Q: The unemployment rate is calculated as:

$$ \frac{\text{Unemployed}}{\text{Labour Force}} \times 100 $$

Q: Which of the following equations correctly represents the output gap in percentage terms?

$$ \frac{Y - Y_p}{Y_p} \times 100 $$

Question 1

Which of the following best describes the main cause of long-term increases in a country's potential output?

Accepted Answer

Growth in productivity, technological improvements, and increased economic resources

Question 2

According to the business cycle, which phase is characterized by high employment, high inflationary pressures, and high business confidence?

Accepted Answer

Peak

Question 3

Suppose the actual unemployment rate is 8% and the NAIRU is 6%. According to Okun’s Law, by how much does output fall short of potential output?

Accepted Answer

$$ (8 - 6) 	imes 2 = 4\% $$

Question 4

Which of the following is NOT a type of unemployment measured by Statistics Canada?

Accepted Answer

Seasonal unemployment as a separate category

Question 5

If actual output $$Y is $$less than potential output $$Y_p$$, and the unemployment rate $$U is $$greater than the NAIRU, which type of gap is the economy experiencing?

Accepted Answer

Recessionary gap

Question 6

Which government policy is most effective at reducing structural unemployment?

Accepted Answer

Providing education and retraining programs for workers

Question 7

The unemployment rate is calculated as:

Accepted Answer

$$ \frac{	ext{Unemployed}}{	ext{Labour Force}} 	imes 100 $$

Question 8

Which of the following would most likely increase the NAIRU in Canada?

Accepted Answer

A demographic shift with more young people entering the labour force

Question 9

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment due to workers searching for new jobs or waiting to start new jobs

Question 10

If the output gap is negative, what does this indicate about the economy?

Accepted Answer

The economy is experiencing a recessionary gap

Question 11

Which of the following is a real-world example of a government policy aimed at reducing frictional unemployment?

Accepted Answer

A website that connects job seekers with employers in Calgary

Question 12

Which of the following best explains why zero frictional unemployment is neither possible nor desirable?

Accepted Answer

Because search and seasonal unemployment are unavoidable and partly beneficial for matching workers to jobs

Question 13

A government program that retrains oil and gas workers for tech jobs is primarily designed to reduce which type of unemployment?

Accepted Answer

Structural unemployment

Question 14

If the unemployment rate is below the NAIRU and actual output exceeds potential output, what is the likely macroeconomic consequence?

Accepted Answer

Accelerating inflation

Question 15

Which of the following equations correctly represents the output gap in percentage terms?

Accepted Answer

$$ \frac{Y - Y_p}{Y_p} 	imes 100 $$

Question 16

Which of the following is a likely effect of prolonged high unemployment (hysteresis) on the NAIRU?

Accepted Answer

It raises the NAIRU due to skill loss and insider-outsider effects

Question 17

Which of the following best describes the relationship between the output gap and the unemployment gap?

Accepted Answer

The output gap measures lost output, while the unemployment gap measures cyclical unemployment

Question 18

Which of the following is NOT a cause of structural unemployment?

Accepted Answer

Seasonal changes in demand

Question 19

Which of the following would be considered a cyclical unemployment policy response?

Accepted Answer

Cutting taxes and increasing government spending during a recession

Question 20

If the labour force in Canada is 22.1347 million and the number of unemployed is 1.4042 million, what is the unemployment rate?

Accepted Answer

$$ \frac{1.4042}{22.1347} 	imes 100 \approx 6.3\% $$

Macroeconomics Study Guide: Output, Unemployment, and the Business Cycle

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