Question 1

During 1986-1991, Nicaragua has experienced an economic condition which can be best described as:

Accepted Answer

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

Question 2

To be officially unemployed a person must be in the labour force and must:

Accepted Answer

A) be actively seeking work. 
B) be 21 years of age or older. 
C) have just lost a job. 
D) be waiting to be called back from a layoff.

Question 3

A recession is a period in which:

Accepted Answer

A) cost-push inflation is present. 
B) nominal domestic output falls. 
C) demand-pull inflation is present. 
D) real domestic output falls.

Question 4

A nation has a population of 300 million people.Of these, 80 million are retired, in the military, in institutions, or under 15 years old.There are 210 million who are employed.What is the unemployment rate?

Accepted Answer

A) 3.3 percent 
B) 3.6 percent 
C) 4.5 percent 
D) 5.2 percent

Question 5

Which of the following Canadian provinces had the highest increase in real GDP in 2016?

Accepted Answer

A) Manitoba 
B) Nova Scotia 
C) Yukon 
D) Nunavut

Question 6

The Canadian economy is said to be producing its non-inflationary potential level of GDP when the natural rate of unemployment is:

Accepted Answer

A) 10-15 percent. 
B) 7-10 percent. 
C) 6-7 percent. 
D) 2.3 percent.

Question 7

Core inflation is the underlying inflation that exists when volatile food and energy prices are omitted.

Accepted Answer

A) True 
 B)False

Question 8

After World War I, Germany experienced an economic condition which can be best described as:

Accepted Answer

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

Question 9

Part-time workers are counted as:

Accepted Answer

A) unemployed and therefore the official unemployment rate tends to overstate the level of unemployment. 
B) unemployed and therefore the official unemployment rate tends to understate the level of unemployment. 
C) fully employed and therefore the official unemployment rate tends to overstate the level of unemployment. 
D) fully employed and therefore the official unemployment rate tends to understate the level of unemployment.

Question 10

The phase of the business cycle where real domestic output is at a minimum is called:

Accepted Answer

A) the peak. 
B) a recession. 
C) the trough. 
D) the pits.

Question 11

Official unemployment statistics:

Accepted Answer

A) understate unemployment because individuals receiving unemployment compensation are counted as employed. 
B) understate unemployment because "discouraged workers" are not counted as unemployed. 
C) include cyclical and structural unemployment, but not frictional unemployment. 
D) overstate unemployment because workers who are involuntarily working part time are counted as being employed.

Question 12

Cost-of-living adjustment clauses (COLAs):

Accepted Answer

A) invalidate the "rule of 70." 
B) apply only to demand-pull inflation. 
C) increase the gap between nominal and real income. 
D) tie wage increases to changes in the price level.

Question 13

The consumer price index:

Accepted Answer

A) uses a fixed market basket set in the base year for all subsequent years. 
B) is also called the GDP price index. 
C) measures changes in the prices of a market basket of some 50,000 goods and services. 
D) is adjusted annually for changes in consumer spending patterns.

Question 14

If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about:

Accepted Answer

A) $18,857 
B) $25,143 
C) $44,000 
D) $77,000

Question 15

One perspective on low levels of inflation is that it can:

Accepted Answer

A) reduce real output. 
B) increase real output. 
C) have no effect on real output. 
D) have no effect on businesses.

Question 16

If the unemployment rate is 9 percent and the natural rate of unemployment is 7.5 percent, then the:

Accepted Answer

A) frictional unemployment rate is 7.5 percent. 
B) cyclical unemployment rate and the frictional unemployment rate together are 7.5 percent. 
C) cyclical unemployment rate is 1.5 percent. 
D) natural rate of unemployment will eventually increase.

Question 17

The natural rate of unemployment in Canada is thought to be about 6-7 percent.

Accepted Answer

A) True 
 B)False

Question 18

Households and businesses must spend time and effort obtaining the information they need to distinguish between real and nominal values such as prices, wages, and interest rates.

Accepted Answer

A) True 
 B)False

Question 19

In an economy nominal GDP is $4,000 billion.The actual unemployment rate is 8 percent and the natural rate of unemployment is 6 percent.According to Okun's law there will be:

Accepted Answer

A) $80 billion lost in potential output. 
B) $100 billion lost in potential output. 
C) $160 billion lost in potential output. 
D) $300 billion lost in potential output.

Question 20

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 amount of output being forgone by the above economy is:

Accepted Answer

A) $12 billion. 
B) $15 billion. 
C) $18 billion. 
D) $24 billion.

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

During 1986-1991, Nicaragua has experienced an economic condition which can be best described as:

To be officially unemployed a person must be in the labour force and must:

A recession is a period in which:

A nation has a population of 300 million people.Of these, 80 million are retired, in the military, in institutions, or under 15 years old.There are 210 million who are employed.What is the unemployment rate?

Which of the following Canadian provinces had the highest increase in real GDP in 2016?

The Canadian economy is said to be producing its non-inflationary potential level of GDP when the natural rate of unemployment is:

Core inflation is the underlying inflation that exists when volatile food and energy prices are omitted.

After World War I, Germany experienced an economic condition which can be best described as:

Part-time workers are counted as:

The phase of the business cycle where real domestic output is at a minimum is called:

Official unemployment statistics:

Cost-of-living adjustment clauses (COLAs) :

The consumer price index:

If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about:

One perspective on low levels of inflation is that it can:

If the unemployment rate is 9 percent and the natural rate of unemployment is 7.5 percent, then the:

The natural rate of unemployment in Canada is thought to be about 6-7 percent.

Households and businesses must spend time and effort obtaining the information they need to distinguish between real and nominal values such as prices, wages, and interest rates.

In an economy nominal GDP is $4,000 billion.The actual unemployment rate is 8 percent and the natural rate of unemployment is 6 percent.According to Okun's law there will be:

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 amount of output being forgone by the above economy is: