Key Macroeconomic Concepts
Student Worksheet
Define the Term GDP? Explain the two approaches to calculating GDP.
Compare and contrast real GDP and per capita GDP. Explain their possible uses and limitations when comparing living standards in different years or different countries.
Define the term inflation. How is inflation measured? Give an example inflation measurement.
What is inflation’s effect on nominal incomes; on real incomes?
Interest Rates and Exchange Rates
1. What is interest? What is an interest rate? What Interest rate would you receive in your personal savings account? Personal chequing account? What Interest Rate would you pay on a visa card? What Interest Rate would you have to pay for a mortgage?
2. Who sets the interest rate in Canada? When interest rate is set, how do Canadian banks respond to the interest rates being set?
3. Define Prime Rate? How is the rate set in Canada?
4. What is an exchange rate? How would you write down the information about exchange rate?
5. How does the exchange rate affect the economy?
6. What exchange rate would you like with the US dollar if you were a Canadian exporter and why?
7. What exchange rate would you like with the US dollar if you were a Canadian traveller to the US?
8. What exchange rate would you like with the Canadian dollar if you were an American tourist travelling in Canada?
9. What are the two most common types of exchange rate systems? Explain each type of exchange rate system and how it affects the economy. What type of system do most advanced countries have including Canada and the United States?
10. What factors are widely accepted as influencing the exchange rates? List all factors and select the three factors which you feel are most influential and explain why?
11. Explain Foreign Exchange Reserves and what the reserves are made up? What agency owns the reserve and what agency administers the reserve?
12. What policy does the bank follow when the Canadian dollar is strong? What policy does the bank follow when the Canadian dollar is weak? What effect does holding gold currently and what is the gold being replaced with currently?