Department of Economics ECON 305-D100
Simon Fraser University April 22, 2024
FINAL EXAM – ANSWER KEY
PART 1: Multiple-Choice Questions (1.25 points each, 30 points total)
THERE IS ONLY ONE CORRECT ANSWER PER QUESTION
1. According to the quantity theory of money:
(a) Velocity is fixed in the short run but flexible in the long run, like capital
(b) The price level is independent of real GDP
(c) Money demand is proportional to nominal GDP
(d) All of the above
(e) None of the above
2. Which of the following theories would predict that immigration causes local workers’
wages to increase?
(a) Increasing returns to scale
(b) Skill substitutability
(c) Capital accumulation
(d) Monopsony
(e) None of the above
3. If output is below potential:
(a) Wages will rise faster than prices
(b) Inflation will increase above expectations
(c) The central bank is likely to lower interest rates
(d) The currency will appreciate
(e) All of the above
4. Over the long run of human history:
(a) Technological progress exceeded 0.1% before the Industrial Revolution
(b) Capital was the most important factor of production
(c) Living standards never exceeded the bare-survival level
(d) Human populations grew steadily, with few interruptions
(e) All of the above
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, 5. Which of the following is/are essential for economic development?
(a) Property rights
(b) The rule of strength
(c) Redistributive taxes
(d) All of the above are essential
(e) None of these are essential
6. If inflation rates in Canada are higher than in Japan, then according to the
“purchasing power parity” condition:
(a) The Canadian dollar will appreciate relative to the Japanese Yen
(b) The Canadian dollar will depreciate relative to the Japanese Yen
(c) The Canadian dollar will appreciate relative to the Japanese Yen immediately,
but depreciate in the run
(d) The Canadian dollar will depreciate relative to the Japanese Yen immediately,
but appreciate in the long run
(e) None of the above
7. According to the Phillips curve, a positive macroeconomic demand shock:
(a) Reduces the unemployment rate temporarily
(b) Reduces the rate of inflation
(c) Has no effect on the rate of inflation
(d) Increases the unemployment rate permanently
(e) None of the above
8. Suppose that in a 50-year time period, real output increases by 300% and the money
supply increases by 700%. According to the quantity theory, what happens to the price
level?
(a) Decreases by 100%
(b) Decreases by 50%
(c) Stays the same, because velocity adjusts endogenously
(d) Increases by 100%
(e) Increases by 400%
9. The money demand curve is downward sloping because:
(a) Bonds are more liquid than money
(b) High interest rates represent a high opportunity cost of holding money, so people
want less of it
(c) The central bank tends to raise interest rates in booms and lower them in
recessions
(d) Inflation is positively affected by changes in potential output
(e) None of the above
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Simon Fraser University April 22, 2024
FINAL EXAM – ANSWER KEY
PART 1: Multiple-Choice Questions (1.25 points each, 30 points total)
THERE IS ONLY ONE CORRECT ANSWER PER QUESTION
1. According to the quantity theory of money:
(a) Velocity is fixed in the short run but flexible in the long run, like capital
(b) The price level is independent of real GDP
(c) Money demand is proportional to nominal GDP
(d) All of the above
(e) None of the above
2. Which of the following theories would predict that immigration causes local workers’
wages to increase?
(a) Increasing returns to scale
(b) Skill substitutability
(c) Capital accumulation
(d) Monopsony
(e) None of the above
3. If output is below potential:
(a) Wages will rise faster than prices
(b) Inflation will increase above expectations
(c) The central bank is likely to lower interest rates
(d) The currency will appreciate
(e) All of the above
4. Over the long run of human history:
(a) Technological progress exceeded 0.1% before the Industrial Revolution
(b) Capital was the most important factor of production
(c) Living standards never exceeded the bare-survival level
(d) Human populations grew steadily, with few interruptions
(e) All of the above
1
, 5. Which of the following is/are essential for economic development?
(a) Property rights
(b) The rule of strength
(c) Redistributive taxes
(d) All of the above are essential
(e) None of these are essential
6. If inflation rates in Canada are higher than in Japan, then according to the
“purchasing power parity” condition:
(a) The Canadian dollar will appreciate relative to the Japanese Yen
(b) The Canadian dollar will depreciate relative to the Japanese Yen
(c) The Canadian dollar will appreciate relative to the Japanese Yen immediately,
but depreciate in the run
(d) The Canadian dollar will depreciate relative to the Japanese Yen immediately,
but appreciate in the long run
(e) None of the above
7. According to the Phillips curve, a positive macroeconomic demand shock:
(a) Reduces the unemployment rate temporarily
(b) Reduces the rate of inflation
(c) Has no effect on the rate of inflation
(d) Increases the unemployment rate permanently
(e) None of the above
8. Suppose that in a 50-year time period, real output increases by 300% and the money
supply increases by 700%. According to the quantity theory, what happens to the price
level?
(a) Decreases by 100%
(b) Decreases by 50%
(c) Stays the same, because velocity adjusts endogenously
(d) Increases by 100%
(e) Increases by 400%
9. The money demand curve is downward sloping because:
(a) Bonds are more liquid than money
(b) High interest rates represent a high opportunity cost of holding money, so people
want less of it
(c) The central bank tends to raise interest rates in booms and lower them in
recessions
(d) Inflation is positively affected by changes in potential output
(e) None of the above
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