Pre-testJust how much do you know about

economics all ready?

If we all had more money, we would all

be better off.

1. True or false?

FALSE

giving everyone more money is inflationary in a case of ceteris paribus (all other factors remain the same). If everyone had more money demand would rise and therefore prices would rise.

2. True or false?

A nations money supply must be backed by gold or some other “solid” commodity to be accepted as having worth.

False:

Today money is known as fiat money - it is backed by the government and it’s value lies in its acceptance by consumers.

3. True or false?Canadians almost always sell more goods to

foreign countries than it buys from them.

TRUE

Canada usually has a positive balance of trade -meaning we export more than we import. This makes us extremely vulnerable to the economic

state of other nations.

4. True or False?Economists agree that if the Canadian dollar were equal in value to the American dollar the Canadian economy would be better off.

False1. Some industries would benefit but and some would not. The response to the last question indicates that Canada is generally better off with a lower dollar.2. Economists never agree on anything.

5. True or false

When there is high unemployment a government can help by cutting its own spending.

False:This was the belief prior to the Great Depression of the 1930‘s but today

the general belief is that in tough times government should

help by spending more on capital goods and

services.

6. True or false?

Money is created in our banking system.

TrueIt is created through something called the deposit multiplier. When you deposit

money in the bank it doesn’t just sit there

waiting for you to come back and get it - it is used and reused thus creating more money.

7. True or false?

Canadian banks are profit-seeking enterprises whose shares are bought and sold on the stock market just as they are for any other corporation.

In fact some of Canada’s banks are the most profitable

businesses in Canada. Canadian

banks are also recognized around the world for the

strength and stability.

True

8. True or False?

The appropriate answer to rising prices is for the government to lower taxes.

False:

A government should raise

taxes to control inflation.

9. True or False?

A government deficit is harmful to the economy.

FalseTemporary deficits can

be beneficial to

stimulate the

economy.

10. True or False?

By definition wage increases will always lead to price increases.

Not if the wage increase

is accompanied by increases

in productivity.

False: