Q: A country’s currency appreciates. What is the most likely immediate effect on its exports and imports?

Exports decrease and imports increase.

Q: Which formula correctly calculates labour productivity?

$\text{Labour Productivity} = \frac{\text{Real GDP}}{\text{Employment}}$

Q: If the unemployment rate rises sharply during a recession, which of the following is NOT a likely consequence according to macroeconomic theory?

A significant increase in productivity

Q: Suppose the Bank of Canada raises the bank rate. What is the most likely short-term effect on the economy?

Nominal interest rates rise, discouraging borrowing and spending.

Q: Which of the following best explains why inflation matters?

It reduces the purchasing power of money and the real value of any sum fixed in nominal terms.

Q: Which of the following is a correct statement about long-term economic growth?

It refers to the long-term trend of rising total output and output per person.

Question 1

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

Accepted Answer

Nominal national income is measured in current dollars, while real national income is measured in constant (base-period) dollars.

Question 2

Suppose actual output ($Y$) in an economy is $950$ billion and potential output ($Y^*$) is $1000$ billion. What is the output gap, and what does it indicate?

Accepted Answer

$-\$50$ billion; it is a recessionary gap.

Question 3

Which of the following is NOT considered a key macroeconomic variable?

Accepted Answer

Stock market index

Question 4

If the Consumer Price Index (CPI) increases from $120$ to $126$ over one year, what is the annual inflation rate?

Accepted Answer

$4\%$

Question 5

Which of the following best describes the business cycle?

Accepted Answer

Short-term fluctuations in real GDP around its long-term trend, including phases such as trough, recession, recovery, and peak.

Question 6

If the nominal interest rate is $8\%$ and the inflation rate is $3\%$, what is the real interest rate?

Accepted Answer

$5\%$

Question 7

Which of the following statements about unemployment is TRUE?

Accepted Answer

Cyclical unemployment exists when $Y < Y^*$.

Question 8

A country’s currency appreciates. What is the most likely immediate effect on its exports and imports?

Accepted Answer

Exports decrease and imports increase.

Question 9

Which formula correctly calculates labour productivity?

Accepted Answer

$	ext{Labour Productivity} = \frac{	ext{Real GDP}}{	ext{Employment}}$

Question 10

If the unemployment rate rises sharply during a recession, which of the following is NOT a likely consequence according to macroeconomic theory?

Accepted Answer

A significant increase in productivity

Question 11

Suppose the Bank of Canada raises the bank rate. What is the most likely short-term effect on the economy?

Accepted Answer

Nominal interest rates rise, discouraging borrowing and spending.

Question 12

Which of the following best explains why inflation matters?

Accepted Answer

It reduces the purchasing power of money and the real value of any sum fixed in nominal terms.

Question 13

If Canada’s exports and imports both increase by the same amount, what happens to net exports?

Accepted Answer

Net exports remain unchanged.

Question 14

Which of the following is a correct statement about long-term economic growth?

Accepted Answer

It refers to the long-term trend of rising total output and output per person.

Question 15

A country’s real GDP per capita increases over several decades. Which of the following is the most likely cause?

Accepted Answer

A sustained increase in labour productivity.

Question 16

If the exchange rate for the Canadian dollar falls from $1.30$ to $1.20$ per US dollar, what has happened to the Canadian dollar?

Accepted Answer

It has appreciated.

Question 17

Which of the following is the correct formula for the output gap?

Accepted Answer

$	ext{Output Gap} = Y - Y^*$

Question 18

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

Accepted Answer

It leads to unexpected changes in the real value of prices and wages.

Question 19

Which of the following best describes net exports?

Accepted Answer

The difference between exports and imports.

Question 20

Which of the following statements about government policy and economic growth is supported by the study materials?

Accepted Answer

There is considerable debate about the ability of government policy to influence the long-run growth rate.

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

Study Guide - Practice Questions

Study Guide - Flashcards