EC140 Final Exam

Question 1

What is Macroeconomics?

Answer 1

Macroeconomics is the study of the determination of economic aggregates, such as total output, total employment, the price level, and the rate of economic growth.

Question 2

Describe what National Product + National Income mean

Answer 2

Value of its total production of goods and services, referred to as national product ; output.

Question 3

What is Nominal National Income?

Answer 3

Nominal national income is the total national income measured in current dollars. Also called current-dollar national income.

Question 4

What is Real National Income?

Answer 4

National income that is measured in constant (base-period) dollars. It changes only when quantities change.

Question 5

What is Real GDP and what does it measure?

Answer 5

Real GDP measures the quantity of total output produced by the nation’s economy during a year.

Question 6

What is a recession?

Answer 6

A fall in the level of real GDP. Often defined precisely as two consecutive quarters of negative growth in real GDP.

Question 7

What is a business cycle?

Answer 7

Fluctuations of real national income around its trend value that follow a more or less wavelike pattern.

Question 8

What is potential output (Y*)?

Answer 8

The real GDP that the economy would produce if its productive resources were fully employed. Also called potential GDP.

Question 9

What is an output gap?

Answer 9

Actual output minus potential output, in other words (Y - Y*)

Question 10

What is a recessionary gap?

Answer 10

A situation in which actual output is less than potential output, in other words (Y < Y*)

Question 11

What is an inflationary gap?

Answer 11

A situation in which actual output exceeds potential output, (Y > Y*)

Question 12

What is employment in macroeconomics?

Answer 12

The number of persons 15 years of age or older who have jobs

Question 13

What is unemployment in macroeconomics?

Answer 13

The number of persons 15 years of age or older who are not employed and are actively searching for a job.

Question 14

What is the labour force in macroeconomics?

Answer 14

The number of persons employed plus the number of persons unemployed

Employed + # Unemployed

Question 15

What is the unemployment rate and how is it calculated?

Answer 15

Unemployment expressed as a percentage of the labour force.

Unemployment Rate =

(# of people unemployed / # of people in the labour force) x 100

Question 16

What is potential GDP?

Answer 16

An estimate of the value of output that the economy would have produced if labour and capital had been employed at their maximum sustainable rates.

Question 17

What is actual GDP?

Answer 17

An inflation adjusted measure that reflects the value of goods and services produced by an economy in a given year.

“Constant price” or “Inflation corrected” or “Constant dollar” GDP.