Final Exam

Question 1

Three ways to calculate GDP

Answer 1

1. Total spending (AE)
2. Total income
3. Value added (output)

Question 2

Nominal GDP

Answer 2

measured in today’s dollars

Question 3

Real GDP

Answer 3

measured in a constant dollar

Question 4

GDP vs GNP

Answer 4

GDP is only in origin country
GNP is in any country

Question 5

Technology

Answer 5

new and efficient ways of combining inputs to produce more outputs

Question 6

Best form of technology

Answer 6

division of labour

Question 7

Is population growth good for economic growth?

Answer 7

No. This lowers the GDP/person

Question 8

Four factors that impact GDP

Answer 8

1. Investment in physical capital
2. Population growth rates
3. Investment in human capital
4. Technology growth

Question 9

efficiency wages

Answer 9

really high wages to entice workers not to leave

Question 10

structural unemployment

Answer 10

unemployment that results when wages are too high and supply doesn’t equal demand

Question 11

frictional unemployment

Answer 11

unemployment due to people moving from one job to another

Question 12

cyclical unemployment

Answer 12

due to recession

Question 13

working age population

Answer 13

people 15 years and older

Question 14

employed population

Answer 14

working age people who work atleast 1 hour a week for some kind of pay: includes parental leave

Question 15

unemployed population

Answer 15

working-age people without jobs who are searching and could immediately accept a job

Question 16

labour force

Answer 16

employed + unemployed

Question 17

labour force participation rate

Answer 17

(labour force / working age population) x 100%

Question 18

unemployment rate

Answer 18

(unemployed/labour force) x 100%

Question 19

shoe leather costs

Answer 19

increased cost of transactions caused by inflation (i.e the pain of getting more cash)

Question 20

menu costs

Answer 20

refer to the real costs of changing listed prices due to inflation

Question 21

real interest rate

Answer 21

nominal rate - inflation

Question 22

indexing

Answer 22

a way to correct the effect of inflation

Question 23

whats the relationship between saving and investment

Answer 23

savings = investment

(this is for unplanned investment) and think that spending is inversely

Question 24

AE > output

Answer 24

negative unplanned investment

Question 25

AE < output

Answer 25

positive unplanned investment

Question 26

if hours are ever reduced in a lockdown/shutdown

Answer 26

effective unemployment increases

Question 27

compounding

Answer 27

present value x (1 + r)^t

Question 28

discounting

Answer 28

future value x (1/(1+r)^t)

Question 29

present value of sum of payments

Answer 29

(next years revenue)/(r+d)

Question 30

supply in market for loanable funds

Answer 30

savers

Question 31

demand in market for loanable funds

Answer 31

investors

Question 32

current account balance

Answer 32

difference between the income receive from and paid abroad

Question 33

financial account balance

Answer 33

difference between financial inflows and outflows

Question 34

read this

Answer 34

current account defecit means canadians spend more than they make the financial account covers this gap

Question 35

balance of payments

Answer 35

current account = financial account keeps everything in check

Question 36

nominal exchange rate

Answer 36

foreign / domestic

Question 37

floating exchange rate regime

Answer 37

exchange rate fluctuates in response to market forces

Question 38

fixed regime

Answer 38

The exchange rate is set by the government and never (or rarely) changes.

Question 39

Managed Exchange Rate Regime

Answer 39

The government buys and sells currency to reduce volatility and/or to keep the currency cheap.

Question 40

devaluation

Answer 40

a reduction in the value of a currency (giving in as a fixed regime)

Question 41

revaluation

Answer 41

an increase in the value of a currency (giving in as a fixed regime).

Question 42

purchasing power parity

Answer 42

the nominal exchange rate at which a given basket of goods would cost the same in each country

Question 43

Okuns rule of thumb

Answer 43

for every percentage point that actual output falls below potential output, the unemployment rate is around 1/3% higher

Question 44

GDP multiplier

Answer 44

ΔGDP = Δspending x multiplier

Question 45

GDP multiplier (for transfers/tax)

Answer 45

ΔGDP = Δspending x multiplier x MPC

Question 46

the yield curve illustrates

Answer 46

the relationship between time to maturity of an asset and the interest rate of that asset

Question 47

is there more or less uncertainty overtime for bonds?

Answer 47

less

Question 48

difference in yield rate is due largely to?

Answer 48

term risk

Question 49

supply shocks

Answer 49

sudden changes to output (input prices, intermediates, etc) any rise in production cost

Question 50

three causes of inflation

Answer 50

inflation expectations demand-pull inflation cost-push inflation

Question 51

how does inflation affect unemployment rate

Answer 51

structural unemployment - supply shock anything with oG = cyclical

Question 52

multiplier

Answer 52

1 / (1-MPC)

Question 53

specie money

Answer 53

gold/silver coins

Question 54

fiat money

Answer 54

bills from bank

Question 55

commodity money

Answer 55

random items

Question 56

deposit rate

Answer 56

rate bank pays to store peoples money

Question 57

bank rate

Answer 57

rate bank charges to loan money

Question 58

what does gdp not include

Answer 58

- value of intermediate goods - value of stored inventories - value of things from other years - goods that are not final - anything produced foreignly