Macroeconomics Overview and GDP Measurement
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What is the main reason for the rise in Canada's natural unemployment rate in recent decades?

  • Expansion of manufacturing
  • Structural changes in the economy (correct)
  • Increased immigration
  • Decreased unemployment benefits

    • Inflation leads to a rise in the general level of prices.

    True

    What does the GDP gap represent?

    The difference between actual GDP and potential GDP.

    According to Okun's Law, for every percentage point that the actual unemployment rate exceeds the natural rate, the GDP gap is ________%.

    <p>2</p> Signup and view all the answers

    Match the economic terms with their definitions:

    <p>Inflation = Persistent rise in prices Deflation = Persistent fall in prices CPI = Measure of average prices paid by consumers Natural Unemployment Rate = Long-term average unemployment level</p> Signup and view all the answers

    What consequence does unexpected inflation have on wages?

    <p>Wages may not keep pace with rising prices</p> Signup and view all the answers

    Hyperinflation is defined as an inflation rate of 20% per month or higher.

    <p>False</p> Signup and view all the answers

    What is one negative effect of deflation on employers?

    <p>Decreased revenues and potential profit loss.</p> Signup and view all the answers

    The ________ index is the most common measure of inflation.

    <p>consumer price</p> Signup and view all the answers

    What happens to real GDP during unexpected inflation at first?

    <p>It rises above potential GDP</p> Signup and view all the answers

    What characterizes a recessionary gap in an economy?

    <p>High unemployment and low inflation</p> Signup and view all the answers

    An inflationary gap occurs when aggregate demand intersects aggregate supply below full employment equilibrium.

    <p>False</p> Signup and view all the answers

    What is the term for the point where the AD and AS curves intersect, indicating economic stability?

    <p>Full-Employment Equilibrium</p> Signup and view all the answers

    The business cycle is characterized by periods of __________ and __________ as measured by changes in real GDP.

    <p>economic growth, recession</p> Signup and view all the answers

    Match the following gaps with their characteristics:

    <p>Recessionary Gap = High unemployment and low inflation Inflationary Gap = High employment and high inflation</p> Signup and view all the answers

    What percentage of GDP does consumer expenditure approximately represent?

    <p>60%</p> Signup and view all the answers

    The income approach to calculating GDP includes the measurement of financial exchanges and second-hand purchases.

    <p>False</p> Signup and view all the answers

    Which economic indicator represents the total market value of all final goods and services produced in a country in a given year?

    <p>Gross Domestic Product (GDP)</p> Signup and view all the answers

    GDP is calculated using the formula: GDP = C + G + I + (X - M), where C stands for ______.

    <p>Consumer Expenditure</p> Signup and view all the answers

    Match the following expenditure categories with their descriptions:

    <p>Durable Goods = Last a long time like cars Semi Durable Goods = Last for a reasonable amount of time like clothing Non-Durable Goods = Used quickly like food Services = Haircuts, eating out, etc.</p> Signup and view all the answers

    Which of the following is NOT included in government expenditure?

    <p>Purchases of goods and services from abroad</p> Signup and view all the answers

    What are the two approaches to measuring national income?

    <p>Expenditure approach and Income approach</p> Signup and view all the answers

    What is the main measurement used to assess the economic growth of a country?

    <p>Gross Domestic Product (GDP)</p> Signup and view all the answers

    An increase in GDP always indicates a higher output per person.

    <p>False</p> Signup and view all the answers

    What does the acronym RRSP stand for?

    <p>Registered Retirement Savings Plan</p> Signup and view all the answers

    The formula to calculate real GDP growth rate is [(real GDP year 2 - real GDP year 1) / real GDP year 1] x _____

    <p>100</p> Signup and view all the answers

    Which of the following is NOT a limitation of GDP as a measure of economic welfare?

    <p>Inflation Rate</p> Signup and view all the answers

    Match the following limitations of GDP with their explanations:

    <p>Population Size = May misleadingly indicate economic growth not reflected in output per person Non-Market Production = Ignores unpaid contributions like stay-at-home parenting The Underground Economy = Transactions not reported to the government Leisure = Does not account for the value of time not spent working</p> Signup and view all the answers

    The underground economy can account for up to 20% of GDP.

    <p>True</p> Signup and view all the answers

    If a country's major export includes weapons, some argue this affects the GDP's measure of _____

    <p>well-being</p> Signup and view all the answers

    What is a significant issue with using GDP to assess economic welfare?

