Question 1

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%. D

Question 2

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

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. D

Question 3

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. E

Question 4

Inflation,the rate of change of average prices in the economy,generally

Accepted Answer

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. 
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.

Question 5

In macroeconomics,the "output gap" is the difference between

Accepted Answer

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. 
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.

Question 6

If 0.75 U.S.dollars can be exchanged for one Canadian dollar,we say that the Canadian-U.S.exchange rate is

Accepted Answer

A) 0.75. 
B) 75. 
C) 1.0. 
D) 1.33. 
E) 1.25. 
A) 0.75. 
B) 75. 
C) 1.0. 
D) 1.33. 
E) 1.25.

Question 7

Most economists believe that the single largest cause of rising material living standards over long periods of time is

Accepted Answer

A) productivity growth. 
B) rising employment. 
C) growth in the capital stock. 
D) real GDP growth. 
E) rising real wages. 
A) productivity growth. 
B) rising employment. 
C) growth in the capital stock. 
D) real GDP growth. 
E) rising real wages.

Question 8

Canada's unemployment rate has been as low as ________ in the 1960s and as high as ________ during the recession in the early 1980s.

Accepted Answer

A) 4.6; 14 
B) 2.0; 15 
C) 5.5; 17 
D) 2.4; 10 
E) 3.4; 12 
A) 4.6; 14 
B) 2.0; 15 
C) 5.5; 17 
D) 2.4; 10 
E) 3.4; 12

Question 9

Economic booms can cause problems as well as create benefits because they are often accompanied by

Accepted Answer

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. 
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.

Question 10

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

Question 11

The Canadian exchange rate is defined to be the

Accepted Answer

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) 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.

Question 12

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 2012,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 13

If constant-dollar national income decreased by $6 billion over a one-year period,then it must be true that

Accepted Answer

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. 
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.

Question 14

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 15

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?

Accepted Answer

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. 
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.

Question 16

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

Accepted Answer

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]. 
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].

Question 17

The real interest rate must be

Accepted Answer

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. 
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.

Question 18

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.

Accepted Answer

A) appreciation; more 
B) appreciation; fewer 
C) depreciation; more 
D) depreciation; fewer 
A) appreciation; more 
B) appreciation; fewer 
C) depreciation; more 
D) depreciation; fewer

Question 19

Short-run fluctuations in real GDP around its trend value are

Accepted Answer

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. 
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.

Question 20

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

Accepted Answer

A) 5 million. 
B) 13 million. 
C) 20 million. 
D) 7.6 million. 
E) 2.6 million. 
A) 5 million. 
B) 13 million. 
C) 20 million. 
D) 7.6 million. 
E) 2.6 million.

Exam 19: What Macroeconomics Is All About

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

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

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

Inflation,the rate of change of average prices in the economy,generally

In macroeconomics,the "output gap" is the difference between

If 0.75 U.S.dollars can be exchanged for one Canadian dollar,we say that the Canadian-U.S.exchange rate is

Most economists believe that the single largest cause of rising material living standards over long periods of time is

Canada's unemployment rate has been as low as ________ in the 1960s and as high as ________ during the recession in the early 1980s.

Economic booms can cause problems as well as create benefits because they are often accompanied by

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

The Canadian exchange rate is defined to be the

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 2012,it is probably the case that workers are ________ and factories are ________.

If constant-dollar national income decreased by $6 billion over a one-year period,then it must be true that

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

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?

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

The real interest rate must be

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.

Short-run fluctuations in real GDP around its trend value are

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

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

Interest Rates and the Capital Market

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

Filters

Canada's unemployment rate has been as low as in the 1960s and as high as during the recession in the early 1980s.

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 2012,it is probably the case that workers are and factories are .

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

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.