Macroeconomics for Life: Smart Choices for All?, 2e (Cohen)
Chapter 5 Are Your Smart Choices Smart for All? Macroeconomics and
Microeconomics
5.1 Is the Whole Greater Than the Sum of the Parts? Reconciling Macroeconomics and
Microeconomics
1) Macroeconomics looks at
A) the performance of the Canadian economy.
B) individual choices.
C) choices made by business people.
D) shopping.
E) why you might work more hours after a pay raise.
Answer: A
Diff: 1
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
2) Macroeconomics looks at
A) the global economy.
B) individual choices.
C) choices made by business people.
D) shopping.
E) why you might work more hours after a pay raise.
Answer: A
Diff: 1
Type: MC
Page Ref: 4-11
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
3) Macroeconomics looks at
A) the performance of the Canadian economy.
B) individual choices.
C) choices made by business people.
D) shopping.
E) why you might work more hours after a pay raise.
Answer: A
Diff: 1
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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4) Macroeconomics looks at
A) the global economy.
B) the combined outcomes of all individual choices.
C) the Canadian economy.
D) money and the financial system.
E) all of the above answers.
Answer: E
Diff: 1
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
5) The Great Depression of 1929 was worse than the Great Recession of 2009 because in 1929
there were no
A) stock market crashes.
B) government programs to help the unemployed.
C) bank failures.
D) government blunders.
E) falling prices.
Answer: B
Diff: 1
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
6) Speculative bubbles that helped trigger the Great Depression and the Global Financial Crisis
involve
A) money.
B) banks.
C) expectations.
D) all of the above.
E) none of the above.
Answer: D
Diff: 1
Type: MC
Page Ref: 108 - 114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
7) Which statement is false?
A) Consumer spending is business income.
B) Business spending is consumer income.
C) If consumers and businesses both cut spending, everyone's incomes falls.
D) If consumers and businesses both cut spending, employment increases.
E) Falling wages decrease demand in output markets.
Answer: D
Diff: 2
Type: MC
Page Ref: 108 -114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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8) Which statement is false?
A) Consumer spending is business income.
B) Business spending is consumer income.
C) If consumers and businesses both increase spending, everyone's incomes falls.
D) If consumers and businesses both increase spending, employment increases.
E) Falling wages decrease demand in output markets.
Answer: C
Diff: 2
Type: MC
Page Ref: 108 -114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
9) The fallacy of composition suggests
A) all for one and one for all.
B) the needs of the many outweigh the needs of the few.
C) what is true for one is not true for all.
D) what goes around, comes around.
E) be true to your school.
Answer: C
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
10) Input markets determine
A) all prices.
B) loans.
C) outputs.
D) incomes.
E) connections.
Answer: D
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
11) When everybody saves their money, aggregate savings decrease. This is an example of
A) the Zero Sum Scenario.
B) the Fallacy of Combination.
C) the Kobayashi Maru Scenario.
D) Say's Law.
E) the Paradox of Thrift.
Answer: E
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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12) The economist most associated with the "Yes - Markets Self-Adjust" view is
A) J.B. Say.
B) J.K. Rowling.
C) J.M. Keynes.
D) G.B. Shaw.
E) A.C. Pigou.
Answer: A
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
13) The economist most associated with the "No - Markets Fail Often" view is
A) Joseph Stiglitz.
B) John Maynard Keynes.
C) George Costanza.
D) Jean-Baptiste Say.
E) James Tiberius Kirk.
Answer: B
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
14) Say's Law states which of the following?
A) What goes up must come down.
B) In the long run, we are all dead.
C) Supply creates its own demand.
D) What is true for one is not true for all.
E) The meek shall inherit the earth.
Answer: C
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
15) According to the paradox of thrift, when everyone saves more,
A) businesses raise prices.
B) banks raise interest rates.
C) government spend more.
D) businesses lay off workers.
E) households spend more.
Answer: D
Diff: 1
Type: MC
Page Ref: 108 -114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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16) In the circular flow of economic life, which players are the main buyers in input markets?
