Assignment 1

Question 1

In Japan in 2000 nominal interest rates were 1.5 per cent and the inflation rate was -0.5 per cent. The real interest rate was

Answer 1

• 2 per cent

Question 2

In 1989, Don bought a Dodge Dart for $2500. He drove this car until 2003 when he bough a Honda Civic for $18000. If the price index in 1969 was 36.7 and the price index in 2003 is 180, what’s the price of the Dodge Dart in 2003 prices?

Answer 2

• $12,262

Question 3

The goal of the consumer price index is to measure changes in the

Answer 3

• relative prices of consumer goods

Question 4

The price index in 2001 is 120, and in 2002 the price index is 127.2. What is the inflation rate?

Answer 4

• 6 per cent

Question 5

If the GDP deflator is 200 and nominal GDP is 10,000 billion, then real GDP is

Answer 5

• 5,000 billion

Question 6

Which of the following is a correct way to measure productivity?

Answer 6

• divide output by the number of hours worked

Question 7

Which of the following is included in Canadian GDP

Answer 7

• Canadian exports of goods and services

Question 8

Greg, a Canadian citizen, works only in the U.S. The value added to production from his employment is

Answer 8

• included only in Canadian GDP

Question 9

Goods that go into inventory and are not sold during the current period are

Answer 9

• included in current period GDP as inventory investment

Question 10

Grapes are

Answer 10

• counted as an intermediate good only if they are used to produce another good like wine

Question 11

What is included in GDP?

Answer 11

• services such as those provided by lawyers and hairstylists
• the estimated rental value of owner-occupied housing
• production of foreign citizens living in Canada

Question 12

To compute GDP we

Answer 12

• sum the market values of final goods and services

Question 13

Macroeconomics includes the study of topics such as

Answer 13

• national output, the inflation rate, and the trade deficit

Question 14

During recessions

Answer 14

• sales and profits fall

Question 15

Meredith is looking for work as a computer programmer. Although her prospects are good she hasn’t yet taken a job. Julie is looking for work in a steel mill, but there aren’t many ads for steel workers and every time she shows up for an interview, there are many more people than interviews/openings.

Answer 15

• Meredith is frictionally unemployed and Julie is structurally unemployed

Question 16

A few years ago, based on concepts similar to those sued to estimate U.S. employment figures, the Canadian adult non-institutionalized population was 24 million, the labour force was 16 million, and the number of people employed was 14 million. According to these numbers, the Canadian labour force participation rate and unemployment rates were about

Answer 16

• 67 per cent and 12.5 per cent

Question 17

Human capital is the

Answer 17

• knowledge and skills that workers acquire through education, training and experience.

Question 18

Which of the following would be considered physical capital?

Answer 18

• the pizza oven at the Liquidity Preferences Tavern

Question 19

When the money market is represented in a diagram with the value of money on the vertical axis, what happens to the price level and the value of money when the money supply increases?

Answer 19

• price of money will go up and the value of money will go down

Question 20

How is the supply of money determined?

Answer 20

• by the Bank of Canada

Question 21

In the money market, as the price level increases, how does the quantity of money demanded or supplied change?

Answer 21

• the quantity of money demanded increases

Question 22

Which statement best describes the impact of open market purchases by the Bank of Canada?

Answer 22

• the money supplied increases, which makes the value of money decrease