econ-midterm2

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econ-midterm2
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  1. Which of the following countries, had the highest growth rate over the last 100 years?a.Brazil
    b.Germany
    c.Canada
    d.United States
    e.Argentina
    a
  2. Which of the following is considered human capital?
    a.knowledge acquired from early childhood education programs
    b.knowledge acquired from grade school
    c.knowledge acquired from on-the-job training
    d.All of the above are correct.
    d
  3. Natural resources
    a.are inputs provided by nature.
    b.are inputs such as land, rivers, and mineral deposits.
    c.take two forms: renewable and nonrenewable.
    d.All of the above are correct.
    d
  4. In a market economy, we know that a resource has become scarcer when
    a. its price rises relative to other prices.
    b. it is non-renewable and some of it is used.
    c. people search for substitutes.
    d. All of the above are correct.
    a
  5. Which of the following would increase productivity?
    a. an increase in the physical capital stock per worker
    b. an increase in human capital per worker
    c. an increase in natural resources per worker
    d. All of the above are correct.
    d
  6. One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch: It requires that society
    a. conserve resources for future generations.
    b. sacrifice consumption goods and services now in order to enjoy more consumption in the future.
    c. recycle resources so that future generations can produce goods and services with the accumulated capital.
    d. Both b and c are correct.e. None of the above are correct.
    b
  7. If there are diminishing returns to capital,
    a. capital produces fewer goods as it ages.
    b. new ideas are not as useful as old ideas.
    c. increases in the capital stock eventually decrease output.
    d. increases in the capital stock increase output by ever smaller amounts.
    d
  8. If a country's saving rate increases, in the long run
    a. both productivity growth and income growth increase.
    b. only productivity growth increases.
    c. only income growth increases.
    d. neither productivity growth nor income growth increase.
    d
  9. If a country's saving rate increases, in the long run
    a. productivity is higher, real GDP per person is not higher.
    b. real GDP per person is higher, productivity is not higher.
    c. productivity and real GDP per person are both higher.
    d. neither productivity nor real GDP per person are higher.
    c
  10. Foreign saving is used for domestic investment when foreigners engage in
    a. foreign direct investment.
    b. foreign portfolio investment.
    c. Either a or b are correct.
    d. Neither a nor b are correct.
    c
  11. The source of most technological progress is
    a. private research by firms.
    b. individual inventors.
    c. government research.
    d. Both a and b are correct.
    d
  12. All else equal, which of the following would tend to cause GDP per person to rise?
    a. high population growth
    b. investment in human capital
    c. rapid growth in the number of workers
    d. All of the above are correct.
    b
  13. Stock representsa.
    a claim to the profits of a firm.
    b. ownership in a firm.
    c. equity finance.
    d. All of the above are correct
    d
  14. The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's
    a. earnings.
    b. retained earnings.
    c. economic, or real, profit.
    d. dividend.
    a
  15. Which of the following equations will always represent GDP in an open economy?
    a. S = I - G
    b. I = Y - C + G
    c. Y = C + I + G
    d. Y = C + I + G + NX
    d
  16. The country of Meditor uses the merit as its currency. Recent national income statistics showed that it had GDP of 700 million merits, no government transfer payments, taxes of 210 million merits, a budget surplus of 60 million merits, and investment of 100 million merits. What were its consumption and government expenditures on goods and services?
    a. 450 million merits and 150 million merits
    b. 410 million merits and 150 million merits
    c. 330 million merits and 270 million merits
    d. 290 million merits and 270 million merits
    e. There is insufficient information to answer this question.
    a
  17. In the small closed economy of San Lucretia, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 70 billion denars, government purchases of goods and services were 80 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What were consumption and investment in San Lucretia?
    a. 270 billion denars and 50 billion denars
    b. 260 billion denars and 60 billion denars
    c. 250 billion denars and 70 billion denars
    d. 240 billion denars and 80 billion denars.
    e. There is insufficient information to answer this question.
    a
  18. 18. Which of the following is not always correct in a closed economy?
    a. National saving equals private saving plus public saving.
    b. Net exports equal zero.
    c. Real GDP measures both income and expenditures.
    d. Private saving equals investment.
    d
  19. ____ 19. In 1995, MP Bill Gatt proposed that the income tax be replaced with a consumption tax. If his program had been passed, then today it is likely that the equilibrium interest rate
    a. and quantity of loanable funds would be lower.
    b. and quantity of loanable funds would be higher.
    c. would be higher and the equilibrium quantity of loanable funds would be lower.
    d. would be lower and the equilibrium quantity of loanable funds would be higher.
    d
  20. 20. What would happen in the market for loanable funds if the government were to increase the tax on interest income?

