Final Exam

Question 1

On Canada’s balance of payments, a German buying. Canadian bond creates a

Answer 1

• credit on the capital account

Question 2

On Canada’s balance of payments, a Canadian buying an American avocado creates a

Answer 2

• debit on the current account

Question 3

A Canadian buy-in gan avocado from the U.S. creates additional

Answer 3

-demand for U.S. dollars

supply of Canadian dollars

Question 4

Additional shipments of Canadian lumber to the U.S. will cause

Answer 4

• appreciation of the Canadian dollar

Question 5

Falling interest rates in Canada with steady interest rates in the U.S. will cause

Answer 5

• a decrease in the demand for Canadian dollars

Question 6

aggregate behaviour

Answer 6

• the behaviour of all households and firms, taken together. (e.x. studying unemployment)

Question 7

aggregate output

Answer 7

• the total quantity of goods produced by the entire economy in a given period

Question 8

Name the three major concerns of macreconomics

Answer 8

1) output growth
2) unemployment
3) price level stability (inflation and deflation)

Question 9

sticky prices

Answer 9

• are prices that don’t always adjust rapidly between quantity supplied and quantity demanded

Question 10

unemployment rate

Answer 10

• the percentage of the labour force that is unemployed
• key indicator of the economy’s health
• measures the percentage of people who are ready and able to work but don’t have a job
• if there is an unemployment rate - then that means the aggregate labour market is NOT in equilibrium
• near impossible to not have an unemployment rate in a dynamic economy

Question 11

inflation

Answer 11

• is an increase int eh overall price level
• governments want to keep inflation low
• encourages borrowing, consumption, but can also discourage investment

Question 12

hyperinflations

Answer 12

• a period of very rapid increase in the overall price

- ver rare –> could destabilize an economy or government

Question 13

deflation

Answer 13

• a decrease in the overall price

- discourages borrowing and consumpiton

Question 14

stagflation

Answer 14

• high inflation consistent with high unemployment

Question 15

Name the 4 components of the macroeconomy

Answer 15

• households –> private sector
• firms –> private sector
• the government –> public sector
• rest of the world –> foreign sector

Question 16

Name the 3 market arenas

Answer 16

1) goods and services market
2) labour market
3) money market

Question 17

labour market

Answer 17

• input market
• households = SUPPLY labour
• firms and governments = DEMAND labour
• rest of the world = SUPPLY and DEMAND labour

Question 18

labour productivity

Answer 18

• aggregate output/ # of hours worked

Question 19

money market (capital/financial)

Answer 19

• made up of the borrowers and savers
• firms and government = demand funds
• consumers = supply funds
• firms - borrow (demand) to build new buildings to earn more in the future
• they consider the cost and availability of borrowing vs raising equity

Question 20

the great gatsby

Answer 20

• set in the 1920s
• boom cycle
• very wealthy and gridy

Question 21

the grapes of wrath

Answer 21

• set in the early 1930s
• bust cycle
• bad for the economy, very depressing time

Question 22

great depression

Answer 22

• a period of severe economic contraction and high unemployment in 1930s
• said that a lot of monetary and fiscal policy errors prolonged the depression
• didn’t end until the war started

Question 23

John Maynard Keynes

Answer 23

• father of macroeconomics
• influenced byt hed depth of the great depression
• ground-breaking book - general theory of employment
• says that government should step in when aggregate demand is low

Question 24

All other things being equal, an increase in the domestic price level will

Answer 24

• decrease the value of real wealth and cause the consumption and aggregate expenditure functions to shift dowward

Question 25

All other things being equal, a decrease in the domestic price level will shift the next export function

Answer 25

- upward, thus causing the aggregate expenditure function to shift upward

Question 26

The aggregate demand (AD) curve relates

Answer 26

- equilibrium real national incomes to the price level

Question 27

All other things equal, a fall int eh domestic price level causes

Answer 27

- the aggregate expenditure curve to shift upward and hence leads to a movement downward and to the right along the AD curve

Question 28

All other things being equal, the AD curve shifts to there ight was a result of

Answer 28

- increased government expenditure - increased autonomous exports - increased investment expenditure - decreased tax rates

Question 29

All other things being equal, an increase in desired investment expenditures will

Answer 29

- shift the AE curve upward - shift the AD curve to the right - cause the equilibrium levels of real national income and price to increase if the economy operates with a positively sloped SRAS curve

Question 30

fine-tuning

Answer 30

- refers to the governments role in seeking goldilocks solutions (just right solutions) to inflation and unemployment

Question 31

treasury bonds, notes, or bills

Answer 31

- promissory notes issued by the federal government when they borrow money - promise to pay

Question 32

corporate bonds

Answer 32

- promissory notes issued y tech corporations when they borrow money

Question 33

stock

Answer 33

- a quantity of something at a given time

Question 34

flow

Answer 34

- a quantity measured per unit of time that shows how fast something is changing

Question 35

GDP (gross domestic product)

Answer 35

- the value of all goods and services produced in a. country in a year

Question 36

frictional unemployment

Answer 36

- arises from the flow of individuals form job to job and in and out of employment. (unemployed for short period of time because of constant movement between jobs).

Question 37

structural unemployment

Answer 37

-mismatch of available jobs and available skills. (don't have right qualifications for jobs that are available). Also includes seasonal unemployment