PRINCIPLES OF MACROECONOMICS
(ECON102)
Tutorial 1
1. Keynesians argue that low levels of spending:
a) are irrelevant in an economy.
b) can lead to prolonged recessions.
c) are not helped by monetary or fiscal policy efforts.
d) are evident only during expansions.
2. The advice to “retrain” would be most appropriate for which of the following types of
unemployment?
a) Cyclical unemployment
b) Structural unemployment
c) Frictional Unemployment
d) Core Unemployment
3. Which of the following policies would reduce frictional unemployment?
a) a decrease in the minimum wage
b) building an online job database that helps workers find jobs
c) implementing an unemployment insurance policy
d) a job retraining program
4. Gross domestic product is calculated by summing up:
a) the total market value of goods and services in the economy.
b) the total quantity of goods and services produced in the economy during a period of
time.
c) the total quantity of goods and services in the economy.
d) the total market value of final goods and services produced in the economy during a
period of time.
5. The increased generosity of unemployment insurance programs in Canada as compared to the
United States should
a) increase the duration of unemployment in Canada as compared to the United States.
b) have no impact on the duration of unemployment in Canada.
c) raise the duration of unemployment in the United States.
d) decrease the duration of unemployment in Canada as compared to the United States
6. Full employment is not considered to be zero unemployment, because
a) there are not enough jobs for everyone who wants one.
b) some people do not want a job.
c) some frictional and structural unemployment always exists.
d) some cyclical unemployment always exists.
7. Laid-off auto workers in Detroit need to be trained for jobs in other industries where there is
more labor demand. In the meantime, they are out of work. This is an example of:
a) Structural unemployment
b) Frictional unemployment
c) Cyclical unemployment
d) Natural unemployment
8. If a country runs a trade deficit, its investment spending is probably:
a) equal to zero.
b) equal to its level of saving.
c) less than its level of saving.
d) greater than its level of saving.
9. Long-run growth is the sustained upward trend in:
a) interest rates over time.
b) nominal GDP over time.
c) aggregate output per person over the business cycle.
d) aggregate output per person over several decades.
10. If the actual unemployment rate is 7% and the natural rate of unemployment is 5%, then
the cyclical unemployment rate is:
a) 5%.
b) 9%.
c) 7%.
d) 2%.
11. When inflation rises quickly:
a) lenders will be hurt and borrowers will benefit.
b) both borrowers and lenders will benefit.
c) both borrowers and lenders will be hurt.
d) borrowers will be hurt and lenders will benefit.
The presence of discouraged workers causes the:
e) actual unemployment rate to understate the true level of unemployment.
f) actual unemployment rate to overstate the true level of unemployment.
g) actual unemployment rate to increase when the workers are not included in the
unemployment calculation.
h) natural rate of unemployment to increase.
12. Inflation affects people adversely because:
a) purchasing power tends to increase during inflation.
b) inflation causes money to lose its value over time if the overall price level is
rising.
c) budget deficit increases during inflation.
d) nominal income falls during inflation.
13. Economic recessions tend to be _______________, and economic expansions tend to be
_______________.
a) long; short
b) short; short
c) short; long
d) long; long