question

Define GDP.

answer

market value of all goods and services produced in a country over a time period-- 1 year.

question

What's 'point of ? at GDP'?

answer

measure of economic well-being-- sense of our standard of living

question

The GDP of China is 7 trillion dollars, while the GDP in Canada is 2 trillion dollars. Why can't we compare countries in this way?

answer

because countries have vastly different resources, so it's not a "fair" comparison

question

What's a more accurate measure of a country's GDP?

answer

GDP per capita

question

What does 'capita' mean in GDP per capita?

answer

it's per person

question

What's the formula for GDP Per Capita?

answer

GDP/Population

question

What's the problem with the formula for GDP Per Capita: GDP/Population?

answer

this doesn't really give us a sense of productivity because the population includes everyone like kids and retired people who don't contribute to production

question

What formulas can we use to get a better idea of productivity since GDP Per Capita doesn't give us a sense of productivity?

answer

GDP/labor force or even better yet: GDP/# hours worked

question

GDP, regardless of which formula you use, is always expressed as what?

answer

a dollar value

question

Is the GDP perfect? Explain what it gives uf.

answer

gives some information but it's not perfect

question

How can we see how GDP is progressive?

answer

compare GDP over time

question

What do we need to keep in mind while comparing GDP?

answer

issues like cost of living, tax rate, government services, etc

question

What does GDP per capita imply? Is this the reality?

answer

implies GDP is divided equally among the population which is NOT the reality

question

Why does the government want an accurate measure of GDP?

answer

to know if it needs to do something or not to improve the standard of living of its population

question

To get the best measure possible, how does StatsCanada count GDP?

answer

in three different ways: product approach, income approach, and expenditure approach

question

Getting the best measure of GDP as much as possible: What does the product approach do?

answer

count $ value of all goods and services produced

question

Getting the best measure of GDP as much as possible: What does the income approach do?

answer

counts all $ earned

question

Getting the best measure of GDP as much as possible: What does the expenditure approach do?

answer

counts all $ spent on goods and services

question

What is the assumption with the product approach, the income approach, and the expenditure approach? Explain.

answer

they should all give the same answer since all 3 methods are counting the same thing-- GDP.

question

All 3 methods of counting the GDP (product, income, and expenditure approach) should all give the same answer because they count the same thing (GDP) but they don't. What does StatsCanada do?

answer

takes the average of the GDP's

question

Method of counting GDP: Why can't you simply count the output of each firm in the country?

answer

this would lead to what is called "double counting"

question

Product approach of counting GDP: What does 'double counting' mean?

answer

we would end up counting the same elements more than once

question

Product approach of counting GDP: Why would 'double counting' occur?

answer

because some firms' outputs (what a firm produces) are other firms' inputs (what a firm uses to produce something).

question

Product approach of counting GDP: What are firms' 'outputs'?

answer

what a firm produces

question

Product approach of counting GDP: What are firms' 'inputs'?

answer

what a firm uses to produce something

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. If you were double counting, then what would the GDP be?

answer

100 + 400 + 900 = GDP would be $1400 million

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. If you were double counting, the GDP would be 100 + 400 + 900 = $1400 million. What would you be double counting and why?

answer

you'd be double counting the steel and tires because the $900 million worth of cars already includes the $100 million worth of tires and $400 million worth of steel

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. What should the actual GDP be?

answer

$900 million-- $ output of Ford

question

Product approach of counting GDP: To avoid double counting, what do you technically end up doing to get the GDP?

answer

count only the FINAL goods and NOT counting intermediate goods

question

Product approach of counting GDP: What's a final good?

answer

goods sold to consumers for final use

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. What would be the final good?

answer

Ford-- good sold to consumers for final use

question

Product approach of counting GDP: What's an intermediate good?

answer

goods sold to firms to then be "transformed" into something else-- could be either another intermediate good or a final good

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. What would be the intermediate good?

answer

tires and steel

question

Product approach of counting GDP: To avoid double counting, we would count only final goods and not intermediate goods. Why is counting only final goods also problematic?

answer

because it can be hard to tell when a good is a final good

question

Product approach of counting GDP: What if I buy tired to put on my car... would tires be considered a final good or an intermediate good? What does this show?

answer

final good... shows that counting only final goods and not intermediate goods to avoid double counting is problematic because for e.g. Ford uses tires as an intermediate good

question

Product approach of counting GDP: A taxi company buys a car, then the car becomes what kind of good (final or intermediate)? And the taxi service becomes the final or intermediate good?What does this show?

answer

the car becomes the intermediate good when the taxi company buys it, and the taxi service becomes the final good. This shows that counting only final goods and not intermediate goods to avoid double counting is problematic because in this case we have both a final good and an intermediate good

question

Product approach of counting GDP: When we say double counting 'goods', can we also double count 'services?

answer

Yes

question

Product approach of counting GDP: To solve the problem of not being able to tell whether a good is a final good because it could be both, then does StatsCanada do?

answer

counts a firm's output a little differently. They count what is called "value added output"

question

Product approach of counting GDP: What is the formula for value added output?

answer

Value added output = Value of total output (what a firm produces) - Value of inputs bought from other firms

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. What would be the value added output?

answer

Value added output = Value of total output (what a firm produces) - Value of inputs bought from other firms --> $900 million - $100 million (tires) - $400 million (steel) = $400 million would be the value added output of Ford

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. The value added output of Ford is $400 million. What does StatsCanada do now?

answer

add up ALL the firm's value added output

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. What would be the value added output for Goodyear?

answer

same as their total output because applying the formula Value added output = Value of total output (what a firm produces) - Value of inputs bought from other firms, Value of inputs bought from other firms = 0 because they haven't bought anything from other firms

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. What would be the value added output for the Steel company?

answer

same as their total output because applying the formula Value added output = Value of total output (what a firm produces) - Value of inputs bought from other firms, Value of inputs bought from other firms = 0 because they haven't bought anything from other firms

question

Product approach of counting GDP: The $ output from GoodYear is $100 million (they say tires). The $ output from the Steel company is $400 million, and the $ output from Ford is $900 million. How would we get the GDP taking into account the value added output?

