Question 1

The labour force participation rate is
A) the proportion of people 15 years old and over who are in the labour force.
B) the ratio of employed workers to unemployed workers.
C) the percentage of employed workers in the labour force.
D) the percentage of employed workers 15 years old and over who are in the labour force.

Accepted Answer

The labour force participation rate is defined as the proportion of people 15 years old and over who are in the labour force, which includes both employed and unemployed individuals who are actively seeking work. Therefore, option A is the correct choice. Option B is incorrect because it refers only to the ratio of employed and unemployed individuals, not the total labour force. Option C is incorrect because it only addresses employed workers within the labour force, not the overall participation rate. Option D is also incorrect because it only considers employed workers rather than the total labour force.

Question 2

Which of the following would cause the unemployment rate as measured by Statistics Canada to overstate the true degree of joblessness in the economy?
A) discouraged workers
B) unemployed persons who falsely report themselves as actively looking for a job
C) retired people who have no intention of returning to work
D) people with part-time jobs who would prefer to be working full time

Accepted Answer

Unemployed persons who falsely report themselves as actively looking for a job would be counted as unemployed, thus overstating the true degree of joblessness.

Question 3

Suppose the population of a fictional economy falls into the following categories: 320 are employed full time; 110 are employed part time; 20 are unemployed but are actively looking for employment; 50 are unemployed and are not actively looking for employment.The official unemployment rate as calculated by Statistics Canada would be
A) 4.4%.
B) 5.9%.
C) 14.0%.
D) 28.9%.

Accepted Answer

The answer of Suppose the population of a fictional economy...

Question 4

Which of the following is true about the consumer price index?
A) It is updated continuously to account for the introduction of new goods.
B) It accounts for people switching away from goods whose prices have risen.
C) It assumes that consumers purchase the same quantity of each product in the market basket each month.
D) It accurately reflects quality changes in goods and services over time.

Accepted Answer

The consumer price index (CPI) assumes a fixed basket of goods and services, meaning it does not account for changes in consumer purchasing habits or quality changes over time.

Question 5

Which of the following would cause the unemployment rate as measured by Statistics Canada to understate the true degree of joblessness in the economy?
A) people employed in the underground economy
B) unemployed persons who falsely report themselves as actively looking for a job
C) retired people who have no intention of returning to work
D) people with part-time jobs who would prefer to be working full time

Accepted Answer

People with part-time jobs who would prefer to be working full time are considered underemployed and are not counted as unemployed in the official statistics. Therefore, the unemployment rate may not fully capture the extent of joblessness in the economy. The other options, while they may affect the accuracy of the unemployment rate calculation in other ways, do not directly cause it to understate joblessness.

Question 6

Suppose you borrow $2000 for one year and at the end of the year you repay the $2000 plus $110 of interest.The expected inflation rate was 2.2% at the time you took out the loan,but the actual inflation rate turned out to be 3.3%.What was the actual real interest rate you paid?
A) 2.2%
B) 3.3%
C) 5.5%
D) 8.8%

Accepted Answer

The answer of Suppose you borrow $2000 for one year...

Question 7

When the cost of borrowing funds that is stated on a loan is adjusted for the effects of inflation,the resulting interest rate is called the
A) prime interest rate.
B) nominal interest rate.
C) real interest rate.
D) core PCE interest rate.

Accepted Answer

The real interest rate is the nominal interest rate adjusted for inflation, which reflects the actual cost of borrowing. The prime interest rate is the rate at which banks lend to their most creditworthy customers, while the core PCE interest rate is a measure of inflation used by the Federal Reserve.

Question 8

Suppose the working-age population of a fictional economy falls into the following categories: 30 are retired; 45 are stay-at-home parents; 120 are employed full time; 40 are employed part time; 25 are unemployed but are actively looking for employment; 15 are unemployed and are not actively looking for employment.The official unemployment rate as calculated by Statistics Canada would be
A) 9.62%.
B) 13.51%.
C) 14.55%.
D) 20.0%.

Accepted Answer

The answer of Suppose the working-age population of a fictional...

Question 9

________ is/are a particularly serious problem as job skills deteriorate among people who have been out of work for an extended time and it is difficult for them to find new employment.
A) Long-term unemployment
B) Involuntary part-timers
C) Discouraged workers
D) Waiting group

Accepted Answer

Long-term unemployment is a particularly serious problem as job skills deteriorate among people who have been out of work for an extended time and it is difficult for them to find new employment. Involuntary part-timers, discouraged workers, and waiting group are all related to unemployment, but do not specifically address the issue of long-term unemployment and its consequences.

Question 10

The consumer price index is
A) an average of the prices of the goods and services purchased by the typical family.
B) the cost of a market basket of goods and services typically consumed in a base year.
C) the cost of a market basket of goods and services typically consumed in the current year.
D) an average of the prices of new final goods and services produced in the economy over a period of time.

Accepted Answer

The consumer price index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Question 11

Suppose you borrow $8000 for one year and at the end of the year you repay the $8000 plus $600 of interest.The expected inflation rate was 3.5% at the time you took out the loan,but the actual inflation rate turned out to be 2.5%.What was the expected real interest rate at the time of the loan? What was the actual real interest rate you paid? Who gained and who lost from the difference in the expected and actual inflation rates?

