Chapter 19
A worker is considered unemployed if that worker has no job, is legally eligible to work, A) and is actively searching for employment. B) and is not collecting unemployment insurance. C) whether the worker is looking for a job or is not looking for a job. D) but only if they previously held a job. E) but only if they were previously employed for at least three consecutive months.
A
The Canadian exchange rate is defined to be the A) number of Canadian dollars needed to buy one unit of foreign currency. B) number of ounces of gold it takes to buy one hundred Canadian dollars. C) system of quotas imposed on the international exchange of goods. D) term for foreign currencies or claims on foreign currencies. E) value of one Canadian dollar in terms of foreign currencies.
A
Which of the following is the best example of cyclical unemployment? A) A worker is laid off because his firm had to reduce production due to reduced demand. B) A worker quits her current job to search for a better one. C) An ironworker cannot find a job in Ottawa because all job vacancies are in Alberta. D) Bank tellers are unable to find jobs due to technological advances in the banking system. E) Inflationary pressures have led to higher wages for all jobs.
A
A nation's real national income in a given year measures the A) dollar income earned by the nation's producing sector. B) value of output produced by the economy, measured in constant dollars. C) level of national income that is subject to taxation by the federal government. D) market value of national output produced by the economy. E) opportunity cost of the economy's national output.
B
If one Canadian dollar can be exchanged for 0.5 euros, we say that the Canadian-euro exchange rate is A) 0.5. B) 2.0. C) 5.0. D) 20. E) 1.0.
B
In determining the economy's real GDP growth rate between two time periods, A) nominal national income should be used because it compares actual output in each time period. B) real national income, which is equal to nominal national income corrected for price-level changes, should be used. C) potential national income should be used. D) we should ignore prices completely, in order to examine output alone. E) only the real national product from the latest time period is relevant.
B
Suppose the Bank of Montreal wants a 5% real rate of return on all its loans, and anticipates an annual inflation rate of 4%. It should therefore lend its money at a nominal interest rate of A) 10%. B) 9%. C) 5%. D) 4%. E) 1%.
B
Suppose the city of Calgary, Alberta has a population of 1 million, a labour force of 575 000, and employment is equal to 545 000. The unemployment rate in Calgary is approximately A) 3.0%. B) 5.2%. C) 5.5%. D) 54.5%. E) 57.5%.
B
The real rate of interest is equal to the nominal interest rate A) divided by the price level. B) minus the rate of inflation. C) multiplied by the rate of inflation. D) plus the risk ratio. E) plus the price level.
B
When macroeconomists use the term "recession" they usually define it as a fall in real GDP that lasts for at least A) one quarter. B) two quarters. C) three quarters. D) one year. E) two years.
B
Why is real income for an average Canadian today so much higher than it was for an average Canadian 100 years ago? A) Because of the increase in the labour force due to rising population, immigration and the increase in female labour-force participation. B) Primarily because productivity per worker is so much higher today than in the past. C) Because inflation has been maintained at relatively low levels throughout that time. D) Because free-trade agreements have vastly increased real incomes. E) Because the life span of the average worker has increased from about 55 years to about 80 years over that time period.
B
Workers with marketable skills sometimes quit a job and become unemployed, with the expectation of soon finding a better job. This type of unemployment is called A) cyclical unemployment. B) frictional unemployment. C) historical unemployment. D) overly-optimistic unemployment. E) structural unemployment.
B
An equivalent term for "real national income" is A) nominal national income. B) current-dollar national income. C) constant-dollar national income. D) actual national income. E) potential national income.
C
Assume that Sarah agrees to lend $100 to Sam for one year. Sam agrees to pay Sarah $110 at the end of the year. If inflation over that one year is 7%, what real rate of interest does Sarah earn on her $100? A) 10% B) 7% C) 3% D) 13% E) 17%
C
Consider a small economy with 3 individuals. Individual A produces 100 chickens that sell for $8 each. Individual B produces 50 bags of corn that sell for $10 each. Individual C produces 40 bushels of apples that sell for $20 each. National product in this economy is A) 100 chickens plus 50 bags of corn plus 40 bushels of apples. B) 190 units of goods produced. C) $2100. D) $2470 E) Not determinable from the information provided.
