Economics 203 is the Principles Of Macroeconomics class. Depending on the Professor, the exams format may or may not be multiple choice. This quiz only covers materials from Chapters 7 and 8 from 6th Canadian Edition of Principles of Macroeconomics by Mankiw, Kneebone and McKenzie. You may try Midterm I and Final exams for questions from other chapters.
Disclaimer: While every reasonable effort is made to ensure that the information provided is accurate, no guarantees for the currency or accuracy of information are made. It takes several proof readings and rewrites to bring the quiz to an exceptional level. If you find an error, please contact me as soon as possible. Please indicate the question ID-Number or description because server may randomize the questions and answers.
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Economics (ECON 203-UCAL) Midterm Exam II
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Question 1 |
A | Increased in market for loanable funds. |
B | Government spending is higher than the tax revenue. |
C | Higher productivity level. |
D | Increased in government investments. Hint: If the government investments are balanced by the tax intake, it will not lead to a deficit. |
Question 2 |
A | Increase government spending on small scale projects but at large volumes. |
B | Encourage Canadians to invest outside of the country. |
C | Increase tax on individuals and on industry. |
D | Reduce interest rates across all levels of funds. |
Question 3 |
A | Technological knowledge is not a form of physical capital. |
B | For maximum productivity, the physical capital should satisfy the demands of the human capital. |
C | Physical capital is the equipment and structures used to produce goods and services. |
D | Having right tool for the right job, in other word, right physical capital, will drastically increase productivity. |
E | Production output of a company cannot be used as physical capital. |
Question 4 |
A | Productivity |
B | Population growth |
C | Inflation rate |
D | Nominal GDP |
E | Real GDP |
Question 5 |
A | Domestic markets |
B | Interest rates |
C | Productivity |
D | GDP |
E | Net exports |
Question 6 |
A | The country must be experiencing a higher than normal inflation. |
B | The market of this particular country must be highly regulated. |
C | The manufacturing and services (quantity of output) must be negative. |
D | The government must be running a deficit budget. |
E | The country must be a developing or poor nation with a low GDP. |
Question 7 |
A | the quantity of output will be increased by more than double but less than triple the original amount. |
B | the quantity of output will be increased by six times the original amount. |
C | the quantity of output will be increased by more than triple the original amount. |
D | the quantity of physical capital doubles. |
E | the state of technology will be increased by at least triple the original amount. |
Question 8 |
A | Graph D |
B | Graph A |
C | Graph B |
D | Graph C |
Question 9 |
A | Diminishing returns |
B | Economies of scale |
C | Return to normal |
D | Catch-up effect |
Question 10 |
A | decrease , reduces , raises |
B | increase , reduces , raises |
C | increase , raises , reduces |
D | decrease , raises , raises |
E | increase , raises , raises |
F | decrease , raises , reduces |
G | decrease , reduces , reduces |
Question 11 |
A | Large physical capital |
B | Renewable natural resources |
C | Nonrenewable natural resources |
D | Large human capital |
Question 12 |
I. Buying a house with a mortgage to be paid off later.
II. Buying large volume of dry noodles to be sold at a higher price later.
III. Buying stock from Volkswagen AG to be sold at a higher price later.
IV. Buying government bonds to earn interest and face value later.
A | All of the choices falls under equity finance. |
B | III and IV only |
C | III only |
D | I and IV only |
E | IV only |
F | II and III only |
Question 13 |
A | An investment made by a country using tax revenue in another country to boost federal reserves. |
B | An investment that is financed with foreign money but operated by domestic residents. |
C | A capital investment that is owned and operated by a foreign entity. |
D | A multinational investment in a country where it is operated by the domestic residents. |
E | A capital investment made by individuals using personal wealth in a different country that their own. |
Question 14 |
A | Rate of change in real GDP per capita. |
B | Rate of change in nominal GDP. |
C | Rate of change in inflation. |
D | Rate of change in real GDP |
E | Rate of change in inflation per capita. |
F | Rate of change in nominal GDP per capita. |
Question 15 |
GDP = $9.5 trillion
Consumption spending = $4.0 trillion
Taxes = $6.4 trillion
Government transfers = $3.6 trillion
Government purchases = $4.0 trillion
A | $3.1 trillion |
B | $6.4 trillion |
C | $2.4 trillion |
D | $3.6 trillion |
E | $2.8 trillion |
Net taxes = $6.4 - $3.6 = $2.8 trillion
Question 16 |
A | 100% |
B | 2.5% |
C | 5% |
D | 10% |
Question 17 |
A | There would be an increase in the amount of lonable funds borrowed. |
B | The change in lonable funds borrowed would be ambiguous. |
C | There would be a reduction in the amount of lonable funds borrowed. |
D | There would be no change in the amount of lonable funds borrowed. |
Question 18 |
A | Politicians and policymakers in charge have no or little knowledge and skills in managing the economy. |
B | Emigration of highly educated workers to first world countries. |
C | Decrease in access to higher education among poor populations. |
D | Emergence of a population with unsuitable educational and skills levels due to improper planing. For example, large enrollment in petroleum industry education when that country has no petroleum natural resources. |
E | Increase in number of people in the workforce while decrease in the quality of education among them. |
Question 19 |
A | Public market policies |
B | Global market policies |
C | Outward-oriented policies |
D | Inward-oriented policies |
Question 20 |
A | Steven |
B | Erica |
C | Lauren |
D | Sanuja |
E | Manuja |
Sanuja = 20/5 = 4 wings/hr
Manuja = 30/6 = 5 wings/hr
Steven = 60/20 = 3 wings/hr
Erica = 18/8 = 1.5 wings/hr
Lauren = 55/20 = 2.75 wings/hr
Therefore, Manuja has the highest productivity.
