Discussion Questions

 

In what ways are national income statistics useful? [L07.1]

Why do national income accountants compare the market value of the total outputs in various years rather than actual physical volumes of production? What problem is posed by any comparison over time of the market values of various total outputs? How is this problem resolved? [L07.1]

Which of the following goods are usually intermediate goods and which are usually final goods: running shoes, cotton fibres, watches, textbooks, coal, sunscreen lotion, lumber? [L07.1]

Why do economists include only final goods when measuring GDP for a particular year? Why don't they include the value of the stocks and bonds bought and sold? Why don't they include the value of the used furniture bought and sold? [L07.1]

Explain why an economy's output, in essence, is also its income. [L07.1]

Provide three examples of each: consumer durable goods, consumer nondurable goods, and services. [L07.2]

Why are changes in inventories included as part of investment spending? Suppose inventories declined by $1 billion during 2022. How would this affect the size of gross investment and gross domestic product in 2022? Explain. [L07.2]

What is the difference between gross investment and net investment? [L07.2]

Use the concepts of gross investment and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. Explain: "Though net investment can be positive, negative, or zero, it is impossible for gross investment to be less than zero." [L07.2]

Define net exports. How are net exports determined? Explain how net exports might be a negative amount. [L07.2]

 

Discussion Questions

 

What are the four phases of the business cycle? How long do business cycles last? How do seasonal variations and long run trends complicate measurement of the business cycle? Why does the business cycle affect output and employment in capital goods industries and consumer durable goods industries more severely than in industries producing consumer nondurables? [L09.1]

How can a financial crisis lead to a recession? How, in general, can a major new invention lead to an expansion? [L09.1]

How is the labour force defined and who measures it? How is the unemployment rate calculated? Does an increase in the unemployment rate necessarily mean a decline in the size of the labour force? Why is a positive unemployment rate more than zero percent—fully compatible with full employment? [L09.2]

How do unemployment rates vary by gender, occupation, and education? Why does the average length of time people are unemployed rise during a recession? [L09.2]

Why is it difficult to distinguish between frictional, structural, seasonal, and cyclical unemployment? Why is unemployment an economic problem? What are the consequences of a negative GDP gap? What are the noneconomic effects of unemployment? [L09.2]

Even though Canada has an employment insurance program that provides income for those who are out of work, why should we worry about unemployment? [L09.2]

What is the Consumer Price Index (CPI) and how is it determined each month? How does Statistics Canada calculate the rate of inflation from one year to the next? How does inflation affect the purchasing power of a dollar? How does it explain difference between nominal and real interest rates? How does deflation differ from inflation? [L09.3]