Q: Suppose the nominal GDP of Canada increased from $$1.8$$ trillion to $$1.9$$ trillion, while the GDP deflator increased from $$110 to$$ $$115. $$What is the real GDP growth rate?

$$\frac{1.9}{1.8} \times \frac{110}{115} - 1 = 0.009 or$$ $$0.9\%$$

Question 1

Which of the following best describes Gross Domestic Product (GDP)?

Accepted Answer

The total value of all goods and services produced within a country's borders in a given period.

Question 2

Suppose the nominal GDP of Canada increased from $$1.8$$ trillion to $$1.9$$ trillion, while the GDP deflator increased from $$110 to$$ $$115. $$What is the real GDP growth rate?

Accepted Answer

$$\frac{1.9}{1.8} 	imes \frac{110}{115} - 1 = 0.009 or$$ $$0.9\%$$

Question 3

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Purchases of used goods

Question 4

If the unemployment rate is $$6\%$$ and the labor force participation rate is $$70\%$$, which of the following statements is correct?

Accepted Answer

6% of the labor force is unemployed.

Question 5

Which of the following best explains why the aggregate demand curve slopes downward?

Accepted Answer

Because as the price level falls, the real value of wealth increases, leading to higher consumption.

Question 6

Suppose the Bank of Canada increases the money supply. According to the short-run aggregate supply and demand model, what is the most likely short-run effect?

Accepted Answer

Aggregate demand shifts to the right, increasing output and the price level.

Question 7

Which of the following is an example of fiscal policy?

Accepted Answer

The government increasing infrastructure spending to stimulate the economy.

Question 8

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

Accepted Answer

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

Question 9

Which of the following would cause the Canadian dollar to appreciate in the foreign exchange market?

Accepted Answer

An increase in demand for Canadian exports.

Question 10

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment caused by changes in the structure of the economy, such as technological change.

Question 11

If the government runs a budget deficit, which of the following is true?

Accepted Answer

Government spending exceeds tax revenue.

Question 12

Suppose the economy is operating above potential output. Which of the following policies would be most appropriate to reduce inflationary pressure?

Accepted Answer

Decrease the money supply.

Question 13

Which of the following is a limitation of using GDP as a measure of economic well-being?

Accepted Answer

GDP does not account for the distribution of income.

Question 14

If the price level increases by $$3\%$$ and nominal wages increase by $$2\%$$, what happens to real wages?

Accepted Answer

Real wages decrease by $$1\%.$$

Question 15

Which of the following best describes the crowding-out effect?

Accepted Answer

Government borrowing increases interest rates, reducing private investment.

Question 16

Suppose the Canadian government implements a policy that increases productivity. Which of the following is the most likely long-run effect?

Accepted Answer

A rightward shift of the long-run aggregate supply curve.

Question 17

If the Bank of Canada wants to reduce inflation, which of the following actions is it most likely to take?

Accepted Answer

Sell government bonds in the open market.

Question 18

Which of the following equations correctly represents the relationship between savings, investment, and net exports in an open economy?

Accepted Answer

$$S = I + NX$$

Question 19

Suppose the Canadian dollar depreciates relative to the US dollar. What is the most likely short-run effect on Canadian net exports?

Accepted Answer

Net exports will increase because Canadian goods become cheaper for foreigners.

Question 20

Which of the following is an example of a supply shock?

Accepted Answer

A technological breakthrough that increases productivity.

ECON*1100 Introductory Macroeconomics Syllabus and Study Guide

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