Question 1

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.

Question 2

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130.The person's real income will:

Accepted Answer

A) fall by about 1 percent. 
B) remain constant. 
C) rise by about 4 percent. 
D) rise by about 1 percent.

Question 3

Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree.With degree in hand she is now searching for a position in management.Kimberly presently is:

Accepted Answer

A) cyclically unemployed. 
B) structurally unemployed. 
C) frictionally unemployed. 
D) not a member of the labour force.

Question 4

The consumer price index was 247 in year 1 and 272 in year 2.The rate of inflation in year 2 was about:

Accepted Answer

A) 12 percent. 
B) 10 percent. 
C) 8 percent. 
D) 6 percent.

Question 5

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 6

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.

Question 7

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 8

If the consumer price index was 170 in one year and 180 in the next year, then the rate of inflation from one year to the next was approximately:

Accepted Answer

A) 5.5 percent. 
B) 5.9 percent. 
C) 5.3 percent. 
D) 7.2 percent.

Question 9

Okun's law indicates that for:

Accepted Answer

A) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, there is a generated 2 percent GDP gap. 
B) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, there is a generated 5 percent GDP gap. 
C) a 5 percent GDP gap, there is a generated 1 percent increase in the natural unemployment rate. 
D) a 2 percent GDP gap, there is a generated 2 percent increase in the actual unemployment rate.

Question 10

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.

Question 11

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 12

To limit the loss of purchasing power from inflation:

Accepted Answer

A) people increase the amount of money they hold as cash. 
B) people limit the amount of money they hold as cash. 
C) people do not spend their money. 
D) people limit the amount of goods and services they buy.

Question 13

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 14

At the economy's natural rate of unemployment:

Accepted Answer

A) the economy achieves its potential output. 
B) there is only a relatively small amount of cyclical unemployment. 
C) only frictional unemployment exists. 
D) none of the above are true.

Question 15

In 2018, the labour force in Canada constituted: Using Figure 9.2, what percentage of the total population of was in the labour force?

Accepted Answer

A) 50 percent of the total population. 
B) 40 percent of the total population. 
C) 60 percent of the total population. 
D) 92 percent of the total population.

Question 16

Demand-pull inflation:

Accepted Answer

A) can occur before the economy has reached its full-employment output. 
B) can occur only after the economy has reached its full-employment output. 
C) can be present even during an economic depression. 
D) is self-limiting.

Question 17

When a group of workers find that their job skills and work experience have become obsolete and are not needed by industry, this type of unemployment is:

Accepted Answer

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

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

Question 19

During the Great Recession of 2008 - 2009 in Canada:

Accepted Answer

A) burden of unemployment was quite evenly distributed among males and females, and young and old workers. 
B) unemployment rate for teenagers was below the rate for the labour force as a whole. 
C) unemployment rate for women was considerably higher than that for men. 
D) unemployment rate for women was lower than the rate for men.

Question 20

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.

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