Chapter 6B MCQ Flashcards
Back in 1911, it took more hours of work to earn enough money to buy sausages than it takes today. T F
True. See examples in text.
Back in the 1970s, the cell phone was invented. This increased the quality of labour. T F
False. The invention of the cell phone, a technological change, increased the quality of capital.
An old friend of mine, Farmer Fred, started using fertilizer back in 1941. This increased the quality of the land. T F
False. Fertilizer is a capital input, so Fred increased the quality of capital.
My sister put $1000 in a savings account in 1935 with a fixed annual interest rate of 1 percent per year, then left the account alone. With compound interest, the savings account balance reached $2000 in 2005. T F
True. Use the rule of 70.
The economy expanded in the early 2000s and hit a peak in 2008. T F
True. High point before the Global Financial Crisis.
Back in my youth, I remember a three quarter contraction in real GDP. This was a recession. T F
True. Two consecutive quarters (or more) of decrease in real GDP is a recession.
If underground economic activity were included in GDP calculations, measured GDP levels would be higher. T F
True. Real GDP omits the underground economy.
Real GDP per person in the United States is much higher than in Canada. Americans are therefore better off than Canadians. T F
False. GDP per person is the best measure of material standards of living, but doesn’t account for many other factors affecting well-being.
If two economies have the same real GDP per person, then the overall well-being must be the same in each economy. T F
False. Real GDP per person is an imperfect measure of well-being: does not include crime, pollution, and freedom
When real GDP equals potential GDP,
all inputs are fully employed.
everyone is getting the most bang per buck for their choices.
the whole is equal to the sum of the well-functioning parts.
all of the above.
d) Definitions of potential GDP = full employment GDP.
If real GDP per person this year is $41 000, and real GDP per person last year was $40 000, then the economic growth rate is
−5.0 percent.
2.5 percent.
−2.5 percent.
5.0 percent.
b) $1000 ÷ $40 000 = 0.025 per person.
Which is not a source of economic growth?
More workers
Better educated workers
Higher stock market prices
Growing quantities of capital equipment
c) Financial assets not part of real GDP and measures of growth
Our long-run standard of living depends most on increases in
population growth.
employment growth
productivity.
land.
c) Getting more for less work.
A recession occurs when real GDP
is negative.
growth is negative.
growth is negative for two quarters in a row.
growth is negative for two years in a row.
c) Definition of recession.
An output gap is
negative if real GDP is above potential GDP.
negative for an inflationary gap.
positive if real GDP equals potential GDP.
positive for an inflationary gap.
d) Real GDP > potential GDP.
Maud and her three sons belong to a church in their hometown of Springfield. The church provides benefits to the community, such as counselling, worship services, and distribution of food and clothing to the poor. Suppose that Maud’s New Year’s resolution for 2020 is to give up her $50 000 a year job to devote all of her time to fundraising for the church. As a result, GDP in 2020
increases by $150 000.
increases by $200 000.
decreases by $50 000.
decreases by $150 000.
c) Voluntary, non-market work is not counted in GDP
Economists estimate the size of the underground economy in Canada to be between 5 and 15 percent ofGDP. Which activities are part of the undergroundeconomy?
Ecstasy sales
Bartender tips
Taxi driver tips
All of the above
d) Income that is illegal or unreported to tax authorities.
Moby goes from a stay-at-home father to a paid worker. He now earns $200 a week but pays $100 a week for day care and $100 a week for a housekeeper. Moby is better off by
$0 and GDP increases by $0.
$0 and GDP increases by $400.
$200 and GDP increases by $0.
$200 and GDP increases by $400.
b) Market transactions are $400, but Moby earns and spends $200 per week.
If real GDP is growing at 7 percent per year,
A.
real GDP will double in 10 years.
B.
potential GDP will double in 5 years.
C.
real GDP will double in 5 years.
D.
nominal GDP will double in 10 years.
A.
real GDP will double in 10 years.
According to the Rule of 70, the number of years it takes for an initial amount to double is roughly 70 divided by the annual percentage growth rate of the amount. In this case, 70 divided by 7 equals 10 years for real GDP to double.
What is the key measure of our standard of living?
A. increasing the size of the labour force
B. productivity
C. increasing the land base
D. real GDP per person
D. productivity
What is the key measure of our standard of living?
A. increasing the size of the labour force
B. productivity
C. increasing the land base
D. real GDP per person
D. real GDP per person
What is the key measure of our standard of living?
A. increasing the size of the labour force
B. productivity
C. increasing the land base
D. real GDP per person
D. productivity
If real GDP per person this year is $31 comma 500, and real GDP per person last year was $30 comma 000, then the economic growth rate is
A.
9.00%
B.
4.76%
C.
4.00%
D.
5.00%
D. 5%
31,500 - 30,000 / 30,000 = 0.05 X 100%
In 2013, nominal GDP was $350 and real GDP was $200. In 2014, nominal GDP was $420 and real GDP was $220. What is the growth rate of real GDP between 2013 and 2014?
A.
20%
B.
110%
C.
75%
D.
10%
d. 10%
220 - 200 / 200 = .10 x 100%