A) economists
B) households
C) governments
D) banks
E) businesses
Answer: E
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
17) In the circular flow of economic life, which players are the main sellers in input markets?
A) economists
B) households
C) governments
D) banks
E) businesses
Answer: B
Diff: 2
Type: MC
Page Ref: 108 -114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
18) In the circular flow of economic life, which players are the main buyers in output markets?
A) economists
B) households
C) governments
D) banks
E) businesses
Answer: B
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
19) In the circular flow of economic life, which players are the main sellers in output markets?
A) economists
B) households
C) governments
D) banks
E) businesses
Answer: E
Diff: 2
Type: MC
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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20) According to the "Yes - Markets Self-Adjust" view,
A) macroeconomic outcomes are different from microeconomic outcomes.
B) Say's Law is sometimes true but usually not.
C) there are broken connections between input markets and output markets.
D) supply creates its own demand.
E) all of the above are true.
Answer: D
Diff: 1
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
21) According to the "No - Markets Fail Often" view,
A) macroeconomic outcomes differ from microeconomic outcomes.
B) Say's Law is sometimes true but usually not.
C) there are broken connections between input markets and output markets.
D) a short run focus is more important than the long run.
E) all of the above are true.
Answer: E
Diff: 1
Type: MC
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
22) All prices are determined in output markets.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108 -114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
23) Output prices are determined in output markets.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
24) Incomes are determined in output markets.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
25) Incomes are determined in input markets.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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26) Macroeconomics focuses on the individual smart choices of consumers and businesses.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
27) Macroeconomics focuses on the combined market outcomes of all individual choices.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
28) Microeconomics analyzes the performance of the whole Canadian economy and the global
economy.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
29) Macroeconomics analyzes the performance of the whole Canadian economy and the global
economy.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
30) The economist most associated with the view that markets are not quick to adjust is J.B. Say.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
31) The economist most associated with the view that markets are quick to adjust is J.B. Say.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
32) The economist most associated with the view that markets are quick to adjust is J.M. Keynes.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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33) The economist most associated with the view that markets are not quick to adjust is J.M.
Keynes.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
34) Say's Law states, "What is true for one is not true for all."
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
35) Say's Law states, "What is true for one is true for all."
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
36) According to the fallacy of composition, "What is true for one is true for all."
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
37) According to the fallacy of composition, "What is true for one is not true for all."
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
38) Businesses are sellers in input markets.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
39) Businesses are buyers in input markets.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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40) Households are buyers in input markets.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
41) Households are sellers in input markets.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
42) Say's Law advises, "Be true to your school."
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
43) The paradox of thrift happens when many people save more and spend less, so businesses
lower prices.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
44) The paradox of thrift happens when many people save more and spend less, so employment
and savings actually decrease.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
45) Mortgages issued to people who cannot really afford houses are called variable rate
mortgages.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
46) Mortgages issued to people who cannot really afford houses are called sub-prime mortgages.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
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47) The Great Depression lasted for less than 24 months.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
48) The effects of the Great Depression lasted over 10 years.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 108-114
Skill: Recall
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
49) In the circular flow of economic life, the government cannot buy products in output markets.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
50) In the circular flow of economic life, the government sets the rules of the game.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 108-114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
51) In the circular flow of economic life, businesses set the rules of the game.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 108 - 114
Skill: Applied
Objective: 5.1 Explain how macroeconomics differs from microeconomics.
10
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5.2
Should Government Be Hands-Off or Hands-On? Economics and Politics
1) Which Canadian political party is most likely to support a hands-off approach by government?
A) Conservative Party of Canada
B) Liberal Party of Canada
C) Bloc Quebecois
D) New Democratic Party
E) Green Party
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
2) Which Canadian political party is least likely to support a hands-on approach by government?
A) Liberal Party of Canada
B) Conservative Party of Canada
C) Bloc Quebecois
D) New Democratic Party
E) Green Party
Answer: B
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
3) There is market failure when market outcomes are
A) inefficient.
B) inequitable.
C) fail to serve the public interest.
D) all of the above.
E) none of the above.
Answer: D
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
11
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4) The hands-off camp generally believes that
A) government is part of the solution.
B) socialism is better than capitalism.
C) markets fail to quickly self-adjust.
D) supply creates its own demand.
E) macroeconomic and microeconomic outcomes are different.
Answer: D
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
5) The hands-on camp generally believes that
A) government is part of the problem.
B) capitalism is better than socialism.
C) markets quickly self-adjust.
D) supply creates its own demand.
E) macroeconomic and microeconomic outcomes are different.
Answer: E
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
6) The hands-off camp generally believes that
A) the world is ending in 2018.
B) markets do not self-adjust.
C) markets quickly self-adjust.
D) demand creates its own supply.
E) markets do not exist.
Answer: C
Diff: 1
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
7) The hands-on camp generally believes that
A) market failure is worse than government failure.
B) markets adjust quickly.
C) external events are the major cause of business cycles.
D) supply creates its own demand.
E) demand creates its own supply.
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
12
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8) The hands-on camp generally believes that
A) government failure is worse than market failure.
B) markets quickly self-adjust.
C) that external events are the major cause of business cycles.
D) that government failure causes business cycles.
E) in the fallacy of composition.
Answer: E
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
9) The hands-off camp generally believes that
A) market failure is worse than government failure.
B) markets fail to quickly self-adjust.
C) external events are major causes of business cycles.
D) macroeconomic and microeconomic outcomes are different.
E) demand creates its own supply.
Answer: C
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
10) The hands-off camp generally believes that
A) supply creates its own demand.
B) governments never fail.
C) markets never fail.
D) demand creates its own supply.
E) connection failures between input and output markets cause business cycles.
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
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11) The hands-off camp generally believes that business cycles are caused by
A) external events.
B) banking.
C) expectations.
D) money.
E) connection failures between input and output markets.
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
12) The hands-off camp generally believes that business cycles are caused by
A) government policy.
B) banking.
C) expectations.
D) money.
E) connection failures between input and output markets.
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
13) The hands-on camp generally believes that business cycles are caused by
A) irrational investors.
B) banking.
C) expectations.
D) money.
E) all of the above answers.
Answer: E
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
14) The hands-on camp generally believes that business cycles are caused by
A) government policy.
B) government failure.
C) expectations.
D) external events
E) economists.
Answer: C
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
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15) The hands-on camp generally believes that business cycles are caused by
A) government policy.
B) government failure.
C) Say's Law.
D) external events
E) connection failures between input and output markets.
Answer: E
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
16) Macroeconomists agree
A) that prices and markets adjust, but differ on how long it takes.
B) that business cycles happen even without government failure.
C) that there is some role for government, but differ on how big a role.
D) on all of the above.
E) on none of the above.
Answer: D
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
17) Macroeconomists
A) agree that prices and markets adjust.
B) differ on how long it takes for prices and markets to adjust.
C) agree that business cycles happen even without government failure.
D) agree that there is some role for government.
E) differ on how big a role government should play in economic policy.
F) all of the above.
Answer: F
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
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18) There is government failure when
A) policymakers are captured by special interest groups.
B) a minority government is defeated in the House of Commons.
C) government policy serves the public interest.
D) economists lie to politicians.
E) markets quickly self-adjust.
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
19) There is government failure when
A) policymakers are captured by special interest groups.
B) policymakers make mistakes based on poor information.
C) government policy fails to serves the public interest.
D) lobbying and political pressure cause government to act for special interest groups.
E) all of the above.
Answer: E
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
20) Which outcome is not part of the fundamental macroeconomic question?
A) a strong Canadian dollar
B) stable prices
C) low unemployment
D) full employment
E) steady growth in living standards
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
21) Who said, "In the long run, we are all dead?"
