Question 1

Since 1960 in Canada,the rate of inflation has ranged (approximately)between

Accepted Answer

A) 0 and 12%. 
B) -5 and 5%. 
C) 2 and 4%. 
D) 2 and 20%. 
E) 1 and 24%. 
A) 0 and 12%. 
B) -5 and 5%. 
C) 2 and 4%. 
D) 2 and 20%. 
E) 1 and 24%. A

Question 2

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

Accepted Answer

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. 
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

Question 3

Cyclical unemployment is associated with which of the following?

Accepted Answer

A) changes to the economyʹs industrial structure resulting from growth in some industries and decline in others 
B) an output level different from the economyʹs 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 
A) changes to the economyʹs industrial structure resulting from growth in some industries and decline in others 
B) an output level different from the economyʹs 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

Question 4

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

Accepted Answer

A) 10%. 
B) 9%. 
C) 5%. 
D) 4%. 
E) 1%. 
A) 10%. 
B) 9%. 
C) 5%. 
D) 4%. 
E) 1%.

Question 5

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?

Accepted Answer

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 
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

Question 6

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

Accepted Answer

A) (P2 - P1)× 100. 
B) (P2/P1)× 100. 
C) (P1/P2)× 100. 
D) [(P2 - P1)/P1] × 100. 
E) [(P1 - P2)/P2] × 100. 
A) (P2 - P1)× 100. 
B) (P2/P1)× 100. 
C) (P1/P2)× 100. 
D) [(P2 - P1)/P1] × 100. 
E) [(P1 - P2)/P2] × 100.

Question 7

If a country is experiencing inflation,the change in the nominal national product will

Accepted Answer

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. 
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.

Question 8

If the Canadian dollar exchange rate increases,the

Accepted Answer

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) 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.

Question 9

Which of the following statements is logically valid?

Accepted Answer

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. 
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.

Question 10

The price level is measured in some time period with an index number,such as the number 118.6.How is such a number of use to us?

Accepted Answer

A) It allows us to compare it to the value of the same index number from another time period to determine the rate of change of the price level. 
B) The index number tells us the rate of inflation. 
C) It tells us the dollar value for the average basket of goods and services bought by the typical Canadian household. 
D) It tells us the real value for the average basket of goods and services bought by the typical Canadian household. 
E) It tells us the percentage change in the price level from the previous time period. 
A) It allows us to compare it to the value of the same index number from another time period to determine the rate of change of the price level. 
B) The index number tells us the rate of inflation. 
C) It tells us the dollar value for the average basket of goods and services bought by the typical Canadian household. 
D) It tells us the real value for the average basket of goods and services bought by the typical Canadian household. 
E) It tells us the percentage change in the price level from the previous time period.

Question 11

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?

Accepted Answer

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 
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

Question 12

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

Accepted Answer

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) $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.

Question 13

An upward trend in real national income over an extended period of time is called

Accepted Answer

A) an inflationary boom. 
B) aggregate output. 
C) constant-dollar national income. 
D) potential national income. 
E) economic growth. 
A) an inflationary boom. 
B) aggregate output. 
C) constant-dollar national income. 
D) potential national income. 
E) economic growth.

Question 14

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

Accepted Answer

A) cyclical unemployment. 
B) frictional unemployment. 
C) historical unemployment. 
D) natural rate of unemployment. 
E) structural unemployment. 
A) cyclical unemployment. 
B) frictional unemployment. 
C) historical unemployment. 
D) natural rate of unemployment. 
E) structural unemployment.

Question 15

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

Accepted Answer

A) 10%. 
B) 9%. 
C) 5%. 
D) 4%. 
E) 1%. 
A) 10%. 
B) 9%. 
C) 5%. 
D) 4%. 
E) 1%.

Question 16

What is potential or full-employment output?

Accepted Answer

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 economyʹs resources were fully employed at a normal intensity of use 
E) the GDP that could be produced if the economyʹs resources were fully employed at their maximum intensity of use 
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 economyʹs resources were fully employed at a normal intensity of use 
E) the GDP that could be produced if the economyʹs resources were fully employed at their maximum intensity of use

Question 17

Which of the following is an accurate statement about real national income?

Accepted Answer

A) it always equals nominal national income 
B) it changes by the same amount and in the same direction as does nominal national income 
C) it changes only when the underlying quantities change 
D) it refers to national income with no adjustment for changes in prices 
E) it refers to national wealth but is not an indicator of current production 
A) it always equals nominal national income 
B) it changes by the same amount and in the same direction as does nominal national income 
C) it changes only when the underlying quantities change 
D) it refers to national income with no adjustment for changes in prices 
E) it refers to national wealth but is not an indicator of current production

Question 18

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?

Accepted Answer

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 
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

Question 19

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?

Accepted Answer

A) if next yearʹs inflation rate is 4% 
B) if next yearʹs inflation rate is 3% 
C) if next yearʹs inflation rate is 5% 
D) if next year some prices increase by only 4% 
E) if next year some prices increase by only 5% 
A) if next yearʹs inflation rate is 4% 
B) if next yearʹs inflation rate is 3% 
C) if next yearʹs inflation rate is 5% 
D) if next year some prices increase by only 4% 
E) if next year some prices increase by only 5%

Question 20

In some macroeconomic analyses,it is common to treat the level of productivity as roughly constant.This is a justifiable assumption in

Accepted Answer

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. 
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.

Exam 19: What Macroeconomics Is All About

Since 1960 in Canada,the rate of inflation has ranged (approximately)between

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

Cyclical unemployment is associated with which of the following?

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

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?

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

If a country is experiencing inflation,the change in the nominal national product will

If the Canadian dollar exchange rate increases,the

Which of the following statements is logically valid?

The price level is measured in some time period with an index number,such as the number 118.6.How is such a number of use to us?

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?

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

An upward trend in real national income over an extended period of time is called

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

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

What is potential or full-employment output?

Which of the following is an accurate statement about real national income?

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 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?

In some macroeconomic analyses,it is common to treat the level of productivity as roughly constant.This is a justifiable assumption in

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Exchange Rates and the Balance of Payments

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