ECN204 W2013 MTPractice
Identify the choice that best completes the statement or answers the question.
____ 1. Which of the following is characteristic of the relationship between unemployment insurance and job -search
a. A typical unemployed worker near the end of the time in which he or she can receive
benefits increases job-search efforts.
b. Unemployed people need to put less job -search effort now than they did in 1971 because
in 1971 the conditions to receive unemploy ment benefits were stricter than today.
c. Unemployment insurance raises structural unemployment because it reduces the job
search of the unemployed.
d. Most economists are skeptical of the value of unemployment insurance because they
believe that it results in a poorer match between workers and jobs.
____ 2. For what reason are production possibilities frontiers usually bowed outward?
a. It is because of the effects of technological change.
b. The more resources a society uses to produce one good, the fewer resources it has
available to produce another good.
c. It reflects the fact that the opportunity cost of producing a good falls as one produces more
and more of it.
d. Resources are special ized, that is, some are better at producing particular goods rather than
____ 3. Consider two people who are currently out of work. Deb is not currently looking for work but would like a
job. Although she is not currently searching for work , she has done so at some time in the recent past. Ted is
not looking for work, because he doesn't think there are jobs available for which he would qualify. Who does
Statistics Canada consider to be a discouraged worker?
a. both Deb and Ted
b. only Ted
c. only Deb
d. Neither Deb nor Ted
____ 4. Suppose you bake cookies. One day, you double the time you spend; double the number of chocolate chips,
flour, eggs, and all your other inputs; and bake twice as many cookies. What kind of production function is
a. decreasing returns to scale
b. constant returns to scale
c. increasing returns to scale
d. zero returns to scale
____ 5. Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes a re 2000. What value of
government expenditures would make national saving equal 1000?
d. 2500 ____ 6. World Wide Delivery Service Corporation develops a way to speed up its deliverie s and reduce its costs.
Which of the following would we expect?
a. This would decrease the demand for existing shares of the stock, causing its price to fall.
b. This would raise the demand for existing shares of the stock, causing its price to rise.
c. This would raise the supply of the existing shares of stock, causing its price to fall.
d. This would raise the supply of the existing shares of stock, causing its price to rise.
____ 7. The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the
deflation rate between the first and second year, and between the second and third year?
a. 10 percent between the first and second year, 11 percen t between the second and third year
b. 11 percent between the first and second year, 11 percent between the second and third year
c. 10 percent between the first and second year, 12 percent between the second and third year
d. 11 percent between the fir st and second year, 12 percent between the second and third year
____ 8. Which of the following laws is most likely to reduce the natural rate of unemployment?
a. a law that increases the minimum wage
b. a law that makes it harder to find out about job candidates’ past job history
c. a law that abolishes the minimum wage
d. a law that makes all provinces repeal right -to-work laws
____ 9. Suppose that in a closed economy GDP is equal to 15,000, taxes a re equal to 2500, consumption equals 7500,
and government expenditures equal 3000. What is public saving?
____ 10. Between 2006 and 2007, the country of Aquilonia reported an increase in the numb er of people who were
employed. It also reported an increase in the unemployment rate. Which of the following would best explain
the two reports?
a. The two reports are contradictory and cannot be reconciled.
b. There was an increase in the size of the la bour force between 2006 and 2007.
c. There was an increase in the size of the adult population between 2006 and 2007.
d. There was a decrease in the size of the labour force between 2006 and 2007.
____ 11. How do economists consider normative statements?
a. statements that establish production goals for the economy
b. statements about the normal condition of the world
c. descriptive, making a claim about how the world is
d. prescriptive, making a claim ab out how the world ought to be
____ 12. Tom is looking for work after school, but everywhere he fills out an application he is told that so have lots of
others. Simon has a law degree. Several firms have made him offers, but he thinks he might be able to find a
firm where his talents could be put to better use. To which categories of unemployment the two persons
a. Tom is structurally unemployed, and Simon is frictionally unemployed.
b. Tom and Simon are both structurally unemployed.
c. Tom is frictionally unemployed, and Simon is structurally unemployed.