C
Consider a small economy with real GDP of $1 billion and the total number of hours worked equal to 5 million. Which of the following is the best measure of labour productivity in this economy? A) real GDP per hour worked = $20 B) real GDP per employed worker = $20 C) real GDP per hour worked = $200 D) real GDP per employed worker = $200 E) Not able to determine from the information provided.
C
Consider an economy in which existing capital is being used at a high degree, shortages in labour and goods markets are developing, and costs are rising. Which of the following terms best describes this stage of the business cycle? A) trough B) recovery C) peak D) recession E) slump
C
Economic booms can cause problems as well as create benefits because they are often accompanied by A) deflationary pressures. B) excessive labour-force participation. C) inflationary pressures. D) pressure on the government budget deficit to rise. E) rising real interest rates.
C
If 27 million people are employed and 3 million people are unemployed, what is the unemployment rate? A) 11% B) 89% C) 10% D) 90% E) Not able to determine from the information provided
C
If a country is experiencing inflation, the change in the nominal national product will A) equal the change in the real national product. B) overstate the inflation rate. C) overstate the change in the real value of production. D) understate the value of national income. E) be negative and will be falling faster than the rate of inflation.
C
If constant-dollar national income decreased by $6 billion over a one-year period, then it must be true that A) output of every product decreased. B) the price level decreased. C) aggregate output decreased. D) aggregate output decreased and the price level increased. E) aggregate output increased and the price level decreased.
C
If the Consumer Price Index changes from 120 in year one to 144 in year two, the rate of inflation in the intervening year is A) 10%. B) 12.5%. C) 20%. D) 25%. E) 30%.
C
If the cyclical unemployment rate is greater than zero, then the A) economy is operating beyond full employment. B) economy is operating at full employment. C) economy is operating at less than full employment. D) frictional unemployment rate is greater than the structural unemployment rate. E) real-wage unemployment rate is negative.
C
If the price index is P1 in year 1 and P2 in year 3, the average inflation rate per year over this period is calculated as A) (P2 - P1) × (100/2) B) [(P2 - P1)/P1] × 100 C) [(P2 - P1)/P1] × [100/2] D) [(P1 - P2)/P2] × 100 E) [(P1 - P2)/P2] × [100/2]
C
In macroeconomics, the "output gap" is the difference between A) output in the current year and output in the base year. B) output and employment. C) potential real national income and actual real national income. D) real GNP and real GDP. E) real and nominal national income.
C
In the study of short-run fluctuations in national income, potential income (output) is usually assumed to be A) falling at its average growth rate. B) moving together with potential output in neighbouring countries. C) constant. D) equal to actual income. E) irrelevant, as the economy is rarely there
C
Suppose the city of Calgary has a population of 1 million, a labour force of 575 000, and employment equal to 545 000. We can conclude that for legal and various other reasons ________ people are excluded from the labour force. A) 30 000 B) 420 000 C) 425 000 D) 445 000 E) 450 000
C
A change in the Consumer Price Index measures A) a change in a specific absolute price. B) a change in quantities of commodities sold. C) a change in relative prices. D) a change in a broad average price over some particular time span. E) the change in gross domestic product
D
As the banking industry becomes more and more automated, tellers find themselves with unneeded skills and some of them become unemployed. At the same time, computer programmers are in high demand. These unemployed tellers would be classified as A) cyclically unemployed. B) frictionally unemployed. C) naturally unemployed. D) structurally unemployed. E) underemployed.
