1022 - Final Exam Review

If revenues exceed outlays, the government's budget balance is positive, and the government has a budget surplus

• TRUE

• FALSE

As the sole issuer of Canadian money, the Bank of Canada can set any one of the three variables: the rate of inflation, the interest rate, and the natural unemployment rate.

• TRUE

• FALSE

Answer explanation

The monetary base, the exchange rate, and the short-term interest rate

Factors that influence labour productivity include

• the inflation rate, the real wage rate, and the exchange rate

• Physical capital, human capital, and technology

• Physical capital, the real wage rate, and technology

• the population growth rate, human capital, and markets

If velocity increases by 5% a year, potential GDP grows by 4% a year, and the money growth rate is -3% a year, what is the inflation rate? (Only write the numeric value, no percent sign needed)

Stagflation occurs when the economy experiences both a rising price level and increasing real GDP.

• TRUE

• FALSE

Answer explanation

Stagflation is the combination of a rising price level and decreasing real GDP.

The Rule of 70 is used to estimate how long it will take the level of any variable to double.

• TRUE

• FALSE

In a country with a working-age population of 20 million, 14 million are employed, 1.5 million are unemployed, and 1 million of the employed are working part-time, half of whom wish to work full-time. The size of the labour force is:

• 15.5 million

• 20 million

• 12.5 million

• 14 million

• 14.5 million

If Canadian interest rate differential falls, the exchange rate value of the dollar ---------- and net exports -------------

• falls; increase

• rises; increase

• falls; decrease

• rises; decrease

A tax cut on capital income increases potential GDP because the supply of loanable funds increases.

• TRUE

• FALSE

The lower the overnight loan rate, the smaller the quantity of money.

• TRUE

• FALSE