answer

add up ALL the firm's value added output (keep in mind that the value added output for Goodyear and the Steel company stay the same because they haven't bought anything from other firms): $100 million + $400 million + $400 million = $900 million

question

Product approach of counting GDP: In short, what are the steps to getting the GDP from value added output?

answer

get the value added output for each (take into account all intermediate and final goods/services), then add them all together

question

Say we have a GDP of 2.2$ trillion dollars. Why would this value alone not matter?

answer

because we would have to look at a change in GDP over time and that's what would matter more

question

In 2016, the GDP is 2.4 trillion dollars. In 2017, the GDP is 2.2 trillion dollars. What's the problem with this?

answer

the GDP dropped; so we have to do something about it

question

The income approach counts all the money earned from who?

answer

related to the income approach: firms, workers, landowners, and bank investors.... think of the land, labor, and capital resources

question

Income approach: What do firms own?

answer

physical capital

question

Income approach: What do workers own?

answer

labor

question

Income approach: What do bank investors own?

answer

financial capital

question

Income approach: What do firms earn?

answer

profit

question

Income approach: What do workers earn?

answer

salary/wage

question

Income approach: What do landowners earn?

answer

rent

question

Income approach: What do bank investors earn?

answer

interest

question

What's the benefit of the income approach (of counting GDP)? For example, if the GDP dropped, how would we know whether it'd be a good idea to increase the minimum wage or not?

answer

If the GDP drops, we'd have to look at WHERE it is dropping. So if it's dropping in the "workers" category of who earns $, then it would be a good idea to increase the minimum wage. It won't make any difference if we were to try to increase profit because it'd be under a different category of "firms".

question

Expenditure approach: Who SPENDS money in our economy? Give their abbreviations.

answer

related to the expenditure approach: consumers (C), firms (I), government (G) and other countries (NX)

question

Expenditure approach: What's the abbreviation for consumers?

answer

C

question

Expenditure approach: What's the abbreviation for firms?

answer

I

question

Expenditure approach: What's the abbreviation for government?

answer

G

question

Expenditure approach: What's the abbreviation for 'other countries'?

answer

NX

question

Expenditure approach: What's the equation for GDP for the expenditure approach?

answer

C + I + G + NX

question

What does 'C' represent in the expenditure approach?

answer

consumer spending on goods and services

question

In C: Consumer spending on goods and services in the expenditure approach, what do we exclude?

answer

real estate (not a consumer good), secondhand goods (form of double-counting), taxes (not a good nor service), foreign goods

question

What does 'G' represent in the expenditure approach?

answer

government spending on goods and services

question

In G: Government spending on goods and services in the expenditure approach, what do we exclude?

answer

real-estate (if GVT buys), secondhand goods (if GVT buys), transfer payments

question

What are transfer payments?

answer

transfer of money from government to someone else

question

What are examples of transfer payments?

answer

welfare, scholarships, employment insurance, pension, etc

question

What's employment insurance?

answer

If you lose your job, you might be eligible for Employment Insurance (EI). It provides temporary financial assistance while you look for work or upgrade your skills.

question

In G: Government spending on goods and services in the expenditure approach, where does the money they spent go?

answer

in consumer spending (C)

question

In NX (other countries), what does N stand for?

answer

Net

question

In NX (other countries), what does X stand for?

answer

eXports

question

In NX (other countries), what does 'NX' stand for?

answer

Net eXports

question

What is the equation for net exports (NX)?

answer

Net exports (NX) = Exports (X) - Imports (M); so essentially NX = X - M

question

What's the abbreviation for imports?

answer

M (trick: iMports).

question

Knowing that NX = X - M, the formula for GDP in the expenditure approach could also be written as what?

answer

For the EXPENDITURE approach: GDP = C + I + G + (X - M)

question

What are exports?

answer

goods produced in Canada but sold elsewhere

question

Are exports included in the GDP?

answer

yes

question

What are imports?

answer

goods produced elsewhere but bought in Canada

question

Are imports counted in the GDP? Why?

answer

no because it could be what a consumer bought, going into consumer spending (C)

question

In GDP = C + I + G + NX, if I bought a BMW for $50 000, and the car itself was 40 000$, what does this mean?

answer

services are also counted in the GDP. We essentially take OUT the 40 000$ so it becomes $50 000 - $40 000 = $10 000, which is the value of the service of the car

question

In GDP = C + I + G + NX, why is it that for NX, it represents such a small portion of the GDP?

answer

because NX = X - M, so X (exports) are a huge factor, they represent 25% (as an e.g.) of the GDP, whereas imports represent 23% of the GDP. Taking the difference: 25% - 23% = 2% = NX, which is very small indeed

question

What is (I) in the expenditure approach?

answer

it applies to firms and it's predominantly business investments. Yes, it also represents new real-estate and inventories, but business investments is what's you only consider for (I).

question

What are business investments?

answer

firms buying physical capital goods

question

What are physical capital goods?

answer

machinery, equipment, and technology

question

What's the difference between firms investing and people investing?

answer

firms actually invest, people save; people buy stocks to SAVE more in the hopes of spending later

question

What are inventories? ((I) in the expenditure approach)

answer

goods produced but not yet sold by the end of the year

question

GM produces 1000 cars, but sells 900 in 2017. What does C equal to? (expenditure approach)

answer

C = 900

question

GM produces 1000 cars, but sells 900 in 2017. What does I equal to? (expenditure approach)

answer

I (firms) = 100 because that's what's in their inventory

question

GM produces 1000 cars, but sells 900 in 2017. In 2018, they sell all 100 cars, but they don't produce anything else. What is GDP equal to?

answer

Zero because we're taking 100 out of the inventory; C + I = GDP (since they're the only variables involved here) = 100 - 100 = 0

question

When inventories are created (i.e. when there's excess), then are inventories added to or subtracted from GDP?

