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Macroeconomics 1020 > Chapter 3-6 multiple choice > Flashcards

Chapter 3-6 multiple choice Flashcards

1
Q

what are the names of the factors of production

A

labour, capital, land, and enterprise

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2
Q

if 120 workers can produce 600 widgets in a day, what is the daily productivity per worker

A

5

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3
Q

what falls under the category of enterprise

A

adopting high-risk innovations,

the org and coordination of a business, and the investigation and establishment of new markets

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4
Q

what is necessary for national income to be in equilibrium

A

S+IM+T=I+X+G

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5
Q

what are examples of the factor land

A

minerals, natural harbours, supplies of fresh water, fertile soil

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6
Q

which is a valid description of economic growth

A

it is an economy’s real GDP per capita, it is an increase in an economy’s total output of goods and services, it usually implies an increase in labour productivity

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7
Q

what does the sum of national income, indirect taxes, and depreciation equal

A

gross national product

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8
Q

what is included by statistics Canada in investment

A

an increase in business inventions from one year to the next

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9
Q

what is regarded as real capita

A

a dump truck

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10
Q

what leads to an understatement of total production

A

the exclusion of work done by homemakers

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11
Q

what will result in an increase in the stock of capital goods

A

net investment is positive

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12
Q

what is the level of savings in an economy with no government and no international trade, if total factor income is $600 and consumption spending is $480

A

$120

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13
Q

what does the simple circular flow show

A

households are buyers of products and sellers of resources

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14
Q

what could cause an increase in nominal GDP

A

an increase in the output of goods and services but no change in prices, an increase in the prices of goods and services but no change in their output, an increase in both the output and the prices of goods and services

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15
Q

what is true about aggregate expenditures

A

at equilibrium it is equal to national income

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16
Q

a high economic growth rate may not mean a better life for the population. what statement supports that contention

A

work such as housecleaning, which used to be entirely a nonmarket activity, is becoming more and more a market activity, higher production has negative side effects, such as more pollution, in the measurement of GDP, no distinction is made as to the type of goods produced

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17
Q

what would be a side effect if one half of the population did the housework for the other half of the population, and vice versa, and each group paid the other for these services

A

GDP would rise

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18
Q

what is included in consumption and investment spending, respectively

A

spending on domestically produced and foreign produced goods and services, and on real capital

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19
Q

how does govern spending on goods and services differ from transfer payments

A

the former represents payments for services performed, but the latter does not

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20
Q

what is true about equilibrium

A

total leakages equal total injections, the value of production equals aggregate expenditures, Y=AE

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21
Q

in equilibrium, the value of production is equal to what (3)

A

the total receipts of all businesses, total income, aggregate expenditures

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22
Q

what is the real rate of interest if the nominal rate of interest is 10 precent and the rate of inflation is 4 percent

A

6 percent

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23
Q

what is a variation os cost-push inflation

A

import-push inflation

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24
Q

what can be said about Canadian’s inflation rate since 2001?

A

it has always been below 3 percent

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25
Q

what type of unemployment is associated with resessions

A

cyclical

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26
Q

what does inflation affect

A

both the level and the distribution of income

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27
Q

suppose that there are 1.2 million unemployed workers, .6 million discouraged workers, and 12 million employed workers. what is the unemployment rate

A

9.1 percent

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28
Q

according to the official statistic Canada definition, what is the minimum amount of time a person must have worked in the previous week in order to be counted as employed

A

60 minutes

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29
Q

if we apply the “rule of 70” what is correct to a known rate of inflation

A

we could calculate the number of years it will take for the price level to double

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30
Q

what statement is correct regarding the GDP deflator

A

it is a price index that can be used to calculate the inflation rate

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31
Q

how is real in come calculated

A

by dividing nominal income by a price index and multiplying the result by 100

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32
Q

what is the cause of cyclical unemployment

A

a downward fluctuation in the business cycle

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33
Q

what would be the effect on the unemployment rate if all the part time workers were to become full time workers

A

it would remain unchanged

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34
Q

what are the reasons why CPI and GDP deflator differ

A

the CPI in an explict index using a constructed bundled of goods; the GDP deflator is an implict, the bundle of goods remains constant with the CPI; the bundle of goods in the GDP deflator changes each year, the CPI does not include capital or government goods and services; the GDP deflator includes both

35
Q

when is the canadian economy considered to be full emoloyment

A

when approx 5 to 7 percent of the labour force is unemployed

36
Q

statement of the natural rate of unemplyment

A

made up of both frictional and structural unemployment, it is the rate of unemployment at full employment, it is when the total number of job vacancies equals the number of people unemployed and is probably about 5-7 percent in cananda today

37
Q

what does okun’s law refer to

A

the relationship between the level of cyclical unemployment and the difference between potential and actual GDP

38
Q

unanticipated increase in inflation

A

it redistributes wealth and income in unpredictable ways, it decreases the purchasing power of money, it benefits debtors at the expense of creditors, it affects some individuals much more than others

39
Q

if the nominal GDP of a country is equal to $560 billion and its real GDP is $470 billion, what is the value of its GDP deflator?

