MACROECONOMICS MIDTERM REVIEW

1. Distinguish between an intermediate and final good. Give an example of each.

3. What are the four components of GDP by expenditures?

4. Given the following data, calculate GDP.

5. Following is a circular flow diagram. Complete the financial flows in the four empty rectangles:

6. List the various leakages and injections in an economy:

7. What must be true about leakages and injections for national income to be in equilibrium?

8. Distinguish between demand-pull and cost-push inflation.

9. Classify each of the following cases as frictional, structural, or cyclical unemployment.
(a) Eliot worked at a General Motors plant in Oshawa. He lost his job because cheaper cars imported from Japan have taken market share away from GM.
(b) Julia’s youngest child just left for college, so Julia has started to look for a job.
(c) Ling, a product manager, lost her job because of a temporary slowdown in her industry.

10. Suppose the labour force data are:

a) What are the participation rates in 2008 and 2009?
b) What are the unemployment rates in 2008 and 2009?
11. Suppose actual output is equal to potential output, the natural rate of unemployment is 4% and frictional unemployment is 1%. What are cyclical and structural unemployment rates?

12. What is the difference between real GDP and nominal GDP?

13. Suppose that actual GDP is $42.5 billion and cyclical unemployment is 2.5%. According to Okun’s Law, what is the output gap?

14. If inflation unexpectedly rises from 1% to 6%, would each of the following gain or lose as a result?
a) Lars, who borrowed $50 000 last year, repayable over the next 5 years at 6 percent interest.
b) Jan, who lent Lars the $50 000.
c) Arash, an elderly man living on a fixed company