Chapter 5 - 8.5 Midterm Review Questions

Q1. Who is included in the labour force?

Background

Topic: Labour Force and Unemployment

This question tests your understanding of who is counted as part of the labour force in macroeconomic statistics.

Key Terms:

• Labour Force: The sum of all employed and unemployed individuals actively seeking work.

• Not in Labour Force: Includes retirees, full-time students not seeking work, and those not seeking employment.

Step-by-Step Guidance

1. Review the definition of the labour force: includes people who are working or actively looking for work.

2. Go through each option and determine if the person is employed, unemployed (actively seeking work), or not in the labour force (e.g., retired, student, not seeking work).

3. Identify which option describes someone who is either working or actively seeking work.

Try solving on your own before revealing the answer!

Q2. What does Statistics Canada use to calculate the unemployment rate?

Background

Topic: Measuring Unemployment

This question is about the data sources and definitions used in official unemployment statistics.

Key Terms:

• Unemployment Rate: The percentage of the labour force that is unemployed and actively seeking work.

• Working-Age Population: People aged 15 and over who are able to work.

Step-by-Step Guidance

1. Recall the formula for the unemployment rate: $\text{Unemployment Rate} = \frac{\text{Number of Unemployed}}{\text{Labour Force}} \times 100$

2. Consider which population group is used as the base for calculating this rate.

3. Eliminate options that do not relate to the working-age population or employment status within Canada.

Try solving on your own before revealing the answer!

Q5. Who is a discouraged worker?

Background

Topic: Types of Unemployment

This question tests your understanding of discouraged workers and their role in unemployment statistics.

Key Terms:

• Discouraged Worker: Someone who has stopped looking for work because they believe no jobs are available for them.

• Labour Force Participation: Only those actively seeking work are counted as unemployed.

Step-by-Step Guidance

1. Review the definition of a discouraged worker.

2. Go through each option and identify who has stopped looking for work due to discouragement.

3. Eliminate those who are still seeking work, retired, or left the labour force for other reasons.

Try solving on your own before revealing the answer!

Q9. How does Statistics Canada classify someone working part-time at one job and full-time at another?

Background

Topic: Employment Classification

This question is about how employment status is determined when a person holds multiple jobs.

Key Terms:

• Employed: Anyone who works for pay or profit during the reference week, regardless of the number of jobs.

• Full-Time/Part-Time: Classification depends on hours worked, but holding multiple jobs still counts as employed.

Step-by-Step Guidance

1. Recall that employment status is based on whether a person works for pay, not on the number of jobs.

2. Consider how Statistics Canada would count someone with both part-time and full-time jobs.

3. Eliminate options that do not match the official definition of 'employed.'

Try solving on your own before revealing the answer!

Q2. What type of unemployment is zero at full employment?

Background

Topic: Types of Unemployment and Full Employment

This question tests your understanding of the different types of unemployment and what 'full employment' means in macroeconomics.

Key Terms:

• Full Employment: The level of employment when all available resources are used efficiently, and only natural unemployment exists.

• Cyclical Unemployment: Unemployment caused by economic downturns; it is zero at full employment.

• Natural Unemployment: Includes frictional and structural unemployment, which always exist even at full employment.

Step-by-Step Guidance

1. Recall the definitions of frictional, structural, and cyclical unemployment.

2. Understand that at full employment, only natural unemployment remains.

3. Identify which type of unemployment is eliminated when the economy is at full employment.

Try solving on your own before revealing the answer!

Q3. What is macroeconomics concerned with?

Background

Topic: Scope of Macroeconomics

This question tests your understanding of what macroeconomics studies compared to microeconomics.

Key Terms:

• Macroeconomics: The study of the economy as a whole, including aggregate measures like GDP, unemployment, and inflation.

• Microeconomics: The study of individual choices and markets.

Step-by-Step Guidance

1. Review the main focus areas of macroeconomics (national income, output, employment, inflation, etc.).

2. Identify which options refer to aggregate or economy-wide phenomena.

3. Eliminate options that focus on individual or business-level decisions.

Try solving on your own before revealing the answer!

Q14. According to the paradox of thrift, what happens when everyone saves more?

Background

Topic: Paradox of Thrift

This question tests your understanding of the macroeconomic concept that individual saving can have negative effects on the overall economy if done collectively.

Key Terms:

• Paradox of Thrift: The idea that while saving is good for individuals, if everyone saves more, aggregate demand falls, potentially reducing income and employment.

• Aggregate Demand: The total demand for goods and services in the economy.

Step-by-Step Guidance

1. Recall what happens to aggregate demand if everyone increases their savings and reduces consumption.

2. Think about the impact on businesses when demand for goods and services falls.

3. Identify which option describes a likely macroeconomic outcome of reduced aggregate demand.

Try solving on your own before revealing the answer!

Q1. What is GDP?

Background

Topic: Gross Domestic Product (GDP)

This question tests your understanding of the definition of GDP and what it measures in macroeconomics.

Key Terms:

• Gross Domestic Product (GDP): The total market value of all final goods and services produced within a country in a given period.

• Final Goods and Services: Products that are purchased by the end user, not for resale or further processing.

Step-by-Step Guidance

1. Recall the definition of GDP and what is included in its calculation.

2. Identify which option matches the official definition used by economists.

3. Eliminate options that refer to partial, outdated, or non-standard measures of national output.

Try solving on your own before revealing the answer!

Final Answer Examples

For Q1: The labour force includes Arif, who is looking for a job, because he is actively seeking employment and is not retired, a student, or out of the labour force for other reasons.

For Q2: Statistics Canada uses the working-age population in calculating the unemployment rate, as it includes all people aged 15 and over who are able to work.

For Q5: A discouraged worker is someone like Aly, who has stopped looking for work after being laid off and is no longer counted as unemployed.

For Q9: Anka is classified as employed, since working any amount for pay counts as employment in official statistics.

For Q2 (Full Employment): At full employment, cyclical unemployment is zero, but frictional and structural unemployment remain.

For Q3 (Macroeconomics): Macroeconomics looks at the global economy, the combined outcomes of all individual choices, and the Canadian economy—so all of these choices are correct.

For Q14 (Paradox of Thrift): When everyone saves more, businesses lay off workers due to decreased demand, illustrating the paradox of thrift.

For Q1 (GDP): Economists call the final value of all products and services produced annually in a country the gross domestic product (GDP).