Lec5 iC Questions

Question 1

A company imports $75,000 worth of materials from Bangladesh. They then hire 4 workers with a total salary of $150,000 to process those materials. The final output is sold for $300,000. How much GDP is created by this company?
(Valued via expenditure, income or output methods)
(Answer to the nearest dollar)

Answer 1

(Expenditure)
GDP = Final Output Value - Imports
GDP = $300,000 - $75,000
GDP = $225,000

(Income)
GDP = Profit + Wages
GDP = $75,000 + $150,000
GDP = $225,000

Question 2

Consider an economy represented by a constant returns to scale production function, with inputs of physical capital, human capital, and labour. All else equal, if the labour force participation rate increases by 10%, what happens to income per capita?

a) Increases by more than 10%
b) Increases by 10%
c) Increases by an amount between 0 and 10%
d) Does not change
e) Decreases

Answer 2

c) Increases by an amount between 0 and 10%

Question 3

Consider an economy represented by a constant returns to scale production function, with inputs of physical capital, human capital, and labour. All else equal, if the labour force participation rate increases by 10%, what happens to productivity (income per worker)?

a) Increases by more than 10%
b) Increases by 10%
c) Increases by an amount between 0 and 10%
d) Does not change
e) Decreases

Answer 3

e) Decreases

Question 4

In December, there were 5,121,500 people between the ages of 15 and 24 in Canada. 2,689,900 of them were employed, 385,100 were unemployed, and 2,055,600 were not in the labour force.

What was the unemployment rate among this group?
(Answer to 1 decimal point)

Answer 4

Unemployment Rate = (Unemployed / Labour Force) X 100
UR = (385,100 / (2,689,900 + 385,100) X 100
UR = 12.6%

Question 5

In December, there were 5,121,500 people between the ages of 15 and 24 in Canada. 2,680,900 of them were employed, 385,100 were unemployed, and 2,055,600 were not in the labour force.

What was the employment rate among this group?
(Answer to 1 decimal point)

Answer 5

Employment Rate = (Employed / Population) X 100
ER = (2,680,900 / 5,121,500) X 100
ER = 52.3%

Question 6

In December 1976, the participation rate for women between the ages of 30 and 34 was 51.7%, while the employment rate was 48.0%

In December 2024, the participation rate for women between the ages of 30 and 34 was 84.7%, while the employment rate was 79.3%

Which of the following statements is true?
a) The unemployment rate for this group was higher in 1976
b) The unemployment rate for this group was higher in 2024
c) The unemployment rate for this group did not change from 1976 to 2024

Answer 6

a) The unemployment rate for this group was higher in 1976

Unemployment Rate = ((Participation Rate - Employment Rate) / Participation Rate) X 100

1976:
UR = ((51.7 - 48.0)/51.7) X 100
UR = 7.2%

2024:
UR = ((84.7 - 79.3)/84.7) X 100
UR = 6.4%

Question 7

The current (seasonally adjusted) unemployment rate in Canada is 6.7%. If we estimate that long-run frictional unemployment is 3.5% and structural unemployment is 2.5%, what is the current rate of cyclical unemployment?
(Answer to 1 decimal point)

Answer 7

Total Unemployment Rate = Frictional + Structural + Cyclical Unemployment Rate
6.7 = 3.5 + 2.5 + CUR
CUR =0.7%

Question 8

Consider a government policy change that increases the value of benefits available through Employment Insurance. What would be the most direct effect on the unemployment rate?

a) A decrease in structural unemployment
b) A decrease in frictional unemployment
c) An increase in structural unemployment
d) An increase in frictional unemployment
e) None of the above

Answer 8

d) An increase in frictional unemployment

Question 9

Consider a government policy change that increases the value of benefits available through Employment Insurance. In addition to the increase in support for unemployed workers, what would be the likely intended benefit of such a policy?

a) An increase in unemployment rates
b) An increase in employment rates
c) An increase in hysteresis
d) An increase in productivity due to better employment matches
e) None of the above

Answer 9

d) An increase in productivity due to better employment matches

Question 10

Since 1980, there has arguably been a long-term reduction in equilibrium unemployment rates. What is the most likely cause?

a) Reduced cyclical unemployment
b) Reduced frictional unemployment
c) Reduced structural unemployment
d) None of the above

Answer 10

b) Reduced frictional unemployment
c) Reduced structural unemployment

Question 11

In December 2024, people in Canada between the age of 25 and 44 with a university degree had an unemployment rate of 4.9% and an employment rate of 87.2%. What was the participation rate of people in this group?
(Answer to 1 decimal point)
(Note - Bachelor’s Degree - 4.7%; above bachelor’s - 5.1%)

Answer 11

Participation Rate = (Employment Rate + Unemployment Rate) / Population

Unemployment Rate = Unemployed / (Employed + Unemployed)

4.9 = (Unemployed / Population) / ((Employed / Population) + (Unemployed / Population))

Unemployed = x
4.9% = x / (87.2% + x)
(4.9% * x) + (4.9% * 87.2%) = x
0.049*0.872 = (1 - 0.049)x
0.042728 = 0.951x
x = 0.0449
Unemployed = 4.49%

Participation Rate = Employment Rate + Unemployment Rate
PR = 87.2 + 4.5
PR = 91.7%

PR = 91.7%