Question : 1) Many economists argue that Japan’s remarkable long-run growth rate : 1384419

1) Many economists argue that Japan’s remarkable long-run growth rate between 1950 and 1990 was largely due to Japan’s

A) excessive amounts of money invested into research and development.

B) high consumption rate for high quality electronic products.

C) high national saving rate.

D) restrictive trade barriers which eliminated foreign competition.

E) skilled labour force that developed over those forty years.

2) Other things being equal, a country with a high national saving rate may have a ________ long-run growth rate because more saving increases the ________.

A) high; interest rate and encourages more investment

B) high; wealth of people and increases future consumption

C) high; availability of funds, thus lowering the interest rate

D) low; consumption in the long run

E) low; unemployment and decreases wages in the long run

3) A former Governor of the Bank of Canada argued that high interest rates tend to accompany high inflation because inflation

A) causes the Canadian dollar to appreciate which again fuels inflation even more.

B) erodes the value of the dollar and therefore lenders need to be compensated through higher interest rates.

C) reduces banks’ profits who then respond by lowering their lending rates.

D) increases housing prices so younger Canadians are made worse off.

E) lowers short term interest rates and acts as an incentive to borrow money.

4) A former governor of the Bank of Canada argued that interest rates must be increased in order to reduce inflation, and this would ultimately result in lower interest rates. This apparent contradiction can be explained by noting that

A) higher interest rates in the short run put downward pressure on inflation which, in turn, lowers demand for borrowed funds, thus decreasing interest rates in the long run.

B) higher interest rates promote saving which increases the supply of funds for lending and, other things constant, drives the “price” of borrowing down.

C) interest rates move in cycles and therefore tend to rise before they fall.

D) the Governor of the Bank of Canada is typically a patronage appointment with little formal training or knowledge of economic theory.

E) increasing interest rates increases inflation in the short run, but decreases inflation in the long run.

5) Long-run increases in real national income can generally be traced to

A) excess of demand in the labour market that increases employment.

B) growing demand that lead to increases in output and prices.

C) growing demand which causes continuous growth in consumer spending.

D) growing supply because higher wages will increase the participation rate.

E) growing availability of factors and/or growing factor productivity.

6) In the short run, changes in real GDP are primarily determined by changes in factor-utilization rates which, in turn, are due to changes in

A) aggregate demand only.

B) aggregate demand because increases in demand will lead to increases in output.

C) aggregate supply only.

D) aggregate supply because when firms increase prices they are then willing to produce more.

E) both aggregate demand and aggregate supply.

7) Potential GDP is defined as the level of aggregate output at which

A) all factors of production are fully employed.

B) all factors of production are employed 24 hours per day, 7 days per week.

C) the unemployment rate is zero.

D) there is only cyclical and structural unemployment.

E) there is only cyclical and frictional unemployment, and capital equipment is being used at 100% capacity.

8) Which of the following statements describes a possible self-fulfilling prophesy in the short run involving households’ behaviour? A belief of an impending recession leads households

A) to decrease their desired saving.

B) to increase their registration in post-secondary institutions to reduce their risk of being unemployed.

C) to increase their desired consumption.

D) to increase their desired saving.

E) to increase the autonomous portion of their desired consumption.

9) Consider the basic AD/AS model. In the short run, a shift of the aggregate supply curve would lead to a change in real GDP by mostly changing

A) the amount of labour employed.

B) the amount of land (natural resources) available to the economy.

C) the prices of factors of production.

D) the productivity of capital.

E) the level of investment.

10) A decrease in long-run real GDP (potential GDP) would be most likely caused by a (an)

A) decrease in factor productivity.

B) decrease in interest rates.

C) decrease in unemployment rates.

D) increase in factor-utilization rates.

E) increase in unemployment rates.