Gross Domestic Product can be measured as the sum of:
consumption, investment, government purchases, and net exports
The “basket” on which the CPI is based is composed of:
products purchased by the typical consumer
Demand curves represent:
willingness to buy
All other things equal, an increase in the demand for loanable funds would MOST
likely be caused by a ___ :
increase in government borrowing
If Susan decides to change the oil in her car herself instead of having Speedy Lube
change the oil for her, GDP ___ :
falls
The following is incorrect
The unemployment rate is computed using the number of unemployment insurance claims
filed
The Following are True
- Each adult included in the unemployment statistics is classified as employed,
unemployed, or not in the labour force, and include those 16 and above
- Statistics Canada gathers data on unemployment and employment.
Economic growth can be especially fast:
- for countries playing catch-up with countries that already have high real GDP per capita
- for relatively poor countries if the convergence hypothesis holds true
- if the country is able to benefit from adopting the technological advances already used in
advanced countries
The following would not cause structural unemployment
Union offer benefit to its member
The following would cause structural unemployment
- Firm offer a higher wage to lower the worker turnover
- Increase in unemployment insurance benefit
An inferior good is a good for which demands:
falls as income rises
Gold is an example of:
natural resources
According to the efficiency wage theory, which of the following is not the reason why
firms may want to pay higher wages than the market wage?
- reduce worker effort
- increase worker effort
- reduce worker quality
- increase worker turnover
Labour Productivity can be measured by:
GDP/Labour Force
The value of net exports equals the value of:
Export minus import
Curtis is a stockbroker. He has had several job offers, but he has turned them down
because he thinks he can find a firm that better matches his tastes and skills. John is
an accountant. He has looked for work for some time, but no accounting firms are
hiring:
Curtis is frictionally unemployed, and John is structurally unemployed
Real GDP per person is $25,000 in Aquilonia, $10,000 in Nemedia, $15,000 in Shem,
and $20,000 in Zexa. Saving per person is $2,000 in all four countries. Other things
equal, we would expect that:
Nemedia will grow the fastest.
Which of the following would decrease the demand (shift the curve to the left) for
beer?
The price of a substitute, wine, falls.
The increase in demand would cause supply to:
neither rise nor fall, although quantity supplied would increase.
The purchase of plant and equipment by Ford is part of:
investment.
Gross Domestic Product would include which of the following?
legal consulting fee.
Inflation can be measured by which of the following?
GDP deflator || Consumer price index
Suppose your incomes rises from $29,000 to $76,000 while the CPI rises from 102 to
130. Your standard of living has likely:
risen.
The amount of unemployment that are persistent and that the economy normally
experiences is known as:
the natural rate of unemployment.
According to Statistics Canada, a husband who chooses to stay home and take case
of the household is:
not in the labour force.
The demand curve for loanable funds slopes:
downward, because the quantity of loanable funds demanded falls when the price of
borrowing money rises.
The crowding-out effect is ....
the negative effect of government budget deficits on private investment spending
Investment spending is undertaken when the rate of return is:
higher than the equilibrium interest rate.
If real GDP doubles in 35 years, its average annual growth rate is approximately:
2%
A decrease in the demand for loanable funds would MOST likely be caused by a ___ :
decrease in perceived business opportunities.
A business will want a loan when:
rate of return of operation > interest rate.
In an open economy:
savings of foreigners may support investment spending
Assume an open economy in which GDP is $20 trillion. If consumption is $14 trillion,
government spending is $3 trillion, taxes are $2 trillion, government transfers are $0,
exports are $2 trillion, and imports are $3 trillion, what is investment spending?
$ 4 trillion
Name two reasons why the unemployment rate is an imperfect measure of joblessness.
If a person is out of job but is very confidence on finding a job and is just waiting for a better
offer. Some people claim to be looking for work just to collect Employment Insurance
benefits. Also, it can be any of the following: Discouraged searchers, Marginally attached
worker and Underemployment.
Does the minimum wage cause much unemployment in the market for accountants?
Why?
No, because the market wage of accountants is much higher than minimum wage.
What are the components of expenditure in the GDP calculation? Provide an example
of each.
Consumption: Buying a mobile phone.
Investment: A café purchasing an espresso machine to make espresso for customers.
Government Purchase: National defense spending.
Net Export: Canada exporting oil to the US.
Consider an economy in which existing capital is being used intensively, shortages in
labor and goods markets are developing, and costs are rising. Which stage of the
business cycle is the economy experiencing? Why?
Boom. During a boom, most labor is already employed, therefore there are shortages in the
labor market. For the same reason, wages would increase (costs are rising).
If workers and firms negotiate a wage increase based on their expectation of inflation,
who gains or loses if actual inflation turns out to be higher than expected? Why?
The worker lost since his real wage is lower now when the actual in ation turns out to be
higher than expected
Which would have a greater impact on the CPI: a 20% increase in the price of a luxury
watch or a 20% increase in the price of new cars? Why?
A 20% increase in the price of new cars. It is because a car would has a higher weight in the
basket of CPI that represent the consumption bundle of a typical consumer.
If the federal government eliminates taxes on interest earned from savings, how will
the equilibrium interest rate and the equilibrium quantity of loanable funds be
affected?
If households are no longer taxed on income earned from interest on savings, savings will
increase, and the supply curve for loanable funds will shift to the right. The equilibrium
interest rate will decrease, and the equilibrium quantity of loanable funds will increase
What happens to the company's value added when it outsources the work? What
happens to value added in the economy as a whole?
A firm's value added is equal to the payments it makes to its employees plus its profits. In
other words, it is equal to its total revenues minus the value of its purchases of inputs from
other firms. If a firm now lays off its maintenance workers and contracts out its
maintenance to an outside firm (suppose total expenditure is unchanged), its measured
value added falls. When this company's value added falls, the value added of some
outside firm rises by the same amount (assuming that total expenditure is unchanged). In
this case, total value added in the economy is unaffected.
Formulas
Unemployment Rate = Unemployed / Labour Force
Labour force = unemployed + employed