Question 1

A nation's real national income in a given year measures the

Accepted Answer

Real national income measures the value of output produced by the economy, adjusted for inflation, and expressed in constant dollars to reflect true purchasing power.

Question 2

Suppose Honest Rob's Used Cars buys a used car for $2000 and resells it for $3000.The result of Honest Rob's transactions is to

Accepted Answer

The resale of the car by Honest Rob's Used Cars adds value to national income, as the car was sold for $1000 more than it was purchased for. Therefore, this transaction increases the value of national income by $1000.

Question 3

An example of a topic outside the scope of macroeconomics is

Accepted Answer

Changes in the price of a particular good in a specific market is a microeconomic topic that focuses on individual market dynamics and is outside the scope of macroeconomics, which deals with the broader economy as a whole.

Question 4

Suppose Appliance Mart buys a used refrigerator for $100,repairs it,and resells it for $250.The result of this transaction is to

Accepted Answer

The resale of the repaired refrigerator for $250 adds value to the national product. The value added is the difference between the sale price and the purchase price, which is $250 - $100 = $150. Therefore, the national product increases by $150.

Question 5

Macroeconomics is mainly concerned with the study of

Accepted Answer

Macroeconomics is concerned with studying the economy as a whole, so it focuses on aggregated data such as national income, employment rates, and inflation. It looks at trends and fluctuations in these variables and tries to understand how they are connected and what policies can be implemented to stabilize the economy.

Question 6

The economic problems studied in macroeconomics include:
1)the level of economic activity;
2)competition policy;
3)the rate of unemployment.

Accepted Answer

Macroeconomics studies the overall level of economic activity, which includes the rate of unemployment, as well as other key measures like GDP growth, inflation, and trade. Competition policy falls under microeconomics, which studies the behavior of individual firms and markets, rather than the macro-level trends and patterns that macroeconomics is concerned with.

Question 7

Consider a small economy with 3 individuals.Individual A produces 100 chickens that sell for $8 each.Individual B produces 50 bags of corn that sell for $10 each.Individual C produces 40 bushels of apples that sell for $20 each.National product in this economy is

Accepted Answer

National product is the total value of goods and services produced in an economy in a given period of time. In this case, the national product is the sum of the value of the chickens, corn, and apples produced. The value of the chickens is 100 * $8 = $800. The value of the corn is 50 * $10 = $500. The value of the apples is 40 * $20 = $800. Therefore, the national product is $800 + $500 + $800 = $2100.

Question 8

Suppose that in 2016 Canada's automobile manufacturers produced 2 million cars priced at $20 000 each.And in 2017 they produced 1 million cars priced at $40 000 each.Ceteris paribus,the change in nominal national income is

Accepted Answer

Nominal national income remains unchanged because the total revenue from car production is the same in both years: 2 million cars x $20,000 = $40 billion in 2016 and 1 million cars x $40,000 = $40 billion in 2017.

Question 9

Which of the following is an accurate statement about real national income?

Accepted Answer

Real national income changes only when the underlying quantities change, as it is adjusted for inflation and reflects the actual volume of production.

Question 10

To compare the economy's aggregate output in two different time periods,economists compare the

Accepted Answer

To accurately compare the economy's aggregate output in two different time periods, economists need to compare the real national income for the two periods. Nominal national income may not provide an accurate comparison because it includes the effects of price changes within the economy. Similarly, potential national income may not reflect changes in the actual output of the economy. Unemployment rates and inflation rates are important measures but do not provide a direct comparison of the economy's aggregate output between two time periods.

Question 11

Which of the following is an equivalent term for "full-employment output"?

Accepted Answer

Full-employment output refers to the level of output that would result when all available resources in an economy are employed at their full capacity. It is also known as potential output. Therefore, option E is the correct equivalent term for full-employment output. Option A (actual output) refers to the current level of output in an economy, which may or may not be equal to full-employment output. Option B (long-run output) is a term used to refer to the output an economy can sustain in the long run given its available resources and technology. Options C and D (GNP and GDP) measure the size of an economy in terms of the value of goods and services produced within a given period, but they do not necessarily represent the economy's full-employment output.

Question 12

What is potential or full-employment output?

Accepted Answer

Potential or full-employment output refers to the maximum GDP that an economy can produce when all of its resources are fully employed at a normal intensity of use. It is a theoretical concept that cannot be fully achieved in practice due to various factors such as technological limitations, resource constraints, and cyclical fluctuations in the economy.

Question 13

Which of the following is the best description of the business cycle?

Accepted Answer

The business cycle refers to the short-run fluctuations of national income around its trend value. It includes periods of expansion (or boom) and contraction (or recession) in the economy.

Question 14

Consider a small economy with 3 individuals where each individual produces and sells $1000 worth of final goods and services.The national income for this economy is

Accepted Answer

National income is the total income earned by all individuals in a country, and in this case, all three individuals earn $1000 each. Therefore, the national income for this economy is simply 3 x $1000 = $3000. None of the other options accurately reflect the calculation of national income in this scenario.

Question 15

In order to determine the economy's real GDP growth rate between two time periods,we should look at

Accepted Answer

To determine the economy's real GDP growth rate between two time periods, we need to compare the real national income in each period, which is equal to nominal national income corrected for price-level changes. This will give us a more accurate measure of the actual growth in output, as it takes into account inflation or deflation. Comparing nominal national income alone (choice A) would not give an accurate representation of real growth, as it doesn't account for changes in the price level. Potential national income (choice C) is a theoretical concept and not a measure of actual output. Real national income corrected for quantity changes (choice D) is a similar concept to real national income corrected for price-level changes, but the latter is more commonly used in practice. Only considering the real national product from the latest time period (choice E) would not give us a complete picture of the growth rate over the entire time frame.

Question 16

An equivalent term for "real national income" is

Accepted Answer

Real national income is adjusted for inflation and is sometimes referred to as constant-dollar national income. This is in contrast to nominal national income, which is not adjusted for inflation and is sometimes referred to as current-dollar national income. Actual national income refers to the actual amount of goods and services produced in a given time period, while potential national income refers to the maximum amount of goods and services that could be produced with all available resources.

Question 17

Real GDP measures

Accepted Answer

Real GDP measures the quantity of total output produced by the nation's economy over the period of one year, adjusted for inflation.

Question 18

An upward trend in real national income over an extended period of time is called

Accepted Answer

An upward trend in real national income over an extended period of time is known as economic growth. This is different from an inflationary boom (A), which refers to a short-term increase in prices and spending, and constant-dollar national income (C), which adjusts income for inflation but does not necessarily imply growth. Aggregate output (B) refers to the total quantity of goods and services produced in an economy, and potential national income (D) refers to the maximum feasible output of an economy given its resources and technology. While both of these concepts are related to economic growth, they do not capture the sustained upward trend in real national income over time.

Question 19

In macroeconomics,if the value of the national product increases,there is

Accepted Answer

An increase in the value of national product implies an increase in the total amount of output produced by the economy. This in turn leads to an increase in the total amount of income earned by individuals and firms in the economy. As a result, there will be an equal increase in the value of income claims on that output. This includes wages, profits, rents, and interest earned by individuals and firms.

Question 20

In macroeconomics,the term "national income" refers to

Accepted Answer

National income refers to the value of the income generated by the production of total output within a nation's borders. It includes wages, salaries, profits, and other types of income earned by individuals and businesses within the country during a specific period of time. It does not include sales of used goods or goods produced and sold to other nations. It also does not refer to a nation's total wealth or current spending by households.

Quiz 19: What Macroeconomics Is All About