Q: Given the following data for a country: Employed = 18 million, Unemployed = 2 million, Population (age 15+) = 30 million. What is the unemployment rate?

$$\frac{2}{20} \times 100\% = 10\%$$

Q: If the Consumer Price Index (CPI) was 120 last year and 126 this year, what is the annual inflation rate?

$$\frac{126 - 120}{120} \times 100\% = 5\%$$

Q: If the CPI basket cost $$1,000 in the base year and 1$$,200 in the current year, what is the CPI for the current year?

$$\frac{1,200}{1,000} \times 100 = 120$$

Question 1

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

Accepted Answer

Nominal GDP uses current prices, while real GDP uses base-year prices to measure output.

Question 2

Suppose the Canadian economy is producing at a level where $$Y \u003c Y^*$$, where $$Y is $$actual GDP and $$Y^* is $$potential GDP. Which of the following is true?

Accepted Answer

The economy is experiencing a recessionary gap.

Question 3

Given the following data for a country: Employed = 18 million, Unemployed = 2 million, Population (age 15+) = 30 million. What is the unemployment rate?

Accepted Answer

$$\frac{2}{20} 	imes 100\% = 10\%$$

Question 4

Which type of unemployment is most likely to increase during a recession?

Accepted Answer

Cyclical unemployment

Question 5

If the Consumer Price Index (CPI) was 120 last year and 126 this year, what is the annual inflation rate?

Accepted Answer

$$\frac{126 - 120}{120} 	imes 100\% = 5\%$$

Question 6

Which of the following best describes the effect of unanticipated inflation?

Accepted Answer

It causes market distortions and creates winners and losers.

Question 7

If the nominal interest rate is 6% and the expected inflation rate is 2%, what is the real interest rate?

Accepted Answer

$$6\% - 2\% = 4\%$$

Question 8

Refer to the exchange rate chart provided. If the Canadian dollar price of 1 US dollar rises from 1.25 to 1.40, what has happened to the Canadian dollar?

Accepted Answer

The Canadian dollar has depreciated.

Question 9

Suppose Canada’s exports are $$500 billion and imports are 550 $$billion. What is the value of net exports, and does Canada have a trade surplus or deficit?

Accepted Answer

Net exports = -$50 billion; trade deficit

Question 10

Which of the following best explains why real GDP is a better measure of economic growth than nominal GDP?

Accepted Answer

Real GDP adjusts for changes in the price level, reflecting only changes in output.

Question 11

If the unemployment rate rises sharply during a recession, which type of unemployment is primarily responsible for this increase?

Accepted Answer

Cyclical unemployment

Question 12

Which of the following is most likely to occur if the actual GDP exceeds potential GDP ($$Y \u003e Y^*$$)?

Accepted Answer

An inflationary gap

Question 13

If the CPI basket cost $$1,000 in the base year and 1$$,200 in the current year, what is the CPI for the current year?

Accepted Answer

$$\frac{1,200}{1,000} 	imes 100 = 120$$

Question 14

Which of the following best describes the natural rate of unemployment?

Accepted Answer

The sum of frictional and structural unemployment at full employment

Question 15

If labour productivity increases but real wages remain constant, what does this imply about the distribution of economic gains?

Accepted Answer

Firms are capturing a larger share of the gains from productivity.

Question 16

Suppose the CPI increases from 150 to 153 over one year. What is the annual inflation rate?

Accepted Answer

$$\frac{153 - 150}{150} 	imes 100\% = 2\%$$

Question 17

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The purchase of a used house

Question 18

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

Accepted Answer

Canadian exports become more expensive for US buyers, so exports may decrease.

Question 19

Which of the following best describes the relationship between national production and national income?

Accepted Answer

National income equals national production because all value created is distributed as income.

Question 20

If the real interest rate is negative, which of the following is true?

Accepted Answer

The nominal interest rate is less than the inflation rate.

Macroeconomic Indicators: GDP, Labour, Inflation, and Trade

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