Question 21 |
A | Encourage investments in technology and human capital. |
B | Discourage consumers from purchasing products made outside of Canada. |
C | Engage in military wars against countries with high manufacturing output such as China. |
D | Increase the exploitation of natural resources. |
E | Increase the printing of monetary funds (money) using government bonds as collateral to increase investments in manufacturing. |
Question 22 |
A | technology for production doubles. |
B | quantity of physical capital doubles. |
C | quantity of natural resources doubles. |
D | quantity of labour doubles. |
E | quantity of human capital doubles. |
Question 23 |
A | It is a system in which people who wants to save can supply funds for people who wants to borrow money. |
B | It is a marketplace for international traders can meet national traders. |
C | It is a system fully controlled by the government which keeps the inflation in control. |
D | It is a marketplace for companies to exchange their assets. |
Question 24 |
A | Funds collected through interest |
B | Central banks |
C | Investments |
D | Government funds |
Question 25 |
A | face value of the particular bond. |
B | principle of of the bond. |
C | duration of the bond. |
D | number of coupons in the bond certificate. |
E | supply and demand. |
Question 26 |
A | decreasing the minimum legal age of work hence increasing the available population for work. |
B | increasing (hiring) the number of workers per job. |
C | decrease taxes imposed on individual workers. |
D | increasing the immigration into a country. |
E | educating the workers. |
Question 27 |
GDP = $9.5 trillion
Consumption spending = $4.0 trillion
Taxes = $6.4 trillion
Government transfers = $3.6 trillion
Government purchases = $4.0 trillion
A | $2.8 trillion |
B | $5.5 trillion |
C | $1.5 trillion |
D | $2.7 trillion |
E | $3.6 trillion |
Investments = GDP - Consumption - Govt Spending
I = $9.5 - $4 - $4 = $1.5 trillion
Question 28 |
A | Net exports do not include products exported or imported under free trade agreements such as NAFTA. |
B | The end of a Government of Canada GIC bond period, you will collect only the interest of the face value. |
C | Publicly traded companies are always more stable than private organizations. |
D | The primary purpose of a banking system is the distribution of wealth through loans/mortgages. |
E | Mutual funds companies buy stocks and bonds to maintain their portfolio. |
Question 29 |
A | total amount of money that is injected into the financial markets. |
B | differences between government spending and its tax revenue. |
C | total income in an economy that remains after paying for consumption and government purchases. |
D | total income in an economy after firms pay for capital goods. |
E | total amount of money that deposited in the bond market. |
Question 30 |
A | A decrease in demand for loanable funds. |
B | A decrease in supply of loanable funds. |
C | An increase in demand for loanable funds and a decrease in supply of loanable funds. |
D | None of the answers are correct. |
E | An increase in demand for loanable funds. |
Question 31 |
A | Graph A |
B | Graph B |
C | Graph C |
D | Graph D |
E | None of the graphs depict the correct answer. |
Question 32 |
A | Government salaries paid to individuals. |
B | Payment of Employment Insurance to people who lost their jobs. |
C | Payments made for the Members of the Parliament for their official work. |
D | Payments for companies who completed a project for the government. |
E | Purchase of military equipment for national armed forces. |
Question 33 |
A | face value. |
B | market price. |
C | remaining funds according to interest rates. |
D | regulated fixed government rate. |
Question 34 |
A | the supply of the available credits are greater than the demand for investments. |
B | tax collected by the government is greater then that of government spending. |
C | tax collected by the government is equal to that of government spending. |
D | the supply of the available credits are lower than the demand for investments. |
E | tax collected by the government is lower than that of government spending. |
Question 35 |
A | decrease in long term economic growth. |
B | decrease in productivity. |
C | advancement in technology. |
D | decrease in GDP. |
Question 36 |
A | ~ $100 |
B | ~ $120 |
C | ~ $80 |
D | ~ $90 |
present value = $110/(1.10)^1 = $100
Question 37 |
