Question 1

The phase of the business cycle in which real domestic output declines is called:

Accepted Answer

A) the peak. 
B) an expansion. 
C) a recession. 
D) the trough.

Question 2

The rate of inflation can be found by subtracting:

Accepted Answer

A) the real income from the nominal income. 
B) last year's price index from this year's price index. 
C) this year's price index from last year's price index and dividing the difference by this year's price index. 
D) last year's price index from this year's price index and dividing the difference by last year's price index.

Question 3

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

Accepted Answer

A) Alberta 
B) Saskatchewan 
C) Yukon 
D) Ontario

Question 4

The above diagram shows different phases of the:

Accepted Answer

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

Question 5

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 6

Depression means idleness.And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest.This quote describes some of the:

Accepted Answer

A) consequences of the hyperinflation that accompanies a recession. 
B) reasons for the natural rate of unemployment. 
C) noneconomic costs of unemployment. 
D) characteristics of structural unemployment.

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.

Question 8

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.

Question 9

If the price level doubles in a 23-year period, we can conclude that the average annual rate of inflation over that period was about 3 percent.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which phase of the business cycle would be most closely associated with an economic contraction?

Accepted Answer

A) peak 
B) recession 
C) trough 
D) expansion

Question 12

Unemployment that occurs when there is a decline in total spending is called:

Accepted Answer

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

Question 13

The unemployment rate is the:

Accepted Answer

A) ratio of unemployed to employed workers. 
B) number of employed workers minus the number of workers who are not in the labour force. 
C) percentage of the labour force which is out of work. 
D) percentage of the total population which is out of work.

Question 14

Suppose there are 5 million unemployed workers seeking jobs.After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work.As a result of this, the official unemployment rate would:

Accepted Answer

A) increase in the short run but eventually decline. 
B) increase. 
C) decline. 
D) be unchanged.

Question 15

The severe recession of 2008 - 2009 was precipitated by:

Accepted Answer

A) a slowdown in productivity. 
B) a combination of excessive money and financial frenzy. 
C) a combination of a decrease in the money supply and financial frenzy. 
D) A combination of a decrease in money and a productivity slowdown.

Question 16

If the consumer price index was 115 in one year and 120 in the next year, then the rate of inflation from one year to the next was:

Accepted Answer

A) 4.3 percent. 
B) 5.1 percent. 
C) 5.3 percent. 
D) 6.8 percent.

Question 17

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.

Question 18

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 19

Which of the following is the phase that follows the trough of a business cycle?

Accepted Answer

A) Recession 
B) Expansion 
C) Peak 
D) Contraction

Question 20

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.

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