Intro To Macro

Question 1

What is Macroeconomics?

Answer 1

It is the study of all of the segments of the economy as a whole.

Question 2

What is GDP?

Answer 2

GDP (Gross Domestic Product) measures the total market value of all goods and services produced for final use in an economy.

Question 3

What is the expenditure approach for measuring GDP?

Answer 3

The expenditure approach for measuring GDP uses the formula: C+G+I+(X-M)

C - cost
I - investments
G - Gov't
X - exports
M - imports

Question 4

What is the income approach to calculating GDP?

Answer 4

The income approach to calculating GDP uses the formula: Profit+Income+Interest and Expense Income+Wages

(P+In+E+W)

Question 5

Why did Statistics Canada switch from GNP to GDP in 1986?

Answer 5

This is because GDP gave a better indication of Canadian output.

Question 6

What is Multiple Counting?

Answer 6

Multiple counting is inflating the size of the GDP by including the value of the components of the final goods in the total.

Question 7

What are transfer payments?

Answer 7

Government investments

Question 8

Give 2-3 drawback to GDP.

Answer 8

GDP doesn’t measure:

1) Distribution of income
2) Environmental degradation
3) the Underground Economy

Question 9

Why is a high unemployment rate bad?

Answer 9

A high unemployment rate is bad because this indicates that the economy is not using it’s resources very efficiently, which shows less of economic output.

Question 10

How do you calculate unemployment rate?

Answer 10

UR= #unemployed / labour force • 100

Question 11

What is CPI?

Answer 11

CPI (Consumer Price Index) is a price index that measures changes in prices of consumer goods.

Question 12

How do you calculate CPI?

Answer 12

CPI=Total Spent Yr1 / Total Spent Yr2

Percentage — x100%

Question 13

Give a limitation to CPI.

Answer 13

A limitation to CPI is the weighting of the categories of major components of spending – not every household’s spending habits reflect the index rates of the CPI.

Question 14

What is the difference between GDP and Real GDP?

Answer 14

GDP is the total value of final goods and services produced by an economy in a given year, whereas Real GDP is the total value of all goods and services in a given year ADJUSTED FOR PRICE CHANGES.

Question 15

What is the difference between the GDP deflator and CPI?

Answer 15

The GDP deflator is the price index that includes ALL goods, while CPI only includes consumer goods.

Question 16

Give a criticism to Per-capita GDP.

Answer 16

Everyone’s financial situation and habits are different.

Question 17

What is Full Unemployment?

Answer 17

Full unemployment is considered to be achieved when only frictional and some structural unemployment exists. It is also known as the natural rate of unemployment. In Canada, it is considered to be between 6-7%.

Question 18

What is Structural Unemployment?

Answer 18

Structural Unemployment occurs when the skills/location of workers no longer matches the patterns of demand in the economy.

Question 19

What is Technological Unemployment?

Answer 19

Technological Unemployment occurs when industries use more tech in the production process and thus reducing the need for workers.

Question 20

What is Replacement Unemployment?

Answer 20

Replacement Unemployment results as firms move labour-intensive production to other countries where labour rates are lower. Workers producing in another country replace the local worker.

Question 21

What is Frictional Unemployment?

Answer 21

Frictional Unemployment results from people moving between jobs. A certain amount of this is natural.

Question 22

What is Cyclical Unemployment?

Answer 22

Cyclical Unemployment results from a reduction in overall consumer spending. When demand declines, need for workers decline.

Question 23

What is Seasonal Unemployment?

Answer 23

Seasonal Unemployment is caused by a variation in climate over the course of the year. Stats Canada adjusts for this type.