answer

added to GDP

question

When inventories are sold, then are inventories added to or subtracted from GDP?

answer

subtracted from GDP

question

What does GDP stand for?

answer

Gross Domestic Product

question

What does GNP stand for?

answer

Gross National Product

question

What does GDP mean?

answer

goods produced IN a country e.g. in Canada by Canadian firms OR by foreign firms (like Walmart). As long as they're produced in Canada, then it would be relating to the GDP.

question

What does GNP mean?

answer

everything produced by a country's firm e.g. by CANADIAN FIRMS in Canada OR abroad

question

Consider Canada. Bombadier (a Canadian company) trains in Russia. Would this be GNP or GDP? Explain why.

answer

GNP because it's produced by a Canadian firm abroad

question

Consider Canada. Bombadier (a Canadian company) C-Series in Mirabel. Would this be GNP or GDP? Explain why.

answer

GDP AND GNP; GDP because it's produced IN Canada by a Canadian firm and GNP because it's produced by a Canadian firm in Canada

question

Consider Canada. GM (a US company) cars in Ontario. Would this be GNP or GDP? Explain why.

answer

GDP; produced in Canada by foreign firms

question

Consider Canada. GM (a US company) cars in Detroit. Would this be GNP or GDP? Explain why.

answer

Neither; NOT a good produced in Canada by a foreign firm nor Canadian firm; so not GDP. Also not GNP because it's not produced by a Canadian firm in Canada or abroad.

question

In one case, GDP ; GNP. In the second case, GDP ; GNP. Which case would the government want? Explain why

answer

the first case because if we have more good produced in Canada (by Canadian firms or by foreign firms) than goods produced by Canadian firms (in Canada or abroad), then this would = more jobs because there's more production in Canada; with GNP it could be abroad so with GNP you're also helping other countries; jobs could also be created elsewhere with GNP.

question

Let's say that in an imaginary country, the GDP is $1000 and the GNP is $10. What does this mean about the economy?

answer

the economy is dominated by foreign firms

question

Let's say that in Canada, the GDP is $1000 and the GNP is $10. What portion would Canadian firms have? What portion would foreign firms have? What would this explain?

answer

Canadian firms would have $10 while $990 would belong to foreign firms; this is because in GNP, it involves what's produced by Canadian firms ONLY. So Canadian firms would have $10, and subtract $10 from $1000 = $990. Something like this would explain child labor in some countries (which is done out of necessity).

question

Why should the product approach, income approach, and expenditure approach all give the same GDP?

answer

because we spend (expenditure approach) goods/services, which are produced (product approach) by firms, and they receive income (income approach).

question

What's nominal GDP?

answer

GDP expressed in current prices in dollars

question

What's real GDP?

answer

GDP expressed in constant prices in dollars, it uses a base year which could be any year

question

What's the oversimplified definition of GDP? Express this as a formula.

answer

GDP = Price that's produced x QTY that's produced, NOT SOLD

question

Give an example of calculating nominal GDP with 2015 and 2016. What's the problem with this?

answer

2015: Price of 2015 x QTY produced of 2015 = $2 trillion; 2016: Price of 2016 x QTY produced of 2016 = $2.4 trillion-- but it doesn't tell us if we produced more stuff or not because we also have price involved. So quantity OR price could've changed (or both). So nominal GDP by itself is useless.

question

Give an example of calculating real GDP with 2015 and 2016. What does this show? *HINT: use a base year!

answer

Establish a base year; let's say 2014. So in 2015: Price of 2014 x QTY produced of 2015 = $1.9 trillion; 2016: Price of 2014 x QTY produced of 2016 = $2.2 trillion; so we produced more stuff in 2016

question

On a production possibilities curve, what do the points represent and why?

answer

the real GDP because we're only looking at quantity produced and NOT price

question

GDP: What's useless and what's useful?

answer

nominal GDP by itself is useless; real GDP by itself is useful

question

If nominal GDP by itself is useless, why do we want it? Give an example.

answer

to give you an idea about inflation; for e.g.: if we're just looking at the year 2015, then nominal GDP would be: Price of 2015 x QTY produced of 2015 = $2 trillion, and real GDP is Price of 2014 x QTY produced of 2015 = $1.9 trillion... so inflation went down

question

What's the formula for real GDP?

answer

Real GDP = (Nominal GDP/GDP deflator) x 100

question

What's GDP deflator?

answer

deflating (i.e. taking out) inflation out of nominal GDP so you're left with real GDP

question

What's price index?

answer

kind of an average price; not exactly an average; it just looks at everything as a whole

question

What does price index tell you about?

answer

inflation

question

How do you create a price index?

answer

look at the price of basket of goods

question

If in 2014, the price of a basket of goods was $1200, and our base price index at this time is 100, and in 2015 the price of a basket of goods is $1300, what would the price index for 2015 be? What does this indicate?

answer

we would have to take the % change in price from 2014 to 2015; % change in price = (P2 - P1 / P1) x 100 = (1300 - 1200/1200) x 100 = 8.3% --> this indicates inflation because the price of a basket of goods rose

question

The price index of the base year must always be equal to what? Why?

answer

100 because that is just the convention

question

What's the reason why we put x 100 in our formula for 'real GDP'?

answer

because the price index of the base year is 100 which would cancel out with the GDP deflator since the GDP deflator is a price index which = 100, so you're left with Real GDP = Nominal GDP, which must happen

question

What are the three commonly used price indexes?

answer

GDP deflator, consumer price index (CPI) and producer price index (PPI)

question

What does the GDP deflator price index focus on?

answer

ALL goods and services

question

What does the consumer price index (CPI) focus on?

answer

consumer goods

question

What does the producer price index (PPI) focus on?

answer

physical capital goods and intermediate goods

question

What do we use price index for?

answer

to calculate inflation?

question

What's the symbol for rate of inflation?

answer

the symbol for pi

question

What does the symbol ? (pi) represent?

answer

rate of inflation

question

What will different price indexes give you?

answer

different inflation rates

question

What's the formula for change in inflation?

