Lec4 iC Questions

Question 1

In the 2024 Fall Economic Statement, the Ontario Ministry of Finance projects that in 2025, real GDP in Ontario will grow 1.7%, while nominal GDP will grow by 3.9%. What is the projected increase in prices of goods and services produced in Ontario?
(Answer to 1 decimal point)

Answer 1

Inflation = Nominal GDP - Real GDP
= 3.9% - 1.7%
= 2.2%

Question 2

Goods and services produced at home (homegrown food, meals cooked, child-care provided, home renovations, etc.) are not usually measured in GDP as there is no available information about their value. This means that GDP tends to…

a) Understate the average well-being in society
b) Correctly value average well-being in society
c) Overstate average well-being in society
d) None of the above

Answer 2

a) Understate the average well-being in society

Question 3

If the government of Canada wanted to increase long run GDP per capita in Canada, which of the following should they promote?

a) Increased labour supply
b) Increased human capital (or educational attainment)
c) Increased investment in physical capital
d) Improvements in technology
e) None of the above

Answer 3

There isn’t necessarily a correct answer

d) Improvements in technology
is the best choice

Question 4

According to the textbook, it took roughly 600 years (from 1200 CE to 1800 CE) for worldwide GDP per capita to double from $200 to $400. Using the rule of 70, what was the approximate growth rate of the world economy over this time?
(Answer to 1 decimal point)

Answer 4

Doubling Time (years) = 70 / Growth Rate

Growth Rate = 70 / Doubling Time
GR = 70 / 600
GR = 0.1%

(Not 11.7%, the output is already in percentage form)

Question 5

Real GDP per capita (in 2017 dollars) increased from $19,735 in 1960 to $56,866 in 2023. Over this 63 year period, what was the average growth rate of real GDP per capita?
(Answer to 1 decimal point)

Answer 5

Y2 = Y1(1+GR)^63
GR = (Y2/Y1)^(1/63) - 1
GR = (56,866/19,735)^(1/63) - 1
GR = 1.7%

Question 6

Consider an economy represented by a constant returns to scale production function. If you increase all inputs by 5%, how much does total income change?

a) More than 5%
b) Equal to 5%
c) Positive, but less than 5%
d) No change
e) Decrease

Answer 6

b) Equal to 5%

Question 7

Consider an economy represented by a constant returns to scale production function. If you increase all inputs by 5% (population, labour, capital, human capital, etc.), how much does income per capital change?

a) More than 5%
b) Equal to 5%
c) Positive, but less than 5%
d) No change
e) Decrease

Answer 7

d) No change

Total income would rise, but not income per person

Question 8

Consider an economy represented by a constant returns to scale production function with multiple inputs (physical capital, human capital, labour). If you increase physical capital by 5%, how much does income per capita change?

a) More than 5%
b) Equal to 5%
c) Positive, but less than 5%
d) No change
e) Decrease

Answer 8

c) Positive, but less than 5%

Question 9

Consider an economy represented by a constant returns to scale production function with multiple inputs (physical capital, human capital, labour). If you increase the population (and labour supply) by 5%, how much does income per capita change?

a) More than 5%
b) Equal to 5%
c) Positive, but less than 5%
d) No change
e) Decrease

Answer 9

e) Decrease

Question 10

Consider an economy represented by a constant returns to scale production function with multiple inputs (physical capital, human capital, labour). If you increase the labour supply (but not the population) by 5%, how much does income per capita change?

a) More than 5%
b) Equal to 5%
c) Positive, but less than 5%
d) No change
e) Decrease

Answer 10

c) Positive, but less than 5%

Question 11

Based on the results of the Solow model. which of the following is most likely to cause long-term growth in GDP per capita in Canada?

a) Increases in population
b) Increases in education rates
c) Increases in capital investment
d) Increases in technological development
e) None of the above

Answer 11

b) Increases in education rates
c) Increases in capital investment
d) Increases in technological development

Question 12

Which of the following is easiest for the government of Canada to cause through policy design?

a) Increases in population
b) Increases in education rates
c) Increases in capital investment
d) Increases in technological development
e) None of the above

Answer 12

a) Increases in population
b) Increases in education rates
c) Increases in capital investment
d) Increases in technological development

Ken Jackson personally says a)