1. Suppose the Canadian economy is in long-run equilibrium. Then suppose the value of the Canadian dollar increases. At the same time, there is an increase in the number of skilled immigrants. What would we expect will happen in the short run?

a.Real GDP will fall, and the price level might rise, fall, or stay the same.

b.Real GDP will rise, and the price level might rise, fall, or stay the same.

c.The price level will rise, and real GDP might rise, fall, or stay the same.

d.The price level will fall, and real GDP might rise, fall, or stay the same.

2. Suppose the closed economy is in long-run equilibrium. Immigration of skilled workers shifts the long-run aggregate-supply curve $120 billion to the right. At the same time, government purchases increase by $50 billion. If the MPC equals 0.8 and the crowding-out effect is $80 billion, what would we expect to happen in the long run to real GDP and the price level?

a.Real GDP would be higher, but the price level would be the same.

b.Both real GDP and the price level would be lower.

c.Both real GDP and the price level would be higher.

d.Real GDP would be higher, but the price level would be lower.

3. Suppose the closed economy is in long-run equilibrium. Pessimism on the part of investors then shifts the aggregate-demand curve $50 billion to the left. The government wants to increase spending in order to avoid a recession. If the crowding-out effect is always half as strong as the multiplier effect, and if the MPC equals 0.9, by how much do government purchases have to rise?

a.$50 billion

b.$100 billion

c.$20 billion

d.$10 billion

4. The country of Sophilia has a GDP of $5000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

a. $1800

b. $3400

c. $1700

d. $3700

5. The price index in 2018 is 130, and in 2019 it is 143. What is the inflation rate?

a. 13 percent

b. 1.01 percent

c. 10 percent

d. 43 percent

6. The price of imported cotton shirts produced by a Canadian company operating in India increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

a.The GDP deflator will be unaffected, but the CPI will increase.

b.The GDP deflator will increase, but the CPI will be unaffected.

c.The GDP deflator and the CPI will both be unaffected.

d.The GDP deflator and the CPI will both increase.

7. What does a fall in the economy's overall level of prices tend to do?

a.It tends to raise both the quantity demanded and supplied of goods and services.

b.It tends to lower both the quantity demanded and the quantity supplied of goods and services.

c.It tends to raise the quantity demanded of goods and services, but lower the quantity supplied.

d.It tends to lower the quantity demanded of goods and services, but raise the quantity supplied.

8. What does a trade deficit imply?

a. saving is less than domestic investment and Y > C + I + G

b.saving is greater than domestic investment and Y > C + I + G

c.saving is greater than domestic investment and Y < C + I + G

d. saving is less than domestic investment and Y < C + I + G

9. What does the labour-force participation rate measure?

a.the percentage of the labour force that is employed

b.the percentage of the total adult population that is in the labour force

c.the percentage of the labour force that is either employed or unemployed

d.the percentage of the total adult population that is employed

10. What happens to aggregate demand if people want to save more for retirement and the government raises taxes?

a.Aggregate demand shifts left.

b.If people save more, aggregate demand shifts right; if the government raises taxes, aggregate demand shifts left.

c.If people save more, aggregate demand shifts left; if the government raises taxes, aggregate demand shifts right.

d.Aggregate demand shifts right.