
3) TRUE
4) TRUE
5) TRUE
6) TRUE
7) FALSE
8) TRUE
9) FALSE
10) FALSE

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MULTIPLE CHOICE. For each question, pick the one best answer.
1) Using the diagrams in the Khan Academy video, start in long-run
macroeconomic equilibrium. A negative demand shock causes
A) none of the other answers.
B) movement down along the short-run Phillips Curve.
C) movement up along the short-run Phillips Curve.
D) the short-run Phillips Curve to shift rightward.
E) the short-run Phillips Curve to shift leftward.

2) Which statement is false?

A) Consumer spending is business income.
B) Business spending is consumer income.
C) If consumers and businesses both cut spending, everyone's incomes
falls.
D) If consumers and businesses both cut spending, employment increases.
E) Falling wages decrease demand in output markets.

3) Hands-On economists generally believe

A) government failure is worse than market failure.
B) markets quickly self-adjust.
C) external events are the major cause of business cycles.
D) government failure causes business cycles.
E) in the fallacy of composition.

4) Hands-Off economists argue that

A) expectations are more important than interest rates for business
investment decisions.
B) most shocks are internal to the economy.
C) supply shocks are more important than demand shocks for explaining
business cycles.
D) business expectations are quickly changeable.
E) government is the solution to business cycles, not the problem.

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 5) In 2021, nominal GDP was $250 and real GDP was $200. In 2022, nominal
GDP was $350 and real GDP was $240. What is the growth rate of nominal
GDP between 2021 and 2022?
A) 60%
B) 40%
C) 25%
D) 20%
E) none of the other answers are correct

6) During the first three quarters of 2021, real GDP went from $200 to $220 to
$180. Economists describe the second quarter of 2021 as a(an)
A) contraction.
B) inflation.
C) peak.
D) recession.
E) trough.

7) In Weekendland, real GDP fell continuously from $200 billion in 2018 to $160
billion in 2019. Potential GDP remained constant at $180 billion. Between 2018
and 2019, Weekendland
A) went from a peak to a trough.
B) went from expansion to contraction.
C) went from a deflationary gap to an inflationary gap.
D) went from a positive output gap to a negative output gap.
E) had a growth rate of -25 percent.

8) An economy having two or more consecutive quarters of increases in real

GDP is experiencing
A) a positive output gap.
B) a negative output gap.
C) economic growth.
D) a peak.
E) an inflationary gap.

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 9) A country with strict environmental standards probably has ________ real
GDP and might have ________ well-being than other countries.
A) higher; higher
B) lower; lower
C) higher; lower
D) lower; higher
E) well-being does not depend on environmental quality

10) When an economy's real GDP

A) equals potential GDP, the natural rate of unemployment equals zero.
B) is above potential GDP, the unemployment rate is above the natural rate.
C) is above potential GDP, there is less-than-normal frictional, structural,
seasonal unemployment.
D) is below potential GDP, the unemployment rate is below the natural rate
of unemployment.
E) equals potential GDP, frictional unemployment equals zero.

11) A 6 percent increase in the Consumer Price Index (CPI) means a

A) 6 percent increase in the cost of living.
B) less than 6 percent increase in the cost of living because consumers
substitute cheaper products for those whose prices rise.
C) more than 6 percent increase in the cost of living because consumers
substitute cheaper products for those whose prices rise.
D) less than 6 percent increase in the cost of living because of falling quality
of products over time.
E) more than 6 percent increase in the cost of living because of the
introduction of new products.

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 12) Taryn loans Armaan $1,000. Armaan agrees to pay Taryn $1,100 next year.
They both expect an inflation rate of 4 percent. At the end of the year, the
inflation rate turns out to be only 3 percent. This unexpected change is
A) good for Armaan but bad for Taryn.
B) good for both Armaan and Taryn.
C) bad for both Taryn and Armaan.
D) good for Taryn but bad for Armaan.
E) irrelevant, a deal is a deal.

13) The velocity of money is 5, real GDP is 100 and the money supply is 100.
According to the quantity theory of money, a 20 percent increase in the
money supply causes a
A) 10 percent decrease in average prices.
B) 10 percent increase in average prices.
C) 5 percent decrease in real GDP.
D) 20 percent decrease in velocity.
E) 20 percent increase in average prices.

14) Government investments that improve the quality of public infrastructure

like roads, transit and sewers
A) decrease both long-run and short-run aggregate supply.
B) increase aggregate quantity supplied.
C) increase only long-run aggregate supply.
D) increase both long-run and short-run aggregate supply.
E) decrease aggregate quantity supplied.

15) Which media headline describes a shift of the SAS curve only?
A) "Decreased consumer spending may lead to recession."
B) "Increased consumer spending is expected to lead to inflation, with no
change in real GDP."
C) "Higher wage settlements may lead to inflation."
D) "Faster growth may be due to more women entering the labour force."
E) "Recent tornadoes destroyed factories in Edmonton and Calgary."

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 16) Nemo earns an income of $30,000, pays $10,000 in taxes and receives $5,000 in
transfer payments. He saved $8,000. What is his disposable income?
A) $22,000
B) $25,000
C) $20,000
D) $17,000
E) $15,000

17) In long-run macroeconomic equilibrium

A) short-run aggregate supply (SAS) equals aggregate demand (AD).
B) the price level is stable.
C) real GDP equals potential GDP.
D) Say's Law is true.
E) all other answers are true.

18) When there are supply shocks, unemployment and inflation move in the
A) same directions, as the Phillips Curve suggests.
B) opposite direction, as the Phillips Curve suggests.
C) same direction, which is not what the Phillips Curve suggests.
D) opposite direction, which is not what the Phillips Curve suggests.
E) dreams of economists.

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Answer Key
Testname: F22_MACRO_TERMTEST_MC

1) B
2) D
3) E
4) C
5) B
6) C
7) D
8) C
9) D
10) C
11) B
12) D
13) E
14) D
15) C
16) B
17) E
18) C