Economics Chapter 24 Quiz

Questions and Answers

How is the economy's output gap calculated?

By using nominal national incomes.

By subtracting actual income from potential national income. (correct)

By considering the percentage change in the general price level.

By using real national incomes.

What is the effect of fully anticipated inflation on debtors?

It decreases the real value of their debts.

It benefits debtors. (correct)

It has no effect on debtors.

It increases the cost of borrowing.

If the unemployment rate is 8 percent and the natural rate of unemployment is 5 percent, what is the cyclical unemployment rate?

8 percent.

3 percent. (correct)

14 percent.

5 percent.

What can be concluded if nominal national income increased by 10 percent while real national income increased by 20 percent?

The price level has declined by about 10 percent. Signup and view all the answers

Which of the following statements about inflation is correct?

Inflation is negatively related to the purchasing power of money. Signup and view all the answers

If actual income is lower than potential national income, which situation describes the economy?

There is a recessionary gap. Signup and view all the answers

What happens to the purchasing power of money during inflation?

It decreases. Signup and view all the answers

What is the relationship between the unemployment rate and inflation rate when considering the output gap?

When unemployment is high, inflation is low. Signup and view all the answers

An individual who worked at least one hour as a paid worker outside their home during the survey week would be classified as what?

an employed worker Signup and view all the answers

How is the marginal propensity to consume represented?

the change in consumption divided by the change in disposable income Signup and view all the answers

If current income is positioned to the left of equilibrium, what does the height of the 45-degree line above the AE line indicate?

the amount by which desired expenditures exceeds output Signup and view all the answers

An increase in the real interest rate will lead to what changes in desired consumption and investment?

a decrease in both consumption and investment Signup and view all the answers

In the given macro model, what is the value of autonomous expenditure?

1,350 Signup and view all the answers

What effect does a rise in the Canadian dollar price of foreign currencies have on Canada's net export curve?

shifts downward and becomes flatter Signup and view all the answers

In a macro model with a marginal propensity to consume of 0, what is the expected value of the multiplier?

0 Signup and view all the answers

What does it indicate if a country has an actual GDP less than its potential GDP?

the country is producing inside its production possibilities boundary Signup and view all the answers

Study Notes

Exam Overview

Examination consists of 25 multiple-choice questions.
Each question is valued at 3 marks; total marks available is 75.
Required details: name and student number on the answer sheet.

Calculation of Output Gap

Calculation uses actual income subtracted from potential national income.

Understanding Inflation

Fully anticipated inflation benefits debtors.
Inflation negatively affects the purchasing power of money.

Unemployment Metrics

If the unemployment rate is 8% and the natural rate is 5%, the cyclical unemployment rate is 3%.

Nominal vs Real National Income

A 10% increase in nominal national income with a 20% increase in real national income indicates a decline in the price level.

Labour Force Classification

An individual who worked at least one hour as a paid worker is classified as an employed worker.

Marginal Propensity to Consume (MPC)

MPC is defined as the change in consumption divided by the change in disposable income.

Equilibrium Analysis

If income is left of equilibrium, the gap reflects the amount desired expenditures exceed output.

Real Interest Rate Effects

An increase in the real interest rate results in a decrease in desired consumption and a decrease in desired investment.

Autonomous Expenditure Calculation

In the provided macro model, autonomous expenditure totals 1,350.

Net Export Curve Impact

A rise in Canadian dollar price of foreign currencies shifts Canada's net export curve downward and becomes flatter.

Multiplier Effect

In a macro model where the marginal propensity to consume, income tax, and import propensity are all zero, the multiplier equals 0.

GDP Context

A country with an actual GDP less than potential GDP operates inside its production possibilities boundary.

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Description

Test your understanding of Chapter 24: From the Short Run to the Long Run. This quiz consists of 25 multiple-choice questions, each worth 3 marks, covering key concepts related to the adjustment of factor prices. Choose the most appropriate answer from the provided options.