Question 1

Consider a small economy where factor supply is 1000 units, the factor utilization rate is 0.9 and a simple measure of productivity (GDP per factor employed)is $80. This economy's GDP is
A)$72 000
B)$7200
C)$88 888
D)$90 000
E)$80 000

Accepted Answer

The GDP is calculated by multiplying the factor supply (1000 units) by the factor utilization rate (0.9) and the productivity per factor employed ($80). So, GDP = 1000 * 0.9 * 80 = $72,000.

Question 2

In the short run, aggregate demand and aggregate supply shocks cause output gaps, which in turn, cause fluctuations in
A)productivity.
B)the natural rate of unemployment.
C)factor supply.
D)the normal factor utilization rate.
E)the factor utilization rate.

Accepted Answer

In the short run, output gaps caused by aggregate demand and supply shocks lead to fluctuations in the factor utilization rate, as firms adjust their use of labor and capital in response to changes in economic conditions.

Question 3

The level of aggregate output is determined in the short run by but in the long run by the level of .
A)the output gap; factor productivity
B)the AD and AS curves; Y*
C)the AS curve; potential output
D)the AD curve; interest rates
E)the AD and AS curves; factor utilization

Accepted Answer

In the short run, aggregate output is determined by the intersection of the Aggregate Demand (AD) and Aggregate Supply (AS) curves. In the long run, it is determined by the economy's potential output (Y*), which is the level of output when all resources are fully utilized.

Question 4

Other things being equal, a country with a high national saving rate may have a long- run growth rate because more saving increases the .
A)high; availability of funds, thus lowering the interest rate
B)high; wealth of people and increases future consumption
C)low; unemployment and decreases wages in the long run
D)high; interest rate and encourages more investment
E)low; consumption in the long run

Accepted Answer

A high national saving rate increases the availability of funds for investment, which can lower interest rates and promote economic growth by encouraging more investment in productive activities.

Question 5

Which of the following provides the best explanation for why GDP may increase over long periods of time?
A)increase in mortality rates
B)increase in interest rates
C)increase in emigration
D)increase in unemployment
E)increase in capital stock

Accepted Answer

An increase in capital stock, which represents the accumulation of physical and human capital in an economy, can lead to increased productivity and output over time, resulting in an increase in GDP.

Question 6

Consider the equation GDP = F × (F_E/F)× (GDP/F_E). Which component describes the amount of output produced per unit of input employed? A)F B)F_E C)(GDP/F_E) D)(F_E/F) E)GDP

Accepted Answer

The component (GDP/F_E) describes the amount of output (GDP) produced per unit of input employed (F_E), which is essentially the productivity of the input.

Question 7

Consider the basic AD/AS model. In the short run, a shift of the aggregate supply curve would lead to a change in real GDP by mostly changing
A)the level of investment.
B)the prices of factors of production.
C)the productivity of capital.
D)the amount of labour employed.
E)the amount of land (natural resources)available to the economy.

Accepted Answer

In the short run, a shift in the aggregate supply curve would mostly change the amount of labour employed as firms adjust their production levels to meet changes in input costs or availability. A shift in aggregate supply could be caused by changes in the prices of factors of production or productivity, but it is the resulting change in the amount of labour employed that leads to changes in real GDP.

Question 8

GDP can be represented by the equation: GDP = F x (Fe/F)x (GDP/Fe), where F represents the total factor supply and Fe represents the number of employed factors. The term (GDP/Fe)represents
A)factor utilization.
B)average factor productivity.
C)income per person.
D)output per capital.
E)factor supply per level of output.

Accepted Answer

The term (GDP/Fe) represents the average factor productivity, which is a measure of the efficiency of producing output given the number of employed factors. It indicates the output produced per unit of employed factor, thus representing the productivity level of the factors of production.

Question 9

An estimate for the value of potential GDP can be generated by observing and recording
A)the economy's total supply of factors, their normal rates of utilization, and factor productivity.
B)the economy's total output, its total cost and demand for that output.
C)the economy's total supply of factors, the costs of those factors, and their productivity.
D)the total available capacity for production in the Canadian economy.
E)the level of actual GDP when the unemployment rate is zero.

