Question 1

If the Consumer Price Index changes from 120 in the year 2009 to 126 in the year 2011, the average rate of inflation per year over this two- year period is approximately
A)5 percent.
B)3 percent.
C)2.5 percent.
D)1.5 percent.
E)6 percent.

Accepted Answer

The average rate of inflation per year is (126 - 120) / 2 = 3.

Question 2

Consider a small economy with 2500 employed workers who worked a total of 5 million hours at an average wage of $40 per hour. Which of the following is the best measure of labour productivity in this economy?
A)real GDP per employed worker = $80 000
B)real GDP per hour worked = $80
C)real GDP per employed worker = $125 000
D)real GDP per hour worked = $40
E)indeterminable from the information provided.

Accepted Answer

E

Question 3

Suppose the Bank of Montreal wants a five percent real rate of return on all its loans, and anticipates an annual inflation rate of four percent. It should therefore lend its money at a nominal interest rate of
A)ten percent.
B)nine percent.
C)five percent.
D)four percent.
E)one percent.

Accepted Answer

To calculate the nominal interest rate, we need to add the anticipated inflation rate to the desired real rate of return. Therefore, nominal interest rate = real rate of return + inflation rate.
Nominal interest rate = 5% + 4% = 9%. So, the Bank of Montreal should lend its money at a nominal interest rate of nine percent to achieve a five percent real rate of return after accounting for inflation.

Question 4

If constant- dollar national income decreased by $6 billion over a one- year period, then it must be true that
A)aggregate output decreased and the price level increased.
B)the level of individual output decreased.
C)aggregate output decreased.
D)aggregate output increased and the price level decreased.
E)the price level decreased.

Accepted Answer

Constant-dollar national income refers to the real GDP, which is adjusted for inflation. A decrease in constant-dollar national income implies a decrease in real GDP or aggregate output. Therefore, the correct option is C. The remaining options are incorrect because they suggest an increase in the price level, individual output, or aggregate output, which is not consistent with the given information.

Question 5

Short- run fluctuations in real GDP around its trend value are
A)generally ignored by economists, because these fluctuations are constant and predictable.
B)referred to in economics as "background noise".
C)unimportant to the study of macroeconomics.
D)referred to in economics as "the business cycle".
E)generally ignored by economists, because these fluctuations do not affect behaviour of other variables such as the unemployment rate.

Accepted Answer

Short-run fluctuations in real GDP around its trend value are referred to in economics as "the business cycle". This cycle consists of expansions and contractions in economic activity, with fluctuations in output, employment, and other macroeconomic variables. It is an important topic of study in macroeconomics because understanding its causes and consequences is critical for policymakers and businesses.

Question 6

Suppose Canada's exchange rate with the euro rises from 1.2 to 1.4. This rise indicates a(n) of the Canadian dollar, which means it takes Canadian dollars to purchase one euro.
A)appreciation; more
B)depreciation; fewer
C)depreciation; more
D)appreciation; fewer

Accepted Answer

The rise in the exchange rate from 1.2 to 1.4 means it now takes more Canadian dollars to purchase one euro, indicating a depreciation of the Canadian dollar.

Question 7

On a graph showing real national income on the vertical axis and time on the horizontal axis, the fluctuations of real national income around the trend- line would indicate the
A)distribution of income.
B)inflation rate.
C)business cycle.
D)unemployment rate.
E)path of potential output.

Accepted Answer

Fluctuations of real national income around the trend-line would indicate the business cycle, as it reflects the short-term cyclical fluctuations in economic activity. The other options are not directly related to the fluctuations of real national income.

Question 8

The real rate of interest is equal to the nominal interest rate
A)divided by the price level.
B)minus the rate of inflation.
C)plus the price level.
D)plus the risk ratio.
E)multiplied by the rate of inflation.

Accepted Answer

The real rate of interest is equal to the nominal interest rate minus the rate of inflation. This is because the nominal interest rate includes both the real interest rate and the expected rate of inflation. By subtracting the rate of inflation, we can isolate the real rate of interest.