D
Economic theory argues that there will be fewer real effects from inflation as long as the A) actual rate of inflation is less than 5%. B) anticipated rate of inflation is more than the actual rate of inflation. C) anticipated rate of inflation is less than the actual rate of inflation. D) inflation is fully anticipated and no one changes their behaviour. E) whole private sector is unaware that it is happening.
D
How is Canada's unemployment rate determined? A) The rate is determined by Canada Census data. B) The rate is determined by a survey of Canadian employers. C) The federal government department HRSDC (Human Resources and Skills Development Canada) conducts a monthly survey of the labour force. D) Statistics Canada conducts a Labour Force Survey each month. E) An estimate is produced by HRSDC based on the previous month's unemployment rate adjusted by the current month's job losses and job gains.
D
If 0.75 U.S. dollars can be exchanged for one Canadian dollar, we say that the Canadian-U.S. exchange rate is A) 0.75. B) 75. C) 1.0. D) 1.33. E) 1.25.
D
The real interest rate must be A) high if the nominal interest rate is high. B) high if the inflation rate is greater than the nominal interest rate. C) low if the nominal interest rate is high. D) positive if the nominal rate of interest is greater than the rate of inflation. E) negative if the nominal rate of interest is greater than the rate of inflation.
D
The three main reasons that Canada's real GDP has increased steadily for many years are A) rising employment, increasing levels of education of the labour force and the increase in the participation rate of women in the labour force. B) an increasing stock of physical capital, increasing exports and rising employment. C) the increase in life expectancy, the rise in employment and increasing productivity. D) rising employment, increasing stock of physical capital and increasing productivity. E) increasing productivity of labour, increasing productivity of land and increasing productivity of the capital stock.
D
An upward trend in real national income over an extended period of time is called A) an inflationary boom. B) aggregate output. C) constant-dollar national income. D) potential national income. E) economic growth.
E
Canada's unemployment rate has been as low as ________ in the 1960s and as high as ________ during the recession in the early 1980s. A) 4.6; 14 B) 2.0; 15 C) 5.5; 17 D) 2.4; 10 E) 3.4; 12
E
If a country's labour force is 15 million people, and 1.35 million of those are unemployed, the country's unemployment rate is A) 2.5%. B) 3.3%. C) 4.5%. D) 6.7%. E) 9.0%.
E
If nominal national income increased by 20% over a certain period of time while real national income increased by 10%, then A) everybody in the economy became worse off. B) inflation has decreased during this time period. C) the labour force increased by 10%. D) the price level has declined by about 10%. E) the price level has increased by approximately 10%.
E
In macroeconomics, if the value of the national product increases, there is A) an even larger increase in the value of income claims on that output, due to value added. B) a decrease in value of income claims on that output, due to taxation. C) a decrease in the value of income claims on that output, due to importing. D) a decrease in the value of income claims on that output, due to household saving. E) an equal increase in the value of income claims on that output.
E
Refer to Table 19-1. In the year 2009, it is probably the case that workers are ________ and factories are ________. A) facing cyclical unemployment; facing temporary shut downs B) working longer than normal hours; facing temporary shutdowns C) experiencing zero unemployment; operating extra shifts D) experiencing zero unemployment; operating beyond their normal capacity E) working longer than normal hours; operating beyond their normal capacity
E
An example of a topic outside the scope of macroeconomics is A) changes in the price of a particular good in a specific market. B) changes in the unemployment rate. C) the aggregate growth rate of the economy. D) the overall level of unemployment. E) the level of productivity, as compared with that in the United States.
A
Consider a small economy with 3 individuals where each individual produces and sells $1000 worth of final goods and services. The national income for this economy is A) $3000. B) less than $3000 if some of the income is saved. C) more than $3000 if some of the income is invested. D) less than $3000 if there are taxes in this economy. E) more than $3000 if the individuals are earning profits
A
If the Canadian dollar exchange rate increases, the A) Canadian dollar depreciates relative to foreign currencies. B) internal value of the dollar falls. C) Canadian dollar appreciates relative to foreign currencies. D) internal value of the dollar rises. E) external value remains unaffected.
