Chapter 3-6 multiple choice

Question 1

what are the names of the factors of production

Answer 1

labour, capital, land, and enterprise

Question 2

if 120 workers can produce 600 widgets in a day, what is the daily productivity per worker

Answer 2

5

Question 3

what falls under the category of enterprise

Answer 3

adopting high-risk innovations,

the org and coordination of a business, and the investigation and establishment of new markets

Question 4

what is necessary for national income to be in equilibrium

Answer 4

S+IM+T=I+X+G

Question 5

what are examples of the factor land

Answer 5

minerals, natural harbours, supplies of fresh water, fertile soil

Question 6

which is a valid description of economic growth

Answer 6

it is an economy’s real GDP per capita, it is an increase in an economy’s total output of goods and services, it usually implies an increase in labour productivity

Question 7

what does the sum of national income, indirect taxes, and depreciation equal

Answer 7

gross national product

Question 8

what is included by statistics Canada in investment

Answer 8

an increase in business inventions from one year to the next

Question 9

what is regarded as real capita

Answer 9

a dump truck

Question 10

what leads to an understatement of total production

Answer 10

the exclusion of work done by homemakers

Question 11

what will result in an increase in the stock of capital goods

Answer 11

net investment is positive

Question 12

what is the level of savings in an economy with no government and no international trade, if total factor income is $600 and consumption spending is $480

Answer 12

$120

Question 13

what does the simple circular flow show

Answer 13

households are buyers of products and sellers of resources

Question 14

what could cause an increase in nominal GDP

Answer 14

an increase in the output of goods and services but no change in prices, an increase in the prices of goods and services but no change in their output, an increase in both the output and the prices of goods and services

Question 15

what is true about aggregate expenditures

Answer 15

at equilibrium it is equal to national income

Question 16

a high economic growth rate may not mean a better life for the population. what statement supports that contention

Answer 16

work such as housecleaning, which used to be entirely a nonmarket activity, is becoming more and more a market activity, higher production has negative side effects, such as more pollution, in the measurement of GDP, no distinction is made as to the type of goods produced

Question 17

what would be a side effect if one half of the population did the housework for the other half of the population, and vice versa, and each group paid the other for these services

Answer 17

GDP would rise

Question 18

what is included in consumption and investment spending, respectively

Answer 18

spending on domestically produced and foreign produced goods and services, and on real capital

Question 19

how does govern spending on goods and services differ from transfer payments

Answer 19

the former represents payments for services performed, but the latter does not

Question 20

what is true about equilibrium

Answer 20

total leakages equal total injections, the value of production equals aggregate expenditures, Y=AE

Question 21

in equilibrium, the value of production is equal to what (3)

Answer 21

the total receipts of all businesses, total income, aggregate expenditures

Question 22

what is the real rate of interest if the nominal rate of interest is 10 precent and the rate of inflation is 4 percent

Answer 22

6 percent

Question 23

what is a variation os cost-push inflation

Answer 23

import-push inflation

Question 24

what can be said about Canadian’s inflation rate since 2001?

Answer 24

it has always been below 3 percent

Question 25

what type of unemployment is associated with resessions

Answer 25

cyclical

Question 26

what does inflation affect

Answer 26

both the level and the distribution of income

Question 27

suppose that there are 1.2 million unemployed workers, .6 million discouraged workers, and 12 million employed workers. what is the unemployment rate

Answer 27

9.1 percent

Question 28

according to the official statistic Canada definition, what is the minimum amount of time a person must have worked in the previous week in order to be counted as employed

Answer 28

60 minutes

Question 29

if we apply the "rule of 70" what is correct to a known rate of inflation

Answer 29

we could calculate the number of years it will take for the price level to double

Question 30

what statement is correct regarding the GDP deflator

Answer 30

it is a price index that can be used to calculate the inflation rate

Question 31

how is real in come calculated

Answer 31

by dividing nominal income by a price index and multiplying the result by 100

Question 32

what is the cause of cyclical unemployment

Answer 32

a downward fluctuation in the business cycle

Question 33

what would be the effect on the unemployment rate if all the part time workers were to become full time workers

Answer 33

it would remain unchanged

Question 34

what are the reasons why CPI and GDP deflator differ

Answer 34

the CPI in an explict index using a constructed bundled of goods; the GDP deflator is an implict, the bundle of goods remains constant with the CPI; the bundle of goods in the GDP deflator changes each year, the CPI does not include capital or government goods and services; the GDP deflator includes both

Question 35

when is the canadian economy considered to be full emoloyment

Answer 35

when approx 5 to 7 percent of the labour force is unemployed

Question 36

statement of the natural rate of unemplyment

Answer 36

made up of both frictional and structural unemployment, it is the rate of unemployment at full employment, it is when the total number of job vacancies equals the number of people unemployed and is probably about 5-7 percent in cananda today

Question 37

what does okun's law refer to

Answer 37

the relationship between the level of cyclical unemployment and the difference between potential and actual GDP

Question 38

unanticipated increase in inflation

Answer 38

it redistributes wealth and income in unpredictable ways, it decreases the purchasing power of money, it benefits debtors at the expense of creditors, it affects some individuals much more than others

Question 39

if the nominal GDP of a country is equal to $560 billion and its real GDP is $470 billion, what is the value of its GDP deflator?

