Q: Suppose the nominal GDP of Canada increased by 5% from one year to the next, while the GDP deflator increased by 3%. What is the approximate growth rate of real GDP?

$$\text{Real GDP growth} \approx 5\% - 3\% = 2\%$$

Q: If the unemployment rate is $$8\%$$, the natural rate of unemployment is $$5\%$$, and the labour force is 10 million, what is the level of cyclical unemployment?

$$(0.08 - 0.05) \times 10,000,000 = 300,000$$

Question 1

Suppose the nominal GDP of Canada increased by 5% from one year to the next, while the GDP deflator increased by 3%. What is the approximate growth rate of real GDP?

Accepted Answer

$$	ext{Real GDP growth} \approx 5\% - 3\% = 2\%$$

Question 2

In the circular flow model of the Canadian economy, which of the following is NOT considered an injection?

Accepted Answer

Household savings

Question 3

In macroeconomics, 'investment' refers to:

Accepted Answer

The purchase of new capital goods by firms

Question 4

If the marginal propensity to consume (MPC) is $$0.8$$, what is the value of the simple multiplier?

Accepted Answer

$$\frac{1}{1-0.8} = 5$$

Question 5

Suppose the government wants to close a recessionary output gap of $$\100$ million. If the marginal propensity to consume is 0.75$, how much must government spending increase to close the gap?

Accepted Answer

$$\25$ million

Question 6

Which of the following would cause the Aggregate Demand (AD) curve to shift to the right?

Accepted Answer

An increase in government spending

Question 7

A government budget deficit occurs when:

Accepted Answer

$$G \u003e T$$

Question 8

If the Bank of Canada implements contractionary monetary policy, which of the following is most likely to occur in the short run?

Accepted Answer

Short-term interest rates rise

Question 9

Which of the following is NOT included in the calculation of the money supply?

Accepted Answer

Credit available on a Visa card

Question 10

If the desired reserve ratio is $$10\%$$, what is the maximum increase in chequable deposits that could result from a $$\1$$,000$ increase in bank reserves?

Accepted Answer

$$\10$$,000$

Question 11

Which of the following would most likely increase net exports in Canada?

Accepted Answer

A decrease in domestic income

Question 12

Which of the following best describes stagflation?

Accepted Answer

High inflation and high unemployment occurring together

Question 13

If the Bank of Canada sells $$\50$ million in government bonds, what is the immediate effect on the money supply and bank reserves?

Accepted Answer

Money supply decreases; bank reserves decrease

Question 14

Which of the following is a likely short-run effect of a fiscal deficit?

Accepted Answer

Higher aggregate demand

Question 15

Which of the following would shift the Aggregate Supply (AS) curve to the left?

Accepted Answer

An increase in nominal wages

Question 16

If the unemployment rate is $$8\%$$, the natural rate of unemployment is $$5\%$$, and the labour force is 10 million, what is the level of cyclical unemployment?

Accepted Answer

$$(0.08 - 0.05) 	imes 10,000,000 = 300,000$$

Question 17

Which of the following best explains why a zero rate of unemployment is considered inefficient?

Accepted Answer

It eliminates frictional and structural unemployment, which are natural in a dynamic economy

Question 18

Which of the following is a likely effect of expansionary monetary policy on the foreign exchange rate?

Accepted Answer

The domestic currency depreciates

Question 19

Which of the following is a reason why monetary policy may be less effective during a deep recession?

Accepted Answer

Banks may be unwilling to lend even if interest rates are low

Question 20

If real GDP per capita is rising but productivity is declining, what is likely to happen to the standard of living in the long run?

Accepted Answer

The standard of living may not be sustainable in the long run

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