1. The marginal propensity to consume

Select one:

a. is greater than 1 but less than 2.

b. is between zero and 1.

c. is greater than 1 if dissaving is present.

d. is negative if dissaving is present.

e. is between 1/2 and 1.

2. The objective of the Bank of Canada's monetary policy is

Select one:

a. to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3 percent a year, and long-term interest rates below 4 percent a year.

b. to control the quantity of money and interest rates to avoid inflation and, when possible, prevent excessive swings in real GDP growth and unemployment.

c. to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3 percent a year, and long-term real GDP growth above 4 percent a year.

d. to keep the overnight loans rate below 2 percent a year and the unemployment rate at its natural rate.

e. to keep the labour force participation rate above 80 percent, the inflation rate below 2 percent a year, and the exchange rate fluctuating by less than 3 percent a year.

3. Refer to the figure below. AD is the aggregate demand curve, LAS is long-run aggregate supply curve, and SAS is short-run aggregate supply curve.

Price level (GDP deflator, 2002 = 100) LAS SAS1 150 SASO 130 120 100 4 AD1 ADO O Real GDP (trillions of 2002 dollars)