A) J.M. Keynes
B) J.B. Say
C) J.K. Rowling
D) G.B. Shaw
E) D. Vader
Answer: A
Diff: 1
Type: MC
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
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22) During the Global Financial Crisis, all of the following measures fell except
A) housing prices.
B) stock prices.
C) unemployment.
D) economic growth.
E) asset prices.
Answer: C
Diff: 3
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
23) If J.B. Say were alive today and voted in Canadian elections, he would probably support the
A) Conservative Party of Canada.
B) Liberal Party.
C) Bloc Quebecois.
D) Green Party.
E) New Democratic Party.
Answer: A
Diff: 2
Type: MC
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
24) J.B. Say would probably vote for the New Democratic Party in Canada.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
25) Price stability is not a desirable macroeconomic outcome.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
26) Market failure happens when government fails to serve the market's interests.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
17
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27) Government failure can occur if policymakers make "honest mistakes."
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Recall
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
28) Government failure can make business cycles worse.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
29) The hands-off camp believes that business cycles can be caused by government mistakes.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
30) The hands-on camp believes that business cycles are caused by normally functioning
markets.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
31) The hands-off camp believes that business cycles are caused by normally functioning
markets.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
32) The hands-on camp believes that markets do not quickly self-adjust.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
18
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33) The hands-on camp believes that markets quickly self-adjust.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
34) The hands-off camp believes that markets do not quickly self-adjust.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
35) The hands-off camp believes that markets quickly self-adjust.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
36) The hands-off camp believes that government failure is worse than market failure.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
37) The hands-on camp believes that government failure is worse than market failure.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
38) The hands-on camp believes that market failure is worse than government failure.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
19
Copyright © 2016 Pearson Education, Inc.
39) The hands-off camp believes that market failure is worse than government failure.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
40) The Conservative Party of Canada (on the political right) believes that left alone, markets
quickly self-adjust.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
41) The Conservative Party of Canada (on the political right) believes that government failure is
worse than market failure.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
42) The New Democratic Party (on the political left) believes that government failure is worse
than market failure.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
43) When everyone expects housing prices to rise, then housing prices will rise.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
44) J.M. Keynes wrote his book after the Great Depression started.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
20
Copyright © 2016 Pearson Education, Inc.
45) Macroeconomists agree that prices and markets adjust, but differ on how long the
adjustments take.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
46) Macroeconomists agree that there is some role for government, but differ on how big a role.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
47) The "Yes, Markets Self-Adjust" camp focuses on long-run growth, while the "No, Markets
Fail Often" camp focuses on short-run business cycles.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
48) The "Yes, Markets Self-Adjust" camp focuses on short-run business cycles, while the "No,
Markets Fail Often" camp focuses on long-run growth.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 115-119
Skill: Applied
Objective: 5.2 Describe the fundamental macroeconomic question and the hands-off and
hands-on positions on government policy.
21
Copyright © 2016 Pearson Education, Inc.
5.3
Adding Up Everyone's Choices: Macroeconomic Outcomes and Players
1) Economists call the final value of all products and services produced annually in a country,
A) gross domestic product.
B) total product.
C) grand total product.
D) industrial value of product.
E) national production.
Answer: A
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
2) An economy performs well if it has all of the following except
A) low unemployment.
B) high GDP.
C) low inflation.
D) high living standards.
E) unpredictable inflation.
Answer: E
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
3) Good outcomes for an economy include
A) low GDP, high inflation and low unemployment.
B) low GDP, low inflation, and low unemployment.
C) high GDP, high inflation, and high unemployment.
D) high GDP, low inflation, and low unemployment.
E) high GDP, high inflation, and low unemployment.
Answer: D
Diff: 2
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
22
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4) Higher GDP per person generally means
A) higher living standards.
B) lower prices.
C) higher unemployment rates.
D) an increasing population.
E) a decreasing population.
Answer: A
Diff: 2
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
5) Lower GDP per person generally means
A) lower unemployment rates.
B) higher prices.
C) lower living standards.
D) an increasing population.
E) a decreasing population.