answer

Pi T + 1 = (P T + 1 - P T/P T) x 100; see this formula written in notebook as it's difficult to picture it here

question

In the formula ? T + 1 = (P T + 1 - P T/P T) x 100, what does ? represent?

answer

rate of inflation

question

In the formula ? T + 1 = (P T + 1 - P T/P T) x 100, what does P represent?

answer

price index

question

In the formula ? T + 1 = (P T + 1 - P T/P T) x 100, what does T represent?

answer

time period, which could be in years, months, or quarterlies usually

question

Using the formula ? T + 1 = (P T + 1 - P T/P T) x 100, calculate the inflation rate of 2015.

answer

T = 2015; Pi 2016 = (P 2016 - P 2015/P 2015) x 100

question

What does the Bank of Canada only focus on?

answer

inflation

question

What's the Bank of Canada?

answer

Central bank, bank of banks, bank of government

question

What's the main and ONLY goal of the Bank of Canada?

answer

to regulate inflation and to keep rate of inflation at 2%

question

Using supply and demand, why does inflation occur?

answer

because as the demand curve shifts to the right, the equilibrium price (supply curve is there and doesn't move) increases, giving rise to inflation-- prices increase because demand increases

question

Why does the Bank of Canada actually WANT to keep the rate of inflation at 2%?

answer

because as prices go up by 2%, the quantity stays the same as people don't normally notice a bit of inflation-- so this is free profit for the firms. This entices firms to produce more by increasing supply, therefore they will hire more and jobs are good for economy = economic growth

question

Why is too much inflation bad?

answer

too much decrease in demand as prices rise

question

What follows inflation?

answer

a raise in salaries

question

What grows at roughly the rate of inflation?

answer

wages

question

What's inflation?

answer

a rise in the price of goods AND services

question

What's deflation?

answer

a drop in the price of goods and services

question

What's worse: inflation or deflation? Explain.

answer

deflation because it can actually lead to a trough and then a depression-- REALLY bad for economy

question

What's disinflation?

answer

prices are rising slower i.e. decrease in the rate of inflation

question

? 2014 = 1.8% ? 2015 = 1.3% ? 2016 = 0.4% What phenomenon does this show?

answer

shows disinflation; decrease in the rate of inflation (it's still inflation, but slower rise). Once the number becomes negative, it doesn't represent inflation anymore-- it represents deflation.

question

? 2017 = -1.2% What phenomenon does this show?

answer

the fact that it's a NEGATIVE number shows that it's deflation

question

What does GDP only count?

answer

market value of all FINAL goods (NOT intermediate) goods/services PRODUCED... whether it'd be for the product, expenditure, AND income approach

question

Why is the GDP calculated via the expenditure approach equal to the GDP calculated via the income approach?

answer

because every buyer must have a seller

question

What approach for calculating GDP does this formula apply to?: GDP = C + I + G + NX

answer

expenditure approach... counts all $ spent on goods and services

question

Be careful when they say something is in e.g. "in millions" (take that into account)

answer

ok

question

When they ask for the "economic growth rate", what are we getting?

answer

% change: (x2 - x1/x1) x 100

question

When is the base year?

answer

when the GDP deflator (price index) is 100

question

What's an example of an answer for "behavior of production for this economy over the 2008-2013 time period"?

answer

Real GDP is falling from 2008-2010 and real GDP is rising from 2010-13-- keep in mind Real GDP refers to production because GDP = Price of base year x QTY produced

question

In the expenditure approach, is this situation related to C, I, G, X, or M?: Akshay buys a sweater made in Guatamala.

answer

For Canada, it is imports (for Guatamala it would be an export). Because the sweater is bought is in Canada, it is also included in the consumption category since it's an expenditure by an individual (Akshay).

question

Classify whether this situation is an investment or if it's saving: Amy purchases a new condominium in Surrey.

answer

investment because she hopes to sell it later for more money when it's at a greater value

question

Classify whether this situation is an investment or if it's saving: Jeff buys a new mower for his landscaping business.

answer

investment because he is investing in a physical capital good

question

Classify whether this situation is an investment or if it's saving: Stan purchases shares in Pherk, a pharmaceutical company.

answer

saving because you're depositing unspent income in a bank and using it to purchase shares (or bonds).

question

Classify whether this situation is an investment or if it's saving: Fiore buys a Canada Savings Bond.

answer

saving because you're depositing unspent income in a bank and using it to purchase bonds (or shares).

question

How can we differentiate between investment and saving?

answer

investment is buying physical capital goods OR buying something (like real-estate) that'll increase in value so you could sell it for more later. Acts of Saving are depositing unspent income in a bank and using it to purchase shares or bonds.

question

Is the following scenario accounted for by the computation of GDP? Explain: The value produced by doing your own laundry.

answer

no because GDP doesn't include household production, such as the value you produce making your own laundry

question

Is the following scenario accounted for by the computation of GDP? Explain: The quality of goods available to consumers.

answer

no because GDP doesn't measure quality of goods and services

question

When we talk about "inflation" and "deflation", what are we talking about?

answer

rates

question

Which takes inflation/deflation into account: nominal GDP or real GDP?

answer

nominal GDP

question

What is NOT included in the GDP?

answer

illegal activities (i.e. crime), non-reported activities (i.e. under the table), non-market activities (e.g. doing your own laundry or mowing your own lawn) and environmental issues (e.g. over-producing crops and this resulting in soil depletion)...

question

Though illegal activities are not included in the GDP, how do they affect a country's economy?

answer

could contribute to a country's well-being

question

What's a market?

answer

where buyers and sellers meet

question

What does H.D.I. stand for?

answer

Human Development Index

question

What does the H.D.I. look at?

answer

GDP per capita, literacy rates, life expectancy

question

Are the GDP per capita, literacy rates, life expectancy interdependent? Explain.

answer

sort of, but one doesn't imply the other, however they can help each other. For example, you can have more of GDP per capita and less can be funelled into the other two.

question

When we look at the H.D.I., what does the GDP per capita tell us?