Answer 39

119.15

Question 40

which two pieces of info would allow us to calc a GDP deflator

Answer 40

nominal gdp and real gdp figures

Question 41

a 35 year old, healthy male who does not work because he has inherited a large fortune would fall into

Answer 41

the working age population

Question 42

under what condition could the number of people employed and the number of people unemployed both increase

Answer 42

if the number of people in the labour force increased more than the number of people employed

Question 43

how is real GDP calculated

Answer 43

dividing nominal GDP by the GDP deflator and multiplying by 100

Question 44

what would be the effect of 100000 unemployed people becoming discouraged workers

Answer 44

both unemployment rate and the size of the labour force would decline

Question 45

how does statistic canada define a recession

Answer 45

a decline in real GDP over two consecutive quarters

Question 46

why are economists concerned about deflation

Answer 46

because it could cause credit markets to freeze up, an, in turn cause economic growth to stop

Question 47

why is the AD curve downward sloping

Answer 47

because lower prices cause an increase in real balances, which increases spending

Question 48

why is the AS curve upward sloping

Answer 48

because firms will experience higher profits at higher prices and will therefore produce more

Question 49

what will cause the AD curve to shift to the right

Answer 49

a decrease in the interest rate

Question 50

when does macroeconomics equilibrium occur

Answer 50

when the AD curve interests the AS curve

Question 51

what could cause the level of real GDP to rise but the price level to fall

Answer 51

a rightward shift in the AS curve

Question 52

what can cause an increase in potential GDP

Answer 52

technological improvement

Question 53

what does the real balance effect mean

Answer 53

a higher price will decrease the real value of financial assets thereby causing a decrease in consumption

Question 54

what effect will a decrease in AD have if the economy is in a recession

Answer 54

the price level will drop a little, but the real GDP will fall a great deal

Question 55

what is the result of an increase in labour productivity

Answer 55

an increase in potential GDP

Question 56

what is the business cycle

Answer 56

the expansionary and contractionary phase in the growth rate of real GDP

Question 57

what is meant by the term human capital

Answer 57

the accumulated skills and knowledge of human beings

Question 58

what will contribute to economic growth

Answer 58

increase levels of human capital, increases in the capital stock, technological improvement, increased quantities of natural resources

Question 59

what are the 4 components of AD

Answer 59

consumption, investment, government spending, and net exports

Question 60

what will be the effect on trade of an increase in the canadian price level

Answer 60

it will decrease the volume of canadian exports but increase the volume of imports

Question 61

what is the domestic effect of an increase in the incomes of a country's major international trading partners

Answer 61

the AD curve will shift to the right

Question 62

what are the implications if the price level is 100

Answer 62

there is as shortage of real output of $250

Question 63

if the aggregate quantity demanded falls by $100 at every price level, what will be the new equilibrium price level and real output, respectively

Answer 63

105 and $650

Question 64

at what level of real output will full employment occurs in this economy

Answer 64

cannot be determined

Question 65

what is the slope of the AS curve, according to neoclassical economists

Answer 65

vertical, at the capacity level of output in the economy

Question 66

what is teh slope of the AS curve according to keynesians

Answer 66

horizontal, because wages are inflexible

Question 67

what does the multiplier effect indicate

Answer 67

that a change in autonomous expenditures will cause income to change by a larger amount

Question 68

what is the marginal propensity to expend

Answer 68

it is the ratio of change in expenditures that result from a change in income

Question 69

what is the effect of a decrease in government spending

Answer 69

it leads to an even larger decrease in income

Question 70

what effect does an increase in exports have

Answer 70

it leads to an even larger increase in income

Question 71

what is the effect of a decrease in the MTR

Answer 71

the MLR will decrease, and the multiplier will increase

Question 72

what is the most important determinant of the level of consumption

Answer 72

the level of income

Question 73

what circumstances will lead to a smaller multiplier

Answer 73

if the MPS becomes bigger

Question 74

What is correct about the equilibrium level of income?

Answer 74

There will be no tendency for firms to increase or decrease production. Unplanned investment in inventories will not occur. Leakages equal injection. Aggregate expenditures equal income.

Question 75

What are induced consumption and the marginal propensity to consume?

Answer 75

The amount of consumption that results from higher levels of income and the change in consumption divided by the change in income

Question 76

How is the AE function placed onto the 45 degree graph?

Answer 76

It starts on the vertical axis at the level of autonomous expenditures and rises with a slope equal to the MPE

Question 77

If the MPE is equal to 0.4, what is the value of the MLR?

Answer 77

0.6

Question 78

If the MPE is equal to 0.4, what is the value of the multiplier?

Answer 78

1.67

Question 79

If X is an autonomous $90 (there are no autonomous imports) and the MPM is 0.2, what is the value of Xn at an income of $500?

Answer 79

-$10

Question 80

What does the real-balances effect refer to?

Answer 80

The effect of a change in consumption on the real value of wealth

Question 81

Which of the following variables in the expenditure model are wholly autonomous, and which are partly induced?

Answer 81

I, G, and X are autonomous; S, IM, and C are partly induced

Question 82

Which two of the four components of aggregate expenditures are wholly autonomous?

Answer 82

I and G

Question 83

What happens to income earned in Canada?

Answer 83

It is spent on consumption, imports, taxes, and saved

Question 84

Graphically, when is the balance of trade equal to zero?

Answer 84

When the rising IM line intersects the horizontal X line