d. Tom and Simon are both frictionally unemployed. ____ 13. In 2000 in the United Kingdom, the adult population was about 46.5 million, the labour force participation
rate was 63.5 percent, and the unemployment rate was 5.8 percent. What was the number of people
a. 1.7 million
b. 2.7 million
c. 3.7 million
d. 0.7 million
____ 14. Refer to Figure 2-3. At which point or points can the economy NOT produce?
a. point C
b. point A, C
c. point A, C, D
d. point A
____ 15. When the quality of a good deteriorates, what happens to the purchasing power of the dollar?
a. It increases, so the CPI overstates the change in the cost of living if the quality change is
not accounted for.
b. It increases, so the CPI understates the ch ange in the cost of living if the quality change is
not accounted for.
c. It decreases, so the CPI understates the change in the cost of living if the quality change is
not accounted for.
d. It decreases, so the CPI overstates the change in the cost of living if the quality change is
not accounted for.
____ 16. PacknCamp Corporation has a price of $50, has issued 2 000 000 shares, has increased its cumulated retained
earnings by $2 million, and has a dividend yield of 2 percent. What is the price -earnings ratio of PacknCamp?
a. 50, which is low compared to historical standards of the market
b. 25, which is high compared to historical standards of the market
c. 25, which is low compared to historical standards of the market
d. 50, which is high compared to historical standards of the market Use the following information to answer the following questions.
In the country of Shem, the CPI is calculated using a market basket consisting o f 5 apples, 4 loaves of bread,
3 robes, and 2 litres of gasoline. The per -unit prices of these goods have been as follows:
Year Apples Bread Robes Gasoline
2007 $1.00 $2.00 $10.00 $1.00
2008 $1.00 $1.50 $9.00 $1.50
2009 $2.00 $2.00 $11.00 $2.00
2010 $3.00 $3.00 $15.00 $2.50
____ 17. Refer to Table 6-3. What was the inflation rate, as measured by the CPI, between 2008 and 2009?
a. It is impossible to determine without knowing the base year.
b. 34.2 percent
c. 28.5 percent
d. 47 percent
Use the following table to answer the following questions.
Stock Sym Yld % PE Vol 100s Hi Lo Close Net Chg
GenMills GIS 2.5 35 13758 44.3 43.5 43.97 –0.63
Gillette G 2.2 31 30428 31.1 29.7 30 0.17
Graco GGG 1.2 16 705 24.2 23.1 23.95 –0.53
Hershey HSY 2.1 38 5418 63.4 61.7 62.45 0.72
____ 18. Refer to Table 8-1. In dollar terms, which company paid the highest dividend per share?
____ 19. The country of Aquilonia does not trade with any other country. Its GDP is $30 billion. Its government
purchases $5 billion worth of goods and services each year, collects $7 billion in taxes, and provides $3
billion in transfer payments to households. Pri vate saving in Aquilonia is $5 billion. What is consumption?
a. $13 billion
b. $18 billion
c. $21 billion
d. There is not enough information to answer the question.
____ 20. Why is the use of theory and observation more difficult in economics than in sciences such as physics?
a. due to the difficulty in evaluating an economic experiment
b. due to the difficulty in actually performing an experiment in an economic system
c. due to the difficulty in devising an economic experiment
d. due to the difficulty in collecting sufficient data ____ 21. When unions raise wages in some sectors of the economy, which of the following happens to the supply of
labour in other sectors of the economy?
a. It increases, reducing wages in industries that are not unionized.
b. It decreases, raising wages in industries that are not unionized.
c. It decreases, reducing wages in industries that are not unionized.
d. It increases, raising wages in industries that are not unionized.
Use the table below to answer the following questions.
year peaches pecans
2010 $14 per bushel $9 per bushel
2011 $12 per bushel $14 per bushel
____ 22. Refer to Table 6-1. Suppose that the typical consumer basket consists of 5 bushels of peaches and 10 bushels
of pecans and that the base year is 2010. What is the consumer price index for 2011?