Accepted Answer

Potential GDP is the maximum level of output that can be produced with the economy's existing resources and technology at full employment. Therefore, an estimate of potential GDP can be generated by observing and recording the economy's total supply of factors (such as labor, capital, and natural resources), their normal rates of utilization, and their productivity. This approach takes into consideration both the quantity and quality of factors of production and their efficiency in contributing to economic output.

Question 10

Suppose that real GDP in an economy is $750 000 and real GDP per worker is $250. If the employment rate in this economy is 80 percent, then there are
A)600 000 people in the labour force in this economy.
B)150 000 people in the labour force in this economy.
C)3000 people in the labour force in this economy.
D)33 000 people in the labour force in this economy.
E)3750 people in the labour force in this economy.

Accepted Answer

The answer of Suppose that real GDP in an economy...

Question 11

Many economists argue that Japan's remarkable long- run growth rate between 1950 and 1990 was largely due to Japan's
A)skilled labour force that developed over those forty years.
B)high consumption rate for high quality electronic products.
C)high national saving rate.
D)excessive amounts of money invested into research and development.
E)restrictive trade barriers which eliminated foreign competition.

Accepted Answer

Many economists attribute Japan's long-run growth between 1950 and 1990 to its high national saving rate. Japan's saving rate was consistently higher than other developed countries, allowing for more investment in capital and technological advances. This, in turn, contributed to Japan's economic growth.

Question 12

Which of the following may increase real GDP in the short run but may actually decrease the long- run growth rate of GDP?
A)increase in factor- utilization rates in the short run
B)increase in the unemployment rate
C)increase in factor supplies
D)decrease in households' desired saving
E)decrease in factor productivity

Accepted Answer

A decrease in households' desired saving can boost consumption and increase real GDP in the short run. However, it may reduce the funds available for investment, potentially decreasing the long-run growth rate of GDP by limiting capital accumulation.

Question 13

Changes in any of the following variables contribute to changes in GDP. Which one typically changes most over short periods of time?
A)the labour- force participation rate
B)the number of workers who are available to work and the output produced per worker
C)the number of workers who are available to work
D)the number of employed workers as a portion of the number of workers available to work
E)the output produced per worker

Accepted Answer

The number of employed workers as a portion of the number of workers available to work (employment rate) typically changes most over short periods of time, affecting GDP through fluctuations in employment levels.

Question 14

A low factor- utilization rate describes _ in factor markets, which causes factor prices to and shifts the aggregate supply curve to the .
A)excess supply; fall; left
B)excess supply; rise; right
C)excess demand; fall; right
D)excess demand; rise; right
E)excess supply; fall; right

Accepted Answer

A low factor-utilization rate indicates excess supply in factor markets, leading to falling factor prices and shifting the aggregate supply curve to the right.

Question 15

GDP can be represented by the equation: GDP = L x [E/L] x [GDP/E] where L is the total supply of labour and E is the level of employment. In this equation, the term [GDP/E] represents
A)the ratio of the population unemployed.
B)the productivity of labour.
C)one minus the unemployment rate.
D)output per unit of capital.
E)the unemployment rate.

Accepted Answer

[GDP/E] represents the productivity of labour, which measures how much output is produced per hour or per employed worker.

Question 16

Suppose GDP in an economy is $144 000 , the unemployment rate is 10 percent and there are 8000 people in the labour force. Calculate the GDP per worker for this economy.
A)$10
B)$14.40
C)$18
D)$20
E)$80

Accepted Answer

The answer of Suppose GDP in an economy is $144...

Question 17

The average rate of productivity growth in Canada over the past few decades has been about
A)15 percent per year.
B)0.2 percent per year.
C)1.5 percent per year.
D)25 percent per year.
E)5 percent per year.

