Test Bank for Macroeconomics, Fifth Canadian Edition, 5/E 5th Edition Olivier Blanchard, David W. Johnson

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Chapter 1 A Tour of the World

1) A high rate of growth of productivity is:
A) associated with a large government budget deficit.
B) measured by looking at the growth in output per worker.
C) associated with a decrease in the standard of living of a country.
D) associated with a decrease in the unemployment rate.
E) measured by looking at the growth in inputs.
Answer: B
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-1

2) An expansion represents:
A) a simultaneous increase in economic activity and reduction in inflation.
B) an increase in the unemployment rate.
C) a decrease in output.
D) an increase in stock prices.
E) a reduction in the unemployment rate.
Answer: E
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-1

3) Fluctuations refer to:
A) changes in stock prices.
B) deviations of stock prices from their fundamental values.
C) alternating periods of expansions and recessions.
D) movements in prices.
E) an increase in the unemployment rate.
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-1

4) Policy makers can become concerned if the unemployment rate is too low because:
A) inflation might increase.
B) stock prices will fall.
C) output will decrease.
D) an exchange rate crisis might occur.
E) output will increase.
Answer: A
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-1
5) A comparison of the annual average growth rate of real output for the periods 1980-1999 and the period from 2000-2007 in Canada shows:
A) the recent increase in growth rates is due to large increases in capital formation.
B) the growth rates have decreased.
C) the growth rates are basically the same.
D) the level of real output fell from 2000-2007.
E) the level of real output fell from 1980-1999
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-2

6) Which of the following factors are identified by economists as causing higher unemployment in Europe relative to unemployment in North America?
A) relatively low unemployment benefits
B) relatively low level of worker protection
C) lower labour costs
D) adequate macroeconomic policies
E) inadequate macroeconomic policies
Answer: E
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-4

7) Which of the following countries by 2002 were included in the same common currency area?
A) Mexico and the United States
B) Spain and France
C) Japan and China
D) United Kingdom and France
E) Canada and France
Answer: B
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-4

8) At what point could the Euro be used as currency?
A) January 1, 2000
B) January 1, 1998
C) January 1, 1999
D) January 1, 2002
E) January 1, 2004
Answer: D
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-4

9) Which of the following conditions has NOT occurred in Japan in the past decade?
A) a reduction in stock prices
B) a reduction in the rate of growth of output
C) deflation
D) economic boom
E) recession
Answer: D
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-6

10) Deflation represents:
A) an increase in the unemployment rate.
B) a reduction in the aggregate price level.
C) a recession.
D) a reduction in output.
E) an increase in the aggregate price level.
Answer: B
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-4

11) The usual unemployment rate in Canada:
A) has risen in the last 40 years.
B) is usually around 20%.
C) is usually around 10%.
D) rises in an expansion and falls in a recession.
E) has fallen in the last 40 years.
Answer: A
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-2

12) The unemployment rate in Canada:
A) is usually lower than the unemployment rate in the United States.
B) is usually higher than the unemployment rate in Europe.
C) is higher in a recession.
D) is lower in a recession.
E) is higher in an expansion.
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-2

13) In Canada, government budget deficits:
A) declined after 1965.
B) declined after 1975.
C) declined after 1985.
D) declined after 1995.
E) declined after 2004.
Answer: D
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-2

14) In the United States, Canada and Europe in the 2000s, relative to the 1980s-1990s:
A) all countries had relatively low inflation.
B) all countries had relatively high inflation.
C) all countries had relatively rapid output growth.
D) all countries had large government budget deficits.
E) all countries had relatively low unemployment rates.
Answer: A
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-3

15) In the past 25 years, the average rate of real growth of output in China has been:
A) 2%.
B) 5%.
C) 8%.
D) 12%.
E) 14%.
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-5

16) A comparison of the annual average inflation rate for the periods 1980-1999 and the period from 2000-2007 in Canada shows:
A) the recent increase is due to large open market operations.
B) the inflation rates have decreased.
C) the inflation rates are basically the same.
D) the inflation rate increased from 2000-2007.
E) the inflation rate fell from 1980-1999.
Answer: B
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-2

17) In the United States, the average price of a house fell by 20%. The behaviour of house prices is relevant because:
A) as houses fell in value, there are more reasons to build more new houses.
B) if the value of a house falls below the outstanding loan, the borrower wants to repay the mortgage quickly.
C) Americans felt poorer and reduced consumption.
D) if the value of a house falls below the outstanding loan, banks can make more profits.
E) if the value of a house falls below the outstanding loan, bonds held by investment banks increase in value.
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-3

18) The housing crisis in the United States is called the “sub-prime” mortgage meltdown. “Sub-prime” borrowers are:
A) borrowers with relatively low incomes and risky jobs.
B) borrowers with relatively high incomes and risky jobs.
C) borrowers with relatively low incomes and non-risky jobs.
D) borrowers with relatively high incomes and non-risky jobs.
E) borrowers with average incomes and risky jobs.
Answer: A
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-3

19) China’s rapid growth in recent years is often claimed to be responsible for:
A) the recession in Japan.
B) increases in commodity prices.
C) housing crisis in the United States.
D) budget deficits in Canada.
E) the formation of the European Union.
Answer: B
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 1-5
20) From the period 1980-1999 to 2000-2007, the output growth rate has ________ and the unemployment rate has ________ in China.
A) increased; increased
B) decreased; increased
C) increased; remained constant
D) decreased; remained constant
E) increased; decreased
Answer: C
Diff: 2 Type: MC
Skill: Recall
Section Ref.: 1-5