Practice Midterm Flashcards
If the average income of an Australian is higher than the average of a Russia, it is most likely because
- productivity is higher in Australia than in Russia
If the government wanted to enact a policy to increase living standards in the country, it might
- increase educational opportunities for workers
When the German government increased the quantity of money in the German economy in the 1920s
- Germany experiences hyperinflation
Since the early 1990s, inflation in Canada
- has been about 2 per cent per year
Macroeconomists study
- economy wide phenomena
If Susan decides to change the oil in her car herself instead of having speedy lube change the oil for her, GDP
- necessarily falls
GDP
- excludes the value of intermediate goods because their value is already counted in the value of final goods
A movie company makes 50,000 DVDs of one of its latest releases. It sells 300,000 of them before the end of the second quarter, and holds the other in its warehouse.
- the DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP
An American company owns a fast food restaurant in Romania. The value of goods and services it produces is included in
- in Romania GDP, but not in U.S. GDP
Transfer payments are
- not included in GDP because they are not payments for currently produced goods or services
In 2015, Canadian GDP was about
- $2 trillion
If in a given year an economy has consumption of $3000, investment of $2000, government purchases of $1500, exports of $500, imports of $600, taxes of $1200, transfer payments of $400, and depreciation of $300, ten GDP will equal
- $6400
Suppose GDP consists of wheat and rice. In 2002, 20 bushels of wheat are sold at $4/bushel, and 10 bushels of rice are sold at $2/bushel. If the price of wheat was $2/bushel and the price of rice was $1/bushel in 200, the base year, nominal 2002 GDP is
- $100, real 2002 GDP is $50, and the GDP deflator is 200
If a small country has current nominal GDP of $20 billion and a GDP deflator of 50, what is its real GDP
- $40 billion
International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with
- longer life expectancy and a higher percentage of the population that is literate
The CPI is a measure of the overall cost of
- goods and services bought by a typical consumer
The price index is 320 in one year and 360 in the next. What was the inflation rate?
- 12.5 per cent
When the relative price of a good increases, consumers will respond by buying
- less of it and more of its substitutes
Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2003 for $25. If the price index was 38.8 and is 180 in 2003, what’s the price of a 1970 bag of groceries in 2003 prices
- $37.11
If the nominal interest rate is 8 per cent and rate of inflation is 2 per cent, the real interest rate is
- 6 per cent
The average amount of goods and services produced from each hour of a worker’s time is called
- productivity
The equipment and structures available to produce goods and services are called
- physical capital
Examples of human capital
- knowledge acquired from early childhood education programs
- knowledge acquired from grade school
- knowledge acquired from the on-the-job training
The catch-up effect refers to the idea that
- it is easier for a country to grow fast if it starts out relatively poor
Which of the following represents national saving in a closed economy?
- Y-C-G
In a closed economy, public saving is the
- amount of ta revenue that the government has left after paying for its spending
If the tax revenue of the federal government exceeds spending, then the government
- runs a budget surplus
If there is a surplus of loanable funds, then
- neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium
Suppose parliament institutes an investment tax credit. What would happen in the market for loanable funds?
- the interest rate and investment would rise
The ratio of debt to GDP in Canada tends to fall
- during the late 1990s
Federal government fiscal policies have redistributed large amounts of money across regions in the last 40 years. In per capita terms, the primary recipient has been the province of ___ while the primary contributor has been the province of ____.
- Prince Edward Island, Alberta
The Canadian province with the highest per capital market income levels over rate last 40 years has been
- Ontario
Staple dependent economies tend to be
- unstable
What is the future value of $750 one year from today if the interest rate is 3 per cent?
- 772.50
Jackie puts $400 into an account where the interest rate is 10 per cent. Later she checks her balance and finds it’s worth about $708.62. How many years did she wait to check her balance?
- 6 years
The natural rate of unemployment is the
- amount of unemployment that the economy normally experiences
The labour force equals the
- number of people employed plus the number of people unemployed
The U.S. Bureau of Labour Statistics recently reported that there were 48.6 million people over age 25 who at least had a bachelor’s degree. Of this number, 38.0 million were in the labour force and 36.9 million were employed. What were the labour-force participation rate and the unemployment rate fro this group?
- about 78 per cent and about 2.9 per cent
Tom is looking for work after school, but everywhere he fills out an application he is told that so have lots of others. Simon has a law degree. Several firms have made him offers, but he think she might be able to find a firm where his talents could be put to better use.
- Tom is structurally unemployed, and Simon is frictionally unemployed
When Arnold uses dollars to record his income and expenses, he is using money as a
- unit of account
Fiat money
- has no intrinsic value
Savings deposits are included in
- M2 but not M1
The federal reserve is the
- U.S. central bank
When Bank of Canada wants to change the money supply, it most frequently
- conducts open market operations
Bank of Canada can increase the money supply by conducting open market
- purchases and lowering the bank rate
Suppose that the reserve ratio is 5 per cent and that a bank has $1,000 in deposits. Its required reserves are
- $50
If the reserve ratio is 10 per cent, the money multiplier is
- 10
Which list contains actions that decrease the money supply
- raise the bank rate, raise the reserve requirement ratio
Which of the following is not a tool of monetary policy
- increasing the deficit
The bank rate is
- the interest rate Bank of Canada charges banks
According to the classical dichotomy, which of the following is influenced by monetary factors?
- nominal interest rates
The velocity of money is
- the average number o timers per year a dollar is spent
If Y and V are constant, and M doubles, the quantity equation implies that the price level
- doubles
Menu costs refer to
- the cost of more frequent price changes due to higher inflation
A short period of falling incomes and rising unemployment is called a
- recession
During a recession the economy experiences
- falling employment and income
Business cycles
- are fluctuations in real GDP and related variables over time
