Q: If the GDP deflator in 2019 is 108.8 and in 2020 is 109.0, what is the percentage change in the price level?

$$\frac{109.0 - 108.8}{108.8} \times 100 = 0.2\%$$

Q: If the Consumer Price Index (CPI) in 1993 was 85 and in 2021 is 140, what is the value in 2021 dollars of $100 in 1993 dollars?

$$100 \times \frac{140}{85} = 164.71$$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative foregone when a choice is made.

Question 2

Suppose the price of apples increases. According to the law of demand, what will happen to the quantity demanded of apples, ceteris paribus?

Accepted Answer

It will decrease.

Question 3

If the GDP deflator in 2019 is 108.8 and in 2020 is 109.0, what is the percentage change in the price level?

Accepted Answer

$$\frac{109.0 - 108.8}{108.8} 	imes 100 = 0.2\%$$

Question 4

Which of the following is NOT a function of money?

Accepted Answer

Factor of production

Question 5

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

Accepted Answer

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

Question 6

Which of the following would cause a rightward shift in the aggregate demand curve?

Accepted Answer

An increase in consumer confidence

Question 7

According to the quantity theory of money, if the money supply increases by 10% and velocity and real output are constant, what happens to the price level?

Accepted Answer

It increases by 10%.

Question 8

Which of the following is included in the calculation of GDP using the expenditure approach?

Accepted Answer

Government spending on infrastructure

Question 9

If the Bank of Canada wants to decrease the money supply, which action should it take?

Accepted Answer

Sell government bonds

Question 10

Which of the following best explains why the long-run aggregate supply (LRAS) curve is vertical?

Accepted Answer

Because prices and wages are flexible in the long run

Question 11

Suppose the unemployment rate is 7%, the labour force is 20 million, and the population is 30 million. How many people are unemployed?

Accepted Answer

1.4 million

Question 12

If Canada’s GDP increases faster than that of its trading partners, what is the likely effect on net exports?

Accepted Answer

Net exports will decrease because imports will rise.

Question 13

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent graduate searching for their first job

Question 14

If the Consumer Price Index (CPI) in 1993 was 85 and in 2021 is 140, what is the value in 2021 dollars of $100 in 1993 dollars?

Accepted Answer

$$100 	imes \frac{140}{85} = 164.71$$

Question 15

Which of the following is NOT a component of the income approach to calculating GDP?

Accepted Answer

Net exports

Question 16

A country can consume beyond its production possibilities frontier (PPF) if:

Accepted Answer

It specializes and trades based on comparative advantage.

Question 17

Which of the following would shift the supply curve for a good to the left?

Accepted Answer

An increase in the price of inputs

Question 18

If the Bank of Canada lowers the overnight rate, what is the likely short-run effect on aggregate demand?

Accepted Answer

Aggregate demand will increase.

Question 19

Which of the following best describes the Taylor rule for setting monetary policy?

Accepted Answer

It sets the overnight rate based on inflation, output gap, and equilibrium rate.

Comprehensive Study Notes: The Firm in the Macroeconomy

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