Question 1 (0.2 points) P AS AD; ADl Y In the figure shown, when government expenditure falls, the short-run equilibrium in the economy moves from 0 point x to point y. 0 point y to point x. O point x to point 2. 0 point y to point 2. Question 2 (0.2 points) What kind of banking system does Canada have? O A unit banking system Q A fractional reserves system 0 A banking system with required reserves imposed by the central bank O None of the above Question 3 (0.2 points) In a closed economy, if the MPC is 0.75, the multiplier is Question 17 options: Question 4 [0.2 points) Human capital is O a produced factor of production. 0 not a produced factor of production. 0 provided by nature. 0 included as part of physical capital. Question 5 [0.2 points) Which is true of the demand for money? 0 It is infinite Q It is determined by interest rate and nominal GDP 0 It is determined by the Bank of Canada 0 It is determined by the real income 0 It is the same as aggregate demand Question 6 [0.2 points) What is the basis of the modern banking system? 0 Deposit insurance 0 Commodity money 0 Fiat money 0 Fractional reserves banking O The gold standard Question 7 [0.2 points) Suppose the First Bank has the following Balance Sheet: Assume that a company deposits $500,000 in cash in the bank. If the reserve ratio is 20 percent. what is the maximum amount of new loans that the bank can now offer? 0 $500,000 0 $100,000 0 $2,000,000 0 $400,000 0 $2,500,000 Question 8 [0.2 points) In the above graph, MS is the supply of money and MD is the demand for money. If the interest rate is r1, which of the following statements is true? 0 The money market is in equilibrium 0 There is excess demand for money 0 There is excess supply of money O There is surplus of money Question 9 (0.2 points) Productivity is a measure of O the amount of goods and services produced from each worker in a given year. Q the amount of goods and services produced from each hour of a worker's time. Q the amount of goods and services produced per person in the country. 0 the amount of goods and services produced by a country relative to another country. Question 10 (0.2 points) What is meant by the term commodity money? 0 The use of coins to purchase commodities O A type of certificate of deposit that can be used to buy commodities O A share invested in commodities O A type of money that can also function as a commodity Question 11 (0.2 points) One of the following is part of money supply. Which is it? 0 Gold O Currency in a bank's vault 0 Demand deposits 0 Available credit on people's credit cards Question 12 (0.2 points) Which of the following would not be considered physical capital? 0 construction of a new factory O on-the-job-training O a new computer used in a restaurant 0 a desk used in an accountant's office 0 all of the above are considered physical capital Question 13 (0.2 points) Qunlydmuy In the above graph, MS is the supply of money and MD is the demand for money. What is the equilibrium interest rate? 0 Cannot be determined Question 14 (0.2 points) If the exchange rate changes so that fewer euros are needed to buy a Canadian dollar. then 0 Canadians will buy more European goods and services. 0 Europeans will buy fewer Canadian goods and services. 0 Canadians will buy fewer European goods and services. 0 the Canadian dollar has appreciated in value. 0 the euro has depreciated in value. Question 15 (0.2 points) As the MPC _ ___ the multiplier 0 decreases, remains unchanged 0 increases, decreases 0 decreases, increases 0 increases, increases Question 16 (0.2 points) The quantity of money that people plan to hold depends on all of the following factors except 0 real GDP. 0 the interest rate. 0 the price level. 0 the money supply. Question 17 (0.2 points) If someone deposits a $100 bill in a commercial bank which has a 5 percent reserve ratio, which of the following is true? 0 The bank will have $95 of additional reserves 0 The bank will have $100 of additional reserves 0 The bank will be capable of lending additional $100 0 The bank will be capable of lending additional $95 Question 18 {0.2 points) If the exchange rate changes so that fewer Canadian dollars are needed to buy a British pound sterling, then 0 the pound has appreciated in value 0 more dollars will be needed to buy the same quantity of British goods 0 fewer pounds will be needed to buy the same quantity of Canadian goods 0 the dollar has depreciated in value 0 none of the above happens Question 19 (0.2 points) Over the longer runI lagging productivity growth in a single country is likely to lead to O A large increase in that country's unemployment 0 Greater exports from that country 0 Lower exports from that country 0 A lower standard of living relative to other countries Question 20 (0.2 points) What ratio the reserve-todeposit ratio refer to? O The bank's reserves to its liabilities and equity 0 The bank's equity to its total assets 0 The bank's reserves and securities to its demand deposits 0 The bank's reserves to its demand deposits 0 The bank's reserves to its total assets Question 21 {0.2 points) A country's standard of living depends on O its ability to distribute income equitably. 