A
If the cyclical unemployment rate is negative, then the A) economy is operating beyond full employment. B) economy is operating at less than full employment. C) frictional unemployment rate is negative. D) frictional unemployment rate is greater than the structural unemployment rate. E) real-wage unemployment rate is negative.
A
It is important for policy makers to recognize that most macroeconomic variables are characterized by A) long-run trends and short-run fluctuations. B) gradual increases over long periods of time. C) short-run fluctuations that need to be smoothed for a well-functioning economy. D) long-run economic growth. E) the impacts of the business cycle.
A
Most economists believe that the single largest cause of rising material living standards over long periods of time is A) productivity growth. B) rising employment. C) growth in the capital stock. D) real GDP growth. E) rising real wages.
A
On a graph showing real national income on the vertical axis and time on the horizontal axis, the fluctuations of real national income around the trend-line would indicate the A) business cycle. B) distribution of income. C) inflation rate. D) path of potential output. E) unemployment rate
A
Refer to Table 19-1. In which years was this economy experiencing an inflationary gap? A) 2009, 2010 B) 2006, 2007 C) 2010, 2011 D) 2008, 2012 E) 2006, 2007, 2011
A
Since 1960 in Canada, the rate of inflation has ranged (approximately) between A) .0 and 12%. B) -5 and 5%. C) 2 and 4%. D) 2 and 20%. E) 1 and 24%.
A
Suppose a country has an unemployment rate of 20%. If we know that the population is 38 million and the labour force is 25 million, then the number of people unemployed is A) 5 million. B) 13 million. C) 20 million. D) 7.6 million. E) 2.6 million.
A
Suppose a small city has a population of 100 000 and a labour force of 60 000. Employment is 55 000 and 5000 workers are unemployed. How many people are not in the labour force? A) 40 000 B) 35 000 C) 30 000 D) 5000 E) 0
A
Suppose that a price index for a certain basket of goods and services has a value of 150 in 2012 and a value of 156 in 2013. This index suggests that the cost of the market basket of goods and services A) was 4% higher in 2013 than in 2012. B) was 6% lower in 2013 than in 2012. C) was 6% higher in 2013 than in 2012. D) was 156% higher in 2013 than in 2012. E) was approximately the same in 2013 and 2012.
A
Suppose the Bank of Montreal wants a 4% real rate of return on all its loans, and anticipates an annual inflation rate of 6%. It should therefore lend its money at a nominal interest rate of A) 10%. B) 9%. C) 5%. D) 4%. E) 1%.
A
A worker currently earning $3000 per month has negotiated a 4% wage increase in anticipation of a 4% inflation rate in the next year. Under what scenario will the worker have a higher purchasing power? A) if next year's inflation rate is 4% B) if next year's inflation rate is 3% C) if next year's inflation rate is 5% D) if next year some prices increase by only 4% E) if next year some prices increase by only 5%
B
An output gap with Y < Y* A) is desirable because it keeps wage costs low. B) represents a loss of output due to unemployed resources. C) tends to force prices up. D) occurs when there is excess demand. E) is known as an inflationary boom.
B
Consider the situations of a lender and a borrower of money. Which of the following situations is most advantageous to the lender? A) inflation rate of 0% nominal interest rate of 2% B) inflation rate of 2% nominal interest rate of 7.5% C) inflation rate of -1% nominal interest rate of 3% D) inflation rate of 2% nominal interest rate of 4% E) inflation rate of 3% nominal interest rate of 7.5%
B
Cyclical unemployment is associated with A) changes to the economy's industrial structure resulting from growth in some industries and decline in others. B) an output level different from the economy's potential output. C) differences between the characteristics of the supply of labour and the demand for labour. D) people entering the labour force typically take some time to find a job. E) people quitting their present jobs to look for other jobs.
