Deck 2: Measuring the Macroeconomy

Question 1

Consumer purchases that are consumed at the time and place of purchase are categorized by the Statistics Canada as

A) durable goods.
B) nondurable goods.
C) services.
D) investments.

Answer 1

C

Question 2

Table 2.1
2012 2013
Quantity Price Quantity Price

Table 2.1 gives quantities and prices for each good produced in a simple economy in 2012 and 2013.
Refer to Table 2.1.GDP in 2013 is

A) $243.00.
B) $267.50.
C) $294.00.
D) $302.50.

Answer 2

D

Question 3

An example of fixed investment spending is

A) the purchase of a new apartment building by a property management company.
B) the purchase of corporate bonds by Microsoft Corporation.
C) the purchase of a new wood chipper by a landscape maintenance company.
D) $4 million in unsold furniture at a home furnishings manufacturer.

Answer 3

C

Question 4

Gross Domestic Product can be described as

A) GNP - income of foreign factors in Canada + income of Canadian factors abroad.
B) GNP - revenue of foreign factors in Canada + revenue of Canadian factors abroad.
C) GNP + income of foreign factors in Canada - income of Canadian factors abroad.
D) GNP + revenue of foreign factors in Canada - revenue of Canadian factors abroad.

Question 5

Which of the following goods is directly counted in GDP?

A) the ground beef that Taco Bell purchases for use in its burritos
B) the tortillas that Taco Bell purchases for its burritos
C) the paper wrap that Taco Bell purchases to wrap its burritos
D) the Burrito Supreme that Sondra purchases for lunch at Taco Bell

Question 6

To make data comparable across countries,and to have uniform methodology of calculating output,countries use the

A) United Nation's System of National Accounts.
B) International Banking System.
C) OECD System of Accounts.
D) World Bank System of National Accounts.

Question 7

National income accounting reveals that the value of total production in an economy

A) is always greater than the value of total income in the economy.
B) is always less than the value of total income in the economy.
C) is always equal to the value of total income in the economy.
D) may be greater than, less than , or equal to the value of total income in the economy.

Question 8

All of the following are examples of residential investment spending,except

A) the purchase of a new apartment building by a property management company.
B) Sandra's purchase of her childhood home from her parents.
C) the purchase of a new home by the MacGregor family.
D) Tobias purchasing a new duplex. Tobias plans to live in one half and rent the other half to his brother Dorian.

Question 9

If we subtract depreciation from GNP,we are left with

A) disposable income.
B) net national product.
C) gross domestic product
D) gross national income.

Question 10

________ payments,which are one of the largest components of a government's budget,are payments by the government to individuals for which the government does not receive a new good or service in return.

A) Subsidy
B) Transfer
C) Support
D) Equilization

Question 11

When exports equal imports,we say that country has a

A) balanced trade.
B) neutral trade deficit/surplus.
C) deficit equality.
D) symmetric trade deficit/surplus.

Question 12

All of the following new construction projects are examples of fixed investment spending,except

A) a dental office.
B) a manufacturing factory.
C) a public library.
D) a shopping centre.

Question 13

The ________ refers to the production and sale of goods and services that are not recorded,either to avoid tax payments or because they are illegal.

A) black market
B) underwater economy
C) underground economy
D) hidden economy

Question 14

________ is/are the main category of expenditure in Canada,amounting to over 55% of GDP.

A) Consumption
B) Investment
C) Government purchases
D) Net exports

Question 15

Suppose Chevrolet produced 90 000 Camaros in Canada in 2012 and during 2012 sold 69 000 to Canadian customers and exported 14 000 to foreign buyers.How many Camaros would Statistics Canada count as investment spending by Chevrolet in 2012?

A) 7000
B) 21 000
C) 76 000
D) 90 000

Question 16

Which of the following is likely to increase measured GDP in Canada?

A) Alberta implements a higher provincial income tax, prompting more Albertans to obtain jobs in the underground economy.
B) Nissan increases production in its Japanese factories to produce more cars for export to Canada.
C) Prostitution is legalized in all provinces.
D) A greater number of men in Manitoba decide to become "stay-at-home dads" to take care of their kids.

Question 17

________ is national income earned by households plus transfer payments minus personal tax payments.

A) Disposable income
B) Net national product
C) Gross domestic product
D) Gross national income

Question 18

Table 2.1
2012 2013
Quantity Price Quantity Price

Table 2.1 gives quantities and prices for each good produced in a simple economy in 2012 and 2013.
Refer to Table 2.1.GDP in 2012 is

A) $190.00.
B) $199.50.
C) $215.00.
D) $267.50.

Question 19

National income accounting reveals that the value of total production in an economy is ________ the value of total income.