    a. Interest rates would rise.
    b. Interest rates would be unaffected.
    c. Interest rates would fall.
    d. The change in the interest rate would be ambiguous.
    a
  21. 21. If Parliament reduced the tax rate on interest income, investment
    a. would increase and saving would decrease.
    b. would decrease and saving would increase.
    c. and saving would increase.
    d. and saving would decrease.
    c
  22. Other things the same, if the government increases transfer payments to households, then
    a. investment will rise.
    b. the rate of interest will rise.
    c. public saving will rise.
    d. the market for loanable funds will be unaffected.e. None of the above will occur.
    b
  23. Which of the following is incorrect?
    a. If GDP is rising faster than debt, the government is, in some sense, living within its means.
    b. The ratio of debt to GDP in Canada has always been less than one.
    c. Debts during wars may distribute the burden of fighting the war more evenly across generations.
    d. All of the above
    d
  24. Unemployment data is collected
    a. from unemployment insurance claims.
    b. through a regular survey of about 50,000 households.
    c. through a regular survey of about 200,000 firms.
    d. Unemployment data is collected using all of the above.
    b
  25. Which of the following definitions is correct?
    a. Labor force = number of employed.
    b. Labor force = population - number of unemployed.
    c. Unemployment Rate = (number of unemployed  [number of employed + number of unemployed])  100.
    d. Unemployment Rate = (number of unemployed  adult population)  100.e. None of the above are correct.
    c
  26. The labor force participation rate is computed as the number of adults in the labour force
    a. divided by the adult population times 100.
    b. divided by the number of unemployed times 100.
    c. divided by the unemployment rate times 100.
    d. times the participation rate times 100
    e. None of the above are correct.
    a
  27. Consider two people who are currently out of work. Deb is not currently looking for work but would like a job. Although she is not currently searching for work, she has done so at some time in the recent past. Ted is not looking for work, because he doesn't think there are jobs that he would qualify for available. Statistics Canada considers
    a. both Deb and Ted to be discouraged workers.
    b. only Ted to be a discouraged worker.
    c. only Deb to be a discouraged worker.
    d. Neither Deb nor Ted to be discouraged workers.
    b


  28. Refer to Figure 28-2. If the minimum wage fell from $7 to $5

    a. unemployment would fall by 20.
    b. unemployment would fall by 40.
    c. unemployment would be unchanged.
    d. unemployment would rise by 20.
    e. None of the above are correct
    b
  29. Which of the following is incorrect?
    a. A union is a form of cartel.
    b. Union workers typically earn 20 to 30 percent more than similar nonunionized workers.
    c. The power of a union comes from its ability to strike if its demands are not met.
    d. Workers in unions reap the benefits of collective bargaining, while workers not in unions bear some of the cost.
    b
  30. Which of the following is an example of a violation of right-to-work laws?
    a. Musicians agree to join a union. Even though he voted against the union, Ricky must join it.
    b. Lucy is willing to work at the candy factory while the other workers are on strike, but the union does not permit it.
    c. Fred and his co-workers are not allowed by their firm to form a union.
    d. Because Ethel belongs to a union she can't bargain for her own salary increases; she must bargain with the rest of the union.
    a
  31. Dan decides to hire some additional workers for his golf-ball factory. The equilibrium wage is $12 per hour. Efficiency wage theory suggests that it is reasonable for Dan to offer
    a. $12 per hour.
    b. less than $12 per hour, since some people would be willing to work for less.
    c. enough to attract the number of applicants necessary to fill the jobs available.
    d. more than $12 per hour, so as to attract a better pool of applicants.
    d
  32. Anything that makes the efficiency wage rise relative to the market-clearing wage will
    a. increase both the quantity demanded and the quantity supplied of labour.
    b. decrease both the quantity demanded and the quantity supplied of labour.
    c. increase the quantity demanded and decrease the quantity supplied of labour.
    d. decrease the quantity demanded and increase the quantity supplied of labour.
    d
  33. Which of the following best illustrates the medium of exchange function of money?a. You keep some money hidden in your shoe.
    b. You keep track of the value of your assets in terms of currency.
    c. You pay for your double latte using currency.
    d. None of the above is correct.
    c
  34. Term deposits are included in
    a. M1 but not M2.
    b. M1 and M2.
    c. M2 but not M1.
    d. neither M1 or M2.
    c
  35. Given the size of the Canadian. money stock, it is puzzling that
    a. banks hold so much currency relative to the public.
    b. the public holds so much currency relative to banks.
    c. there is so little currency per person.
    d. there is so much currency per person.
    d

  36. Refer to Table 29-3. If the reserve requirement is 10 percent, this bank
    a. is in a position to make a new loan of $18,000.
    b. has less reserves than required.
    c. has excess reserves of less than $8,000.
    d. None of the above are correct.
    c

