1) After winning $100 on a trip to Las Vegas, Hugo returns to Canada and deposits $60 in his savings account and $40 in his chequing account. The immediate effect is

Select one:

a.

M1+ increases by $60.

b.

M2+ increases by $100.

c.

M1+ increases by $100.

d.

M2+ is unchanged.

e.

M1+ is unchanged.

2)Which statementcorrectlydescribes how monetary policy affects the economy?

Select one:

a.

The decreased supply of money is helping sell exports abroad.

b.

The extra money pumped into the economy by the central bank is creating more jobs.

c.

House sales are down, due to increases in the money supply.

d.

The extra money pumped into the economy by the central bank is decreasing exports.

e.

Businesses are investing more, now that monetary policy has attacked the inflationary gap.

3) At the equilibrium price, business inventories are

Select one:

a.

shrinking.

b.

growing.

c.

zero.

d.

unstable.

e.

stable.

4)If sellers expect the price of beef will rise in the future, the price of beef on today's market

Select one:

a.

falls and quantity demanded decreases.

b.

falls and quantity supplied increases.

c.

rises and quantity demanded decreases.

d.

rises and quantity supplied decreases.

e.

falls and quantity demanded increases.

5) If price elasticity of demand is zero, then as price falls

Select one:

a.

total revenue does not change.

b.

quantity demanded does not change.

c.

quantity demanded decreases to zero.

d.

total revenue increases from zero.

e.

none of the above.

6)Tim Horton's coffee cups litter downtown Ottawa, creating a negative externality. In this situation, the

Select one:

a.

marginal private benefits of drinking a coffee are less than the marginal social costs.

b.

marginal private benefits of drinking a coffee are more than the marginal social benefits.

c.

marginal private costs of drinking a coffee are more than the marginal social costs.

d.

marginal social costs of drinking a coffee do not include the marginal external costs of litter removal.

e.

marginal private benefits of drinking a coffee are more than the marginal social costs.

7) Unemployment tends to be inversely related to growth in GDP.

Select one:

True

False

8) Compared to the inflation rate calculated using the Consumer Price Index (CPI), the core inflation rate

Select one:

a.

allows quantities to change in the basket of products and services.

b.

allows quantities to change in the basket of products and services.

c.

is always higher.

d.

is always lower.

e.

is none of the above.

9)Because Tim Horton's is a Canadian corporation, sales from Tim Horton's stores in the U.S. count as part of Canadian GDP.

Select one:

True

False

10) A technological breakthrough lowers the cost of yoga mats. If the demand for yoga mats is price inelastic, yoga mat sales

Select one:

a.

increase and total revenue decreases.

b.

decrease and total revenue increases.

c.

increase and total revenue increases.

d.

increase, but changes in total revenue depend on elasticity of supply.

e.

decrease and total revenue decreases.

11) A basket of products and services cost $200 in the base year. If the Consumer Price Index (CPI) in the current year is 250, then the cost of the basket in the current year is

Select one:

a.

$125.

b.

$250.

c.

$450.

d.

$500.

e.

none of the above answers.

12) Joon buys 20 Starbucks' espressos a day at $2.00 per cup. He heard that Starbuck's will be raising prices to $2.20, a ten percent increase. Joon says he will cut back and only drink 16 cups of espresso a day, a twenty percent decrease. Joon's price elasticity of demand for Starbucks' espressos using the simple formula is

Select one:

a.

2.

b.

1/2.

c.

10.

d.

200.

e.

1/4.

13) Joanna's price elasticity of demand for hamburgers is 5. Her friend Eric is a vegetarian and never eats meat. Eric's price elasticity of demand for hamburgers will be lower than Joanna's.

Select one:

True

False

14) If the Consumer Price Index (CPI) was 150 at the end of 2010 and 165 at the end of 2011, what was the inflation rate for 2011?

Select one:

a.

50 percent

b.

15 percent

c.

10 percent

d.

65 percent

e.

9.1 percent

15) Through the domestic monetary transmission mechanism, increases in money demand cause

Select one:

a.

inflation and increased unemployment.

b.

deflation and increased unemployment.

c.

deflation and decreased unemployment.

d.

inflation and decreased unemployment.

e.

none of the above.

16) When the Bank of Canada buys bonds on the bond market, this

Select one:

a.

fights inflation.

b.

lowers the price of bonds.

c.

increases chartered bank loans to the public.

d.

decreases the money supply.

e.

decreases chartered bank reserves.

Clear my choice

17) Monopolist have market power and donothave to live by the law of demand.

Select one:

True

False

18) The estimated size of the multiplier effect for government spending is

Select one:

a.

almost zero if real GDP equals potential GDP.

b.

smaller if real GDP is close to potential GDP.

c.

larger if real GDP is far below potential GDP.

d.

zero if real GDP is far above potential GDP.

e.

all of the above.

19) Which is a supply plan to increase inputs?

Select one:

a.

a government plan to allow more logging on Crown land in British Columbia.

b.

a business's plan to increase output from its Hamilton, Ontario factory.

c.

a worker's choice about how many hours to work each week.

d.

a father's choice to take a paying job or take care of the kids at home.

e.

a new government policy allowing more immigrants into Canada.

Clear my choice

20) Suppose purchasing power parity (PPP) depends only on hotel rooms. The exchange rate is C$1.00 = US$0.80 and a room at the Weston Hotel in Niagara Falls, New York costs US$200.PPPsuggests that the price of a room at the Weston Hotel in Niagara Falls, Ontario should be

Select one:

a.

C$ 250.

b.

C$ 80.

c.

C$ 160.

d.

C$ 200.

e.

C$ 125.