Question 1

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

Question 2

In defending a mild inflation rate in the economy, the proponents argue that a mild inflation is a by-product of strong spending, and as a result:

Accepted Answer

A)  high spending generates high profit, strong demand for labour and, a great incentive for firms to expand their production capacity. 
B)  high spending generates high profit, less need for labour and, a great incentive for firms to cut back production. 
C)  high spending increases the general price level, increase in the cost of labour and this would result in cost push inflation. 
D)  even a low inflation rate reduces the real output, employment and the profits of the firms. 
A)  high spending generates high profit, strong demand for labour and, a great incentive for firms to expand their production capacity. 
B)  high spending generates high profit, less need for labour and, a great incentive for firms to cut back production. 
C)  high spending increases the general price level, increase in the cost of labour and this would result in cost push inflation. 
D)  even a low inflation rate reduces the real output, employment and the profits of the firms. A

Question 3

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. 
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. C

Question 4

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. 
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 5

Given the annual rate of inflation, the "rule of 70" allows one to:

Accepted Answer

A)  determine whether the inflation is demand-pull or cost-push. 
B)  calculate the accompanying rate of unemployment. 
C)  determine when the value of a real asset will approach zero. 
D)  calculate the number of years required for the price level to double. 
A)  determine whether the inflation is demand-pull or cost-push. 
B)  calculate the accompanying rate of unemployment. 
C)  determine when the value of a real asset will approach zero. 
D)  calculate the number of years required for the price level to double.

Question 6

Which of the following is correct?

Accepted Answer

A)  Real and nominal incomes always move in the same direction. 
B)  Inflation increases the purchasing power of the dollar and necessarily reduces one's nominal income. 
C)  Inflation reduces the purchasing power of the dollar and necessarily reduces one's real income. 
D)  Inflation reduces the purchasing power of the dollar, but does not necessarily reduce one's real income. 
A)  Real and nominal incomes always move in the same direction. 
B)  Inflation increases the purchasing power of the dollar and necessarily reduces one's nominal income. 
C)  Inflation reduces the purchasing power of the dollar and necessarily reduces one's real income. 
D)  Inflation reduces the purchasing power of the dollar, but does not necessarily reduce one's real income.

Question 7

If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent.

Accepted Answer

A) True 
 B)False

Question 8

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 9

People who work part time, but desire to work full time, are considered to be officially unemployed.

Accepted Answer

A) True 
 B)False

Question 10

A college or university graduate using the summer following graduation to search for a job would best be classified as:

Accepted Answer

A)  not officially a member of the labour force. 
B)  a part of structural unemployment. 
C)  a part of cyclical unemployment. 
D)  a part of frictional unemployment. 
A)  not officially a member of the labour force. 
B)  a part of structural unemployment. 
C)  a part of cyclical unemployment. 
D)  a part of frictional unemployment.

Question 11

The business cycle is so named because upswings and downswings in business activity are equal in terms of duration and intensity.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

Accepted Answer

A)  fall by about 20 percent. 
B)  fall by about 2 percent. 
C)  rise by about 25 percent. 
D)  rise by about 15 percent. 
A)  fall by about 20 percent. 
B)  fall by about 2 percent. 
C)  rise by about 25 percent. 
D)  rise by about 15 percent.

Question 13

If both the real interest rate and the nominal interest rate are 3 percent, then the:

Accepted Answer

A)  inflation premium is zero. 
B)  real GDP must exceed the nominal GDP. 
C)  nominal GDP must exceed real GDP. 
D)  inflation premium also is 3 percent. 
A)  inflation premium is zero. 
B)  real GDP must exceed the nominal GDP. 
C)  nominal GDP must exceed real GDP. 
D)  inflation premium also is 3 percent.

Question 14

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. 
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 15

Hyperinflation does not have a devastating impact on real output and employment.

Accepted Answer

A) True 
 B)False

Question 16

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. 
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 17

Which of the following is correct?

Accepted Answer

A)  inflation will always increase the real income. 
B)  inflation does not affect the distribution of income. 
C)  the redistribution effects of inflation does not depend upon expectation. 
D)  the redistribution effects of inflation depends upon whether or not it is expected. 
A)  inflation will always increase the real income. 
B)  inflation does not affect the distribution of income. 
C)  the redistribution effects of inflation does not depend upon expectation. 
D)  the redistribution effects of inflation depends upon whether or not it is expected.

Question 18

If the natural rate of unemployment is 6 percent and the actual unemployment rate is 9 percent, then Okun's law indicates that the GDP gap is:

Accepted Answer

A)  2 percent. 
B)  3 percent. 
C)  4 percent. 
D)  6 percent. 
A)  2 percent. 
B)  3 percent. 
C)  4 percent. 
D)  6 percent.

Question 19

"Waiting for employment" and "searching for employment" are both types of:

Accepted Answer

A)  cyclical unemployment. 
B)  hidden unemployment. 
C)  frictional unemployment. 
D)  structural unemployment. 
A)  cyclical unemployment. 
B)  hidden unemployment. 
C)  frictional unemployment. 
D)  structural unemployment.

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

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

In defending a mild inflation rate in the economy, the proponents argue that a mild inflation is a by-product of strong spending, and as a result:

A lender need not be penalized by inflation if the:

The consumer price index:

Given the annual rate of inflation, the "rule of 70" allows one to:

Which of the following is correct?

If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent.

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

People who work part time, but desire to work full time, are considered to be officially unemployed.

A college or university graduate using the summer following graduation to search for a job would best be classified as:

The business cycle is so named because upswings and downswings in business activity are equal in terms of duration and intensity.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

If both the real interest rate and the nominal interest rate are 3 percent, then the:

Cyclical unemployment is the result of:

Hyperinflation does not have a devastating impact on real output and employment.

The aggregate cost of unemployment can be measured by the:

Which of the following is correct?

If the natural rate of unemployment is 6 percent and the actual unemployment rate is 9 percent, then Okun's law indicates that the GDP gap is:

"Waiting for employment" and "searching for employment" are both types of:

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.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 7: Business Cycles, Unemployment, and Inflation

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

In defending a mild inflation rate in the economy, the proponents argue that a mild inflation is a by-product of strong spending, and as a result:

A lender need not be penalized by inflation if the:

The consumer price index:

Given the annual rate of inflation, the "rule of 70" allows one to:

Which of the following is correct?

If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent.

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

People who work part time, but desire to work full time, are considered to be officially unemployed.

A college or university graduate using the summer following graduation to search for a job would best be classified as:

The business cycle is so named because upswings and downswings in business activity are equal in terms of duration and intensity.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

If both the real interest rate and the nominal interest rate are 3 percent, then the:

Cyclical unemployment is the result of:

Hyperinflation does not have a devastating impact on real output and employment.

The aggregate cost of unemployment can be measured by the:

Which of the following is correct?

If the natural rate of unemployment is 6 percent and the actual unemployment rate is 9 percent, then Okun's law indicates that the GDP gap is:

"Waiting for employment" and "searching for employment" are both types of:

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.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters