Question 1

Which of the following is an equivalent term for ʺfull-employment outputʺ?

Accepted Answer

A)  actual output 
B)  long-run output 
C)  gross national product GNP) 
D)  gross domestic product GDP) 
E)  potential output 
A)  actual output 
B)  long-run output 
C)  gross national product GNP) 
D)  gross domestic product GDP) 
E)  potential output

Question 2

The group that tends to be most hurt by unexpected inflation is

Accepted Answer

A)  banks. 
B)  individuals with unindexed pensions. 
C)  employers. 
D)  fixed-income earners. 
E)  both B and D are correct. 
A)  banks. 
B)  individuals with unindexed pensions. 
C)  employers. 
D)  fixed-income earners. 
E)  both B and D are correct.

Question 3

If nominal national income increased by 10% over a certain period of time while real national income increased by 20%, then

Accepted Answer

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%. 
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%.

Question 4

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 5

The table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant-dollar terms.   TABLE 19-1
-Refer to Table 19-1. What is the unemployment rate when this economy is at ʺfull employmentʺ?

Accepted Answer

A)  5.9% 
B)  6.0% 
C)  6.3% 
D)  7.0% 
E)  7.1% 
A)  5.9% 
B)  6.0% 
C)  6.3% 
D)  7.0% 
E)  7.1%

Question 6

Which of the following is the best example of cyclical unemployment?

Accepted Answer

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 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.

Question 7

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 8

The table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant-dollar terms.   TABLE 19-1
-Refer to Table 19-1. In which years was this economy experiencing an inflationary gap?

Accepted Answer

A)  2012, 2013 
B)  2009, 2010 
C)  2013, 2014 
D)  2011, 2015 
E)  2009, 2010, 2014 
A)  2012, 2013 
B)  2009, 2010 
C)  2013, 2014 
D)  2011, 2015 
E)  2009, 2010, 2014

Question 9

Suppose that a price index for a certain basket of goods and services has a value of 150 in 2015 and a value of 156 in 2016. This index suggests that the cost of the market basket of goods and services

Accepted Answer

A)  was 4% higher in 2016 than in 2015. 
B)  was 6% lower in 2016 than in 2015. 
C)  was 6% higher in 2016 than in 2015. 
D)  was 156% higher in 2016 than in 2015. 
E)  was approximately the same in 2016 and 2015. 
A)  was 4% higher in 2016 than in 2015. 
B)  was 6% lower in 2016 than in 2015. 
C)  was 6% higher in 2016 than in 2015. 
D)  was 156% higher in 2016 than in 2015. 
E)  was approximately the same in 2016 and 2015.

Question 10

In macroeconomics, what is the output gap?

Accepted Answer

A)  the measure of output that could have been produced if the economy were fully employed 
B)  the dead-weight loss of inflation 
C)  the difference between nominal and real output 
D)  the percentage change in real GDP 
E)  the difference between Y and Y* 
A)  the measure of output that could have been produced if the economy were fully employed 
B)  the dead-weight loss of inflation 
C)  the difference between nominal and real output 
D)  the percentage change in real GDP 
E)  the difference between Y and Y*

Question 11

When macroeconomists use the term ʺrecessionʺ they usually define it as a fall in real GDP that lasts for at least

Accepted Answer

A)  one quarter. 
B)  two quarters. 
C)  three quarters. 
D)  one year. 
E)  two years. 
A)  one quarter. 
B)  two quarters. 
C)  three quarters. 
D)  one year. 
E)  two years.

Question 12

The most common measure of productivity is , which can be measured as real GDP divided by
)

Accepted Answer

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 
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

Question 13

If one Canadian dollar can be exchanged for 0.5 euros, we say that the Canadian -euro exchange rate is

Accepted Answer

A)  0.5. 
B)  2.0. 
C)  5.0. 
D)  20. 
E)  1.0. 
A)  0.5. 
B)  2.0. 
C)  5.0. 
D)  20. 
E)  1.0.

Question 14

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%.

Question 15

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 16

A nationʹs real national income in a given year measures the

Accepted Answer

A)  dollar income earned by the nationʹs 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 economyʹs national output. 
A)  dollar income earned by the nationʹs 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 economyʹs national output.

Question 17

How is Canadaʹs unemployment rate determined?

Accepted Answer

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 monthʹs unemployment rate adjusted by the current monthʹs job losses and job gains. 
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 monthʹs unemployment rate adjusted by the current monthʹs job losses and job gains.

Question 18

In order to determine the economyʹs real GDP growth rate between two time periods, we should look at

Accepted Answer

A)  nominal national income, because it compares actual output in each time period. 
B)  real national income in each time period, which is equal to nominal national income corrected for price-level changes. 
C)  potential national income, corrected for price-level changes. 
D)  real national income in each period, which is equal to nominal national income corrected for quantity changes. 
E)  only the real national product from the latest time period. 
A)  nominal national income, because it compares actual output in each time period. 
B)  real national income in each time period, which is equal to nominal national income corrected for price-level changes. 
C)  potential national income, corrected for price-level changes. 
D)  real national income in each period, which is equal to nominal national income corrected for quantity changes. 
E)  only the real national product from the latest time period.

Question 19

Consider the growth in Canadaʹs labour force and employment. Over the last 50 years,

Accepted Answer

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. 
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.

Question 20

Consider the situations of a lender and a borrower of money. Which of the following situations is most advantageous to the lender?

Accepted Answer

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% 
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%

Exam 19: What Macroeconomics Is All About

Which of the following is an equivalent term for ʺfull-employment outputʺ?

The group that tends to be most hurt by unexpected inflation is

If nominal national income increased by 10% over a certain period of time while real national income increased by 20%, then

Which of the following statements is logically valid?

The table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant-dollar terms. TABLE 19-1 -Refer to Table 19-1. What is the unemployment rate when this economy is at ʺfull employmentʺ?

Which of the following is the best example of cyclical unemployment?

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?

The table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant-dollar terms. TABLE 19-1 -Refer to Table 19-1. In which years was this economy experiencing an inflationary gap?

Suppose that a price index for a certain basket of goods and services has a value of 150 in 2015 and a value of 156 in 2016. This index suggests that the cost of the market basket of goods and services

In macroeconomics, what is the output gap?

When macroeconomists use the term ʺrecessionʺ they usually define it as a fall in real GDP that lasts for at least

The most common measure of productivity is , which can be measured as real GDP divided by )

If one Canadian dollar can be exchanged for 0.5 euros, we say that the Canadian -euro exchange rate is

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

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

A nationʹs real national income in a given year measures the

How is Canadaʹs unemployment rate determined?

In order to determine the economyʹs real GDP growth rate between two time periods, we should look at

Consider the growth in Canadaʹs labour force and employment. Over the last 50 years,

Consider the situations of a lender and a borrower of money. Which of the following situations is most advantageous to the lender?

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