answer

the "size of the pie".... i.e. the bigger the size, the bigger the GDP

question

When we look at the H.D.I., what does the literacy rate tell us?

answer

quality of education

question

When we look at the H.D.I., what does the life expectancy tell us?

answer

quality of system of healthcare

question

What is the danger of inflation?

answer

the "snowball effect"

question

Describe the "snowball effect" of inflation

answer

workers will keep demanding money as prices increase = suppliers needs to be able to pay increasing salaries, so they will increase the price of their products = workers will want higher salaries to be able to pay for higher-priced products

question

If the equilibrium (market) price drops (deflation), then what could one possible reason be? Use the supply and demand curve.

answer

because demand drops

question

What's hyperinflation? Give an example.

answer

VERY high inflation e.g. Zimbabwe, its rate of inflation was trillions %-- this means that rate is excessively fast i.e. might be occurring hourly

question

Why is inflation bad? Use TR = P x Q

answer

TR = increased price x decreased quantity demanded

question

When talking about inflation and deflation, how fast is the rate?

answer

the inflation/deflation rates don't suddenly drop/increase... the rate usually changes gradually over time e.g. month after month

question

How does deflation disobey the law of demand? Explain.

answer

normally, when prices decrease, quantity demanded increases. However, in deflation, prices decrease and quantity demanded DECREASES... which is a PROBLEM

question

Why is it that in deflation, when prices fall, quantity demanded decreases? (Why does it disobey the law of demand?) Use TR = P x Q

answer

because people wait for prices to drop even more. So TR = P x Q = decrease in price x decrease in QTY demanded, so total revenue decreases

question

How do firms react to deflation?

answer

will need to cut costs by cutting jobs-- less people have less money, and so they buy less

question

Why is deflation almost inescapable?

answer

because to increase quantity demanded you'd increase price, but consumers are expecting price to drop more... so even a decrease in price doesn't work.

question

How can deflation be "cured"?

answer

people would have to buy to get the economy out of recession... so the government has to try to get consumers to spend by increasing consumer confidence... i.e. they need to make consumers trust that the economy will improve

question

Is deflation common? Explain.

answer

no it's rare because the government does everything to solve it ASAP

question

The inflation rate is 20%. The unemployment rate is 20%. Which % represents a greater portion of the population? Explain.

answer

the inflation rate because inflation means a rise in the price of ALL goods and services, so this affects ALL consumers whereas the unemployment rate only affects the WORKFORCE population

question

Is it easier to compensate for those under inflation or for those who are under unemployment? Explain.

answer

easier to compensate for those who are unemployed because the unemployment rate represents less people

question

Who does the labor force include?

answer

those that are employed + unemployed

question

Who does the adult population include?

answer

Simply those aged 15 years and older

question

On a production possibilities curve, how is unemployment represented? Explain why.

answer

it's the distance between the dot and the curve... and it's inside the PPC because there is an unemployment of the labor resource

question

On a production possibilities curve, the shorter the distance between the dot and the curve, the higher or lower the unemployment rate?

answer

the lower the unemployment rate, logically

question

What's the formula for unemployment rate (UR)?

answer

UR = (# of unemployed people/labor force) x 100

question

What's the formula for labor force (LF)?

answer

LF = Employed + Unemployed

question

To be unemployed, what criteria must be filled?

answer

you must be at least 15 years old, have NO JOB, looking for work and are willing to work

question

Are full-time students unemployed? Explain.

answer

full-time students are NOT "unemployed" NOR part of the labor force because they don't have time for a job

question

What's the formula for the participation rate (PR)?

answer

PR = (Labor Force or LF/Adult population) x 100

question

What's the participation rate?

answer

it represents the amount of people who are contributing to the productive capacity i.e. they're the labor force of economy

question

What does it mean that Canada has a participation rate of 65%?

answer

this means that 65% are contributing to the productive capacity i.e. they're the labor force of economy

question

In the formula for participation rate: PR = (Labor Force or LF/Adult population) x 100, who are included in the 'adult population'?

answer

people who are employed or not and/or working legally (15+ years). Obviously this doesn't include students

question

As the population ages, what happens to the participation rate? Explain.

answer

will decrease because there are less people contributing to the productive capacity i.e. they're the labor force of economy

question

What are some things that could happen to the production possibilities if the participation rate were to increase?

answer

then either the dot could move closer to the curve, or the curve could shift outwards, or both. The opposite can happen if PR were to decrease

question

What's underemployment?

answer

the number that the unemployment rate fails to see

question

What people does underemployment include?

answer

e.g. pHD driving cab (not employed to capacity of skills), part-time workers who want full-time work, and discouraged workers i.e. people trying to look for jobs but find no jobs available, so they stop looking and are not included in the labor force anymore, but they want work

question

What are discourage workers (part of underemployment)?

answer

people trying to look for jobs but find no jobs available, so they stop looking and are not included in the labor force anymore, but they want work

question

What state of the economy do discouraged workers occur in?

answer

recessions

question

What are the types of unemployment?

answer

frictional, structural, cyclical, and seasonal

question

Why don't we consider seasonal unemployment?

answer

because it's not a reflection of the health of economy, just tells you the weather-- no government policy can eliminate seasonal unemployment

question

Give characteristics of frictional unemployment.

answer

first time job seekers or if they quit before having another job or time match b/w job and worker i.e. the hiring process takes long as one needs to go through interviews/tests and you may wait awhile to accept a job

question

Characterize seasonal unemployment.

answer

physical inability to do job because of weather, NOT necessarily because of the season

question

Give characteristics of structural unemployment.

answer

due to lack of proper skills or due to permanent change in demand of worker (which can be due to change in job itself i.e. technology has taken your job or change in demand of product i.e. caused by technology)...

question

One of the reasons for structural unemployment is permanent change in demand for worker, which can mean a change in demand of the job itself. Explain what this means and give an example.

answer

means that technology took your job e.g. automatic banking machines

question

One of the reasons for structural unemployment is permanent change in demand for worker, which can mean a change in demand of the product. Explain what this is caused by and give an example.

