5_Practice

Page 1

Macroeconomics Overview

  • Macroeconomics examines the performance of the Canadian economy as a whole (Answer: A).

  • It does not focus on individual choices, business decisions, shopping habits, or personal financial decisions (E).

Global Financial Crisis of 2008

  • Triggered by falling home prices, making assets worthless (Answer: A).

Macroeconomics Scope

  • Macroeconomics analyzes the global economy, individual choices combined, Canadian economy, money, and the financial system (Answer: E).

Paradox of Thrift

  • The paradox indicates that increased saving by individuals can lead to businesses laying off workers (Answer: D).

Market Self-Adjustment

  • Suggests supply creates its own demand, implying macroeconomic outcomes can be different from microeconomic ones (Answer: D).

Page 2

Government's Role in Markets

  • The view that markets fail often leads to the conclusion that macroeconomic outcomes differ from microeconomic outcomes (Answer: E).

Key Economic Quotes

  • The famous phrase "In the long run, we are all dead" is attributed to economist J. M. Keynes (Answer: A).

Measures of Economic Performance

  • The total value of all annual products and services in a country is represented by Gross Domestic Product (Answer: A).

  • A well-performing economy does not display unpredictable inflation (Answer: E).

Inflation Definition

  • Inflation refers to a rise in the average level of all prices (Answer: A).

Page 3

Investment Spending

  • Purchases of new equipment and factories are categorized as investment spending (Answer: A).

Employment Insurance

  • Payments are classified as a result of government choices (Answer: C).

Fiscal and Monetary Policy

  • The largest group that decides on fiscal policy is the government (Answer: C).

  • Consumers are the largest group that decides whether to save (Answer: D).

  • The Bank of Canada is responsible for making decisions regarding monetary policy (Answer: E).

Page 4

Hiring and Purchasing Decisions

  • Businesses largely decide whether to hire Canadian workers (Answer: A).

  • Consumers primarily decide on purchasing imported products and services (Answer: B).

Business Input Choices

  • A decision like expanding wireless coverage is an example of a business input choice (Answer: D).

Key Economic Choices for Banks

  • Banks prioritize the decision on whether to make more loans (Answer: E).

Global Financial Crisis Impact

  • During the financial crisis, the U.S. reduced imports of Canadian products, affecting Canada's economy (Answer: A).

Page 5

Bank of Canada Functions

  • The Bank supervises Canada's banking system (Answer: C).

Fiscal Policy Changes

  • Fiscal policy involves changing taxes (Answer: D) and government purchases (Answer: E).

Monetary Policy

  • Monetary policy primarily includes changes in interest rates (Answer: A) and the money supply (Answer: B).

Page 6

GDP and Living Standards

  • Higher GDP per person typically correlates with higher living standards (Answer: A).

Unemployment Insights

  • A low unemployment rate gives workers an upper hand in wage negotiations (Answer: D).

  • High unemployment means workers compete for fewer jobs (Answer: E).

Economic Behavior

  • When unemployment is low, consumers' purchasing power generally increases (Answer: B).

Page 7

Connecting Economic Factors

  • Macroeconomic thinking involves understanding connections between input/output markets, the banking system, and the economy (Answer: E).

Exchange Rate Implications

  • A fall in the Canadian dollar increases spending when traveling abroad (Answer: D).

Market Self-Adjustment Theory

  • This theory advocates a government Hands-Off approach, arguing markets can self-correct (Answer: A).