B
In general, productivity is a measure of A) the economy's ability to increase real GDP per capita. B) the amount of output that the economy produces per unit of input. C) real GDP as a function of total employment. D) the total amount of output that the economy is capable of producing. E) potential output.
B
In some macroeconomic analyses, it is common to treat the level of productivity as roughly constant. This is a justifiable assumption in A) the long run. B) the short run. C) both the long run and the short run. D) neither the long run nor the short run. E) macroeconomics but not microeconomics.
B
Real GDP measures A) the constant-dollar value of the potential output of the nation's economy over the period of one year. B) the quantity of total output produced by the nation's economy over the period of one year. C) the fluctuations of national income around its long-term trend. D) the annual growth rate of real national income. E) the long-term trend in total output produced by the nation's economy.
B
Refer to Table 19-1. In which years are the factors of production in this economy said to be "fully employed"? A) 2006, 2007, 2011 B) 2008, 2012 C) 2009, 2010 D) all years E) none of the years
B
Refer to Table 19-1. In which years was this economy experiencing a recessionary gap? A) 2009, 2010 B) 2006, 2007, 2011 C) 2008, 2012 D) 2006, 2007, 2008 E) 2010, 2011, 2012
B
Suppose Canada's exchange rate with the U.S. dollar falls from 1.21 to 1.13. This fall indicates a(n) ________ of the Canadian dollar, which means it takes ________ Canadian dollars to purchase one U.S. dollar. A) appreciation; more B) appreciation; fewer C) depreciation; more D) depreciation; fewer
B
Suppose actual output is less than potential output. If the output gap measures the output loss due to the failure to achieve full employment, it can generally be concluded that the larger this output gap, the A) greater is the employment rate. B) greater is the unemployment rate. C) lower is frictional unemployment. D) lower the deadweight loss of unemployment. E) more upward pressure there is on prices.
B
Suppose an employer and its employees enter into a wage contract specifying a wage increase of 2%. But suppose that the price level rises by 3% over the course of the contract. In this case, A) the employees' purchasing power will rise. B) the employees' purchasing power will fall. C) the employer will experience a greater fall in purchasing power than would have occurred if the price level had held steady. D) both employer and employees will benefit from increased purchasing power. E) both employer and employees will experience a loss of purchasing power
B
Suppose that a country's population is 30 million and it has a labour force of 15 million people. If 14.5 million people are employed, the country's unemployment rate is A) 2.5%. B) 3.3%. C) 4.5%. D) 6.7%. E) 9.0%.
B
Which of the following is the best description of the business cycle? A) the normal cycle of profits and losses by producers in the economy B) the short-run fluctuations of national income around its trend value C) a five-year period designed for national accounting purposes to capture the normal cycle of recession periods and boom periods D) a ten-year period designed for national accounting purposes to capture the normal cycle of recession periods and boom periods E) the fluctuations of one country's national income in comparison to another country's national income
B
Which of the following is the best example of frictional unemployment? A) A worker is laid off because his firm has to reduce production due to reduced demand. B) A worker quits her current job to search for a better one. C) An ironworker cannot find a job in Ottawa because all job vacancies are in Alberta. D) Bank tellers are unable to find jobs due to technological advances in the banking system. E) Inflationary pressures have led to higher wages for all jobs.
B
Which of the following statements is logically valid? A) If the rate of inflation is high, the nominal rate of interest must be low. B) If the rate of inflation is less than the nominal interest rate, the real interest rate is positive. C) If the real interest rate is less than the nominal interest rate, inflation must be zero. D) If the real interest rate is less than the nominal interest rate, inflation must be negative. E) If the nominal interest rate is high, the real interest rate must be high.
B
Changes in productivity can be analyzed by looking at how GDP per employed worker changes over time or how GDP per hour worked changes over time. Why might one measure be more preferable than the other? A) GDP per hour worked is preferable because it eliminates the need to adjust for variations in productivity between employed workers. B) GDP per employed worker is more accurate because the data available on the number of employed workers is more accurate than the data available on the number of hours worked. C) GDP per hour worked is more accurate because the average number of hours worked per employed worker has changed over time. D) GDP per employed worker is preferable because the number of employed workers has risen significantly over time. E) Both measures are equally good.