0 its ability to find natural resources. 0 its ability to produce goods and services. 0 its ability to slow population growth. Question 22 (0.2 points) What will depreciation of the euro do? 0 Make European exports cheaperI but its imports more expensive 0 Make European exports more expensive, but its imports cheaper 0 Make European exports and imports both less expensive 0 Make European exports and imports both more expensive Question 23 (0.2 points) How is the major portion of the Canadian money supply created? 0 By the actions of the Canadian mint 0 By the actions of the commercial banks and the Bank of Canada 0 Through the receipt of gold bullion via international trade 0 By the actions of the Department of Finance 0 Through loans from the International Monetary Fund Question 24 (0.2 points) All of the following except one are factors conductive to a higher economic growth. Which is the exception? 0 A higher savings rate 0 Edumtion 0 Research 0 A higher money supply 0 Flexibility in the working place Question 25 (0.2 points) In which direction will the demand for money curve shift? 0 Right when nominal GDP increases 0 Left when nominal GDP increases 0 Right when nominal GDP decreases 0 Right when interest rate increases 0 Left when interest rate decreases Question 26 (0.2 points) Canada is said to be a small open economy because 0 an increase in the domestic demand or supply of internationally traded goods has no effect on world prices. 0 Canada is just one member of the North American Free Trade Agreement (NAFTA). O Canada's GDP is small relative to U.S. GDP. 0 of recent cut-backs to federal government expenditures. Question 27 (0.2 points) In a small open economy, a reduction in the size of the government deficit would 0 shift the AD curve to the left regardless of whether the exchange rate is fixed or flexible. 0 shift the AD curve to the left if the exchange rate was fixed. 0 shift the AD curve to the left if the exchange rate was flexible. 0 shift the AD curve to the right if the exchange rate was flexible. 0 shift the AD curve to the right if the exchange rate was fixed. Question 28 {0.2 points) Classic growth theory is O optimistic. O realistic. O pessimistic. O amazing. Question 29 (0.2 points) Which of the following is a legitimate concern over the national debt? 0 The costs of servicing the debt each year comes out of current tax revenues but do not affect future generations O The costs of servicing the debt each year do not affect the current generation but do affect future generations O The costs of servicing the debt each year comes out of current tax revenues and affect future generations 0 The costs of servicing the debt each year affect neither current generation nor future generations Question 30 {0.2 points) Recessions are associated with which of the following? 0 rising unemployment O increased bankruptcies O falling profits 0 falling output O all of the above Question 31 (0.2 points) What is the immediate impact of an expansionary fiscal policy in a small open economy with flexible exchange rate? 0 Rightward shift of aggregate demand with increase in nominal GDP O Rightward shift of aggregate demand with decrease in nominal GDP 0 Leftward shift of aggregate demand with increase in nominal GDP O Leftward shift of aggregate demand with decrease in nominal GDP Question 32 {0.2 points) Which of the following is not a tool of monetary policy? O Interest rate Q Money supply O Exchange rate Q Money demand Question 33 (0.2 points) What is meant by the term "fractional reserve banking"? O A system whereby banks keep only a fraction of their assets in the form of cash 0 A system whereby banks keep only a fraction of their cash with the central bank 0 A system whereby banks keep only a fraction of their total deposits in the form of cash 0 A system whereby banks must maintain a minimum amount of loans in the form of cash Question 34 (0.2 points) amuumw In the above graph, MS is the supply of money and MD is the demand for money. If the interest rate is r3, which of the following statements is true? 0 The money market is in equilibrium 0 There is excess demand for money 0 There is excess supply of money 0 There is shortage of money Question 35 (0.2 points) What is the difference between the M1 and M2 definitions of money? 0 The M1 definition includes currency in circulation while the M2 does not 0 The M2 definition includes savings deposits and personal term deposits 0 The M2 definition includes government bonds 0 The M2 definition includes cash held by commercial banks 0 The M2 definition includes certificates of deposit Question 36 (0.2 points) Sustainable development is O The same as the concept of economic growth 0 A broader concept than economic growth 0 A narrower concept than economic growth 0 About achieving a subsistence level Question 37 (0.2 points) In a small open economy, if the Bank of Canada chooses to fix the value of the Canadian dollar, aggregate demand could be increased by 0 increasing government expenditures. 