Question 1

Suppose in 2018, a country produced 20 fur coats at $$30 each and 60 bottles of sunscreen at 10 $$each. What is the nominal GDP for 2018?

Accepted Answer

$1200

Question 2

Using 2017 as the base year (fur coats: $$15, sunscreen: 5$$), what is the real GDP for 2019 if 30 fur coats and 40 bottles of sunscreen were produced?

Accepted Answer

$650

Question 3

Which of the following is NOT included in GDP when using the value-added method?

Accepted Answer

The value of intermediate goods

Question 4

Which of the following is a limitation of GDP as a measure of standard of living?

Accepted Answer

It does not account for unpaid work such as parenting or volunteering

Question 5

If the Consumer Price Index (CPI) was 119.9 in 2011 and 121.6 in 2012, what was the inflation rate in 2012? Use the formula $$\frac{CPI_{t} - CPI_{t-1}}{CPI_{t-1}} 	imes 100.$$

Accepted Answer

1.4%

Question 6

A worker earned $$30,000 in 1993 when the CPI was 85.6. What is the equivalent value in 2021 dollars if the CPI in 2021 is 141.6? Use $$	ext{Value in new-year dollars} = 	ext{Old value} 	imes \frac{CPI_{	ext{new year}}}{CPI_{	ext{old year}}}$.

Accepted Answer

$49,626

Question 7

Which of the following is classified as 'Investment (I)' in the GDP expenditure approach?

Accepted Answer

A business purchasing new machinery

Question 8

In the Aggregate Expenditure (AE) model, what determines the slope of the AE function?

Accepted Answer

The marginal propensity to spend, which depends on MPC, taxes, and imports

Question 9

If the AE equation is $$AE = 228 + 0.62Y$$, what does the number 228 represent?

Accepted Answer

Autonomous spending (the intercept)

Question 10

If the marginal propensity to consume (MPC) is 0.8, what is the marginal propensity to save (MPS)? Use $$MPS = 1 - MPC.$$

Accepted Answer

0.2

Question 11

Which of the following would cause the short-run aggregate supply (SRAS) curve to shift to the right?

Accepted Answer

A decrease in input prices

Question 12

Suppose $$MPC = 0.75$$, $$t = 0.10$$, and $$m = 0.20. $$What is the marginal propensity to spend ($$z$$)? Use $$z = MPC(1 - t) - m.$$

Accepted Answer

0.475

Question 13

If the marginal propensity to spend ($$z) is 0.6$$, what is the value of the multiplier? Use $$	ext{Multiplier} = \frac{1}{1 - z}.$$

Accepted Answer

2.5

Question 14

If investment increases by $$150 million and the marginal propensity to spend (z$) is 0.6, by how much will equilibrium income ($$\Delta Y$$) increase? Use $$\Delta Y = \frac{1}{1 - z} 	imes 150$.

Accepted Answer

$$375$$ million

Question 15

Which of the following best explains why the Aggregate Demand (AD) curve is downward sloping?

Accepted Answer

Because of the wealth effect, interest-rate effect, and international-trade effect

Question 16

If the Canadian dollar appreciates, what is the most likely effect on net exports (NX) and the AD curve?

Accepted Answer

Net exports decrease and AD shifts left

Question 17

During a recession, which of the following is an example of an automatic stabilizer at work?

Accepted Answer

Unemployment insurance payments increase as more people lose jobs

Question 18

In the loanable funds market, what happens if the government raises tax-free saving limits for households?

Accepted Answer

The supply of loanable funds increases, lowering the equilibrium interest rate

Question 19

If the government wants to close a $$90 million inflationary gap and the multiplier is approximately 1.90, by how much should government spending ($$\Delta G$$) decrease? Use $$\Delta Y = 	ext{multiplier} 	imes \Delta G$.

Accepted Answer

$$47$$ million

Question 20

Which of the following would shift the long-run aggregate supply (LRAS) curve to the right?

Accepted Answer

An increase in the labour force due to immigration

Aggregate Expenditure, GDP, Inflation, and AD-AS: Core Macroeconomics Study Notes

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