Answer: C
Diff: 2
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
6) Inflation is a rise in the
A) average level of all prices.
B) value of money.
C) number of people looking for work.
D) value of savings.
E) number of people employed.
Answer: A
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
23
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7) The group of macroeconomic players that makes the most choices about investment spending
is
A) businesses.
B) consumers.
C) government.
D) the Bank of Canada and banking system.
E) the rest of the world.
Answer: A
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
8) The group of macroeconomic players that makes the most choices about setting interest rates
is
A) businesses.
B) the Bank of Canada and banking system.
C) government.
D) consumers.
E) the rest of the world.
Answer: B
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
9) The group of macroeconomic players that chooses fiscal policy is
A) businesses.
B) the Bank of Canada and banking system.
C) government.
D) consumers.
E) the rest of the world.
Answer: C
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
24
Copyright © 2016 Pearson Education, Inc.
10) The largest group of macroeconomic players that chooses whether or not to save is
A) businesses.
B) the Bank of Canada and banking system.
C) government.
D) consumers.
E) the rest of the world.
Answer: D
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
11) The group of macroeconomic players that chooses monetary policy is
A) the rest of the world.
B) government.
C) businesses.
D) consumers.
E) the Bank of Canada.
Answer: E
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
12) The largest group of macroeconomic players that chooses whether or not to hire Canadian
workers is
A) businesses.
B) government.
C) the Bank of Canada and banking system.
D) consumers.
E) the rest of the world.
Answer: A
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
25
Copyright © 2016 Pearson Education, Inc.
13) The largest group of macroeconomic players that chooses whether or not to spend on
imported products and services is
A) businesses.
B) consumers.
C) government.
D) the rest of world.
E) the Bank of Canada and banking system.
Answer: B
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
14) Fiscal policy is chosen by
A) the rest of the world.
B) businesses.
C) the Bank of Canada and banking system.
D) government.
E) consumers.
Answer: D
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
15) Monetary policy is chosen by
A) businesses.
B) the rest of the world.
C) consumers.
D) government.
E) the Bank of Canada.
Answer: E
Diff: 1
Type: MC
Page Ref: 120 -122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
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Copyright © 2016 Pearson Education, Inc.
16) The group of macroeconomic players that makes the most choices about spending on
Canadian exports is
A) the rest of the world.
B) businesses.
C) government.
D) the Bank of Canada and banking system.
E) consumers.
Answer: A
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
17) Fiscal policy includes government changes in
A) interest rates.
B) the supply of money.
C) transfer payments.
D) exports.
E) imports.
Answer: C
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
18) Fiscal policy includes government changes in
A) interest rates.
B) the supply of money.
C) exports.
D) taxes.
E) imports.
Answer: D
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
27
Copyright © 2016 Pearson Education, Inc.
19) Fiscal policy includes government changes in
A) interest rates.
B) the supply of money.
C) exports.
D) imports.
E) government purchases.
Answer: E
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
20) Monetary policy includes changes in
A) interest rates.
B) taxes.
C) exports.
D) imports.
E) government purchases.
Answer: A
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
21) Monetary policy includes changes in
A) transfer payments.
B) the supply of money.
C) exports.
D) imports.
E) government purchases.
Answer: B
Diff: 1
Type: MC
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
22) Gross domestic product is the value of all final products and services produced annually in a
country.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
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23) The inflation rate is measured by the Consumer Price Index.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
24) Unpredictable changes in inflation are good.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
25) High and unpredictable inflation is good.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
26) Low and predictable inflation is good.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
27) Consumers can choose to spend or save their income.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
28) A macroeconomic choice for consumers is whether to spend or save.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
29
Copyright © 2016 Pearson Education, Inc.