A) greater than
B) less than
C) equal to
D) proportionally greater than

Question 20

Gross domestic product is calculated as the sum of the

A) total quantity of final goods and services produced in the economy during a period of time.
B) total quantity of goods and services produced in the economy.
C) total market value of goods and services produced in the economy.
D) total market value of final goods and services produced in the economy during a period of time.

Question 21

If nominal GDP in 2012 was less than real GDP in 2012,we know for certain that

A) the price level in 2012 was greater than the price level in the base year.
B) real GDP in 2012 was greater than real GDP in the base year.
C) the price level in 2012 was less than the price level in the base year.
D) real GDP in 2012 was less than real GDP in the base year.

Question 22

Which of the following could cause nominal GDP to increase and real GDP to decrease?

A) The price level falls and the quantity of final goods and services produced falls.
B) The price level falls and the quantity of final goods and services produced rises.
C) The price level rises and the quantity of final goods and services produced falls.
D) The price level rises and the quantity of final goods and services produced rises.

Question 23

All of the following are government purchases,except

A) the salary paid to Prime Minister Stephen Harper.
B) the pension paid to former Prime Minister John Turner.
C) the purchase of a new office building for the Canadian Security Intelligence Service.
D) the purchase of new radar tracking equipment for the Canadian Navy.

Question 24

Table 2.2
2012 2013
Quantity Price Quantity Price

Table 2.2 gives quantities and prices for each good produced in a simple economy in 2012 and 2013.
Refer to Table 2.2.Calculate GDP in 2012 and 2013.

Question 25

Which of the following does not indicate a change in price levels?

A) inflation rate
B) consumer price index
C) GDP deflator
D) nominal GDP

Question 26

Gross national product (GNP)of Canada is the value of all final goods and services

A) produced anywhere in the world by residents of Canada.
B) produced in Canada by residents of any nation.
C) produced and consumed within Canada.
D) produced anywhere in the world, but consumed by residents of Canada.

Question 27

Nominal GDP is the value of goods and services

A) adjusted for inflation.
B) adjusted for anticipated inflation.
C) using base-year prices.
D) using current-year prices.

Question 28

The purchase by the U.S.government of a fighter jet produced in Canada is included in Canadian

A) consumption spending.
B) investment spending.
C) government purchases.
D) net exports.

Question 29

A country in which a substantial amount of the factories and stores that produce domestic goods and services are foreign-owned is most likely a country in which

A) GDP is much larger than GNP.
B) GNP is much larger than GDP.
C) GDP is roughly equal to GNP.
D) the relationship between GDP and GNP no longer exists.

Question 30

If a U.S.firm opens a production facility in Canada,the profits from this production facility received by the U.S.owners of the firm in exchange for the factors of production they supply will be included in the

A) gross domestic product of the United States.
B) gross national product of Canada.
C) gross national product of the United States.
D) imports from Canada and exports to the United States.

Question 31

Real GDP is the value of goods and services

A) adjusted only for unanticipated inflation.
B) adjusted only for anticipated inflation.
C) using base-year prices.
D) using current-year prices.

Question 32

List and briefly describe the 4 categories of expenditures included in GDP.

Question 33

How would each of the following events likely change measured GDP?
a. The sale and use of marijuana is legalized.
b. There is an increase in sales of counterfeit video games.
c. A foreign-owned furniture manufacturer opens a production facility in Toronto.
d. More people choose to forgo their lawn maintenance services to take care of their own yards.

Question 34

The profits from a Canadian-owned Burger King in France are included in the Canadian ________ and the French ________.

A) GDP; GNP
B) GDP; GDP
C) GNP; GDP
D) GNP; GNP

Question 35

In national income accounting,the value of worn-out or obsolete capital is represented by

A) depreciation.
B) transfer payments.
C) disposable income.
D) dividends.

Question 36

If Statistics Canada uses a base year of 2007 for prices,real GDP will be ________ nominal GDP in 2007.

A) higher than
B) lower than
C) either higher or lower than
D) equal to

Question 37

Economists measure the price level with a(n)________,which is a measure of the average of the prices of goods and services in one year relative to a base year.

A) inflation index
B) chain-weighted index
C) deflation index
D) price index

Question 38

Explain which of the following goods and services are included and which are not included in Canada's GDP:
a. Jacinda buys termite spray at her local Home Depot.
b. Jacinda uses the termite spray she purchased at her local Home Depot to treat her house for termites.
c. Arturo hires a pest control company to treat his house for termites.
d. Jeannine sells her 1969 Pontiac GTO to a local car museum.
e. Simon purchases a new John Deere tractor to use on his farm.
f. Ravi purchases two round-trip airline tickets between Toronto and Montreal.

Question 39

Explain the difference between GDP and GNP.