    <p>It does not account for non-market production.</p> Signup and view all the answers

    What does GDP not account for?

    <p>Social costs and environmental degradation</p> Signup and view all the answers

    Per Capita GDP is always higher in countries with lower populations.

    <p>False</p> Signup and view all the answers

    What is the formula to calculate the employment rate?

    <p>Employment Rate = (Number Unemployed / Labour Force) x 100</p> Signup and view all the answers

    In Canada, the government helps unemployed individuals by ________.

    <p>providing assistance programs</p> Signup and view all the answers

    Match the unemployment terms with their definitions:

    <p>Discouraged workers = People who have given up looking for work Underemployed workers = Those working part-time or in jobs not suited to their skills Temporary layoff = A short-term suspension of work Labour force = All employed and unemployed individuals in an economy</p> Signup and view all the answers

    Which of the following is a drawback of the official unemployment rate?

    <p>It considers discouraged workers as unemployed.</p> Signup and view all the answers

    The monthly Labour Force Survey by Statistics Canada includes 54,000 households.

    <p>True</p> Signup and view all the answers

    What age range defines the 'working age population'?

    <p>15-64 years old</p> Signup and view all the answers

    Underemployed workers may be working part time or in jobs that are ________ to their education.

    <p>not relevant</p> Signup and view all the answers

    What is Per Capita real GDP used for?

    <p>To compare living standards over time in a specific country</p> Signup and view all the answers

    Study Notes

    Macroeconomics

    • Studies the economy as a whole, encompassing consumers, workers, and businesses
    • Aims to understand the overall economic performance
    • Measures include output (GDP), employment (unemployment rates), and price stability (CPI).

    Why Measure Economic Performance?

    • Helps governments assess the effectiveness of economic policies
    • Enables countries to compare their economic situations to others
    • Allows analysis of industry impact on the entire economy
    • Aids in contract negotiations for unions and businesses

    Measuring Output

    • Gross Domestic Product (GDP) is a key metric for economic progress
    • Represents the total market value of all final goods and services produced in a year
    • Two approaches for measuring GDP: expenditure and income.

    Expenditure Approach

    • Calculates GDP by summing final expenditures

    • Excludes financial transactions and second hand goods, to avoid double counting

    • The formula GDP = C + G + I + (X − M) is used

      • C = Consumer spending
      • G = Government spending
      • I = Investment spending
      • X = Exports
      • M = Imports.

    • Consumer expenditures (C) are the largest component (approximately 60% of GDP) comprising durables, non-durables, and services

    Circular Flow Diagram

    • Illustrates the flow of money and resources between various sectors in an economy
    • Presents a visualization of expenditure and income approaches.

    Other limitations of GDP

    • Population Size - Significant population growth doesn't inherently mean a higher GDP per person.

    • Non-market production is not measured

    • The underground economy remains hidden from economic statistics.

    • Types of goods produced (weapons/artillery) may not fully reflect a country's well-being.

    • Leisure time and environmental impact aren't considered in GDP calculations.

    Measuring Employment

    • Unemployment rate is the percentage of the labor force not working
    • The unemployment rate uses data from the Labour Force Survey
    • Various types of unemployment (frictional, structural, cyclical, seasonal) exist.

    Inflation and Deflation

    • Inflation is a sustained increase in the general price level.
    • Deflation is a sustained decrease in the general price level
    • CPI is a measure of average price levels paid by consumers for goods and services.

    The Business Cycle & Fiscal Policy

    • The business cycle comprises alternating periods of economic growth (expansions) and decline (contractions)
    • Two types of government policies influence the business cycle:
      • Fiscal policy: involves government spending and taxation to affect the economy
      • Monetary policy: involves influencing the money supply and interest rates to affect the economy.

    Monetary Policy

    • Managed by the Bank of Canada (BOC)
    • Aims to control inflation and economic growth
    • Tools include manipulating interest rates and influencing the nation's money supply.

    Interest Rates

    • Interest rates influence borrowing, lending, investment, and economic activity
    • Types of interest rates include overnight rate, bank rate and prime rate.

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    Grade 12 Economics Notes - Unit 4 Macro PDF

    Description

    This quiz covers key concepts in macroeconomics, focusing on the economy's overall performance, including how GDP is calculated. It emphasizes the importance of measuring economic performance and the implications for policy-making and industry analysis. Explore the methods used to assess economic activities, including the expenditure approach to GDP.

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