Chapter 19

Question 1

The value of total production of goods and services in Canada is called its _____. National _____ and national _____ are equal because all production generates a claim on its value in the form of income.

Answer 1

national income, income, product

Question 2

In measuring​ Canada’s total​ output, it would be meaningless to add together all goods and services produced during one year​ (i.e., 50 comma 000 trucks plus 14 million dozen eggs plus 100 million​ haircuts, etc.).​ Instead, total output is measured in _____.

Answer 2

dollars

Question 3

The difference between nominal national income and real national income is that with the​ latter, ____ are held constant to enable us to see changes in ______

Answer 3

prices, quantity

Question 4

If all of​ Canada’s resource its ​land, labour, and capital are being employed at normal levels of​ utilization, then we say that Canada is producing its _____ output

Answer 4

potential

Question 5

The output gap measures the difference between _____ and _____GDP. During booms ____ and during recessions _____

Answer 5

potential, actual, Y>Y*, Y

Question 6

The labour force includes people who are ____and people who are _____. The unemployment rate is expressed as the number of people who are _____ as a percentage of people ______

Answer 6

unemployed, employed, unemployed, in the labour force

Question 7

At any point in​ time, some people are unemployed because of the normal turnover of labour​ (new entrants to the labour​ force, job​ leavers, and job​ seekers). This unemployment is referred to as ______.Some people are unemployed because their skills do not match the skills necessary for the available jobs. This employment is referred to as ______.

Answer 7

frictional, structural

Question 8

Suppose 2002 is the base year in which the price of a basket of goods is set to be 100. If the price of the same basket of goods in 2019 is 137 then we can say that the price level is ____ and that the price of the basket of goods has increased by ____ percent between 2002 and 2019

Answer 8

137, 37

Question 9

Canada’s CPI in 2016 was 128.4 and in 2017 was 130.4 The rate of inflation during that​ one-year period was ____ percent

Answer 9

1.6

Question 10

The price that is paid to borrow money for a stated period of time is known as the _____.

Answer 10

interest rate

Question 11

The real interest rate is equal to the nominal interest rate ______ the rate of inflation.

Answer 11

minus

Question 12

The number of Canadian dollars required to purchase one unit of foreign currency is the _____ between the foreign currency and the Canadian dollar.

Answer 12

exchange rate

Question 13

______ in the exchange rate reflects a depreciation of the Canadian​ dollar; in the exchange rate reflects an appreciation of the Canadian dollar.

Answer 13

increase, decrease

Question 14

Explain why people may decide to join the labour force during booms. People may decide to join the labour force during booms because a. there is a decline in productivity and hence an increase in salaries. b. more jobs become available and hence there are more opportunities to find a job c. there is a rise in​ productivity, hence more workers are required in the labour market. d. there is a decline in productivity and hence an increase in salaries.

Answer 14

b

Question 15

Explain why the unemployment rate might rise during a​ boom, even when the level of employment is rising. The increase in _____ reflects the new hiring by firms to produce more output. The increase in _______ reflects an increase in the labour force. If the rise in the labour force ____ ​(in absolute​ number) the rise in​ employment, then the number of unemployed workers will increase.

Answer 15

employment, unemployment, exceeds

Question 16

During a​ recession, suppose unemployed workers leave the labour force because they are discouraged about their inability to find a job. What happens to the unemployment​ rate? The unemployment rate is likely A. to decrease because both number of people unemployed and number of people in the labour force decrease by the same absolute amount. B. not to change because after the recession some workers will return to the labour force. C. not to change because both number of people unemployed and number of people in the labour force decrease by the same percentage. D. to increase because number of people unemployed does not change and number of people in the labour force decreases.

Answer 16

A

Question 17

​”A declining unemployment rate is a clear positive sign for the​ economy.” Is this statement true or​ false? A. It is true because there is always a decline in unemployment rate during the periods of rapid economic growth. B. It is false because a rise in national income is associated with rise in​ productivity, not employment. C. It is false because there can be a decline in unemployment rate during recessions due to discouraged workers. D. It is true because if there are less unemployed​ people, all the people are materially better off.

Answer 17

C

Question 18

Consider an imaginary​ 10-year period over which output per person falls but GDP increases. How can this​ happen? This is possible if A. the number of people in the corresponding population is stable B. the rate of increase in the other factor of productions is high C. the rate of technical progress is small D. the rate of unemployment is constant

Answer 18

C

Question 19

Do you think this is likely to be good for the​ economy? Such a​ long-term decline in output per person is probably A. undesirable because average living standards will be declining. B. desirable because on average​ people’s welfare will increase due to increase in GDP. C. highly recommended because after some period of time it enables the economy to implement the latest technologies. D. nonsignificant for the economy because it does not prevent a rise in GDP.