29) A macroeconomic choice for consumers is whether to buy products and services produced in
Canada or imported from other countries.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
30) A macroeconomic choice for consumers is whether to buy an iPhone or a Blackberry.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
31) Rest-of-the-world players can invest in Canadian businesses.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
32) Monetary policy involves changes in interest rates and the supply of money.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
33) A macroeconomic choice for banks is whether to make loans or not.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
34) When a consumer household buys shares in a Canadian business, this counts as investment
spending.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
30
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35) Government fiscal policy involves changes in transfer payments.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
36) Government fiscal policy involves changes in taxes.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
37) Government fiscal policy involves changes in interest rates.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
38) Government fiscal policy involves changes in the money supply.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
39) Government conducts fiscal policy by changing interest rates.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Recall
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
40) The Bank of Canada is responsible for setting tax rates.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
31
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41) The Bank of Canada conducts monetary policy.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
42) Business investment spending includes buying stocks and bonds.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
43) A macroeconomic choice for businesses is whether to produce more pants or more boxer
shorts.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 120-122
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
44) A macroeconomic choice for businesses is whether or not to build new factories.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 18-21
Skill: Applied
Objective: 5.3 Identify three key economics outcomes and five macroeconomic players whose
choices produce those outcomes.
32
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5.4
Focusing on Your Future: Why You Should Think Like a Macroeconomist
1) Higher GDP per person usually means
A) higher living standards.
B) lower living standards.
C) increasing population.
D) decreasing population.
E) none of the above answers.
Answer: A
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
2) When unemployment is low,
A) jobs are hard to find.
B) workers compete against many other unemployed workers.
C) employers have an advantage in bargaining over wages.
D) workers have an advantage in bargaining over wages.
E) employers can choose from a large number of applicants for a job.
Answer: D
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
3) When unemployment is high,
A) jobs are easy to find.
B) employers compete against many other employers for new workers.
C) employers have an advantage in bargaining over wages.
D) workers have an advantage in bargaining over wages.
E) workers can choose from a large number of available jobs.
Answer: C
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
33
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4) When unemployment is high,
A) jobs are easy to find.
B) employers compete against many other employers for new workers.
C) workers compete against many other unemployed workers.
D) workers have an advantage in bargaining over wages.
E) workers can choose from a large number of available jobs.
Answer: C
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
5) When unemployment is low,
A) jobs are hard to find.
B) employers compete against many other employers for new workers.
C) workers compete against many other unemployed workers.
D) employers have an advantage in bargaining over wages.
E) employers can choose from a large number of applicants for a job.
Answer: B
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
6) When there is inflation,
A) average prices fall.
B) the value of money rises.
C) the purchasing power of your savings falls.
D) the purchasing power of your savings rises.
E) your standard of living falls if your income rises faster than the prices of what you buy.
Answer: C
Diff: 3
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
7) When there is inflation,
A) average prices fall.
B) the value of money falls.
C) your standard of living rises if the prices of what you buy rise faster than your income.
D) the purchasing power of your savings rises.
E) your standard of living falls if your income rises faster than the prices of what you buy.
Answer: B
Diff: 3
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
34
Copyright © 2016 Pearson Education, Inc.
8) When there is inflation,
A) average prices fall.
B) the value of money rises.
C) your standard of living rises if your income rises faster than the prices of what you buy.
D) the purchasing power of your savings rises.
E) your standard of living falls if your income rises faster than the prices of what you buy.
Answer: C
Diff: 3
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
9) A fall in the value of the Canadian dollar
A) makes cross-border shopping a better bargain for Canadians.
B) makes imported products less expensive.
C) increases your income taxes.
D) decreases your income taxes.
E) increases Canadian exports.
Answer: E
Diff: 2
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
10) A fall in the value of the Canadian dollar
A) makes cross-border shopping a better bargain for Canadians.
B) makes imported products less expensive.
C) increases your income taxes.
D) decreases your income taxes.
E) increases Canadian GDP.
Answer: E
Diff: 2
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
35
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11) A rise in the value of the Canadian dollar
A) creates jobs in exporting businesses.
B) makes imported products more expensive.
C) increases your income taxes.
D) decreases your income taxes.
E) decreases Canadian exports.
Answer: E
Diff: 2
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
12) A rise in the value of the Canadian dollar
A) makes cross-border shopping a better bargain for Canadians.