answer

change in demand of product is caused by change in technology e.g. HMV experienced a decrease in demand for CD's as new technology offered another option so employees producing CD's weren't needed anymore

question

Give characteristics of cyclical unemployment.

answer

due to business cycle or due to changes in demand

question

How would cyclical unemployment be due to the business cycle (besides also being due to changes in demand)?

answer

when the economy is doing well, cyclical unemployment decreases

question

If cyclical unemployment were due to changes in demand, would this be permanent? Explain with an example.

answer

not permanent because e.g. if a car company is not doing well, you're fired, but if business picks up again, you're re-hired

question

What does the formula for unemployment rate UR = (# of unemployed people/labor force) x 100 include in '# of unemployed people'?

answer

those falling under frictional + structural + cyclical unemployment, NOT seasonal unemployment

question

Can frictional unemployment be equal to 0%? Explain why.

answer

No because if it was = 0% then this would imply that nobody quits

question

Can structural unemployment be equal to 0%? Explain why.

answer

No because if it was = 0% then this would imply that technology doesn't change

question

Can cyclical unemployment be equal to 0%? Explain why.

answer

yes because the economy can do well for a LONG time-- i.e. it's possible that no one can be loosing their job just because business is doing badly

question

What does the fact that structural and frictional unemployment cannot equal zero imply?

answer

that the unemployment rate CANNOT be zero even though cyclical unemployment can be zero; but structural and frictional unemployment which is included in the unemployment rate cannot

question

If the unemployment rate cannot be 0%, what this mean for full employment?

answer

full employment cannot be equal to 0% because there are people who must be unemployed if unemployment rate cannot be = 0%

question

If the full employment rate cannot be equal to 0%, what does it mean when a dot is ON the PPC curve?

answer

yes it means full employment of the labor resource, but we're just referring to CYCLICAL UNEMPLOYMENT because full cyclical employment is as good as the economy can get if it's on the PPC

question

Why aren't frictional and structural unemployment not considered on the PPC?

answer

because frictional and structural unemployment are always there, so we just consider cyclical unemployment on the PPC

question

The % for frictional and structural unemployment will change how over time?

answer

will remain fairly stable; will pretty much NOT fluctuate

question

The % for frictional and structural unemployment are fairly stable and will pretty much not fluctuate. What can offset this stagnancy and what would occur after?

answer

% will not change much unless there's big demographic changes but then it will achieve stagnancy e.g. baby boomers retiring

question

Is quitting the same as retirement? Explain.

answer

no because quitting would mean you're looking for another job; in retiring you don't so it wouldn't constitute as quitting

question

What type of unemployment does retirement fall under? Explain why and how it affects it.

answer

frictional unemployment will decrease with retirement because time/match decreases because there are more jobs available as people retire because there are more job vacancies

question

When a dot is on the PPC curve, what does this mean for the unemployment rate?

answer

it means that the unemployment rate is NOT equal to 0% because a dot on the PPC curve means FULL EMPLOYMENT of resources

question

What does a dot on the PPC curve mean in terms of unemployment?

answer

it means 0% CYCLICAL unemployment i.e. FULL employment of resources

question

What does a dot on the PPC curve NOT mean? Explain.

answer

0% frictional and structural unemployment because you can never have FULL employment when considering frictional and structural unemployment

question

What does the natural rate of unemployment (NRU) include?

answer

frictional + structural

question

Why will a dot inside the PPC curve eventually move towards the curve? Explain using the concept of the natural rate of unemployment.

answer

initially, some people aren't working, so they want jobs and are willing to work for less, so firms will want to hire for less, so there's an increase in demand for workers; this is why it'll eventually move UP towards MAXIMUM employment (i.e. NRU) to settle its dot ON the curve

question

Why will a dot outside the PPC curve eventually move towards the curve? Explain using the concept of the natural rate of unemployment.

answer

initially, you can't maintain your resources because they're too expensive = decrease in demand for workers, which is why it'll eventually move DOWN towards MAXIMUM employment ( i.e. NRU) to settle its dot ON the curve

question

The unemployment rate in September = 7.1%. The unemployment rate in October = 6.8%. What can you be safe in assuming that changed? Explain.

answer

can be safe in assuming that cyclical unemployment rate changed because frictional and structural unemployment don't generally move

question

Changes in the unemployment rate are due to changes in what? Explain.

answer

due to changed in cyclical unemployment because frictional and structural unemployment don't generally change

question

Explain how the PPC would change if the natural rate of unemployment (NRU) decreased with NO change in cyclical unemployment i.e. cyclical unemployment cannot equal 0%

answer

point A must be inside the curve, NOT on the curve because then cyclical unemployment would equal 0%. Since NRU represents minimum unemployment, if it were to decrease, that means more people would be employed, min. employment DECREASES while max. employment INCREASES, and since there's no change in cyclical unemployment, the distance between the dot and the curve will stay the same so point B will be the same distance from curve as point A

question

On the PPC, the distance between the dot and the curve represents the amount of unemployment. What type of unemployment are we talking about? Explain.

answer

ONLY cyclical unemployment because there will always be frictional + structural unemployment, and we don't consider those

question

Classify this person as employed, unemployed, not in the labor force (but still part of the adult population), or not in the adult population: Carlos is an 83-yr-old professor. He teaches only one or two courses a year, but he's still pursuing an active research agenda.

answer

he is employed because he teaches and researches

question

Classify this person as employed, unemployed, not in the labor force (but still part of the adult population), or not in the adult population: Janis is a 13-yr-old student at some high school. She babysits her younger siblings and does other chores, for which her parents give her an allowance of 25$/week.

answer

not in adult population because she's below 15 yrs old

question

Classify this person as employed, unemployed, not in the labor force (but still part of the adult population), or not in the adult population: Jason is a 78-yr-old retired professor. He enjoys volunteering at the local public library.

