Question 1

Suppose that in 2016 Canadaʹs automobile manufacturers produced 2 million cars priced at $20 000 each. And in 2017 they produced 1 million cars priced at $40 000 each. Ceteris paribus, the change in nominal national income is

Accepted Answer

A)  a decrease because fewer cars were produced. 
B)  an increase because the price of each car increased. 
C)  insufficient information to know. 
D)  no change in nominal national income. 
E)  an increase because of inflation.

Question 2

Suppose Canadaʹs exchange rate with the euro rises from 1.2 to 1.4. This rise indicates an) 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

Question 3

If a countryʹs population is 15 million people, and 1 million of those are unemployed, the countryʹs unemployment rate is

Accepted Answer

A)  2.5%. 
B)  3.3%. 
C)  6.7%. 
D)  7.1% 
E)  There is not enough information to know.

Question 4

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.

Question 5

Economists expect some unemployment to exist even at times of ʺfull employmentʺ for, among others, the following reasons:
1) actual GDP is rarely equal to potential GDP;
2) as the economy changes, the structure of the existing labour force is not the same as the structure of labour demand;
3) people entering the labour force typically take some time to find a job.

Accepted Answer

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

Question 6

Suppose the city of Calgary has a population of 1 million, a labour force of 575 000, and employment equal to 545 000. We can conclude that for legal and various other reasons people are excluded from the labour force.

Accepted Answer

A)  30 000 
B)  420 000 
C)  425 000 
D)  445 000 
E)  450 000

Question 7

Real GDP measures

Accepted Answer

A)  the constant-dollar value of the potential output of the nationʹs economy over the period of one year. 
B)  the quantity of total output produced by the nationʹs economy over the period of one year. 
C)  the fluctuations of national income around its long-term trend. 
D)  the annual growth rate of real national income. 
E)  the long-term trend in total output produced by the nationʹs economy.

Question 8

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.

Question 9

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

Accepted Answer

A)  A worker is laid off because his firm has 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 10

In macroeconomics, the ʺoutput gapʺ 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.

Question 11

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%.

Question 12

Macroeconomics is mainly concerned with the study of

Accepted Answer

A)  individual households and how they deal with problems like inflation and unemployment. 
B)  large economic units such as General Motors or Molson Breweries. 
C)  fluctuations and trends in disaggregated data. 
D)  fluctuations and trends in aggregated data. 
E)  governments and their intervention in individual markets.

Question 13

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.

Question 14

The real rate of interest is equal to the nominal interest rate

Accepted Answer

A)  divided by the price level. 
B)  minus the rate of inflation. 
C)  multiplied by the rate of inflation. 
D)  plus the risk ratio. 
E)  plus the price level.

Question 15

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

Question 16

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.

Question 17

Suppose Canadaʹs exchange rate with the U.S. dollar falls from 1.21 to 1.13. This fall indicates an) of the Canadian dollar, which means it takes Canadian dollars to purchase one U.S. dollar.

Accepted Answer

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

Question 18

Suppose that a countryʹs population is 30 million and it has a labour force of 15 million people. If 14.5 million people are employed, the countryʹs unemployment rate is

Accepted Answer

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

Question 19

Consider the situations of a lender of money and a borrower of money. Which of the following situations is
Least burdensome for the borrower?

Accepted Answer

A)  nominal interest rate of 15% and an inflation rate of 8% 
B)  nominal interest rate of 10% and an inflation rate of 1% 
C)  nominal interest rate of 8% and an inflation rate of 2% 
D)  nominal interest rate of 4% and an inflation rate of 4% 
E)  nominal interest rate of 29% and an inflation rate of 21%

Question 20

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

Exam 19: What Macroeconomics Is All About