Forty questions were automatically and randomly chosen by the computer from Chapters 19 through 2 6 of the Textʹs test
bank - the instructor has not seen the questions chosen.
Name: Random Q. Practice
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
1) Suppose the Bank of Montreal wants a four percent real rate of return 1) _______
on all its loans, and anticipates an annual inflation rate of six percent. It
should therefore lend its money at a nominal interest rate of
A) ten percent.
B) nine percent.
C) five percent.
D) four percent.
E) one percent.
2) Real national income 2) _______
A) refers to national wealth but is not an indicator of current
B) changes only when the underlying quantities change.
C) always equals nominal national income.
D) changes by the same amount and in the same direction as does
nominal national income.
E) refers to national income with no adjustment for changes in prices.
3) If the Canadian dollar exchange rate increases, the 3) _______
A) internal value of the dollar falls.
B) Canadian dollar depreciates relative to foreign currencies.
C) internal value of the dollar rises.
D) Canadian dollar appreciates relative to foreign currencies.
E) external value remains unaffected.
4) If a countryʹs labour force is 15 million people, and 1.35 million of those 4) _______
are unemployed, the countryʹs unemployment rate is
A) 2.5 percent.
B) 3.3 percent.
C) 4.5 percent.
D) 6.7 percent.
E) 9.0 percent.
The table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in
Year Actual Output Potential Output Unemployment Rate
(billions of $) (billions of $) (% of labour force)
2002 402 404 7.1
2003 408 411 7.2
2004 415 415 6.3
2005 420 418 5.9
2006 422 420 6.0
2007 420 423 7.0
2008 425 425 6.3 ▯▯▯▯▯ ▯▯-1
5) Refer to Table 19-1. In which years are the factors of production in this 5) _______
economy being utilized at a normal rate?
A) 2004, 2008
B) 2002, 2003, 2007
C) 2005, 2006
D) all years
E) none of the years
6) The change in the countryʹs capital stock during a year is equal to 6) _______
A) net investment.
B) net change in inventories plus capital consumption allowance.
C) capital consumption allowance.
D) gross investment.
E) gross fixed investment.
7) To calculate the change in the value of inventories for the investment 7) _______
component of GDP, one should use their
A) market value at the time they were produced.
B) cost of production at the time they were produced.
C) value at the time the goods are sold and removed from inventory.
D) cost of production minus the costs of labour and capital.
E) current market value.
8) One major reason that GDP is an inaccurate measure of the true level of 8) _______
economic activity is that
A) it is statistically very inaccurate.
B) it cannot be adjusted for changes in prices.
C) it does not include non-market activities.
D) people frequently buy things they do not want.
E) all of the above
9) Which of the following is included in the current calculations of GDP? 9) _______
A) Pizza purchased by college students for dinner
B) Volunteer work undertaken by Mary Smith
C) The purchase of a second hand automobile
D) The purchase of a 1939 painting
E) Welfare payments
10) The aggregate consumption function is based on a number of 10) ______
assumptions. Given these assumptions, which of the following
statements is true?
A) The MPC is greater than zero and less than one, and the APC falls
as income rises.
B) Below a certain level of income, APC > 1 and MPC