C
During the 1970s, Canada experienced an unusual pattern of interest rates. During this period A) the nominal interest rate was less than the real interest rate. B) the inflation rate was negative, implying a real interest rate that was higher than the nominal interest rate. C) the inflation rate exceeded the nominal interest rate, implying a negative real interest rate. D) the inflation rate was negative, implying a nominal interest rate higher than the real interest rate. E) the nominal and real interest rates were equal to each other.
C
Real national income A) always equals nominal national income. B) changes by the same amount and in the same direction as does nominal national income. C) changes only when the underlying quantities change. D) refers to national income with no adjustment for changes in prices. E) refers to national wealth but is not an indicator of current production.
C
Refer to Table 19-1. What is the unemployment rate when this economy is at "full employment"? A) 5.9% B) 6.0% C) 6.3% D) 7.0% E) 7.1%
C
Since 1960, in Canada the price level has ________, while the rate of inflation has ________. A) fluctuated widely; been relatively stable B) fluctuated widely; also fluctuated widely C) been rising steadily; been quite volatile D) been rising steadily; been relatively stable E) been quite volatile; been rising steadily
C
Suppose Appliance Mart buys a used refrigerator for $100, repairs it, and resells it for $250. The result of this transaction is to A) increase the value of national product by $250. B) leave the value of national product unchanged. C) increase the value of national product by $150. D) decrease the value of national product by $100. E) There is insufficient information to know.
C
Suppose Canada's exchange rate with the U.S. dollar increases from 1.14 to 1.22. Which of the following is likely to happen? A) More Canadians will cross the border to shop in the U.S. B) It is less expensive for Canadians to shop online from U.S. retailers. C) Fewer Canadians will cross the border to shop in the U.S. D) The Canadian dollar value of Canada's imports from the U.S. will fall. E) The Canadian dollar value of Canada's exports to the U.S. will fall.
C
Suppose Canada's exchange rate with the euro rises from 1.2 to 1.4. This rise indicates a(n) ________ of the Canadian dollar, which means it takes ________ Canadian dollars to purchase one euro. A) appreciation; more B) appreciation; fewer C) depreciation; more D) depreciation; fewer
C
Suppose that at the end of a given year there has been unanticipated inflation of 4%. Who is better off at the end of the year? A) a bank that lent money at the beginning of the year B) a bank that lent money at the end of the year C) a consumer who borrowed money at the beginning of the year D) a consumer who borrowed money at the end of the year E) a consumer who lent money at the end of the year
C
The unemployment rate will understate the true amount of unemployment if A) the unemployment rate is rising. B) crime, divorce, and social unrest are all positively correlated with unemployment. C) the official unemployment figure excludes discouraged workers who have stopped actively looking for work. D) the labour force has grown more rapidly than output. E) the actual unemployment rate is greater than the natural rate of unemployment.
C
To compare the economy's aggregate output in two different time periods, economists compare the A) nominal national income for the two periods. B) potential national incomes for the two periods. C) real national income for the two periods. D) unemployment rates for the two periods. E) inflation rates for the two periods.
C
Women entered the labour force in large numbers in the 20th century and increased the economy's GDP. This change A) created inflationary gaps. B) created recessionary gaps. C) raised potential output. D) was only possible in an economy operating above normal rates of utilization. E) was only possible in an economy operating below normal rates of utilization.
