Q: If the Consumer Price Index (CPI) was 130.4 in 2017 and 133.8 in 2018, what was the rate of inflation between these years? Use the formula $$\frac{CPI_{2018} - CPI_{2017}}{CPI_{2017}} \times 100.$$

$$\frac{133.8 - 130.4}{130.4} \times 100 = 2.6\%$$

Q: If the unemployment rate is calculated as $$\frac{U}{E+U} \times 100$$, where $$U is $$the number of unemployed and $$E is $$the number of employed, what is the unemployment rate if $$U = 2$$ million and $$E = 18$$ million?

$$\frac{2}{20} \times 100 = 10\%$$

Question 1

Which of the following best describes the difference between nominal and real GDP?

Accepted Answer

Nominal GDP is measured in current dollars, while real GDP is measured in base-year dollars.

Question 2

Suppose the actual output ($$Y) in an $$economy is less than its potential output ($$Y^*). $$What type of output gap exists, and what is a likely consequence?

Accepted Answer

A recessionary gap; likely leading to higher unemployment.

Question 3

If the Consumer Price Index (CPI) was 130.4 in 2017 and 133.8 in 2018, what was the rate of inflation between these years? Use the formula $$\frac{CPI_{2018} - CPI_{2017}}{CPI_{2017}} 	imes 100.$$

Accepted Answer

$$\frac{133.8 - 130.4}{130.4} 	imes 100 = 2.6\%$$

Question 4

Which of the following is NOT a characteristic of a public good, as discussed in the context of technological knowledge?

Accepted Answer

Rivalrous consumption

Question 5

During a business cycle, which phase is characterized by idle resources beginning to be re-employed and increasing spending?

Accepted Answer

Recovery

Question 6

If the unemployment rate is calculated as $$\frac{U}{E+U} 	imes 100$$, where $$U is $$the number of unemployed and $$E is $$the number of employed, what is the unemployment rate if $$U = 2$$ million and $$E = 18$$ million?

Accepted Answer

$$\frac{2}{20} 	imes 100 = 10\%$$

Question 7

Which of the following best explains Okun’s Law?

Accepted Answer

There is a negative correlation between GDP growth and the unemployment rate.

Question 8

Which of the following is most likely to benefit from a depreciation of the Canadian dollar?

Accepted Answer

Canadian exporters selling goods to the U.S.

Question 9

If the nominal interest rate is 5% and the inflation rate is 2%, what is the real interest rate? Use the formula $$r = i - \pi.$$

Accepted Answer

$$r = 5\% - 2\% = 3\%$$

Question 10

Which of the following scenarios best illustrates 'shrink-flation'?

Accepted Answer

The price of a chocolate bar stays the same, but the size decreases.

Question 11

If Canada’s real GDP per worker increases over time, what does this indicate about labour productivity?

Accepted Answer

Labour productivity is increasing.

Question 12

Which of the following is a likely effect of unanticipated inflation?

Accepted Answer

Borrowers benefit and lenders lose because the real value of repayments falls.

Question 13

Suppose the Canadian dollar exchange rate for the euro was 1.41 in February 2017 and 1.54 in February 2018. What happened to the euro relative to the Canadian dollar?

Accepted Answer

The euro appreciated relative to the Canadian dollar.

Question 14

Which of the following best describes the long-term trend in real GDP per capita in Canada?

Accepted Answer

It has risen dramatically, indicating rising living standards.

Question 15

If the output gap is calculated as $$Y - Y^*$$, and $$Y = 2000$$ and $$Y^* = 2100$$, what type of gap exists and what is its value?

Accepted Answer

Recessionary gap of -100 (since actual output is below potential)

Question 16

Which of the following is a likely social consequence of long-term unemployment?

Accepted Answer

Potential for social unrest and persistent negative effects ('scarring')

Question 17

Which of the following best describes the relationship between the interest rate and the allocation of resources in the economy?

Accepted Answer

The interest rate affects the flow of credit, influencing investment and resource allocation.

Question 18

If the Canadian dollar appreciates against the U.S. dollar, which group is most likely to be harmed?

Accepted Answer

Canadian exporters to the U.S.

Question 19

Which of the following is a plausible reason why economic growth may not make everyone better off?

Accepted Answer

Economic growth can be accompanied by rising inequality.

Chapter 4: What Macroeconomics Is All About – Key Variables, Growth, and Fluctuations

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