B) makes imported products more expensive.
C) increases your income taxes.
D) decreases your income taxes.
E) increases Canadian GDP.
Answer: A
Diff: 2
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
13) Thinking like a macroeconomist means focusing on the connections between
A) input markets and output markets.
B) the banking system and the Canadian economy.
C) expectations and the Canadian economy.
D) the Canadian economy and the rest of the world.
E) all of the above.
Answer: E
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
14) Thinking like a macroeconomist means focusing on the connections between
A) additional benefits and additional opportunity costs.
B) competition and cooperation.
C) marginal benefit and marginal cost.
D) the Canadian economy and the rest of the world.
E) none of the above.
Answer: D
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
36
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15) Thinking like a macroeconomist means focusing on the connections between
A) additional benefits and additional opportunity costs.
B) competition and cooperation.
C) marginal benefit and marginal cost.
D) the banking system and the Canadian economy.
E) none of the above.
Answer: D
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
16) Thinking like a macroeconomist means focusing on the connections between
A) input markets and output markets.
B) competition and cooperation.
C) marginal benefits and marginal costs.
D) additional benefits and additional opportunity costs.
E) none of the above.
Answer: A
Diff: 1
Type: MC
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
17) Higher GDP per person allows higher living standards.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Recall
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
18) Macroeconomics is about the combined outcome of individual choices.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
19) Microeconomics is about the combined outcome of individual choices.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
37
Copyright © 2016 Pearson Education, Inc.
20) If your income rises faster than the prices of what you buy, your standard of living decreases.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
21) If your income rises faster than the prices of what you buy, your standard of living increases.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
22) If your income does not rise as fast as the prices of what you buy, your standard of living
decreases.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
23) If your income does not rise as fast as the prices of what you buy, your standard of living
increases.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
24) When unemployment is high, employers have an advantage in bargaining over wages.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
25) When unemployment is high, workers have an advantage in bargaining over wages.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
38
Copyright © 2016 Pearson Education, Inc.
26) When unemployment is low, workers have an advantage in bargaining over wages.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
27) When unemployment is low, employers have an advantage in bargaining over wages.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
28) Unemployment tends to be inversely related to growth in GDP.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
29) Unemployment tends to be positively related to growth in GDP.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
30) When the total value of products and services produced goes up, unemployment decreases.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
31) When the total value of products and services produced goes up, unemployment increases.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
39
Copyright © 2016 Pearson Education, Inc.
32) When GDP goes up, unemployment goes up.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
33) When GDP goes up, unemployment goes down.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
34) Understanding how interest rates are determined will help you decide what a good mortgage
interest rate is.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
35) Thinking like a macroeconomist means focusing on connections between input markets and
output markets.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
36) Thinking like a macroeconomist means focusing on connections between the banking system
and the Canadian economy.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
37) Thinking like a macroeconomist means focusing on connections between the Canadian
economy and the rest of the world.
Answer: TRUE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
40
Copyright © 2016 Pearson Education, Inc.
38) Thinking like a macroeconomist means focusing on connections between additional benefits
and additional opportunity costs.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
39) Thinking like a macroeconomist means focusing on connections between competition and
cooperation.
Answer: FALSE
Diff: 1
Type: TF
Page Ref: 123-125
Skill: Applied
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
40) In the icon for "No - Markets Fail Often," the hands of government hold the broken
connections between input markets and output markets.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Recall
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
41) In the icon for "Yes - Markets Self-Adjust," the hands of government hold the broken
connections between input markets and output markets.
Answer: FALSE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Recall
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
42) In the icon for "Yes - Markets Self-Adjust," the arms of government are crossed,
representing the hands-off position.
Answer: TRUE
Diff: 2
Type: TF
Page Ref: 123-125
Skill: Recall
Objective: 5.4 Explain how macroeconomics affects your personal success and how you will
benefit from thinking like a macroeconomist.
41
Copyright © 2016 Pearson Education, Inc.