0 decreasing tax rates. 0 increasing the money supply. 0 all of the above are correct. 0 only lst and 2nd are correct. Question 33 (0.2 points) If you put some of your summer earnings into a safety deposit box at the bank, which function of money would you be using? 0 A medium of exchange 0 A store of wealth O A unit of account 0 All of the above 0 None of the above Question 39 (0.2 points) In a small open economy, if the Bank of Canada chooses to fix the value of the Canadian dollarI an expansionary monetary policy 0 would cause the dollar to depreciate and thus require the Bank of Canada to purchase Canadian dollars in the market for foreign currency exchange. 0 would cause the dollar to appreciate and thus require the Bank of Canada to purchase Canadian dollars in the market for foreign currency exchange. 0 would cause the dollar to appreciate and thus require the Bank of Canada to sell Canadian dollars in the market for foreign currency exchange. 0 would cause the dollar to appreciate and thus require the Bank of Canada to sell Canadian dollars in the market for foreign currency exchange. Question 40 (0.2 points) The marginal propensity to consume (MPC) is defined as O the fraction of total income that a household consumes rather than saves. O the fraction of total income that a household either consumes or saves. O the fraction of extra income that a household consumes rather than saves. O the fraction of extra income that a household either consumes or saves. Question 41 (0.2 points) In a small open economy, if the Bank of Canada maintains a fixed exchange rate, an expansionary fiscal policy 0 causes a large and lasting rightward shift in the aggregate demand curve. 0 causes a large and lasting leftward shift in the aggregate demand curve. 0 has no lasting effect on the position of the aggregate demand curve but causes interest rates to increase. 0 has no lasting effect on either the position of the aggregate demand curve or the interest rate. Question 42 (0.2 points) A nation's standard of living is determined by 0 gross domestic product. 0 national income. 0 productivity. 0 government social programs. Question 43 (0.2 points) What is the immediate impact of an expansionary monetary policy in a small open economy with fixed exchange rate? Q Rightward shift of money supply with increase in the interest rate 0 Rightward shift of money supply with decrease in the interest rate 0 Leftward shift of money supply with increase in the interest rate 0 Leftward shift of money supply with decrease in the interest rate Question 44 (0.2 points) If government expenditure decreases, there will be 0 a movement along the aggregate demand curve. 0 no effect on the aggregate demand curve. 0 a shift of the aggregate supply curve. 0 a shift of the aggregate demand curve to the left. 0 a shift of the aggregate demand curve to the right. Question 45 (0.2 points) When economists talk about growth in the economy, they measure that growth with O the absolute change in nominal GDP. 0 the percentage change in real GDR O the absolute change in real GDP. 0 the percentage change in nominal GDP. Question 46 (0.2 points) What is the result if banks maintain 100 percent reserves? 0 The money multiplier would have a value of zero 0 Banks would be less profitable O The money multiplierwould be infinite O The money supply would be larger Question 47 (0.2 points) If taxes increase, there will be 0 a movement along the aggregate demand curve. 0 no effect on the aggregate demand curve. 0 a shift of the aggregate demand curve to the right. 0 a shift of the aggregate demand curve to the left. 0 a shift of the aggregate supply curve. Question 45 (0.2 points) Which items are included in the M2 definition of money? 0 Certificates of deposit, savings accounts. coins, paper money and demand deposits 0 Coins, paper money, demand deposits and gold certificates 0 Savings accounts, coins, paper money and demand deposits 0 Savings accounts, coins, paper money, demand deposits and gold certificates Question 49 {0.2 points) What is fiscal policy? 0 It is the government's approach to its own spending and taxation Q It is the use of interest rate policy by the central bank to stabilize an economy 0 It is the total spending by all levels of government 0 It is employed by governments only when the economy is experiencing a recessionary gap Question 50 {0.2 points) In a small open economy, if the exchange rate is flexibleI then an expansionary monetary policy 0 causes the domestic currency to depreciate in value and causes new exports to decrease. 0 causes the domestic currency to appreciate in value and causes net exports to increase. 0 causes the domestic currency to depreciate in value and causes net exports to increase. 0 causes the domestic currency to appreciate in value and causes net exports to decrease