Question 1

A peak in the business cycle:

Accepted Answer

A)  occurs when the unemployment rate is its greatest.
B)  occurs when the inflation rate is its lowest.
C)  is a temporary maximum point.
D)  is a temporary minimum point.E) A) and D)
F) A) and C)

Question 2

In recent years the Canadian unemployment rate has been lower than the rate in most of the European countries.

Accepted Answer

A) True 
 B)False

Question 3

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Accepted Answer

A)  military goods
B)  durable goods (machinery, equipment, etc.) 
C)  textile products (clothing) 
D)  agricultural commodities (wheat, corn, etc.) E) A) and D)
F) B) and C)

Question 4

Assume the natural rate of unemployment in the Canadian economy is 7 percent and the actual rate of unemployment is 9 percent.According to Okun's law, the GDP gap:

Accepted Answer

A)  is 4 percent.
B)  is 8 percent.
C)  is 10 percent.
D)  is 2 percent.E) A) and B)
F) C) and D)

Question 5

The sequence of events by which inflation can reduce output is:

Accepted Answer

A)  as prices rise, the quantity of goods and services demanded increases, the firms therefore, produce more output which causes the unemployment to increase.
B)  as prices rise, the quantity of goods and services demanded increases, the firms therefore, produce more output which causes the unemployment to decrease.
C)  as prices rise, the quantity of goods and services demanded falls, the firms therefore, produce less output which causes the unemployment to increase.
D)  as prices rise, the quantity of goods and services demanded falls, the firms therefore, produce less output which causes the unemployment to decrease.E) C) and D)
F) A) and B)

Question 6

Recently a labour union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring significant increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Accepted Answer

A)  Yes, because when you have a large nominal income your standard of living automatically increases.
B)  No, because real income may fall if price increases are more proportionately than the increase in nominal income.
C)  No, because real income may fall if price increases are less proportionately than the increases in nominal income.
D)  Yes, because real income may fall if price increases are less proportionately than the increases in nominal income.E) All of the above
F) B) and C)

Question 7

The following information is for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 billion
Natural rate of unemployment = 6 percent
Actual rate of unemployment = 12 percent
The size of the GDP gap in percentage terms for the above economy is:

Accepted Answer

A)  9 percent.
B)  12 percent.
C)  15 percent.
D)  18 percent.E) B) and D)
F) None of the above

Question 8

The labour force includes:

Accepted Answer

A)  employed workers and persons who are officially unemployed.
B)  employed workers, but excludes persons who are officially unemployed.
C)  full-time workers, but excludes part-time workers.
D)  permanent employees, but excludes temporary employees.E) None of the above
F) A) and B)

Question 9

If the price index rose from 254 in year 1 to 289 in year 2, then the rate of inflation for this economy in year 2 would be:

Accepted Answer

A)  11.3 percent.
B)  13.78 percent.
C)  89 percent.
D)  35 percent.E) A) and B)
F) None of the above

Question 10

During a period of hyperinflation:

Accepted Answer

A)  debtors gain because they repay their debts with dollars of diminished value.
B)  people tend to hold goods rather than money.
C)  income is redistributed away from savers.
D)  all of these.E) A) and B)
F) A) and C)

Question 11

Inflation is undesirable because it:

Accepted Answer

A)  arbitrarily redistributes real income and wealth.
B)  always is cumulative; that is, creeping inflation invariably causes hyperinflation.
C)  always increases everyone's standard of living.
D)  reduces everyone's standard of living.E) B) and D)
F) A) and B)

Question 12

Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Accepted Answer

A) True 
 B)False

Question 13

In 2014, Ortega's nominal income rose by 8 percent and the price level rose by 5 percent.We can conclude that Ortega's real income:

Accepted Answer

A)  fell by 13 percent.
B)  rose by 13 percent.
C)  rose by 3 percent.
D)  fell by 3 percent.E) None of the above
F) A) and B)

Question 14

Suppose the consumer price index was 140.3 in 2013 and 144.5 in 2014.Therefore, the rate of inflation for 2014 was about:

Accepted Answer

A)  6.7 percent.
B)  3.0 percent.
C)  1.2 percent.
D)  13.6 percent.E) A) and D)
F) A) and C)

Question 15

The descriptions give the responses of four individuals to Statistics Canada.1.Mollie just graduated from university and is now looking for work.She has had three job interviews in the past month.2.George works in an automotive assembly plant.He was laid off six months ago as the economy weakened.He expects to return to work in several months when national economic conditions improve.3.Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defence spending.She has been looking for similar work for a year but no company seems interested in her aircraft design skills.4.Ryan lost his job last year when his company downsized and laid off middle-level managers.He tried to find another job for a year, but was unsuccessful and quit looking for work.Refer to the above information.Which individual is frictionally unemployed?