C
Consider a small economy with real GDP of $1 billion and the number of workers employed equal to 2500. Which of the following is the best measure of labour productivity in this economy? A) real GDP per hour worked = $200 B) real GDP per employed worker = $200 000 C) real GDP per hour worked = $400 D) real GDP per employed worker = $400 000 E) Not able to determine from the information provided
D
Consider the growth in Canada's labour force and employment. Over the last 50 years, A) the labour force has grown much more rapidly than employment. B) both the labour force and employment have remained roughly constant. C) the number of unemployed persons has been a much larger fraction of the labour force than it was during the first half of the 20th century. D) the main trend of the economy has been one of growth in employment that roughly matches the growth in the labour force. E) the main trend of the economy has been to have employment grow more rapidly than the growth in output.
D
Consider the situations of a lender of money and a borrower of money. Which of the following situations is least burdensome for the borrower? A) nominal interest rate of 15% and an inflation rate of 8% B) nominal interest rate of 10% and an inflation rate of 1% C) nominal interest rate of 8% and an inflation rate of 2% D) nominal interest rate of 4% and an inflation rate of 4% E) nominal interest rate of 29% and an inflation rate of 21%
D
Economists expect some unemployment to exist even at times of "full employment" for, among others, the following reasons: 1) actual GDP is rarely equal to potential GDP; 2) as the economy changes, the structure of the existing labour force is not the same as the structure of labour demand; 3) people entering the labour force typically take some time to find a job. A) 1 only B) 2 only C) 3 only D) 2 and 3 E) 1 and 2
D
If a country's labour force is 15 million people, and 1 million of those are unemployed, the country's unemployment rate is A) 2.5%. B) 3.3%. C) 4.5%. D) 6.7%. E) 7.1%.
D
If nominal national income increased by 10% over a certain period of time while real national income increased by 20%, then A) everybody in the economy became worse off. B) inflation has occurred during this time period. C) the labour force increased by 10%. D) the price level has declined by about 10%. E) the price level has increased by approximately 10%.
D
If the Consumer Price Index changes from 120 in the year 2012 to 126 in the year 2014, the average rate of inflation per year over this two-year period is approximately A) 6%. B) 5%. C) 3%. D) 2.5%. E) 1.5%.
D
If the Consumer Price Index changes from 120 in year one to 122 in year two, the rate of inflation in the intervening year is A) 22%. B) 20%. C) 2.0%. D) 1.67%. E) 0%.
D
If the price index is P1 in one year and P2 in the next year, the inflation rate from one year to the next is calculated as A) (P2 - P1) × 100 B) (P2/P1) × 100 C) (P1/P2) × 100 D) [(P2 - P1)/P1] × 100 E) [(P1 - P2)/P2] × 100
D
In macroeconomics, the term "national income" refers to A) all sales of both current production and used goods. B) only those sales of currently produced goods sold to other nations. C) the value of a nation's total wealth. D) the value of the income generated by the production of total output. E) total current spending by all households.
D
Inflation, the rate of change of average prices in the economy, generally A) benefits creditors if it is unanticipated. B) has no real effects if it is unanticipated. C) increases the purchasing power of money. D) reduces the real value of existing nominal debt. E) increases the real value of fixed money incomes
D
Macroeconomics is mainly concerned with the study of A) individual households and how they deal with problems like inflation and unemployment. B) large economic units such as General Motors or Molson Breweries. C) fluctuations and trends in disaggregated data. D) fluctuations and trends in aggregated data. E) governments and their intervention in individual markets.
D
On a graph showing real national income on the vertical axis and time on the horizontal axis, the trend-line would probably be a good approximation of the A) business cycle. B) distribution of income. C) inflation rate. D) path of potential output. E) unemployment rate.
D
Potential or full-employment output is A) the maximum GDP that an economy actually achieves throughout its entire history. B) achieved during periods when all of the labour force is employed. C) a goal that can never be achieved by the economy. D) the GDP that would be produced if the economy's resources were fully employed at a normal intensity of use. E) the GDP that could be produced if the economy's resources were fully employed at their maximum intensity of use.
