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ECON 1BB3 (535)
Lecture

Economics - Lecture 29&30 Notes.docx

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Economics – April 2 , 2013 – Lecture 29 1. Sg = T – Tr – G T: taxes Tr: transfer payments G: government spending A: Sg = 40 – 20 – 30 = -10 B: I = S, S = Sp + Sg 50 = 6- + Sg Sg = -10 C: Y = C + I + G 300 = 180 + 70 + G G = 50 Sg = T – Tr – G = 60 – 20 -50 2. 2006: S = Sp + Sg 70 = 50 +Sg Sg = 20 2007: Sg = T – Tr – G = 100 – 40 – 80 = -20 3. Which of the following people would NOT be included in the adult population for the calculation of labour market statistics? a. Homer, a 75-year-old retiree b. Brett, who has become discouraged looking fro a job and has quit looking for a while c. A 16-year-old student who does not work and is not looking for work d. Derrick, a full-time pilot with the Canadian Armed Forces (Answer: D) 4. Which of the following is a characteristic of the relationship between unemployment insurance and job-search effort? c. A typical unemployed worker ear the end of the time in which he or she can receive benefits increases job-search efforts 5. Employment rate = (# people employed/adult population) x 100 = (36.9/48.6) x 100 = 75.9 6. From time to time, the demand for workers has risen in one region of Canada and fallen in another. Which of the following types of unemployment does this occurrence illustrate? a. Frictional unemployment created by sectorial shifts 7. Suppose Japanese-based Sony Corporation builds and operates a new chip factory in Canada. What would the future production from such an investment do? a. Have no effect on Canadian GNP or GDP b. Increase Canadian GNP more than it would increase Canadian GDP c. Increase Canadian GDP more than it would increase Canadian GNP d. Not affect Canadian GNP, but it would increase Canadian GDP (Answer: C) 8. In economic growth theory, the assumption that the production function has constant returns to scale is important because a. It allows us to write the production function in per worker terms b. It means that when a country doubles all inputs, I gets more than twice as much output c. It tells us about the shape of the production function d. It explains why rich countries grow faster than poor countries (Answer: A) 9. Suppose the banking system has $10 million in reserves, the reserve requirement is 20 percent, and there are no excess reserves. The public holds $10 million in cash. Then bankers decide that it is prudent to hold some excess reserves, and so begin to hold 25 percent of deposits in the form of reserves. Other things the same, what will this action cause the money supply to do? Initially: M = C + D Multiplier = 5 Deposits = 50 M = 10 + 50 After: 10 x 4 = 40 (4 is new multiplier) M = 10 + 40 Money supply has fallen by $10 million 10. Suppose the banking system has $10 million in reserves, the reserve requirement is 20 percent, and there are no excess reserves. The public holds $10 million in cash. Then bankers decide that it is prudent to hold some excess reserves, and so begin to hold 25 percent of deposits in the form of reserves. At the same time, the public decides to withdraw $5 million in currency from the banking system. Other things the same, what will these actions cause the money supply to do? Initially: M = C + D M = 10 + 50 = 60 After: C = 15 Reserv
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