Question 1

The unemployment rate in an economy is 7.5 percent. The total population of the economy is 250 million and the size of the civilian labour force is 180 million. The number of employed workers in this economy is:

Accepted Answer

A)   13.5 million.
B)   15.7 million.
C)   166.5 million.
D)   174.6 million.E) A) and C)
F) C) and D)

Question 2

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Accepted Answer

A)   2 percent.
B)   4 percent.
C)   6 percent.
D)   10 percent.E) A) and B)
F) A) and C)

Question 3

Inflation rates in Canada in recent years:

Accepted Answer

A)   are relatively higher than the rates in other industrial countries.
B)   are relatively the same as the rates in other industrial countries.
C)   are relatively lower than the rates in some other industrial countries.
D)   are double digit and comparable with the rates in Kenya and Venezuela.E) None of the above
F) All of the above

Question 4

A trough in the business cycle occurs when:

Accepted Answer

A)   cyclical unemployment is at a minimum point.
B)   employment and output reach their lowest levels.
C)   the natural rate of unemployment is at a minimum point.
D)   structural and frictional unemployment are at their highest levels.E) A) and C)
F) A) and D)

Question 5

Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

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

Question 8

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 9

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

Accepted Answer

A)   peak
B)   recession
C)   trough
D)   expansionE) None of the above
F) All of the above

Question 10

If a person's nominal income increases by 2% while the price level increases by 6%, the person's real income:

Accepted Answer

A)   increases by about 2%.
B)   increases by about 4%.
C)   decreases by about 6%.
D)   decreases by about 2%.E) C) and D)
F) A) and C)

Question 11

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.E) None of the above
F) C) and D)

Question 12

Between 1967 and 1977 the price level approximately doubled. On the basis of this information we can say that the average annual rate of inflation over this ten-year period was about:

Accepted Answer

A)   10 percent.
B)   7 percent.
C)   4 percent.
D)   2 percent.E) All of the above
F) A) and B)

Question 13

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

Question 14

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

Question 15

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

Question 16

Recently a labour union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring significant increases in the nominal incomes of its members through collective bargaining. Is the critic correct?

Accepted Answer

A)   Yes, because when you have a large nominal income your standard of living automatically increases.
B)   No, because real income may fall if price increases are more proportionately than the increase in nominal income.
C)   No, because real income may fall if price increases are less proportionately than the increases in nominal income.
D)   Yes, because real income may fall if price increases are less proportionately than the increases in nominal income.E) A) and B)
F) C) and D)

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

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

Question 19

In which industry or sector of the economy is output least likely to be affected by the business cycle?

Accepted Answer

A)   housing construction
B)   automobile production
C)   agricultural commodities
D)   capital goods productionE) A) and C)
F) A) and B)

Question 20

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

Exam 7: Business Cycles, Unemployment, and Inflation

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

Correct Answer
verified

Between 1967 and 1977 the price level approximately doubled. On the basis of this information we can say that the average annual rate of inflation over this ten-year period was about:

Correct Answer
verified

Inflation is undesirable because it:

Correct Answer
verified

Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Correct Answer
verified

At the economy's natural rate of unemployment:

Correct Answer
verified

The unemployment rate in an economy is 7.5 percent. The total population of the economy is 250 million and the size of the civilian labour force is 180 million. The number of employed workers in this economy is:

Correct Answer
verified

In which industry or sector of the economy is output least likely to be affected by the business cycle?

Correct Answer
verified

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

Correct Answer
verified

If a person's nominal income increases by 2% while the price level increases by 6%, the person's real income:

Correct Answer
verified

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:

Correct Answer
verified

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.

Correct Answer
verified

During the Great Recession of 2008 - 2009 in Canada:

Correct Answer
verified

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:

Correct Answer
verified

Inflation rates in Canada in recent years:

Correct Answer
verified

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

A recession is a period in which:

Correct Answer
verified

A trough in the business cycle occurs when:

Correct Answer
verified

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

Correct Answer
verified

Exam 7: Business Cycles, Unemployment, and Inflation

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

Correct AnswerverifiedShow Answer

Between 1967 and 1977 the price level approximately doubled. On the basis of this information we can say that the average annual rate of inflation over this ten-year period was about:

Correct AnswerverifiedShow Answer

Inflation is undesirable because it:

Correct AnswerverifiedShow Answer

Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Correct AnswerverifiedShow Answer

At the economy's natural rate of unemployment:

Correct AnswerverifiedShow Answer

The unemployment rate in an economy is 7.5 percent. The total population of the economy is 250 million and the size of the civilian labour force is 180 million. The number of employed workers in this economy is:

Correct AnswerverifiedShow Answer

In which industry or sector of the economy is output least likely to be affected by the business cycle?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a person's nominal income increases by 2% while the price level increases by 6%, the person's real income:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

During the Great Recession of 2008 - 2009 in Canada:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Inflation rates in Canada in recent years:

Correct AnswerverifiedShow Answer

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A recession is a period in which:

Correct AnswerverifiedShow Answer

A trough in the business cycle occurs when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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