$$\text{Unemployment Rate} = \frac{\text{Number of Unemployed}}{\text{Labour Force}} \times 100$$

$$\text{Real Interest Rate} = \text{Nominal Interest Rate} - \text{Inflation Rate} = 5\% - 3\% = 2\%$$

Question 1

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

Accepted Answer

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

Question 2

If the Canadian government increases its spending without raising taxes, which of the following is most likely to occur in the short run?

Accepted Answer

Aggregate demand will increase, potentially raising GDP and employment.

Question 3

Which formula correctly calculates the unemployment rate?

Accepted Answer

$$	ext{Unemployment Rate} = \frac{	ext{Number of Unemployed}}{	ext{Labour Force}} 	imes 100$$

Question 4

Suppose the Bank of Canada lowers the interest rate. What is the most likely effect on aggregate demand?

Accepted Answer

Aggregate demand will increase due to higher investment and consumption.

Question 5

Which of the following is NOT considered a component of aggregate demand?

Accepted Answer

Imports

Question 6

If the price level in Canada rises while nominal GDP remains unchanged, what happens to real GDP?

Accepted Answer

Real GDP decreases.

Question 7

Which equation represents the expenditure approach to calculating GDP?

Accepted Answer

$$GDP = C + I + G + (X - M)$$

Question 8

A country experiences a negative output gap. Which policy is most appropriate to address this situation?

Accepted Answer

Expansionary fiscal policy, such as increasing government spending.

Question 9

If the Canadian dollar appreciates relative to the US dollar, what is the most likely effect on Canadian exports?

Accepted Answer

Canadian exports will decrease because they become more expensive for foreign buyers.

Question 10

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

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is adjusted for inflation.

Question 11

Suppose the government runs a budget deficit. Which of the following is a possible consequence?

Accepted Answer

The government may need to borrow funds, increasing public debt.

Question 12

Which of the following is an example of a contractionary monetary policy?

Accepted Answer

Increasing the policy interest rate.

Question 13

If the inflation rate is 3% and the nominal interest rate is 5%, what is the real interest rate?

Accepted Answer

$$	ext{Real Interest Rate} = 	ext{Nominal Interest Rate} - 	ext{Inflation Rate} = 5\% - 3\% = 2\%$$

Question 14

Which of the following would shift the aggregate supply curve to the right?

Accepted Answer

An increase in productivity due to technological innovation.

Question 15

Which of the following is a function of money?

Accepted Answer

Medium of exchange

Question 16

Suppose Canada is experiencing high inflation. Which policy would be most effective in reducing inflation?

Accepted Answer

Contractionary monetary policy, such as raising interest rates.

Question 17

Which of the following best describes the multiplier effect in fiscal policy?

Accepted Answer

An initial increase in spending leads to a greater overall increase in GDP.

Question 18

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

Accepted Answer

$$	ext{Multiplier} = \frac{1}{1 - MPC} = \frac{1}{1 - 0.8} = 5$$

Question 19

Which of the following is most likely to increase long-run economic growth?

Accepted Answer

Investment in education and technology.

ECON*1100 Introductory Macroeconomics – Course Syllabus and Study Guide

Study Guide - Practice Questions