A

119.15

40
Q

which two pieces of info would allow us to calc a GDP deflator

A

nominal gdp and real gdp figures

41
Q

a 35 year old, healthy male who does not work because he has inherited a large fortune would fall into

A

the working age population

42
Q

under what condition could the number of people employed and the number of people unemployed both increase

A

if the number of people in the labour force increased more than the number of people employed

43
Q

how is real GDP calculated

A

dividing nominal GDP by the GDP deflator and multiplying by 100

44
Q

what would be the effect of 100000 unemployed people becoming discouraged workers

A

both unemployment rate and the size of the labour force would decline

45
Q

how does statistic canada define a recession

A

a decline in real GDP over two consecutive quarters

46
Q

why are economists concerned about deflation

A

because it could cause credit markets to freeze up, an, in turn cause economic growth to stop

47
Q

why is the AD curve downward sloping

A

because lower prices cause an increase in real balances, which increases spending

48
Q

why is the AS curve upward sloping

A

because firms will experience higher profits at higher prices and will therefore produce more

49
Q

what will cause the AD curve to shift to the right

A

a decrease in the interest rate

50
Q

when does macroeconomics equilibrium occur

A

when the AD curve interests the AS curve

51
Q

what could cause the level of real GDP to rise but the price level to fall

A

a rightward shift in the AS curve

52
Q

what can cause an increase in potential GDP

A

technological improvement

53
Q

what does the real balance effect mean

A

a higher price will decrease the real value of financial assets thereby causing a decrease in consumption

54
Q

what effect will a decrease in AD have if the economy is in a recession

A

the price level will drop a little, but the real GDP will fall a great deal

55
Q

what is the result of an increase in labour productivity

A

an increase in potential GDP

56
Q

what is the business cycle

A

the expansionary and contractionary phase in the growth rate of real GDP

57
Q

what is meant by the term human capital

A

the accumulated skills and knowledge of human beings

58
Q

what will contribute to economic growth

A

increase levels of human capital, increases in the capital stock, technological improvement, increased quantities of natural resources

59
Q

what are the 4 components of AD

A

consumption, investment, government spending, and net exports

60
Q

what will be the effect on trade of an increase in the canadian price level

A

it will decrease the volume of canadian exports but increase the volume of imports

61
Q

what is the domestic effect of an increase in the incomes of a country’s major international trading partners

A

the AD curve will shift to the right

62
Q

what are the implications if the price level is 100

A

there is as shortage of real output of $250

63
Q

if the aggregate quantity demanded falls by $100 at every price level, what will be the new equilibrium price level and real output, respectively

A

105 and $650

64
Q

at what level of real output will full employment occurs in this economy

A

cannot be determined

65
Q

what is the slope of the AS curve, according to neoclassical economists

A

vertical, at the capacity level of output in the economy

66
Q

what is teh slope of the AS curve according to keynesians

A

horizontal, because wages are inflexible

67
Q

what does the multiplier effect indicate

A

that a change in autonomous expenditures will cause income to change by a larger amount

68
Q

what is the marginal propensity to expend

A

it is the ratio of change in expenditures that result from a change in income

69
Q

what is the effect of a decrease in government spending

A

it leads to an even larger decrease in income

70
Q

what effect does an increase in exports have

A

it leads to an even larger increase in income

71
Q

what is the effect of a decrease in the MTR

A

the MLR will decrease, and the multiplier will increase

72
Q

what is the most important determinant of the level of consumption

A

the level of income

73
Q

what circumstances will lead to a smaller multiplier

A

if the MPS becomes bigger

74
Q

What is correct about the equilibrium level of income?

A

There will be no tendency for firms to increase or decrease production.
Unplanned investment in inventories will not occur.
Leakages equal injection.
Aggregate expenditures equal income.

75
Q

What are induced consumption and the marginal propensity to consume?

A

The amount of consumption that results from higher levels of income and the change in consumption divided by the change in income

76
Q

How is the AE function placed onto the 45 degree graph?

A

It starts on the vertical axis at the level of autonomous expenditures and rises with a slope equal to the MPE

77
Q

If the MPE is equal to 0.4, what is the value of the MLR?

A

0.6

78
Q

If the MPE is equal to 0.4, what is the value of the multiplier?

A

1.67

79
Q

If X is an autonomous $90 (there are no autonomous imports) and the MPM is 0.2, what is the value of Xn at an income of $500?

A

-$10

80
Q

What does the real-balances effect refer to?

A

The effect of a change in consumption on the real value of wealth

81
Q

Which of the following variables in the expenditure model are wholly autonomous, and which are partly induced?

A

I, G, and X are autonomous; S, IM, and C are partly induced

82
Q

Which two of the four components of aggregate expenditures are wholly autonomous?

A

I and G

83
Q

What happens to income earned in Canada?

A

It is spent on consumption, imports, taxes, and saved

84
Q

Graphically, when is the balance of trade equal to zero?

A

When the rising IM line intersects the horizontal X line

Macroeconomics 1020 (4 decks)

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