Question 9

Suppose that a price index for a certain basket of goods and services has a value of 150 in 2009 and a value of 156 in 2010. This index suggests that the cost of the market basket of goods and services
A)was approximately the same in 2010 and 2009.
B)was 156 percent higher in 2010 than in 2009.
C)was four percent higher in 2010 than in 2009.
D)was six percent lower in 2010 than in 2009.
E)was six percent higher in 2010 than in 2009.

Accepted Answer

The percentage change in the price index can be calculated as ((156-150)/150)*100 = 4%, therefore the cost of the market basket of goods and services was four percent higher in 2010 than in 2009.

Question 10

An upward trend in real national income over an extended period of time is called
A)economic growth.
B)potential national income.
C)constant- dollar national income.
D)aggregate output.
E)an inflationary boom.

Accepted Answer

Economic growth is defined as a sustained increase in real GDP over time. Real national income is a measure of the total income earned by individuals in a country, adjusted for inflation. Therefore, an upward trend in real national income over an extended period of time is indicative of economic growth. B, C, D, and E are not accurate terms to describe this concept.

Question 11

In macroeconomics, if the value of the national product increases, there is
A)a decrease in the value of income claims on that output, due to importing.
B)an even larger increase in the value of income claims on that output, due to value added.
C)an equal increase in the value of income claims on that output.
D)a decrease in the value of income claims on that output, due to household saving.
E)a decrease in value of income claims on that output, due to taxation.

Accepted Answer

When the value of the national product increases, there is an equal increase in the value of income claims on that output. This is because the national product measures the total value of goods and services produced within a country's borders, and income claims represent the income generated by the production of those goods and services, including wages, profits, and taxes. As the value of the national product increases, so does the income generated by its production, leading to an equal increase in income claims.

Question 12

Workers with experience and skills sometimes lose their jobs and become unemployed due to changing technology or market conditions, even while firms in other industries or regions are looking to hire more workers. This type of unemployment is called
A)historical unemployment.
B)frictional unemployment.
C)natural rate of unemployment.
D)cyclical unemployment.
E)structural unemployment.

Accepted Answer

Structural unemployment is the type of unemployment that occurs due to changes in technology or the structure of the economy, leading to an imbalance between the skills workers have and the skills demanded by employers. It is a long-term phenomenon and does not depend on the overall health of the economy.

Question 13

If 0.75 U.S. dollars can be exchanged for one Canadian dollar, we say that the Canadian- U.S. exchange rate is
A)0.75.
B)1.25.
C)75.
D)1.0.
E)1.33.

Accepted Answer

The answer of If 0.75 U.S. dollars can be exchanged...

Question 14

Suppose the city of Calgary, Alberta has a population of 1 million, a labour force of 575 000, and employment is equal to 545 000. The unemployment rate in Calgary is approximately
A)3.0 percent.
B)5.2 percent.
C)5.5 percent.
D)54..5 percent.
E)57.5 percent.

Accepted Answer

To calculate the unemployment rate, we divide the number of unemployed individuals (which is the labour force minus the number employed) by the labour force:

Unemployment rate = (575,000 - 545,000) / 575,000 = 5.22%

Therefore, the closest answer is B) 5.2 percent.

Question 15

Suppose Canada's exchange rate with the U.S. dollar falls from 1.21 to 1.13. This fall indicates a(n) of the Canadian dollar, which means it takes Canadian dollars to purchase one
U.S. dollar.
A)appreciation; fewer
B)depreciation; more
C)depreciation; fewer
D)appreciation; more

Accepted Answer

The exchange rate falling from 1.21 to 1.13 indicates an appreciation of the Canadian dollar, meaning it takes fewer Canadian dollars to purchase one U.S. dollar.

Question 16

If a country's labour force is 15 million people, and 500 000 of those are unemployed, the country's unemployment rate is
A)2.5 percent.
B)3.3 percent.
C)4.5 percent.
D)6.7 percent.
E)9.0 percent.

Accepted Answer

To calculate the unemployment rate, we need to divide the number of unemployed people by the total labor force and multiply by 100.

Unemployment rate = (Number of unemployed people / total labor force) x 100

In this case, the number of unemployed people is 500,000 and the total labor force is 15 million.

