Question 1

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.E) B) and D)
F) B) and C)

Question 2

The consumer price index (CPI) :

Accepted Answer

A)   is an average of the prices of all consumer goods purchased each year.
B)   measures changes in the prices of a market basket of some 600 goods and services purchased by urban consumers.
C)   measures prices of goods, but not services since services don't fit into a market basket.
D)   is also known as the GDP price index.E) B) and C)
F) A) and C)

Question 3

Which of the following is not correct?

Accepted Answer

A)   The Canadian unemployment rates of male and female workers are roughly the same.
B)   The unemployment rate for teenagers is higher than that of adults.
C)   Teenagers experience approximately the same unemployment rates as do adults.
D)   lower-skilled workers are more vulnerable to unemployment than are higher-skilled workersE) B) and D)
F) None of the above

Question 4

When the Canadian economy has achieved "full employment," the unemployment rate is at or below:

Accepted Answer

A)   7 percent.
B)   4.0 percent.
C)   3.3 percent.
D)   2.5 percent.E) C) and D)
F) A) and B)

Question 5

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.E) A) and B)
F) A) and C)

Question 6

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.E) All of the above
F) A) and B)

Question 7

-Refer to the above diagram. The straight line E drawn through the wavy lines would provide an estimate of the:

Accepted Answer

A)   recession fluctuation.
B)   growth trend.
C)   natural rate of unemployment.
D)   expansion trend.E) A) and D)
F) None of the above

Question 8

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Accepted Answer

A)   military goods
B)   durable goods (machinery, equipment, etc.) 
C)   textile products (clothing) 
D)   agricultural commodities (wheat, corn, etc.) E) A) and B)
F) C) and D)

Question 9

Full-employment output is also called:

Accepted Answer

A)   zero-unemployment output.
B)   equilibrium output.
C)   potential output.
D)   zero-savings output.E) A) and B)
F) A) and D)

Question 10

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.E) A) and C)
F) A) and D)

Question 11

Inflation means:

Accepted Answer

A)   all prices are rising, but at different rates.
B)   all prices are rising and at the same rate.
C)   each unit of a currency (such as Canadian dollar)  buys more goods and services.
D)   the continual rise in the general level of prices.E) A) and B)
F) None of the above

Question 12

When the unemployment rate is relatively high, we can conclude that:

Accepted Answer

A)   the economy is in the expansion phase of the business cycle.
B)   potential GDP is in excess of actual GDP.
C)   actual GDP is in excess of potential GDP.
D)   actual GDP is equal to potential GDP.E) A) and D)
F) B) and C)

Question 13

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Accepted Answer

A)   structural
B)   cyclical
C)   frictional
D)   naturalE) C) and D)
F) None of the above

Question 14

A large negative GDP gap implies:

Accepted Answer

A)   an excess of imports over exports.
B)   a low rate of unemployment.
C)   a high rate of unemployment.
D)   a sharply rising price level.E) B) and C)
F) A) and D)

Question 15

As applied to the price level, the "rule of 70" indicates that the number of years required for the price to double can be found by:

Accepted Answer

A)   dividing "70" into the annual rate of inflation.
B)   dividing the annual rate of inflation into "70."
C)   subtracting the annual change in nominal incomes from "70."
D)   multiplying the annual rate of inflation by "70."E) All of the above
F) A) and C)

Question 16

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.E) A) and B)
F) A) and C)

Question 17

The following information is about a hypothetical economy:
Full-time employed = 80
Part-time employed = 25
Unemployed = 15
Discouraged workers = 5
Members of underground economy = 6
Consumer Price Index = 110
-Refer to the above information. If 6 members of the labour force are presently counted as part of the unemployed when in fact they are employed, the official unemployment rate is overstated by:

Accepted Answer

A)   0 percentage points.
B)   2 percentage points.
C)   7.5 percentage points.
D)   6 percentage points.E) B) and D)
F) B) and C)

Question 18

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.E) A) and D)
F) B) and D)

Question 19

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.E) C) and D)
F) A) and B)

Question 20

In 2012 Ortega's nominal income rose by 8 percent and the price level rose by 5 percent. We can conclude that Ortega's real income:

Accepted Answer

A)   may have either increased or decreased.
B)   rose by 13 percent.
C)   rose by 3 percent.
D)   fell by 3 percent.E) B) and C)
F) All of the above

Exam 7: Business Cycles, Unemployment, and Inflation

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

Correct Answer
verified

Cost-of-living adjustment clauses (COLAs) :

Correct Answer
verified

As applied to the price level, the "rule of 70" indicates that the number of years required for the price to double can be found by:

Correct Answer
verified

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Correct Answer
verified

Full-employment output is also called:

Correct Answer
verified

Correct Answer
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When the Canadian economy has achieved "full employment," the unemployment rate is at or below:

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

A large negative GDP gap implies:

Correct Answer
verified

Inflation means:

Correct Answer
verified

The severe recession of 2008 - 2009 was precipitated by:

Correct Answer
verified

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

Correct Answer
verified

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:

Correct Answer
verified

The consumer price index (CPI) :

Correct Answer
verified

Demand-pull inflation:

Correct Answer
verified

-Refer to the above diagram. The straight line E drawn through the wavy lines would provide an estimate of the:

Correct Answer
verified

To limit the loss of purchasing power from inflation:

Correct Answer
verified

When the unemployment rate is relatively high, we can conclude that:

Correct Answer
verified

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Correct Answer
verified

In 2012 Ortega's nominal income rose by 8 percent and the price level rose by 5 percent. We can conclude that Ortega's real income:

Correct Answer
verified

Exam 7: Business Cycles, Unemployment, and Inflation

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

Correct AnswerverifiedShow Answer

Cost-of-living adjustment clauses (COLAs) :

Correct AnswerverifiedShow Answer

As applied to the price level, the "rule of 70" indicates that the number of years required for the price to double can be found by:

Correct AnswerverifiedShow Answer

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Correct AnswerverifiedShow Answer

Full-employment output is also called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Canadian economy has achieved "full employment," the unemployment rate is at or below:

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

A large negative GDP gap implies:

Correct AnswerverifiedShow Answer

Inflation means:

Correct AnswerverifiedShow Answer

The severe recession of 2008 - 2009 was precipitated by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

The consumer price index (CPI) :

Correct AnswerverifiedShow Answer

Demand-pull inflation:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. The straight line E drawn through the wavy lines would provide an estimate of the:

Correct AnswerverifiedShow Answer

To limit the loss of purchasing power from inflation:

Correct AnswerverifiedShow Answer

When the unemployment rate is relatively high, we can conclude that:

Correct AnswerverifiedShow Answer

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Correct AnswerverifiedShow Answer

In 2012 Ortega's nominal income rose by 8 percent and the price level rose by 5 percent. We can conclude that Ortega's real income:

Correct AnswerverifiedShow Answer

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