Question 40

Many provincial and local governments find themselves faced with increasing retirement expenditures for retired government employees.These increasing expenditures will ________ GDP because they are categorized as ________.

A) increase; government purchases
B) increase; gross private domestic investment
C) decrease; state and local government purchases
D) not change; transfer payments.

Question 41

The CPI does a better job than the GDP deflator at measuring changes in the

A) cost of living as experienced by the typical household.
B) standard of living as experienced by the typical household.
C) the price level for the whole economy.
D) the price level for corporations.

Question 42

Pensions,wages,social support payments,tax brackets,and other dollar values are adjusted by the percentage equal to,or related to,the rate of inflation.Such adjusting is called

A) indexation.
B) deflation.
C) price weighting.
D) inflationary reconciliation.

Question 43

Under the inflation targeting framework,introduced in 1991,the Bank of Canada aims to maintain the CPI inflation between

A) 1% and 3%.
B) 1% and 2%.
C) 0% and 2%.
D) 2% and 3%.

Question 44

Table 2.5
2012 2013
Quantity Price Quantity Price

Table 2.5 gives quantities and prices for each good produced in a simple economy in 2012 and 2013.
Refer to Table 2.5.Calculate nominal and real GDP for 2012 and 2013.Assume 2012 is the base year.What is the value of the GDP deflator for 2012 and for 2013?

Question 45

Table 2.4
2011 2012

Refer to Table 2.4.The inflation rate for 2012 is

A) -8.22%.
B) 8.95%.
C) 9.13%.
D) 10.89%.

Question 46

If the GDP deflator is less than 100 in 2013,then nominal GDP ________ real GDP in 2013.

A) is less than
B) is greater than
C) is equal to
D) may be greater than or less than

Question 47

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Assume that 2010 is the base year.The GDP deflator for 2007 is

A) 67.1.
B) 84.5.
C) 100.0.
D) 118.3.

Question 48

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Assume that 2010 is the base year.The GDP deflator for 2010 is

A) 67.1.
B) 84.5.
C) 100.0.
D) 118.3.

Question 49

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Nominal GDP in 2007 is

A) $320.63.
B) $490.00.
C) $568.00.
D) $1282.50.

Question 50

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Nominal GDP in 2010 is

A) $540.00.
B) $568.00.
C) $671.00.
D) $812.00.

Question 51

Table 2.6
2011 2012

Refer to Table 2.6.What is the inflation rate for 2012?

Question 52

Explain the difference between nominal GDP and real GDP.Which is more important when using GDP as a measure of production? Why?

Question 53

Almost ________ of the CPI basket falls into the categories of housing,transportation,and food.

A) two-thirds
B) half
C) one-quarter
D) three-quarters

Question 54

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Assume that 2010 is the base year.Real GDP in 2007 is

A) $490.00.
B) $568.00.
C) $580.00.
D) $671.00.

Question 55

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Assume that 2010 is the base year.Real GDP in 2010 is

A) $490.00.
B) $580.00.
C) $671.00.
D) $812.00.

Question 56

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Assume that 2010 is the base year.The GDP deflator for 2013 is

A) 67.1.
B) 84.5.
C) 100.0.
D) 118.3.

Question 57

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Nominal GDP in 2013 is

A) $568.00.
B) $794.00.
C) $812.00.
D) $961.00.

Question 58

Table 2.4
2011 2012

Refer to Table 2.4.The GDP deflator for 2011 is

A) 86.5.
B) 115.6.
C) 135.1.
D) 156.3.

Question 59

Table 2.3
2007 2010 2013
Quantity Price Quantity Price Quantity Price

Table 2.3 gives quantities and prices for each good produced in a simple economy in 2007, 2010, and 2013.
Refer to Table 2.3.Assume that 2010 is the base year.Real GDP in 2013 is

A) $688.00.
B) $794.00.
C) $812.00.
D) $961.00.

Question 60

Table 2.4
2011 2012

Refer to Table 2.4.The GDP deflator for 2012 is

A) 60.9.
B) 94.3.
C) 106.1.
D) 157.4.

Question 61

The labour force participation rate is

A) the proportion of people 15 years old and over who are in the labour force.
B) the ratio of employed workers to unemployed workers.
C) the percentage of employed workers in the labour force.
D) the percentage of employed workers 15 years old and over who are in the labour force.

Question 62

Which of the following would cause the unemployment rate as measured by Statistics Canada to overstate the true degree of joblessness in the economy?

A) discouraged workers
B) unemployed persons who falsely report themselves as actively looking for a job
C) retired people who have no intention of returning to work
D) people with part-time jobs who would prefer to be working full time

Question 63

Suppose the population of a fictional economy falls into the following categories: 320 are employed full time; 110 are employed part time; 20 are unemployed but are actively looking for employment; 50 are unemployed and are not actively looking for employment.The official unemployment rate as calculated by Statistics Canada would be

A) 4.4%.
B) 5.9%.
C) 14.0%.
D) 28.9%.

