CHAP 4 &5

If prices in the economy rise, then Question 10 options: A) the purchasing power of a dollar declines. B) the purchasing power of a dollar rises. C) the purchasing power of a dollar cannot be determined. D) the purchasing power of a dollar stays constant.

A

If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is Question 31 options: A) -3%. B) 3%. C) 6.67%. D) 15%. E) 25%.

A

Statistics Canada would categorize a retiree who is not working as Question 25 options: A) out of the labour force. B) a discouraged worker. C) not eligible to work in Canada. D) employed. E) unemployed.

A

We say that the economy is at full employment if the unemployment rate is equal to Question 26 options: A) the natural rate of unemployment. B) zero. C) the sum of structural and cyclical unemployment. D) the amount of cyclical unemployment. E) the sum of frictional and cyclical unemployment.

A

Which of the following equations correctly measures GDP in an economy? Question 6 options: A) GDP = C + I + G + NX B) GDP = C + G + I - taxes C) GDP = C + I + G + NX + wages D) GDP = C + I + G + X E) GDP = C + net I + G + NX

A

Which of the following is not an example of a transfer payment? A) the government's contribution to a teacher's pension plan B) government payments to parents with small children C) social program payments to disabled persons D) social program payments to retirees E) employment insurance payments

A

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated? Question 30 options: A) Firms have to hire an extra worker to change prices in its store because of inflation. B) A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. C) A bank collects a lower amount of interest from a loan because inflation was underpredicted. D) A professional pays more income taxes because tax brackets were not adjusted for inflation. E) A worker receives a raise in salary that is less than the rate of inflation because management underpredicted inflation.

A

The GDP deflator does not capture the prices of Question 14 options: A) services. B) goods purchased by government. C) final goods. D) imports. E) exports.

D

If inflation is anticipated, some effects of inflation on the redistribution of income can be avoided. Question 19 options:TrueFalse

TRUE

A full-time student who is not working is categorized as Question 21 options: A) a discouraged worker. B) not in the labour force. C) frictionally unemployed. D) unemployed. E) employed.

B

Except for recessions, the duration of unemployment for the typical person lasts Question 22 options: A) less than 4 weeks. B) less than 13 weeks. C) 14 to 25 weeks. D) more than 25 weeks. E) over five years.

B

If real GDP in 2017 (using 2007 prices) is lower than nominal GDP of 2016, then Question 17 options: A) prices in 2017 are higher than prices in 2016. B) prices in 2017 are lower than prices in 2016. C) real GDP in 2017 is larger than real GDP in 2016. D) the economy is going through a recession. E) nominal GDP in 2017 equals nominal GDP in 2016.

B

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time students. This would cause Question 34 options: A) no change in the unemployment rate. B) the labour force participation rate to decrease. C) the number of discouraged workers to increase. D) the employment population ratio to increase. E) the unemployment rate to decrease.

B

The nominal interest rate will be less than the real interest rate when Question 36 options: A) the rate of inflation is positive and increasing. B) the rate of inflation is negative. C) the rate of inflation is positive and constant. D) the real interest rate is negative. E) the rate of inflation is positive but decreasing.

B

Which of the following would increase GNI in Canada? Question 11 options: A) an increase in the production of Japanese-owned Toyota cars in Canada B) an increase in the production of oil by Canadian-owned Talisman Energy from wells in Mexico C) an increase in the production of Mexican-owned Grupo Minsa corn in Canada D) an increase in the production of Japanese-owned Toyota cars in Mexico E) an increase in the production of Korean-owned Hyundai cars in South Korea

B

Full employment is not considered to be zero unemployment, because Question 33 options: A) there are not enough jobs for everyone who wants one. B) not everyone is entitled to work in Canada. C) people do not find jobs instantaneously. D) some people do not want a job. E) some cyclical unemployment always exists.

C

Household income is defined as Question 2 options: A) net national income less depreciation. B) net national income less personal taxes. C) net national income, less retained earnings, plus transfer payments, plus interest on government bonds. D) gross national product less taxes paid. E) net national income, plus retained earnings, less transfer payments, less interest on government bonds.