A | improvement of productivity. |
B | constant return to scale. |
C | diminishing returns. |
D | Malthus effect. |
E | catch up effect. |
Question 38 |
A | Upward shift in the demand curve. |
B | Increase in interest rate. |
C | Decrease in price and increase in interest rate. |
D | Increase in price and decrease in interest rate. |
Question 39 |
A | By dividing the entire equation by the quantity of natural resources, N. |
B | By dividing the entire equation by the quantity of physical capital, K. |
C | By dividing the entire equation by the quantity of human capital, H. |
D | By dividing the entire equation by the quantity of labour, L. |
Question 40 |
A | $1050 million |
B | $1250 million |
C | $1080 million |
D | $1854 million |
E | $1025 million |
GDP_2040 = 1000 (1+0.025)^25 = $1854 million
Question 41 |
A | the equilibrium interest rate would increase. |
B | the supply for lonable funds would be lower than the demand for lonable funds. |
C | the equilibrium of lonable funds would be lower than that of the supply of lonable funds. |
D | the equilibrium conditions would not change. |
Question 42 |
A | It is the total amount of debt accumulated by a government between elections. For example, every five years. |
B | It is the difference between tax collected and the government spending during a given year or a fixed period. |
C | It is the total accumulation of debt for a country since its it has been established. |
D | It is the amount of money and other funds owe by a government to international lenders across the world. |
E | It is the difference between the amount of money printed by the central bank and the total national resources. |
Question 43 |
A | the quantity of output will be increased but less than that of human capital increase. |
B | the quantity of all other variables will be increased but less than that of human capital. |
C | the state of technology will also be tripled. |
D | the quantity of all other variables be will increased more than that of human capital. |
E | the quantity of output will be tripled. |
F | the quantity of output will be increased more than that of human capital increase. |
Question 44 |
A | ~ $300 |
B | ~ $120 |
C | ~ $140 |
D | ~ $100 |
Question 45 |
A | David Thompson |
B | Thomas Malthus |
C | Gergory Mankiw |
D | Karl Marx |
Question 46 |
A | Bonds from a major established company such as Apple Inc or Google Inc. |
B | Bonds from a Provincial Government in Canada |
C | Bonds from the Federal Government of Canada |
D | Bonds from the Federal Government of India |
Question 47 |
A | A measure of net output of domestically produced goods. |
B | A measure of goods and services available for consumers within a given economy. |
C | A measure of goods and services produced per person in a given country or population. |
D | A measure of goods and services produced for each hour of a worker's time. |
E | The ability of a country to produce goods at the lowest cost. |
Question 48 |
A | Country C with a very high GDP with a slow economic growth. |
B | Country A with a very high GDP with a rapid economic growth. |
C | Country B with a very low GDP with a rapid economic growth. |
D | Country D with a very low GDP with a slow economic growth. |
E | Country E with a very low GDP and a very high emigration of highly educated workers. |
Question 49 |
GDP = $9.5 trillion
Consumption spending = $4.0 trillion
Taxes = $6.4 trillion
Government transfers = $3.6 trillion
Government purchases = $4.0 trillion
A | 5.5 trillion dollars |
B | 0.4 trillion dollars |
C | 0.6 trillion dollars |
D | -1.2 trillion dollars |
E | 1.9 trillion dollars |
Public savings = $6.4 - $3.6 - $4.0 = -$1.2 trillion
Question 50 |
A | Graph A |
B | None of the above graphs are correct. |
C | Graph C |
D | Graph B |
E | Graph D |
Question 51 |
A | 6 years |
B | 5 years |
C | ~ 2.3 years |
D | 30 years |
E | ~ 11.7 years |
F | ~ 4.3 years |
70 / 6 = 11.6660... years
Question 52 |
A | Investments made by private companies for future gains. |
B | Savings made by private companies through profits. |
C | Money saved by households after taxes and consumption. |
D | Savings made by private financial institutions such as banks. |
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Credits: Based on the excellent class notes provided by, Dr. Peter Tracey during Fall 2015 and textbook ISBN-978-0-17-653085-3.
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