Question 1

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

Accepted Answer

A)  22%. 
B)  20%. 
C)  2.0%. 
D)  1.67%. 
E)  0%. 
A)  22%. 
B)  20%. 
C)  2.0%. 
D)  1.67%. 
E)  0%.

Question 2

Suppose Appliance Mart buys a used refrigerator for $100, repairs it, and resells it for $250. The result of this transaction is to

Accepted Answer

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. 
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.

Question 3

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?

Accepted Answer

A)  trough 
B)  recovery 
C)  peak 
D)  recession 
E)  slump 
A)  trough 
B)  recovery 
C)  peak 
D)  recession 
E)  slump

Question 4

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

Accepted Answer

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. 
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.

Question 5

Suppose Canadaʹs exchange rate with the U.S. dollar increases from 1.14 to 1.22. Which of the following is likely to happen?

Accepted Answer

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 Canadaʹs imports from the U.S. will fall. 
E)  The Canadian dollar value of Canadaʹs exports to the U.S. will fall. 
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 Canadaʹs imports from the U.S. will fall. 
E)  The Canadian dollar value of Canadaʹs exports to the U.S. will fall.

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

The economic problems studied in macroeconomics include:
1) the level of economic activity;
2) competition policy;
3) the rate of unemployment.

Accepted Answer

A)  1 only 
B)  2 only 
C)  3 only 
D)  1 and 2 
E)  1 and 3 
A)  1 only 
B)  2 only 
C)  3 only 
D)  1 and 2 
E)  1 and 3

Question 8

An equivalent term for ʺreal national incomeʺ is

Accepted Answer

A)  nominal national income. 
B)  current-dollar national income. 
C)  constant-dollar national income. 
D)  actual national income. 
E)  potential national income. 
A)  nominal national income. 
B)  current-dollar national income. 
C)  constant-dollar national income. 
D)  actual national income. 
E)  potential national income.

Question 9

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?

Accepted Answer

A)  10% 
B)  7% 
C)  3% 
D)  13% 
E)  17% 
A)  10% 
B)  7% 
C)  3% 
D)  13% 
E)  17%

Question 10

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, software engineers are in increasing demand. These unemployed tellers would be classified as

Accepted Answer

A)  cyclically unemployed. 
B)  frictionally unemployed. 
C)  naturally unemployed. 
D)  structurally unemployed. 
E)  underemployed. 
A)  cyclically unemployed. 
B)  frictionally unemployed. 
C)  naturally unemployed. 
D)  structurally unemployed. 
E)  underemployed.

Question 11

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.

Question 12

Suppose that a countryʹs population is 30 million and it has a labour force of 15 million people. Assuming it has
1)35 million people unemployed, the countryʹs unemployment rate is

Accepted Answer

A)  2.5%. 
B)  3.3%. 
C)  4.5%. 
D)  6.7%. 
E)  9.0%. 
A)  2.5%. 
B)  3.3%. 
C)  4.5%. 
D)  6.7%. 
E)  9.0%.

Question 13

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 the year 2014, it is probably the case that workers are and factories are
)

Accepted Answer

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 
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

Question 14

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 15

The unemployment rate will understate the true amount of unemployment if

Accepted Answer

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. 
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.

Question 16

During the 1970s, Canada experienced an unusual pattern of interest rates. During this period

Accepted Answer

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. 
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.

Question 17

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 output gap in 2012?

Accepted Answer

A)  $420 billion 
B)  $418 billion 
C)  -$2 billion 
D)  -$20 billion 
E)  $2 billion 
A)  $420 billion 
B)  $418 billion 
C)  -$2 billion 
D)  -$20 billion 
E)  $2 billion

Question 18

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

Accepted Answer

A)  business cycle. 
B)  distribution of income. 
C)  inflation rate. 
D)  path of potential output. 
E)  unemployment rate. 
A)  business cycle. 
B)  distribution of income. 
C)  inflation rate. 
D)  path of potential output. 
E)  unemployment rate.

Question 19

Economic theory argues that there will be fewer real effects from inflation as long as the

Accepted Answer

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. 
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.

Question 20

Which of the following correctly describes the meaning of the expression Y < Y*?

Accepted Answer

A)  actual output is less than potential output - a recessionary gap 
B)  potential output is less than actual output - a recessionary gap 
C)  actual output is less than potential output - an inflationary gap 
D)  potential output is less than actual output - an inflationary gap 
A)  actual output is less than potential output - a recessionary gap 
B)  potential output is less than actual output - a recessionary gap 
C)  actual output is less than potential output - an inflationary gap 
D)  potential output is less than actual output - an inflationary gap

Exam 19: What Macroeconomics Is All About

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

Suppose Appliance Mart buys a used refrigerator for $100, repairs it, and resells it for $250. The result of this transaction is to

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?

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

Suppose Canadaʹs exchange rate with the U.S. dollar increases from 1.14 to 1.22. Which of the following is likely to happen?

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

The economic problems studied in macroeconomics include: 1) the level of economic activity; 2) competition policy; 3) the rate of unemployment.

An equivalent term for ʺreal national incomeʺ is

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?

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, software engineers are in increasing demand. These unemployed tellers would be classified as

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

Suppose that a countryʹs population is 30 million and it has a labour force of 15 million people. Assuming it has 1)35 million people unemployed, the countryʹs unemployment rate is

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 the year 2014, it is probably the case that workers are and factories are )

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?

The unemployment rate will understate the true amount of unemployment if

During the 1970s, Canada experienced an unusual pattern of interest rates. During this period

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 output gap in 2012?

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

Economic theory argues that there will be fewer real effects from inflation as long as the

Which of the following correctly describes the meaning of the expression Y < Y*?

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

Trade Policy

Exchange Rates and the Balance of Payments

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