Answer 19

A

Question 20

When the Canadian dollar depreciates in​ foreign-exchange markets, many people view this as​ “good” for the Canadian economy. Who is likely to be harmed by and who is likely to benefit from a depreciation of the Canadian​ dollar? A depreciation of the Canadian dollar is beneficial for A. sellers of Canadian goods abroad and harmful for Canadian buyers of foreign goods B. Canadian government and harmful for the Canadians. C. Canadas imports and harmful for canadas exports D. all participants of Canadas international trade process

Answer 20

A

Question 21

Compute the output gap for each year as a percentage of potential output.

Answer 21

Question 22

Explain how GDP can exceed potential GDP. GDP can exceed potential GDP

A. when capital and land are used less intensivly as normal

B. when labor works overtime

C. when​ capital, land, and labour are used at their standard rate.

D. only if there are some statistical errors.

Answer 22

B

Question 23

Does real GDP ever fall in the time period​ shown?

In the time period​ shown, _____ falls in real gdp.

Answer 23

there are no

Question 24

What do economists call such​ periods?

Economists call the periods when real GDP falls _____

Answer 24

recessions

Question 25

What is the unemployment rate when this economy is at​ “full employment”?

The unemployment​ rate, when this economy is at​ “full employment,” is ___%

Answer 25

7.9

Question 26

What kind of unemployment exists during​ “full employment”? ​(Select all that​ apply.)

A. Structural

B. Cyclical

C. Frictional

Answer 26

A,C

Question 27

With the information​ provided, determine the unemployment rate for each of these hypothetical economies.

a. Labour force equals=20 million; number of people

unemployed = 23 million; population = 34 million

b. Number of people employed equals = 13million; labour force equals = 16 million
c. Number of people unemployed equals = 700,000; number of people employed equals = 2.25 million
d. Labour force equals = 8.2​ million; number of people

unemployed equals = 300,000​; population equals = 12.4 million

a. The unemployment rate is ___ percent
b. The unemployment rate is ___ percent
c. The unemployment rate is ___ percent
d. The unemployment rate is ___ percent

Answer 27

a. 11.5
b. 18.8
c. 23.7
d. 3.7

Question 28

a.​ & b. For each of the four​ years, compute real GDP per worker - a standard measure of labour productivity - and a slightly more complex measure of labour productivity - real GDP per hour worked. ​(Round your answers to the nearest​ cent.)

Answer 28

Question 29

c. For the​ 15-year period, compute the total percentage change for real GDP and both measures of productivity. ​(Round your answers to two decimal​ places.)

Real​ GDP:__​%

Real GDP per​ worker:__​%

Real GDP per hour​ worked:__%

Answer 29

Question 30

Which currencies appreciated relative to the Canadian dollar from February 2017 to February 2018​?​ (Select all that​ apply.)

A. Japanese yen

B. U.S. dollar

C. Swedish krona

D. Euro

E. British pound

Answer 30

C,D,E

Question 31

Which currencies depreciated relative to the Canadian dollar from February 2017 to February 2018​?​ (Select all that​ apply.)

A. U.S. dollar

B. Swedish krona

C. Japanese yen

D. Euro

E. British pound

Answer 31

A,C

Question 32

Suppose Honest​ Rob’s Used Cars buys a used car for $3,000 and resells it for​ $4,500. The result of Honest​Rob’s transactions is to

A. decrease the value of national income by​ $1,500.

B. Increase the value of national income by​ $4,500.

C. increase the value of national income by​ $1,500.

D. decrease the value of national income by​ $4,500.

E. leave the value of national income unchanged.

Answer 32

C

Question 33

Consider a small economy with 3 individuals. Individual A produces 110 chickens that sell for​ $6each. Individual B produces 50 bags of corn that sell for​ $9 each. Individual C produces 50 bushels of apples that sell for​$25 each. What is the national product in this economy?

A.The national product is 210 units of goods produced.

B.The national product is​ 2,360.

C.The national product is 110 chickens plus 50 bags of corn plus 50 bushels of apples.

D.The national product is​ 1,890.

E.The national product cannot be determined from the information provided.

Answer 33

B

Question 34

If a​ country’s labour force is 12 million​ people, and 1.10 million of those are​ unemployed, the​ country’s unemployment rate is

A. 6.3 percent.

B. 7.4 percent.

C. 8.1 percent.

D. 8.6 percent.

E. 9.2 percent.

Answer 34

E

Question 35

Consider a small economy with real GDP of​ $1.5 billion and the number of workers employed equal to 1,000. Which of the following is a measure of labour productivity in this​ economy?

