Intro Macro: MCQ Practice

Introduction to Macroeconomics Multiple Choice Questions (1 mark each) 1) The unemployment rate may overestimate the true extent of unemployment if: a. many part-time employees would like to work fulltime, but are unable to get the additional work. b. many people who claim to be unemployed actually work in the underground economy. c. people falsely claim that they are actively seeking work in order to receive unemployment benefits. d. either b) or c) occurs. 2) If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: a. 8 percent. b. 20 percent. c. 25 percent. d. 32 percent. 3) A person who works 25 hours per week: a. is considered to be a discouraged worker. b. is considered to be employed. c. is considered to part of the labour force. d. is characterized by both b) and c). 4) Cody has recently graduated from university with an MA in economics. Having been unsuccessful in getting a job in Toronto’s financial district, he accepts a job at Home Depot in Kingston. According to Statistics Canada, Cody is: a. frictionally unemployed. b. structurally unemployed. c. employed. d. underemployed. 5) Full employment implies that the economy is experiencing: a. no frictional unemployment. b. no cyclical unemployment. c. no structural unemployment. d. zero unemployment. 6) Refer to figure above. If the minimum wage is $5 or $6, what is the number of people unemployed, respectively? a. 40 and 0 b. 20 and 20 c. 40 and 20 d. 0 an 0 7) Since World War II, which of the following has happened to the labour-force participation rate? a. It has increased for both men and women. b. It increased for women and decreased for men. c. It has decreased for both men and women. d. It decreased for women and increased for men. 8) Demand deposits are: a. assets of banks, liabilities of depositors. b. liabilities of banks, assets of depositors. c. assets of banks and their depositors. d. liabilities of banks and their depositors. 9) The money supply would tend to fall if: a. banks decide to keep more reserves and people convert more of their demand deposits to currency. b. banks decide to keep more reserves and people deposit currency in their demand deposit accounts. c. banks decide to keep fewer reserves and people deposit currency in their demand deposit accounts. d. banks decide to keep fewer reserves and people convert more of their demand deposits to currency. 10) In the equation of exchange, an increase in M of 8 percent could be accompanied by changes in velocity, the price level and real GDP of: a. -2%; 3%; 3%. b. 4%; 0%; 4%. c. 2%; 8%; 8%. d. 8%; 8%; 4%. 11) If money supply and money demand both increased: a. interest rates would increase and investment would increase. b. interest rates would increase and investment would decrease. c. interest rates would decrease and investment would increase. d. the change in interest rates and investment would be indeterminate. 12) When the money market is depicted in a graph with the value of money on the vertical axis, as the price level increases, which of the following happens to the value of money? a. It increases, so the quantity of money demanded increases. b. It increases, so the quantity of money demanded decreases. c. It decreases, so the quantity of money demanded decreases. d. It decreases, so the quantity of money demanded increases. 13) If the reserve ratio increased from 10 percent to 20 percent, which of the following would happen to the money multiplier? a. It would rise from10 to 20. b. It would rise from 5 to 10. c. It would fall from 10 to 5. d. It would not change. 14) Which of the following does the quantity theory of money try to explain? a. how inflation determines economic growth b. the relationship between the quantity of money and the price level c. the determinants of relative prices in the economy d. the relationship between inflation and unemployment 15) If there are 5 goods and in the absence of money, ________ prices will be need for comparison a. 5 b. 10 c. 20 d. 40 16) How is the labour-force participation rate defined? a. (Employed Adult population)  100 b. (Employed Labour force)  100 c. (Labour force Adult population)  100 d. (Adult population Labour force)  100 17) Which of the following causes of unemployment is NOT associated with a wage rate above the equilibrium level? a. unions b. efficiency wages c. job search d. minimum-wage laws 18) How are discouraged workers counted in unemployment statistics? a. They are not counted either as part of the adult population or as part of the labour force. b. They are counted as part of the adult population, but not as part of the labour force. c. They are counted as part of the adult population and as unemployed. d. They are counted as unemployed, but not part of labour force. 19) When a union bargains successfully with employers, what happens to quantity of labour supplied and demanded in that industry? a. Both the quantity of labour supplied and the quantity of labour demanded increase. b. Both the quantity of labour supplied and the quantity of labour demanded decrease. c. The quantity of labour supplied increases and the quantity of labour demanded decreases. d. The quantity of labour supplied decreases the quantity of labour demanded decreases. 20) Which of the following characterizes fiat money? a. It has no intrinsic value. b. It is backed by gold. c. It has intrinsic value equal to its value in exchange. d. It is an illiquid asset. 21) In the 14th century, the Western African Emperor Kankan Musa travelled to Cairo where he gave away much gold, which was in use as a medium of exchange. Which of the following would we predict this increase in gold would do to the price level and value of gold in Cairo? a. raise both the price level and the value of gold in Cairo b. raise the price level, but decrease the value of gold in Cairo c. lower the price level, but increase the value of gold in Cairo d. lower both the price level and the value of gold in Cairo 22) After all the anti-smoking legislations, the following is used in some prisons as money a. Mack pouches b. drugs c. soda cans d. US dollars 23) The Nazi plan to drop counterfeit British currency bills in UK is known as a. Operation Wilhelm b. Operation Bernhard c. Operation SS d. Operation Kaiser 24) Which of the following will not shift the investment demand curve? a. the introduction of new profitable technology investment opportunities b. business inventories that have fallen far below desired levels c. a decrease in real interest rates d. business expectations of higher future sales and profits 25) If, at a given interest rate, the quantity of savings supplied is less than the quantity of investment demanded: a. there is a surplus of savings and real interest rates will rise. b. there is a surplus of savings and real interest rates will fall. c. there is a shortage of savings and real interest rates will rise. d. there is a shortage of savings and real interest rates will fall. 26) Which of the following is true for the financial markets in a closed economy? a. interest rate will adjust until public saving equals zero b. investment will equal private saving plus public saving c. private savings will equal public savings d. if public savings is positive, investment will be less than private savings 27) During a recession, governments tend to run budget deficits. This causes the saving supply curve to shift . The resulting in real interest rates leads to a in investment spending. a. right; increase; decrease b. right; decrease; increase c. left; increase; decrease d. left; decrease; decrease 28) The current Alberta government is not a. b. c. d. running a deficit of $6.1 billion increasing taxes on tobacco and liquor capping debt to 15% of GDP introducing user fees for ring roads 29) Those who argue for raising minimum wages do NOT assert that a. b. c. d. Labour productivity will increase Labour turnover will increase Demand curve for labour is inelastic Labour market is monopsonistic 30) Identify the incorrect identity for the income statement a. b. c. d. Sales Revenue – CoGs = EBIT EBT – Taxes = Net Income EBIT – Interest = EBT Net Income = Dividends - Retained Earnings