____ 23. The country of Nemedia does not trade with any other country. Its GDP is $20 billion. Its government collects
$4 billion in taxes and pays out $3 billion to households in the form of transfer payments. Consumption
equals $15 billion, and investment equals $2 billion. What is the value of the goods and services purchased by
the government of Nemedia?
a. $3 billion
b. There is not enough information to answer the question.
d. $5 billion
____ 24. Consider three different closed economies with the following national income statistics. Country A has taxes
of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion.
Country B has private savings of $60 bi llion, and investment expenditures of $50 billion. Country C has GDP
of $300 billion, investment of $70 billion, consumption of $180 billion, taxes of $60 billion, and transfers of
$20 billion. Based on this information, which country has a $10 billion def icit?
a. Country A
b. all three countries
c. Country C
d. Country B ____ 25. Suppose that the nominal interest rate is 5 percent and the expected inflation rate is 3 percent. What happens
with the value of savings?
a. The dollar value of savings increases by 8 percent and the value of savings measured in
goods is expected to increase by 3 percent.
b. The dollar value of savings increases by 2 percent and the value of savings measured in
goods is expected to increase by 5 percent.
c. The dollar value of savings increases by 5 percent and the value of savings in goods is
expected to increase by 3 percent.
d. The dollar value of savings increases by 8 percent and the value of savings measured in
goods is expected to incr ease by 5 percent.
e. The dollar value of savings increases by 5 percent and the value of savings in goods is
expected to increase by 2 percent.
____ 26. Which of these would be included in Canadian consumption?
a. Beverly buys a newly issued stock in a Canadian corporation
b. A French resident buys a new house in Canada
c. A Canadian resident buys a car manufactured in Brazil.
d. Samantha produces some art work to decorate her house.
____ 27. What is the goal of the consumer price index?
a. to measure changes in the cost of living
b. to measure changes in the production of consumer goods
c. to measure changes in the costs of production
d. to measure changes in the relative prices of consumer goods
____ 28. Leslie is offered a job in Vancouver that pays $50 000. She is also offered a job in Halifax that pays $60 000.
Which of the following sets of CPIs comes closest to giving both salaries the same purchasing power?
a. 89.3 in Vancouver and 100 in Halifax
b. 100 in Vancouver and 124.5 in Halifax
c. 100 in Vancouver and 140 in Halifax
d. 83.3 in Vancouver and 100 in Halifax
____ 29. Suppose that the real interest rate was 3 percent and the inflation rate was 1 p ercent. What happened with the
value of savings?
a. The dollar value of savings increased at 4 percent, and the value of savings measured in
goods increased at 3 percent.
b. The dollar value of savings increased at 1 percent, and the value of savings meas ured in
goods increased at 2 percent.
c. The dollar value of savings increased at 2 percent, and the value of savings measured in
goods increased at 3 percent.
d. The dollar value of savings increased at 3 percent, and the value of savings mea sured in
goods increased at 1 percent.
____ 30. A Brazilian company produces soccer balls in Canada and exports all of them. If the price of the soccer balls
increases, what happens to the GDP deflator and the CPI?
a. The GDP deflator increases, and the CPI is unchanged.
b. The GDP deflator and the CPI are both unchanged.
c. The GDP deflator and the CPI both increase.
d. The GDP deflator is unchanged, and the CPI increases. ____ 31. What does a general, persistent decline in stock prices signal about an economy?
a. nothing about the business cycle because stock prices can fall for many reasons
b. that the economy is about to enter a recession because low stock prices mean that
corporations have had low profits in the past
c. that the economy is about to enter a boom period because people will be able to buy stock
for less money
d. that the economy is about to enter a recession because low stock prices may mean that
people are expecting low corporate profits
Stock Sym Yld% PE Vol 100s Hi Lo Close Net Chg
Boeing BA 1.55 30.48 4 531 600 64.78 63.70 64.62 +.93
Eli Lily LLY 2.60 29.71 3 765 700 58.98 58.21 58.52 +.16
H.J. Heinz HNZ 3.30 15.33 1 350 200 36.55 36.26 36.33 +.21
Kellogg K 2.22 20.50 1 990 600 45.72 45.20 45.50 +.24
____ 32. Refer to Table 8-2. Which company had the highest earnings per share?
a. Boeing Co.
b. H.J. Heinz and Co.
c. Kellogg Co.
d. Eli Lily a