Question 1

If nominal national income increased by 10 percent over a certain period of time while real national income increased by 20 percent, then

Accepted Answer

Real national income accounts for inflation, so if real income increased by 20% and nominal by only 10%, the price level must have decreased to account for the difference, indicating a decline of about 10%.

Question 2

Suppose the city of Calgary has a population of 1 million, a labour force of 575 000, and employment equal to 545 000 . We can conclude that for legal and various other reasons people are excluded from the labour force.

Accepted Answer

The labour force is the number of people who are employed or unemployed but actively seeking work. The population of Calgary is 1 million, and the labour force is 575,000. This means that there are 1,000,000 - 575,000 = 425,000 people who are not in the labour force.

Question 3

Suppose that in 2010 Canada's automobile manufacturers produced 2 million cars priced at $20 000 each. And in 2011 they produced 1 million cars priced at $40 000 each. Ceteris paribus, the change in nominal national income is

Accepted Answer

Nominal national income remains unchanged because the total revenue from car production is the same in both years: 2 million cars x $20,000 = $40 billion in 2010 and 1 million cars x $40,000 = $40 billion in 2011.

Question 4

In some macroeconomic analyses, it is common to treat the level of productivity as roughly constant. This is a justifiable assumption in

Accepted Answer

In the short run, productivity is often assumed to be constant because changes in technology or efficiency typically take time to implement and are not immediate.

Question 5

As the banking industry becomes more and more automated, tellers find themselves with unneeded skills and some of them become unemployed. At the same time, computer programmers are in high demand. These unemployed tellers would be classified as

Accepted Answer

The situation described in the question is an example of structural unemployment, which occurs when there is a mismatch between the skills and abilities of the workforce and the requirements of the available jobs. As the banking industry becomes more automated, the skills of tellers become outdated and they are no longer needed, which leads to unemployment. This is a long-term phenomenon rather than a temporary one (frictional unemployment) or a result of changes in the business cycle (cyclical unemployment). It is also not a natural or voluntary choice by the workers (natural unemployment or underemployment). Thus, C is the best choice.

Question 6

Suppose Appliance Mart buys a used refrigerator for $100, repairs it, and resells it for $250. The result of this transaction is to

Accepted Answer

The increase in the value of the national product is the difference between the selling price and the purchase price, which is $250 - $100 = $150.

Question 7

When macroeconomists use the term "recession" they usually define it as a fall in real GDP that lasts for at least

Accepted Answer

When macroeconomists use the term "recession," they typically define it as a significant decline in economic activity measured by a decrease in real gross domestic product (GDP) for at least two consecutive quarters, or six consecutive months.

Question 8

Suppose a small city has a population of 100 000 and a labour force of 60 000. Employment is 55 000 and 5,000 workers are unemployed. How many people are not in the labour force?

Accepted Answer

The total population is 100,000. 
Out of 100,000, 60,000 are in the labour force and 5,000 of them are unemployed. Therefore, 55,000 are employed. 
So the total number of people not in the labour force is: 
100,000 - 60,000 = 40,000.

Question 9

A nation's real national income in a given year measures the

Accepted Answer

Real national income measures the value of output produced by the economy, adjusted for inflation, and expressed in constant dollars to reflect true purchasing power.

Question 10

A worker is considered unemployed if that worker has no job, is legally eligible to work,

Accepted Answer

The definition of unemployment typically includes being without a job and actively seeking employment. This means that someone who is not looking for a job, or who is collecting unemployment insurance, may not be considered unemployed despite not having a job. It is also not necessary for the person to have previously held a job, as first-time job seekers would also be considered unemployed. Finally, there is no requirement for a minimum length of time that the person was previously employed.

Question 11

Suppose that a country's population is 30 million and it has a labour force of 15 million people. Assuming it has 500 000 people unemployed, the country's unemployment rate is

Accepted Answer

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

Question 12

Suppose an employer and its employees enter into a wage contract specifying a wage increase of 2 percent. But suppose that the price level rises by 3 percent over the course of the contract. In this case,

Accepted Answer

The wage increase of 2 percent will not keep up with the rise in the price level of 3 percent, meaning that the employees' purchasing power will fall. The employer may not necessarily experience a fall in purchasing power, but they will not benefit from increased purchasing power either. Therefore, option C is the best choice.

Question 13

To compare the economy's aggregate output in two different time periods, economists compare the

Accepted Answer

In order to compare the economy's aggregate output in two different time periods, economists compare the real national income for the two periods. Real national income adjusts for inflation by using a base year's prices, allowing for a more accurate comparison of output over time. Nominal national income, potential national income, and inflation rates do not provide an accurate comparison of output over time as they do not adjust for changes in the price level. Unemployment rates may provide some insight into the health of the economy but do not directly compare aggregate output.

Question 14

If nominal national income increased by 20 percent over a certain period of time while real national income increased by 10 percent, then

Accepted Answer

Nominal national income increased by 20%, which includes the effect of inflation. Real national income increased by only 10%, which is the increase in production after adjusting for inflation. Therefore, inflation during this time period was about 10%, which means the price level has increased by approximately 10%.

Question 15

In determining the economy's real GDP growth rate between two time periods,

Accepted Answer

Real national income, which takes price-level changes into account, is the most appropriate measure for comparing the output of two time periods. We cannot use nominal national income directly because changes in prices would affect the level of output, making it difficult to determine whether the increase in nominal GDP represents an increase in real output or just an increase in prices. Therefore, by using real national income, we can better evaluate the true growth rate of the economy.

Question 16

If a country's labour force is 20 million people, and 1 million people are unemployed, the country's unemployment rate is

Accepted Answer

The unemployment rate is calculated as the number of unemployed people divided by the total labor force, multiplied by 100. So, (1 million / 20 million) * 100 = 5 percent.

Question 17

Consider a small economy with 3 individuals. Individual A produces 100 chickens that sell for $8 each. Individual B produces 50 bags of corn that sell for $10 each. Individual C produces 40 bushels of apples that sell for $20 each. National product in this economy is

Accepted Answer

Individual A contributes $800 (100 chickens x $8) to the national product, Individual B contributes $500 (50 bags of corn x $10), and Individual C contributes $800 (40 bushels of apples x $20). Therefore, the national product is $800 + $500 + $800 = $2100.

Question 18

If the cyclical unemployment rate is negative, then the

Accepted Answer

A negative cyclical unemployment rate indicates that the economy is operating beyond full employment, meaning that the actual unemployment rate is below the natural rate of unemployment.

Question 19

Cyclical unemployment is associated with

Accepted Answer

Cyclical unemployment occurs when there is not enough demand for goods and services in the economy, leading to a decrease in production and, consequently, a decrease in the demand for labor. This results in an output level that is different from the economy's potential output.

Question 20

If the Consumer Price Index changes from 120 in year one to 144 in year two, the rate of inflation in the intervening year is

Accepted Answer

The rate of inflation can be calculated using the formula: 
((CPI in year two - CPI in year one)/CPI in year one) x 100%

Plugging in the values: 
((144 - 120)/120) x 100% = 20%

Therefore, the rate of inflation in the intervening year is 20%.

Quiz 19: What Macroeconomics Is All About