Question 1

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. 
A) 6.7 percent. 
B) 3.0 percent. 
C) 1.2 percent. 
D) 13.6 percent.

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 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. 
A) fell by 13 percent. 
B) rose by 13 percent. 
C) rose by 3 percent. 
D) fell by 3 percent.

Question 4

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. 
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.

Question 5

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. 
A) 9 percent. 
B) 12 percent. 
C) 15 percent. 
D) 18 percent.

Question 6

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. 
A) 4 years. 
B) 6 years. 
C) 10 years. 
D) 12 years.

Question 7

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. 
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.

Question 8

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

Question 9

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. 
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.

Question 10

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 11

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. 
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.

Question 12

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. 
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.

Question 13

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. 
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.

Question 14

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. 
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.

Question 15

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. 
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.

Question 16

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

Question 17

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. 
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.

Question 18

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) Ryan 
A) Mollie 
B) George 
C) Jeanette 
D) Ryan

Question 19

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. 
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.

Question 20

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. 
A) 11.3 percent. 
B) 13.78 percent. 
C) 89 percent. 
D) 35 percent.

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

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

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

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:

During a period of hyperinflation:

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:

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

Inflation is undesirable because it:

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

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

The labour force includes:

A peak in the business cycle:

Cost-push inflation may be caused by:

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

Cost-push inflation:

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:

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

Unanticipated inflation tends to penalize:

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:

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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