Accepted Answer

The answer of Suppose you borrow $8000 for one year...

Question 12

Identify which of the following people would be considered either employed,unemployed,or not in the labour force:
a. Alejandro just lost his job at an automobile assembly plant and is looking for work in another industry.
b. Bonnie quit her job six months ago to take care of her newborn triplets.
c. Cheyenne just received her bachelor's degree in accounting and is going to backpack through Europe for six months before seeking employment as an auditor.
d. Danitra owns a talent agency which provides clowns for children's birthday parties.
e. Edgar is a full-time student and is working 10 hours each week as a lab assistant at Faber College.
f. Flavio was awarded a $10 million settlement from his former employer and has chosen to retire.

Accepted Answer

The answer of Identify which of the following people would...

Question 13

Most economists believe there are four reasons the CPI overstates the true inflation rate.List and briefly explain these four reasons.

Accepted Answer

The answer of Most economists believe there are four reasons...

Question 14

The Bank of Canada may use core CPI,which excludes items such as food and energy,as a measure of inflation because
A) food and energy are necessities, so consumers have no choice but to purchase these.
B) food and energy prices tend to remain stable in the short run, so are not relevant to the calculation of inflation.
C) including food and energy prices tends to overstate the true inflation rate by 0.5% to 1%.
D) food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation.

Accepted Answer

Food and energy prices tend to fluctuate up and down for reasons that may not be related to the general causes of inflation. Therefore, they can skew the overall inflation rate and make it harder to accurately measure changes in the price level of goods and services. Core CPI allows the Bank of Canada to focus on price changes that are directly caused by changes in monetary policy and other economic factors, rather than short-term fluctuations in food and energy prices.

Question 15

If the real interest rate is 3% and the expected inflation rate is 6%,then the nominal interest rate is
A) 0.5%.
B) 2%.
C) 3%.
D) 9%.

Accepted Answer

Nominal interest rate = Real interest rate + Expected inflation rate
= 3% + 6%
= 9%

Therefore, the answer is D.

Question 16

The cost of borrowing funds that is stated on a loan is the
A) prime interest rate.
B) nominal interest rate.
C) real interest rate.
D) core PCE interest rate.

Accepted Answer

The nominal interest rate is the cost of borrowing funds that is stated on a loan. It does not take into account inflation or other factors that could affect the real value of the loan. The prime interest rate is the rate that banks use when lending money to their most creditworthy customers. The real interest rate takes into account inflation and provides a more accurate picture of the true cost of borrowing funds, but it is not typically stated on a loan. The core PCE interest rate measures the change in prices of goods and services, and is not directly related to the cost of borrowing funds.

Question 17

Suppose you borrow $2000 for one year and at the end of the year you repay the $2000 plus $110 of interest.If the expected inflation rate was 2.2% at the time you took out the loan,what was the real interest rate you paid?
A) 2.2%
B) 3.3%
C) 5.5%
D) 7.7%

Accepted Answer

To calculate the real interest rate, we need to subtract the inflation rate from the nominal interest rate. In this case, the nominal interest rate is $110/$2000 = 5.5%. The real interest rate is therefore 5.5% - 2.2% (inflation rate) = 3.3%. So the answer is B) 3.3%.

Question 18

If the actual inflation rate is less than the expected inflation rate,the actual real interest rate will be ________ than the expected real interest rate.When this happens,________ will lose and ________ will gain.
A) less; borrowers; lenders
B) less; lenders; borrowers
C) greater; borrowers; lenders
D) greater; lenders; borrowers

Accepted Answer

The answer of If the actual inflation rate is less...

Quiz 2: Measuring the Macroeconomy

The labour force participation rate is

Which of the following would cause the unemployment rate as measured by Statistics Canada to overstate the true degree of joblessness in the economy?

Which of the following is true about the consumer price index?

Which of the following would cause the unemployment rate as measured by Statistics Canada to understate the true degree of joblessness in the economy?

Suppose you borrow $2000 for one year and at the end of the year you repay the $2000 plus $110 of interest.The expected inflation rate was 2.2% at the time you took out the loan,but the actual inflation rate turned out to be 3.3%.What was the actual real interest rate you paid?

When the cost of borrowing funds that is stated on a loan is adjusted for the effects of inflation,the resulting interest rate is called the

________ is/are a particularly serious problem as job skills deteriorate among people who have been out of work for an extended time and it is difficult for them to find new employment.

The consumer price index is

Most economists believe there are four reasons the CPI overstates the true inflation rate.List and briefly explain these four reasons.

The Bank of Canada may use core CPI,which excludes items such as food and energy,as a measure of inflation because

If the real interest rate is 3% and the expected inflation rate is 6%,then the nominal interest rate is

The cost of borrowing funds that is stated on a loan is the

Suppose you borrow $2000 for one year and at the end of the year you repay the $2000 plus $110 of interest.If the expected inflation rate was 2.2% at the time you took out the loan,what was the real interest rate you paid?

If the actual inflation rate is less than the expected inflation rate,the actual real interest rate will be than the expected real interest rate.When this happens, will lose and will gain.