answer

not in labor force because neither employed not unemployed; but old enough to be part of adult population

question

Classify this person as employed, unemployed, not in the labor force (but still part of the adult population), or not in the adult population: Megan is a famous novelist. She's spending the summer at her house on Lake Huron, doing a little writing each day but mostly spending her time gardening and reading.

answer

employed because she's a novelist who writes

question

Classify this person as employed, unemployed, not in the labor force (but still part of the adult population), or not in the adult population: Shen is a 28-yr-old who lost his job as an associate producer for a radio station. After spending a few weeks out of work and interviewing for several other positions, he gave up on his job search a few months ago and has decided to go to grad school.

answer

Not in labor force (but still part of adult population) because he's neither employed nor unemployed since he's back at school

question

Classify this person as employed, unemployed, not in the labor force (but still part of the adult population), or not in the adult population: Ana is a 25-yr-old recent university graduate. She did not work for pay last week, but she went for two job interviews.

answer

she is unemployed because she is actively seeking work and is not a student anymore

question

Labor force = 200 people. Of those, employed full-time = 160 and unemployed = 40. UR = (40/200) x 100 = 20%. Suppose a reduction in foreign demand = recession. One possible scenario is: firms reduce work hours by 25%. The number of underemployed workers rises as firms respond to the reduction in the demand for their products by reducing the hours of each employed person from 40 to 30 hours per week. Calculate the unemployment rate.

answer

unemployment rate doesn't change because underemployed workers are those that are a) have skills, but not the right job for it, b) discouraged workers, and c) part-time workers wanting full-time workers. The UR doesn't see who's underemployed, so UR stays the same

question

Labor force = 200 people. Of those, employed full-time = 160 and unemployed = 40. UR = (40/200) x 100 = 20%. Suppose a reduction in foreign demand = recession. One possible scenario is: Firms reduce employment by 25%. The # of unemployed workers rises as firms respond to the reduction in the demand for their products by laying off 40 previously employed workers. Calculate the unemployment rate.

answer

they lay off 25% employed workers, which corresponds to 40 workers: unemployed = 40 + 40 = 80 ("# of unemployed workers rises"): UR = (80/200) x 100 = 40%

question

Identify this person as being structurally, frictionally, or cyclically unemployed: A physician who has decided to relocate to Alberta to be closer to her family. She is currently interviewing with hospitals in Calgary.

answer

frictional unemployment because she quit her job so she could relocate to Alberta

question

Identify this person as being structurally, frictionally, or cyclically unemployed: Latasha is a real-estate agent. House sales in her area have declined because the region has been going through a recession. She has no clients and is currently looking for a full-time job.

answer

Cyclically unemployed because of recession, and no clients

question

Identify this person as being structurally, frictionally, or cyclically unemployed: Clancy has worked as a dishwasher for 15 years but has now been fired because it has become cheaper to use a dishwashing machine. Clancy does not qualify for any available jobs, most of which are in computer programming. He's considering going back to school to learn how to program.

answer

structurally unemployed because of change in technology

question

Frictional unemployment = 0.9%; Cyclical unemployment = 0.0%; Structural unemployment = 3.7%; Total unemplyment = 4.6%. True or False: This economy is currently at the natural rate of unemployment.

answer

Recall that NRU = Frictional + Structural unemployment, so 0.9% + 3.7% = 4.6%, which is what the total unemployment happens to be equal to. So it's True: also because cyclical unemployment = 0%

question

When is the economy at the NRU?

answer

when cyclical unemployment = 0%

question

Suppose we have: 10 notebooks for 5$ each, and 1 computer for $100 each (for 2012). What's the cost of basket?

answer

Do price x quantity: $5 x 10 = $50, then 1 x 100 = 100$. Add them up = 100$ + 50$ = 150$... that's the total cost

question

The total cost of a basket of goods is $1400 in 2012, $1680 in 2013, and $2100 in 2014. If the base year is 2012, what should the price index for 2012 be?

answer

100 is the P.I. because it's always 100 for the base year

question

The total cost of a basket of goods is $1400 in 2012, $1680 in 2013, and $2100 in 2014. If the base year is 2012, what should the price index for 2013 be?

answer

Do % change: (1680-1400/1400) x 100 = 20%, add that to the base price index: 100 + 20 = 120 is the price index for 2013.

question

The total cost of a basket of goods is $1400 in 2012, $1680 in 2013, and $2100 in 2014. If the base year is 2012, what should the price index for 2014 be?

answer

Do % change: (2100-1400/1400) x 100 = 50%, add that to the base price index: 100 + 50 = 150 is the price index for 2014.

question

The price index for 2012 is 100, for 2013 it's 120, and for 2014 it's 150. Between 2012 and 2013, the CSPI (a price index) changed how?

answer

Do % change: (120-100/100) x 100 = 20%... so the P.I. increased by 20%

question

The price index for 2012 is 100, for 2013 it's 120, and for 2014 it's 150. Between 2013 and 2014, the CSPI (a price index) changed how?

answer

Do % change: (150-120/120) x 100 = 25%... so the P.I. increased by 25%

question

Which of the following, if true, would illustrate why price indexes such as the CSPI might OVERSTATE (i.e. exaggerate) inflation in the cost of going to college? a) The quality of textbooks increased dramatically from 2012 to 2014, with textbook companies bundling new online study aids with their books. b) As the price of energy drinks increased relative to the price of coffee between 2012 and 2014, students decreased their consumption of energy drinks and increased their consumption of coffee. c) Professors required each student to buy 10 textbooks, regardless of the price.

answer

a measure of inflation that assumes that students would not reduce their consumption of energy drinks, even as their price rose, would overstate inflation. So a) and b)

question

It is known that the "Société de transports de Montréal" (STM) often has deficits. It claims that by increasing the price of their services it can rectify this situation. a) What must be true about the Price Elasticity of Demand (Ed) for this claim to be true? Be clear in your explanation.

answer

They need to increase the price of their service so that they can pay off their debt. Since they say it can rectify this situation, then Ed must be less than 1 so that quantity demanded won't decrease as much with an increase in price. So revenues would increase.