  37. Refer to Table 29-3. If the reserve requirement is 10 percent and then someone deposits $50,000 into the bank, it will
    a. have $57,000 in excess reserves.
    b. have $52,000 in excess reserves.
    c. need to raise reserves by $5,000.
    d. None of the above are correct.
    b
  38. When the Bank of Canada conducts open market purchases,
    a. it buys Treasury securities, which increases the money supply.
    b. it buys Treasury securities, which decreases the money supply.
    c. it borrows from member banks, which increases the money supply.
    d. it lends money to member banks, which decreases the money supply.
    a
  39. When Bank of Canada decreases the bank rate, banks will borrow more from Bank of Canada, lend
    a. more to the public, and so the money supply will decrease.
    b. less to the public, and so the money supply will decrease.
    c. more to the public, and so the money supply will increase.
    d. less to the public, and so the money supply will increase.
    c
  40. If the reserve ratio is 20 percent, and banks do not hold excess reserves, when Bank of Canada sells $40 million of bonds to the public, bank reserves
    a. increase by $40 million and the money supply eventually increases by $200 million.
    b. increase by $40 million and the money supply eventually increases by $800 million.
    c. decrease by $40 million and the money supply eventually decreases by $200 million.
    d. decrease by $40 million and the money supply eventually decreases by $800 million.
    c
  41. The banking system has $20 million in reserves and has a reserve requirement of 20 percent. The public holds $20 million in currency. Bankers did not use to hold any excess reserves, but difficult economic times make them decide that it is prudent to hold 25 percent of deposits as reserves. At the same time, the public decides to deposit $6.7 million in currency into the banking system. Other things equal, what must the Bank of Canada do to bank reserves to keep the money supply the same?
    a. reduce reserves by $6.7 million
    b. reduce reserves by $5 million
    c. increase reserves by $3 million
    d. No action by the Bank is necessary.
    d
  42. When the money market is represented in a diagram with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the
    a. right, lowering the price level.
    b. right, raising the price level.
    c. left, raising the price level.
    d. left, lowering the price level.
    b
  43. Real GDP measures
    a. the total quantity of final goods and services produced.
    b. the dollar value of the economy's output of final goods and services.
    c. the total income received from producing final goods and services at current prices.
    d. All of the above are correct.
    a
  44. According to the classical dichotomy, which of the following is not influenced by monetary factors?
    a. the price level
    b. real GDP
    c. nominal interest rates
    d. All of the above are correct.
    b
  45. Last year, Tealandia produced 60,000 bags of green tea, which sold at 5 units each of Tealandia's currency-the Leaf. Tealandia's money supply was 10,000. What was the velocity of money in Tealandia?
    a. 40
    b. 30c. 5/6
    d. 1/30
    e. 1/40
    b
  46. The evidence gained from studying hyperinflation indicates that
    a. the rate of inflation is not closely related to the rate at which the money supply changes.
    b. nominal interest rates are independent of the money supply.
    c. inflation rates parallel money supply growth rates.
    d. None of the above is correct.
    c
  47. Shoeleather costs refer to
    a. the cost of more frequent price changes induced by higher inflation.
    b. the distortion in resource allocation created by distortions in relative prices due to inflation.
    c. resources used to maintain lower money holdings when inflation is high.
    d. the distortion in incentives created by inflation by taxes that do not adjust for inflation.
    c
  48. You buy a stock and its price rises less than the price level, so before taxes you made
    a. a nominal and real gain, and you pay taxes on the nominal gain.
    b. a nominal gain and a real loss, and you don't have to pay taxes since you gained less than the change in the price level.
    c. a nominal and a real gain, and you pay taxes on the real gain.
    d. a nominal gain and a real loss, and you pay taxes on the nominal gain.
    d
  49. Norbert purchased 10 shares of Gentech stock for $200 a share in year 1 and sold all the shares in year 2 for $220 a share. Between year 1 and year 2, the price index increased by 5%. The tax on capital gains is 50%. If the capital gains tax is on nominal gains, how much tax does Norbert pay on his gain?
    a. $90
    b. $95
    c. $100
    d. $105
    c
  50. Wealth is distributed from creditors to debtors when inflation is
    a. high, whether it is expected or not.
    b. low, whether it is expected or not.
    c. unexpectedly high.
    d. unexpectedly low.
    c
  51. A forest is an example of a nonrenewable resource.
    F
  52. If the productivity slowdown had not occurred in 1973, the income of the Average Canadian today would be about 70 percent higher.
    T
  53. Generally, if people expect a company to have higher future profits, the price of the stock will be driven down.
    F
  54. If a share of stock in Skylight Chili sells for $75, the retained earnings per share are $5, and the divided per share is $2, then the price-earnings ratio is 15.
    F
  55. Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.
    F
  56. Suppose a small closed economy has GDP of $5 billion, Consumption of $3 billion, and Government expenditures of $1 billion. Then domestic investment and national saving are both $1 billion.
    T
  57. A decrease in taxes on interest income would increase the interest rate.
    F
  58. The unemployment rate is defined as the percentage of the labour force that is unemployed. The labour force participation rate is the percentage of the adult population that is either employed or unemployed.
    T
  59. Firms might offer efficiency wages in order to attract a better pool of applicants.
    T
  60. The quantity theory implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.
    F

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