D
Short-run fluctuations in real GDP around its trend value are A) generally ignored by economists, because these fluctuations do not affect behaviour of other variables such as the unemployment rate. B) generally ignored by economists, because these fluctuations are constant and predictable. C) referred to in economics as "background noise." D) referred to in economics as "the business cycle." E) unimportant to the study of macroeconomics
D
Suppose Honest Rob's Used Cars buys a used car for $2000 and resells it for $3000. The result of Honest Rob's transactions is to A) decrease the value of national income by $3000. B) decrease the value of national income by $1000. C) leave the value of national income unchanged. D) increase the value of national income by $1000. E) increase the value of national income by $3000.
D
Suppose that in 2013 Canada's automobile manufacturers produced 2 million cars priced at $20 000 each. And in 2014 they produced 1 million cars priced at $40 000 each. Ceteris paribus, the change in nominal national income is A) a decrease because fewer cars were produced. B) an increase because the price of each car increased. C) insufficient information to know. D) no change in nominal national income. E) an increase because of inflation.
D
Suppose the unemployment rate is 8.5% and we know that frictional and structural unemployment together account for 5.5%. The cyclical unemployment rate is then A) 14%. B) 8.5%. C) 5.5%. D) 3.0%. E) -3.0%.
D
Consider a small economy with 2500 employed workers who worked a total of 5 million hours at an average wage of $40 per hour. Which of the following is the best measure of labour productivity in this economy? A) real GDP per hour worked = $40 B) real GDP per employed worker = $80 000 C) real GDP per hour worked = $80 D) real GDP per employed worker = $125 000 E) Not able to determine from the information provided
E
If a country's population is 15 million people, and 1 million of those are unemployed, the country's unemployment rate is A) 2.5%. B) 3.3%. C) 6.7%. D) 7.1%. E) There is not enough information to know.
E
Refer to Table 19-1. What is the output gap in 2007? A) $408 billion B) $411 billion C) $7.1 billion D) $3 billion E) -$3 billion
E
Suppose that a country's population is 30 million and it has a labour force of 15 million people. Assuming it has 1.35 million people unemployed, the country's unemployment rate is A) 2.5%. B) 3.3%. C) 4.5%. D) 6.7%. E) 9.0%.
E
The economic problems studied in macroeconomics include: 1) the level of economic activity; 2) competition policy; 3) the rate of unemployment. A) 1 only B) 2 only C) 3 only D) 1 and 2 E) 1 and 3
E
The group that tends to be most hurt by unexpected inflation is A) banks. B) individuals with unindexed pensions. C) employers. D) fixed-income earners. E) both B and D are correct.
E
The most common measure of productivity is ________, which can be measured as real GDP divided by ________. A) indexed productivity; per capita output B) factor productivity; the total number of factors employed in the economy C) capital productivity; the number of units of capital employed in the economy D) potential productivity; the total number of factors that would be employed in the economy at full employment. E) labour productivity; the number of units of work effort
E
The output gap is the A) measure of output that could have been produced if the economy were fully employed. B) dead-weight loss of inflation. C) difference between nominal and real output. D) percentage change in real GDP. E) difference between Y and Y*.
E
What is the approximate measure (2011 data) of Canada's productivity in terms of real GDP per hour worked (expressed in 2012 dollars)? A) $10 B) $92 C) $200 D) $475 E) $45
E
Which of the following groups would benefit most in real terms from a period of high and unanticipated inflation, as was experienced in Canada in the early 1970s? A) mortgage companies and banks who issued fixed-rate mortgages to clients B) banks with outstanding loans to their customers C) seniors whose income is largely interest earnings on past savings D) firms that maintain large cash balances for the operation of their business E) homeowners who had long-term fixed-rate mortgages
E
Workers with experience and skills sometimes lose their jobs and become unemployed due to changing technology or market conditions, even while firms in other industries or regions are looking to hire more workers. This type of unemployment is called A) cyclical unemployment. B) frictional unemployment. C) historical unemployment. D) natural rate of unemployment. E) structural unemployment.
E