question

It is known that the "Société de transports de Montréal" (STM) often has deficits. It claims that by increasing the price of their services it can rectify this situation. b) Would this be more or less true in summer than in winter? Clearly explain.

answer

It would be less true in the summer compared to the winter. In summer STM users have more actual substitutes to taking public transportation (ex: biking) so the product would be LESS inelastic in summer compared to winter.

question

It is known that the "Société de transports de Montréal" (STM) often has deficits. It claims that by increasing the price of their services it can rectify this situation. Graph this situation.

answer

Remember that for demand, it's a negative slope. The price elasticity for the STM is also inelastic. So you'd draw a STEEP negative slope.

question

If cigarettes were no longer addictive, what would likely happen to the level of taxation the government applies on this product? Explain your answer.

answer

If cigarettes were no longer addictive, then they'd become much more elastic since it's seen as less of a 'necessity'. The government wants to make more revenue, so they'd decrease the tax so that quantity demanded would increase by a lot = more revenue for GVT. An increase in price would decrease QTY demanded by a lot.

question

If cigarettes were no longer addictive, what would likely happen to the level of taxation the government applies on this product? Draw it out on supply and demand graph.

answer

Tax increases because the good is more elastic, and so: show price increase and shallower slope keeping in mind a NEGATIVE slope

question

If the price of Copper were to increase substantially explain why Quantity Supplied (Qs) would not change much initially but might increase slowly over time. Explain your answer.

answer

Think of Es: Since the price of Copper is increasing, firms would want to supply more, but producing more copper couldn't happen overnight. It would take time to hire more miners, even more time to buy more equipment and even more time to potentially dig a whole new copper mine. So even though firms would want to increase the quantity supplied, they could only do so little by little over time. Meaning as time progressed, they could have a more and more elastic supply curve.

question

If the price of Copper were to increase substantially explain why Quantity Supplied (Qs) would not change much initially but might increase slowly over time. Explain your answer. Show answer graphically.

answer

Draw supply curves that get shallower and shallower.

question

Which is more price inelastic for consumers; Telus cell phone rates or Videotron cable TV rates? Clearly explain your answer.

answer

Videotron would have a more Inelastic product since there are much less substitutes available for cable TV then there are for cell phone providers.

question

If the price of both were to increase by 15%, the total revenue of who would go up more, Videotron or Telus? Explain and draw your answer using supply and demand. Keep in mind that Videotron would have a more inelastic product.

answer

Revenue = Price x Quantity sold. We're looking at Ed. If price were to increase for an inelastic product, then quantity demanded/sold would not go down as much, so Videotron's total revenue would go up more. Graphically, Videotron would have a steep slope whereas Telus would have a shallower slope.

question

Why would we want to avoid double-counting?

answer

because it would overestimate our GDP

question

Even though GDP per Capita is a good measure of a country's wealth, it is by far not perfect. Explain why and tell me what other information we would need to make a better assessment of the well-being of a country's population.

answer

There are many reasons. Here are a few in no particular order. Do not know how the income is distributed within the population Do not have an idea of the cost of living (or level of inflation) Don't know level of taxation or the services offered by the government, the level of unemployment, crime rates, health of environment, etc...

question

If Canada's labour force got more educated, what should happen to the value of Canada's natural rate of unemployment (NRU)? Explain and graph your answer using the PPC model. (Here assume we began at our full employment level).

answer

NRU represents unemployment. Since there's a change in productivity (it increases because of education), then that means that NRU will go down, so employment will go up, meaning the curve will shift upwards. The dot will also go up to settle on the curve since firms will want more better workers which are now available.

question

Does the curve on a PPC represent NRU? Explain.

answer

No; the curve is simply the maximum employment of resources. Any dot on it represents maximum potential output. When NRU goes down, employment should go up and vice-versa.

question

What's the formula for 'labor force participation rate'?

answer

essentially the same as the formula for the 'participation rate': (labor force/adult population) x 100

question

The population = 200 million, the labor force = 160 million, and employment = 140 million. What would happen to the labor force participation rate if 30 million people lost their jobs and all of them exited the labor force?

answer

labor force = 160 million - 30 million = 130 million, so PF = (130/200) x 100 = 65%

question

If a country had an adult population (those aged 15 years of age and over) of 200 million and a labor force of 160 million, and 140 million people were employed, what would be its labor force participation rate and its unemployment rate?

answer

PF = (labor force/adult population) x 100 = (160/200) x 100 = 80%; UR = (Unemployed/LF) x 100 => LF = Employed + Unemployed => 160 = 140 + Unemployed => Isolate => Unemployed = 20 => UR = (20/160) x 100 = 12.5%

question

A 12-year-old wants to mow lawns for extra cash but is unable to find neighbors willing to hire her. Would economists consider him unemployed?

answer

no because not old enough to seek work; not even part of labor force because not 15+ years old

question

A receptionist who works only 20 hours per week would like to work 40 hours/week. Would economists consider her unemployed?

answer

no because she works, even though she'd like to work more hours each week

question

Most economists consider Canada's current natural rate of unemployment to be around 6 percent. Suppose the actual rate of unemployment was 8 percent. What could be concluded about what types of unemployment are occurring?

answer

NRU = Frictional + Structural; UR = (Frictional + Structural + Cyclical/Labor Force) x 100 => 6% = Frictional + Structural; 8% = Frictional + Structural + Cyclical, so cyclical unemployment = 2% because that's included under unemployment but not NRU

question

What's 'potential output'?

answer

the amount of real output the economy would produce if its labor and other resources were fully employed-- that is, at the natural rate of unemployment

question

If 10 million new jobs were created in the country and it attracted into the labor force 20 million of the people who were previously not in the labor force, what would be its new labor force participation rate and its unemployment rate?

answer

LF = + 20 million, adult population doesn't change. Now, there are only 10 million new jobs but 20 million people entered the labor force: only 10 million of them could be employed, the other 10 million would have to be unemployed. So PR increases

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