Accepted Answer

A)  Mollie
B)  George
C)  Jeanette
D)  RyanE) All of the above
F) A) and D)

Question 16

Cost-push inflation:

Accepted Answer

A)  is caused by excessive total spending.
B)  shifts the nation's production possibilities curve leftward.
C)  moves the economy inward from its production possibilities curve.
D)  is a mixed blessing because it has positive effects on real output and employment.E) None of the above
F) A) and B)

Question 17

If the rate of inflation is 12 percent per year, the price level will double in about:

Accepted Answer

A)  4 years.
B)  6 years.
C)  10 years.
D)  12 years.E) A) and B)
F) None of the above

Question 18

Unanticipated inflation tends to penalize:

Accepted Answer

A)  people who save money in financial institutions.
B)  individuals who borrow money from financial institutions.
C)  businesses which borrow money from financial institutions.
D)  governments which have a progressive personal income tax.E) B) and D)
F) A) and B)

Question 19

Cost-push inflation may be caused by:

Accepted Answer

A)  a decline in per-unit production costs.
B)  a decrease in wage rates.
C)  a negative supply shock.
D)  an increase in resource availability.E) None of the above
F) C) and D)

Question 20

Most economists believe that the immediate cause of cyclical changes in the levels of real output and employment is:

Accepted Answer

A)  the changes in productivity.
B)  the changes in technology.
C)  the changes in the level of total spending.
D)  the changes in the money supply.E) A) and C)
F) B) and C)

Exam 9: B: Business Cycles, Unemployment, and Inflation

A peak in the business cycle:

Correct Answer
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The sequence of events by which inflation can reduce output is:

Correct Answer
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During a period of hyperinflation:

Correct Answer
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Correct Answer
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The labour force includes:

Correct Answer
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Correct Answer
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The following information is for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 billion Natural rate of unemployment = 6 percent Actual rate of unemployment = 12 percent The size of the GDP gap in percentage terms for the above economy is:

Correct Answer
verified

Unanticipated inflation tends to penalize:

Correct Answer
verified

Inflation is undesirable because it:

Correct Answer
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Cost-push inflation:

Correct Answer
verified

Most economists believe that the immediate cause of cyclical changes in the levels of real output and employment is:

Correct Answer
verified

If the price index rose from 254 in year 1 to 289 in year 2, then the rate of inflation for this economy in year 2 would be:

Correct Answer
verified

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Correct Answer
verified

Cost-push inflation may be caused by:

Correct Answer
verified

Assume the natural rate of unemployment in the Canadian economy is 7 percent and the actual rate of unemployment is 9 percent.According to Okun's law, the GDP gap:

Correct Answer
verified

In recent years the Canadian unemployment rate has been lower than the rate in most of the European countries.

Correct Answer
verified

In 2014, Ortega's nominal income rose by 8 percent and the price level rose by 5 percent.We can conclude that Ortega's real income:

Correct Answer
verified

If the rate of inflation is 12 percent per year, the price level will double in about:

Correct Answer
verified

Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Correct Answer
verified

Suppose the consumer price index was 140.3 in 2013 and 144.5 in 2014.Therefore, the rate of inflation for 2014 was about:

Correct Answer
verified

Exam 9: B: Business Cycles, Unemployment, and Inflation

A peak in the business cycle:

Correct AnswerverifiedShow Answer

The sequence of events by which inflation can reduce output is:

Correct AnswerverifiedShow Answer

During a period of hyperinflation:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The labour force includes:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The following information is for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 billion Natural rate of unemployment = 6 percent Actual rate of unemployment = 12 percent The size of the GDP gap in percentage terms for the above economy is:

Correct AnswerverifiedShow Answer

Unanticipated inflation tends to penalize:

Correct AnswerverifiedShow Answer

Inflation is undesirable because it:

Correct AnswerverifiedShow Answer

Cost-push inflation:

Correct AnswerverifiedShow Answer

Most economists believe that the immediate cause of cyclical changes in the levels of real output and employment is:

Correct AnswerverifiedShow Answer

If the price index rose from 254 in year 1 to 289 in year 2, then the rate of inflation for this economy in year 2 would be:

Correct AnswerverifiedShow Answer

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Correct AnswerverifiedShow Answer

Cost-push inflation may be caused by:

Correct AnswerverifiedShow Answer

Assume the natural rate of unemployment in the Canadian economy is 7 percent and the actual rate of unemployment is 9 percent.According to Okun's law, the GDP gap:

Correct AnswerverifiedShow Answer

In recent years the Canadian unemployment rate has been lower than the rate in most of the European countries.

Correct AnswerverifiedShow Answer

In 2014, Ortega's nominal income rose by 8 percent and the price level rose by 5 percent.We can conclude that Ortega's real income:

Correct AnswerverifiedShow Answer

If the rate of inflation is 12 percent per year, the price level will double in about:

Correct AnswerverifiedShow Answer

Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Correct AnswerverifiedShow Answer

Suppose the consumer price index was 140.3 in 2013 and 144.5 in 2014.Therefore, the rate of inflation for 2014 was about:

Correct AnswerverifiedShow Answer

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