A. real GDP per employed worker equals =​ $667667

B. real GDP per employed worker equals =​ $15001500

C. real GDP per employed worker equals = ​$1,500,000

D. employed worker per dollar of real GDP equals = 667

E. employed worker per dollar of real GDP equals = 1500

F. employed worker per dollar of real GDP equals = 1,500,000

G. indeterminable from the information provided

Answer 35

C

Question 36

Which of the following is the main result of​ long-term economic​ growth?

A. rising average living standards

B. increasing inflation rate

C. appreciation of the domestic currency

D. decreasing interest rates

E. decreasing unemployment rate

Question 37

Which of the following events is associated with short term fluctuations rather than long term​ growth?

A. Government budget deficits that drive up interest rates and reduce investment

B. A policy designed to control inflation

C. Increases in the exhange rate due to the political uncertainty caused by elections

D. A higher stock of physical capital

Answer 37

C

Question 38

Which of the following events is associated with​ long-term growth rather than​ short-term fluctuations?

A. Decreasing interest rates durng recessions

B. An increase in the overall education level

C. An increase in the price of oil due to uncertainty of election results in a major oil producing country

D. A reduction in stock prices during the election period

Answer 38

B

Question 39

Which of the following statements is​ true?

A.​ Short-term growth has considerably more importance for a​ society’s living standards from decade to decade and from generation to generation.

B. Most economists agree that the increase in inflation in the 1970s and early 1980s was related to budget deficits.

C. Both total output and output per person have risen for many decades in most developing countries.

D. Understanding business cycles requires an understanding of monetary policy.

Answer 39

D

Question 40

In which years was this economy experiencing a recessionary​ gap?

A. 2001, 2004

B. 2005, 2006

C. 2001, 2002, 2003

D. 2001, 2006

E. 2002, 2006

Answer 40

D

Question 41

What is the output gap in 2001​?

A.​ $405 billion

B.​ $401 billion

C.​ $7.1 billion

D. −$4 billion

E. $4 billion

Answer 41

D

Question 42

If the Consumer Price Index changes from 129 in the year 2009 to 135 in the year​ 2011, the average rate of inflation per year over this​ two-year period is approximately

A. 6.7 percent.

B. 1.1 percent.

C. 4.7 percent.

D. 3.4 percent.

E. 2.3 percent.

Answer 42

E

Question 43

Assume that Sarah agrees to lend​ $100 to Sam for one year. Sam agrees to pay Sarah​ $111 at the end of the year. If inflation over that one year is 8​%, what real rate of interest does Sarah earn on her​ $100?

A. 19​%

B. 12​%

C. 8​%

D. 3​%

E. 11​%

Answer 43

D

Question 44

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

A. nominal interest rate of 7​% and an inflation rate of 5​%

B. nominal interest rate of 11​% and an inflation rate of 2​%

C. nominal interest rate of 26​% and an inflation rate of 20​%

D. nominal interest rate of 7​% and an inflation rate of

3​%

E. nominal interest rate of 15​% and an inflation rate of 9​%

Answer 44

A

Question 45

If 0.80 Canadian dollars can be exchanged for one

U.S.​ dollar, we say that the​ Canadian-U.S. exchange rate is

A. 1.0.

B. 80.0.

C. 0.80.

D. 1.17.

E. 1.25.

Answer 45

C

Question 46

The value of the national output of Oaksville is​ $

Answer 46

Question 47

The expenditures of a typical family on gas​, food​,and clothing in 2009 and 2010 are given in the table below. Assume quantities are constant from 2009 to 2010.

When the base year is 2009 the value of Consumer Price Index​ (CPI) for year 2010 is ____

The inflation rate during 2009 – 2010 period is ___%

Answer 47

105.88, 5.88

Question 48

If the unemployment rate in Forrestville is 15​% and there are 67,000 people in the labour​ force, then there are ___ people employed in Forrestville.

Answer 48

56,950

Question 49

Anne lends Sheila ​$80 for tuition expenses at the beginning of the fall semester.

If the inflation rate is expected to be 6​% and Anne asks Sheila to pay​ $88 at the end of the​ semester, then the real rate of interest earned by Anne is__%

Answer 49

4

Question 50

The table shows CPI values for a​ five-year period. In this​ economy, the inflation rate was highest for the _____ period, and it was the lowest for the _____ period.

Answer 50

2005 - 2006, 2007 - 2008

Question 51

The expenditure behaviour of a typical student in 2005 and 2010 is summarized in the tables below. Assuming the base year is​ 2005, the CPI for the year 2010 is ____

Answer 51

114.9