Accepted Answer

According to the information given, the average rate of productivity growth in Canada over the past few decades has been about 1.5 percent per year. None of the other answer choices are supported by the information given.

Question 18

GDP can be represented by the equation: GDP = F x (Fe/F)x (GDP/Fe). In this equation, the term (Fe/F)represents
A)the factor- utilization rate.
B)output per capital.
C)factor supply per level of output.
D)factor productivity.
E)income per person.

Accepted Answer

The term (Fe/F) represents the factor-utilization rate, which indicates the proportion of available factors of production (like labor or capital) that are actually being used.

Question 19

Inflationary gaps are typically associated with
A)excess supply of factors and lower- than- normal factor- utilization rates.
B)excess supply of factors and normal factor- utilization rates.
C)excess demand for factors and lower- than- normal factor- utilization rates.
D)excess demand for factors and higher- than normal factor- utilization rates.
E)excess supply of factors and higher- than- normal factor- utilization rates.

Accepted Answer

In an inflationary gap, aggregate demand exceeds the potential output of an economy, leading to excess demand for factors of production (such as labor and capital) and higher-than-normal factor-utilization rates. Choice A and B describe a situation of a recessionary gap, while choice C and E do not accurately describe the characteristics of an inflationary gap.

Question 20

Consider a small economy where factor supply is 4000 units, the factor utilization rate is 0.8 and a simple measure of productivity (GDP per factor employed)is $50. This economy's GDP is
A)$200 000
B)$320 000
C)$160 000
D)$40 000
E)$500 000

Accepted Answer

The GDP is calculated by multiplying the factor supply by the factor utilization rate and then by the productivity measure: 4000 units * 0.8 * $50 = $160,000.

Quiz 25: The Difference Between Short-Run and Long-Run Macroeconomics

Consider a small economy where factor supply is 1000 units, the factor utilization rate is 0.9 and a simple measure of productivity (GDP per factor employed) is $80. This economy's GDP is

In the short run, aggregate demand and aggregate supply shocks cause output gaps, which in turn, cause fluctuations in

The level of aggregate output is determined in the short run by but in the long run by the level of .

Other things being equal, a country with a high national saving rate may have a long- run growth rate because more saving increases the .

Which of the following provides the best explanation for why GDP may increase over long periods of time?

Consider the equation GDP = F × (F_E/F) × (GDP/F_E) . Which component describes the amount of output produced per unit of input employed?

Consider the basic AD/AS model. In the short run, a shift of the aggregate supply curve would lead to a change in real GDP by mostly changing

GDP can be represented by the equation: GDP = F x (Fe/F) x (GDP/Fe) , where F represents the total factor supply and Fe represents the number of employed factors. The term (GDP/Fe) represents

An estimate for the value of potential GDP can be generated by observing and recording

Suppose that real GDP in an economy is $750 000 and real GDP per worker is $250. If the employment rate in this economy is 80 percent, then there are

Many economists argue that Japan's remarkable long- run growth rate between 1950 and 1990 was largely due to Japan's

Which of the following may increase real GDP in the short run but may actually decrease the long- run growth rate of GDP?

Changes in any of the following variables contribute to changes in GDP. Which one typically changes most over short periods of time?

A low factor- utilization rate describes _ in factor markets, which causes factor prices to and shifts the aggregate supply curve to the .

GDP can be represented by the equation: GDP = L x [E/L] x [GDP/E] where L is the total supply of labour and E is the level of employment. In this equation, the term [GDP/E] represents

Suppose GDP in an economy is $144 000 , the unemployment rate is 10 percent and there are 8000 people in the labour force. Calculate the GDP per worker for this economy.

The average rate of productivity growth in Canada over the past few decades has been about

GDP can be represented by the equation: GDP = F x (Fe/F) x (GDP/Fe) . In this equation, the term (Fe/F) represents

Inflationary gaps are typically associated with

Consider a small economy where factor supply is 4000 units, the factor utilization rate is 0.8 and a simple measure of productivity (GDP per factor employed) is $50. This economy's GDP is