C

If firms pay what are called "efficiency wages," they pay wages that Question 27 options: A) will eventually lower the unemployment rate. B) are lower than average to ensure maximum profit. C) motivate workers to increase their productivity. D) negotiated by labour unions. E) are mandated by the government.

C

If the number of unemployed workers is 1.9 million, the number in the working-age population is 50 million, and the unemployment rate is 4%, how many workers are in the labour force? Question 29 options: A) 1 million B) 20 million C) 47.5 million D) 48.1 million E) 50 million

C

Which of the following transactions would be included in the official calculation of GDP? Question 9 options: A) Magna sells $2 million worth of seats to General Motors. B) You wash and wax your father's car as a favour to him. C) You buy a new iPod. D) You illegally download music off the Internet to put on your new iPhone. E) A student buys a used textbook at the bookstore.

C

Unemployment caused by a business cycle recession is called cyclical unemployment. Question 24 options:TrueFalse

TRUE

Frictional unemployment is the result of Question 20 options: A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. B) the ups and downs in inflation. C) the changing of the seasons. D) the search process of matching workers with jobs. E) a slowdown in the economy.

D

If real GDP increases, we know for sure that Question 15 options: A) output has fallen. B) prices have risen. C) prices have remained constant. D) output has risen. E) prices have risen but output has remained constant.

D

Suppose that homemakers are included as employed in the labour force statistics, rather than being counted as out of the labour force. This would Question 35 options: A) increase the number of people eligible to work in Canada. B) decrease the number of persons in the labour force. C) increase the measured unemployment rate. D) increase the measured labour force participation rate. E) decrease the number of persons in the working-age population.

D

Which of the following policies would reduce frictional unemployment? Question 28 options: A) an increase in the generousity of Employment Insurance payments B) implementing an unemployment insurance policy C) a decrease in the minimum wage D) building an online job database that helps workers find jobs E) a job retraining program

D

During a business cycle expansion, total production ________ and total employment ________. Question 3 options: A) decreases; decreases B) increases; decreases C) remains constant; decreases D) decreases; increases E) increases; increases

E

In Canada, household spending on consumption as a percentage of GDP is Question 4 options: A) higher than most other countries. B) the highest among OECD countries. C) the lowest among OECD countries. D) lower than most other countries. E) slightly below average among OECD countries.

E

Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no longer charges Chuck for her work. As a result, GDP ________ because ________. Question 16 options: A) falls; Marla's work takes place in the underground economy once she's married B) rises; Marla becomes more productive once she's married C) rises; Marla Marla's work continues to add value for Chuck D) falls; Marla's work becomes less valuable once she's married E) falls; Marla's architectural design services are no longer bought by Chuck once they're married

E

Scott is a woodworker and charges $125 an hour for his time manufacturing custom-made wood products. For his wife's birthday, he designs and creates an intricate birdseye maple jewellery box that takes him 15 hours to complete. How is GDP affected by Scott's efforts? Question 12 options: A) GDP rises by $125. B) GDP rises by $1,875 less the cost of the materials Scott uses. C) GDP falls by $1,875. D) GDP rises by $1,875. E) GDP is not affected by Scott's production of the jewellery box.

E

In the circular flow diagram, the value of all the income in the economy is greater than the value of goods and services produced in the economy. Question 7 options:TrueFalse

FALSE

The labour force survey is compiled from firms who answer questions about the number of persons who are employed and on the company payroll. Question 23 options:TrueFalse

FALSE

The nominal interest rate plus the inflation rate equals the real interest rate. Question 32 options:TrueFalse

FALSE

Transfer payments are subtracted from net national income to get to Household income. Question 5 options:TrueFalse

FALSE

Disposable household income is equal to household income minus personal tax payments. Question 8 options:TrueFalse

TRUE

The recession that followed the global financial crisis of 2007-2009 caused ________ in Canada. Question 18 options: A) less government spending B) less unemployment C) an increase in the duration a typical unemployed person was out of work D) a drop in the working age population E) a rise in the labour force participation rate

c