Question 1

The natural rate of unemployment is the:

Accepted Answer

A) unemployment rate experienced at the depth of a depression. 
B) full-employment unemployment rate. 
C) unemployment rate experienced by the least-skilled workers in the economy. 
D) unemployment rate experienced by the most-skilled workers in the economy.

Question 2

The above diagram shows different phases of the:

Accepted Answer

A) business cycle. 
B) cyclical variation. 
C) recession cycle. 
D) prosperity cycle.

Question 3

During the past ten years the average annual rate of inflation in Canada has been less than 1 percent.

Accepted Answer

A) True 
 B)False

Question 4

The price level has doubled in 35 years.The approximate annual percentage rate of increase in the price level over this period has been:

Accepted Answer

A) 50 percent. 
B) 20 percent. 
C) 5 percent. 
D) 2 percent.

Question 5

A nation has a population of 260 million people.Of these, 60 million are retired, in the military, in institutions, or under 15 years old.There are 188 million who are employed.What is the unemployment rate?

Accepted Answer

A) 4 percent 
B) 6 percent 
C) 9 percent 
D) 27 percent

Question 6

Cyclical unemployment is the result of:

Accepted Answer

A) expansion in the economy. 
B) technological change in the economy. 
C) seasonal variation in the labour force. 
D) a decline in total spending.

Question 7

A lender need not be penalized by inflation if the:

Accepted Answer

A) long-term rate of inflation is less than the short-term rate of inflation. 
B) short-term rate of inflation is less than the long-term rate of inflation. 
C) lender correctly anticipates inflation and increases the nominal interest rate accordingly. 
D) inflation is unanticipated by both borrower and lender.

Question 8

Suppose rate of inflation for some specific year was 10 percent.If the CPI for that year was 139.7, the previous year's CPI must have been:

Accepted Answer

A) 100.0. 
B) 129.7. 
C) 153.7. 
D) 127.0.

Question 9

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

Accepted Answer

A) inflation of 4 percent. 
B) inflation of 3.33 percent. 
C) deflation of 3.33 percent. 
D) deflation of 4 percent.

Question 10

If the CPI was 160 in 2008 and 40 in 2005, the cost of living was:

Accepted Answer

A) 4 times higher in 2008 than in 2005. 
B) 25 percent higher in 2008 than in 2005. 
C) constant over the period. 
D) 4 times lower in 2008 than in 2005

Question 11

If the nominal interest rate is 12 percent and the real interest rate is 8 percent, then the inflation premium is:

Accepted Answer

A) 8 percent. 
B) 12 percent. 
C) 4 percent. 
D) 20 percent.

Question 12

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line.Kevin plans to go to technical school to learn how to repair microcomputers.The type of unemployment Kevin is faced with is:

Accepted Answer

A) cyclical. 
B) frictional. 
C) structural. 
D) natural.

Question 13

The complexity in recognizing the type of inflation:

Accepted Answer

A) arises because demand-pull inflation always follows the cost-push inflation. 
B) arises because sometimes the original source of inflation is unknown. 
C) arises because cost-push inflation always follows the demand-pull inflation. 
D) arises because demand-pull inflation is self-limiting while cost-push inflation will continue as long as there is excess spending.

Question 14

For every 1 percent that the actual unemployment rate exceeds the natural rate, there is generated a 2 percent GDP gap.This is a statement of:

Accepted Answer

A) Stratford's law. 
B) Okun's law. 
C) the law of nominal incomes. 
D) the rule of 70.

Question 15

Working as an elevator operator used to be a common job in the workforce four decades ago, but today few jobs remain.The unemployment created by introduction of automatic elevators would be considered:

Accepted Answer

A) wait. 
B) cyclical. 
C) frictional. 
D) structural.

Question 16

If average nominal income was about $15,000 and the price level index was 118, then average real income would be about:

Accepted Answer

A) $11,146 
B) $12,712 
C) $13,385 
D) $14,249

Question 17

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Accepted Answer

A) True 
 B)False

Question 18

The aggregate cost of unemployment can be measured by the:

Accepted Answer

A) amount by which actual GDP exceeds potential GDP. 
B) amount by which potential GDP exceeds actual GDP. 
C) excess of real GDP over nominal GDP. 
D) excess of nominal GDP over real GDP.

Question 19

A cumulative wage-price spiral which produces a rapid and huge increase in the price level can be characterized as:

Accepted Answer

A) anticipated inflation. 
B) demand-pull inflation. 
C) cost-push inflation. 
D) hyperinflation.

Question 20

If the total population is 175 million, the labour force is 100 million, and 89 million workers are employed, then the unemployment rate is 11 percent.

Accepted Answer

A) True 
 B)False

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

The natural rate of unemployment is the:

The above diagram shows different phases of the:

During the past ten years the average annual rate of inflation in Canada has been less than 1 percent.

The price level has doubled in 35 years.The approximate annual percentage rate of increase in the price level over this period has been:

A nation has a population of 260 million people.Of these, 60 million are retired, in the military, in institutions, or under 15 years old.There are 188 million who are employed.What is the unemployment rate?

Cyclical unemployment is the result of:

A lender need not be penalized by inflation if the:

Suppose rate of inflation for some specific year was 10 percent.If the CPI for that year was 139.7, the previous year's CPI must have been:

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

If the CPI was 160 in 2008 and 40 in 2005, the cost of living was:

If the nominal interest rate is 12 percent and the real interest rate is 8 percent, then the inflation premium is:

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line.Kevin plans to go to technical school to learn how to repair microcomputers.The type of unemployment Kevin is faced with is:

The complexity in recognizing the type of inflation:

For every 1 percent that the actual unemployment rate exceeds the natural rate, there is generated a 2 percent GDP gap.This is a statement of:

Working as an elevator operator used to be a common job in the workforce four decades ago, but today few jobs remain.The unemployment created by introduction of automatic elevators would be considered:

If average nominal income was about $15,000 and the price level index was 118, then average real income would be about:

An annual rate of inflation of 7 percent will double the price level in about 15 years.

The aggregate cost of unemployment can be measured by the:

A cumulative wage-price spiral which produces a rapid and huge increase in the price level can be characterized as:

If the total population is 175 million, the labour force is 100 million, and 89 million workers are employed, then the unemployment rate is 11 percent.