Question 64

Which of the following is true about the consumer price index?

A) It is updated continuously to account for the introduction of new goods.
B) It accounts for people switching away from goods whose prices have risen.
C) It assumes that consumers purchase the same quantity of each product in the market basket each month.
D) It accurately reflects quality changes in goods and services over time.

Question 65

Which of the following would cause the unemployment rate as measured by Statistics Canada to understate the true degree of joblessness in the economy?

A) people employed in the underground economy
B) unemployed persons who falsely report themselves as actively looking for a job
C) retired people who have no intention of returning to work
D) people with part-time jobs who would prefer to be working full time

Question 66

Suppose you borrow $2000 for one year and at the end of the year you repay the $2000 plus $110 of interest.The expected inflation rate was 2.2% at the time you took out the loan,but the actual inflation rate turned out to be 3.3%.What was the actual real interest rate you paid?

A) 2.2%
B) 3.3%
C) 5.5%
D) 8.8%

Question 67

When the cost of borrowing funds that is stated on a loan is adjusted for the effects of inflation,the resulting interest rate is called the

A) prime interest rate.
B) nominal interest rate.
C) real interest rate.
D) core PCE interest rate.

Question 68

Suppose the working-age population of a fictional economy falls into the following categories: 30 are retired; 45 are stay-at-home parents; 120 are employed full time; 40 are employed part time; 25 are unemployed but are actively looking for employment; 15 are unemployed and are not actively looking for employment.The official unemployment rate as calculated by Statistics Canada would be

A) 9.62%.
B) 13.51%.
C) 14.55%.
D) 20.0%.

Question 69

________ is/are a particularly serious problem as job skills deteriorate among people who have been out of work for an extended time and it is difficult for them to find new employment.

A) Long-term unemployment
B) Involuntary part-timers
C) Discouraged workers
D) Waiting group

Question 70

The consumer price index is

A) an average of the prices of the goods and services purchased by the typical family.
B) the cost of a market basket of goods and services typically consumed in a base year.
C) the cost of a market basket of goods and services typically consumed in the current year.
D) an average of the prices of new final goods and services produced in the economy over a period of time.

Question 71

Suppose you borrow $8000 for one year and at the end of the year you repay the $8000 plus $600 of interest.The expected inflation rate was 3.5% at the time you took out the loan,but the actual inflation rate turned out to be 2.5%.What was the expected real interest rate at the time of the loan? What was the actual real interest rate you paid? Who gained and who lost from the difference in the expected and actual inflation rates?

Question 72

Identify which of the following people would be considered either employed,unemployed,or not in the labour force:
a. Alejandro just lost his job at an automobile assembly plant and is looking for work in another industry.
b. Bonnie quit her job six months ago to take care of her newborn triplets.
c. Cheyenne just received her bachelor's degree in accounting and is going to backpack through Europe for six months before seeking employment as an auditor.
d. Danitra owns a talent agency which provides clowns for children's birthday parties.
e. Edgar is a full-time student and is working 10 hours each week as a lab assistant at Faber College.
f. Flavio was awarded a $10 million settlement from his former employer and has chosen to retire.

Question 73

Most economists believe there are four reasons the CPI overstates the true inflation rate.List and briefly explain these four reasons.

Question 74

The Bank of Canada may use core CPI,which excludes items such as food and energy,as a measure of inflation because

A) food and energy are necessities, so consumers have no choice but to purchase these.
B) food and energy prices tend to remain stable in the short run, so are not relevant to the calculation of inflation.
C) including food and energy prices tends to overstate the true inflation rate by 0.5% to 1%.
D) food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation.

Question 75

If the real interest rate is 3% and the expected inflation rate is 6%,then the nominal interest rate is

A) 0.5%.
B) 2%.
C) 3%.
D) 9%.

Question 76

The cost of borrowing funds that is stated on a loan is the

A) prime interest rate.
B) nominal interest rate.
C) real interest rate.
D) core PCE interest rate.

Question 77

Suppose you borrow $2000 for one year and at the end of the year you repay the $2000 plus $110 of interest.If the expected inflation rate was 2.2% at the time you took out the loan,what was the real interest rate you paid?

A) 2.2%
B) 3.3%
C) 5.5%
D) 7.7%

Question 78

If the actual inflation rate is less than the expected inflation rate,the actual real interest rate will be ________ than the expected real interest rate.When this happens,________ will lose and ________ will gain.

A) less; borrowers; lenders
B) less; lenders; borrowers
C) greater; borrowers; lenders
D) greater; lenders; borrowers