Unemployment rate = (500,000 / 15,000,000) x 100
Unemployment rate = 3.3%

Therefore, the answer is B.

Question 17

Suppose actual output is less than potential output. If the output gap measures the output loss due to the failure to achieve full employment, it can generally be concluded that the larger this output gap, the
A)lower is frictional unemployment.
B)greater is the employment rate.
C)more upward pressure there is on prices.
D)lower the deadweight loss of unemployment.
E)greater is the unemployment rate.

Accepted Answer

When actual output is less than potential output, it indicates that the economy is not operating at full employment, leading to a higher unemployment rate. The larger the output gap, the greater the unemployment rate, as more resources, including labor, are underutilized.

Question 18

If the cyclical unemployment rate is greater than zero, then the
A)economy is operating at less than full employment.
B)economy is operating beyond full employment.
C)economy is operating at full employment.
D)real- wage unemployment rate is negative.
E)frictional unemployment rate is greater than the structural unemployment rate.

Accepted Answer

Cyclical unemployment refers to the unemployment that occurs due to fluctuations in the business cycle. If the cyclical unemployment rate is greater than zero, it means that there are unemployed workers who cannot find jobs due to a lack of demand in the economy. Therefore, the economy is operating at less than full employment.

Question 19

the rate of unemployment.
A)2 only
B)1 only
C)1 and 2
D)1 and 3
E)3 only

Accepted Answer

The answer of the rate of unemployment.
A)2 only
B)1 only
C)1 and...

Question 20

Suppose that a country's population is 30 million and it has a labour force of 15 million people. Assuming it has 1.35 million people unemployed, the country's unemployment rate is
A)2.5 percent.
B)3.3 percent.
C)4.5 percent.
D)6.7 percent.
E)9.0 percent.

Accepted Answer

The answer of Suppose that a country's population is 30...

Quiz 19: What Macroeconomics Is All About

If the Consumer Price Index changes from 120 in the year 2009 to 126 in the year 2011, the average rate of inflation per year over this two- year period is approximately

Consider a small economy with 2500 employed workers who worked a total of 5 million hours at an average wage of $40 per hour. Which of the following is the best measure of labour productivity in this economy?

Suppose the Bank of Montreal wants a five percent real rate of return on all its loans, and anticipates an annual inflation rate of four percent. It should therefore lend its money at a nominal interest rate of

If constant- dollar national income decreased by $6 billion over a one- year period, then it must be true that

Short- run fluctuations in real GDP around its trend value are

Suppose Canada's exchange rate with the euro rises from 1.2 to 1.4. This rise indicates a(n) of the Canadian dollar, which means it takes Canadian dollars to purchase one euro.

On a graph showing real national income on the vertical axis and time on the horizontal axis, the fluctuations of real national income around the trend- line would indicate the

The real rate of interest is equal to the nominal interest rate

Suppose that a price index for a certain basket of goods and services has a value of 150 in 2009 and a value of 156 in 2010. This index suggests that the cost of the market basket of goods and services

An upward trend in real national income over an extended period of time is called

In macroeconomics, if the value of the national product increases, there is

Workers with experience and skills sometimes lose their jobs and become unemployed due to changing technology or market conditions, even while firms in other industries or regions are looking to hire more workers. This type of unemployment is called

If 0.75 U.S. dollars can be exchanged for one Canadian dollar, we say that the Canadian- U.S. exchange rate is

Suppose the city of Calgary, Alberta has a population of 1 million, a labour force of 575 000, and employment is equal to 545 000. The unemployment rate in Calgary is approximately

Suppose Canada's exchange rate with the U.S. dollar falls from 1.21 to 1.13. This fall indicates a(n) of the Canadian dollar, which means it takes Canadian dollars to purchase one U.S. dollar.

If a country's labour force is 15 million people, and 500 000 of those are unemployed, the country's unemployment rate is

Suppose actual output is less than potential output. If the output gap measures the output loss due to the failure to achieve full employment, it can generally be concluded that the larger this output gap, the

If the cyclical unemployment rate is greater than zero, then the

the rate of unemployment.

Suppose that a country's population is 30 million and it has a labour force of 15 million people. Assuming it has 1.35 million people unemployed, the country's unemployment rate is