Question 1

Broad economic trends in employment, inflation, and economic growth provide a context that has an important impact on your day-to-day life.

Accepted Answer

Broad economic trends can influence job opportunities, wages, prices, and overall financial stability, which can all affect individuals' daily lives.

Question 2

Financial or social systems are not essential to the development of a strong economy.

Accepted Answer

Financial and social systems play a crucial role in shaping economic development. Financial systems provide the necessary resources for investment and business operations while social systems create the framework for a stable and productive workforce. Without these systems, it is difficult for an economy to grow and thrive.

Question 3

The study of economics falls into two broad categories called meta-economics and econometrics.

Accepted Answer

The study of economics falls into two broad categories but they are not meta-economics and econometrics. The two categories are microeconomics and macroeconomics.

Question 4

The Bank of Canada attempts to reduce the money supply when prices begin to rise.

Accepted Answer

When prices begin to rise, the Bank of Canada will use monetary policy tools to reduce the money supply in the economy, as this can help to limit inflation. For example, the Bank of Canada may increase the target overnight interest rate, which can make borrowing more expensive and reduce spending in the economy. Alternatively, the Bank of Canada may use open market operations to sell government securities, which can reduce the amount of money in circulation.

Question 5

The federal government experiences a budget deficit when its revenue from taxes is higher than its expenditures.

Accepted Answer

The statement is incorrect. A budget deficit occurs when the government spends more money than it receives through taxes and other revenues. In other words, its expenditures exceed its revenue.

Question 6

The devaluation of the Canadian dollar means that American tourists will come in increasing numbers to Canada.

Accepted Answer

The devaluation of the Canadian dollar makes traveling to Canada cheaper for Americans, which will likely result in an increase in American tourists.

Question 7

The bank rate is the interest rate the Bank of Canada charges on its loans to commercial banks.

Accepted Answer

This statement is true. The Bank of Canada sets the bank rate as a tool to influence the overall interest rates in the economy. Commercial banks borrow from the central bank at this rate and then set their own lending rates accordingly.

Question 8

The study of economics focuses on how people, businesses, and governments choose to allocate resources.

Accepted Answer

Economics studies how individuals, organizations, and governments make decisions about how to allocate resources, such as money, time, and labor, to meet their needs and wants. Therefore, the statement is true.

Question 9

Fiscal policy is the government's effort to influence the economy through taxation and spending decisions to encourage growth and boost employment while curbing inflation.

Accepted Answer

Fiscal policy is indeed the government's tool to manage the economy through decisions on taxes and spending, with the intention of achieving macroeconomic goals like economic growth and employment, while also trying to avoid inflation.

Question 10

The M1 money supply consists solely of currency (coins and paper money) issued by the government.

Accepted Answer

The M1 money supply also includes demand deposits, traveler's checks, and other checkable deposits issued by banks.

Question 11

Luke is taking an economics class that focuses on decisions made by individual business firms and consumers. Luke's class is concerned with microeconomic issues.

Accepted Answer

Microeconomics focuses on the study of individual businesses, households, and consumers and their behavior in the market, making the statement true.

Question 12

An economy is both a social and a financial system.

Accepted Answer

An economy involves not only financial transactions, but also social relationships and interactions among individuals, businesses, and institutions within a society.

Question 13

Two factors that will have real impact on the Canadian economy going forward are the Canadian dollar and the low price of oil on the world market.

Accepted Answer

The Canadian dollar and the low price of oil are both expected to have significant impacts on the Canadian economy in the near future. The low oil prices will affect the oil and gas industry, which is a significant contributor to Canada's economy, while the Canadian dollar's valuation can have an impact on trade and investment.

Question 14

The government experiences a budget surplus when its tax revenue exceeds its expenditures.

Accepted Answer

A budget surplus occurs when the government's revenue exceeds its spending, resulting in a positive balance.

Question 15

The Bank of Canada helps guide the economy by depositing funds at specific annual intervals into citizens' personal bank accounts.

Accepted Answer

The Bank of Canada does not deposit funds directly into citizens' personal bank accounts as a means of guiding the economy. Its main tools for guiding the economy include setting interest rates and participating in monetary policy decisions.

Question 16

Macroeconomic conditions impact day-to-day life by influencing variables such as the availability of jobs, the amount of take-home pay households have available after paying taxes, and the buying power of those incomes.

Accepted Answer

Macroeconomic conditions such as unemployment rates, inflation, and government policies can affect the job market and the prices of goods and services. These factors can, in turn, impact the amount of money households have available to spend and how far that money can go in terms of purchasing power. Therefore, macroeconomic conditions play a significant role in day-to-day life.

Question 17

The devaluation of the Canadian dollar means that Canadians will vacation more often in the United States.

Accepted Answer

Devaluation of the Canadian dollar makes the US more expensive for Canadians, likely reducing the number of vacations they take there.

Question 18

Fiscal policy helps control interest rates and the supply of money.

Accepted Answer

Fiscal policy involves government spending and taxation decisions, which primarily affect overall economic demand, whereas controlling interest rates and the supply of money is the role of monetary policy, typically implemented by a central bank.

Question 19

Macroeconomics is the study of a country's overall economic issues, such as the employment rate, the gross domestic product, and taxation policies.

Accepted Answer

This statement is true. Macroeconomics focuses on the overall performance of an economy, including indicators such as economic growth, employment, inflation, and government policies.

Question 20

Microeconomics is the study of broad, economy-wide issues such as the unemployment rate, gross domestic product, and inflation.

Accepted Answer

Microeconomics is the study of individual economic agents such as households, businesses, and markets, and how they interact to make economic decisions. It focuses on specific economic issues such as supply and demand, prices, and the behavior of individual consumers and firms. The study of broad, economy-wide issues is called macroeconomics.

Quiz 3: Economics: The Framework for Business