Question 1

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 2

Inflation initiated by increases in wages or other resource prices is labelled:

Accepted Answer

A)  demand-pull inflation.
B)  demand-push inflation.
C)  cost-push inflation.
D)  cost-pull inflation.E) B) and C)
F) A) and B)

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

Question 4

Demand-pull inflation:

Accepted Answer

A)  occurs when prices of resources rise, pushing up costs and the price level.
B)  occurs when total spending exceeds the economy's ability to provide output at the existing price level.
C)  occurs only when the economy has reached its absolute production capacity.
D)  is also called cost-push inflation.E) B) and D)
F) A) and D)

Question 5

Assuming the total population is 100 million, the civilian labour force is 50 million, and 47 million workers are employed, the unemployment rate:

Accepted Answer

A)  is 3 percent.
B)  is 6 percent.
C)  is 7 percent.
D)  is 9 percent.E) A) and D)
F) A) and C)

Question 6

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.The unemployment rate is:

Accepted Answer

A)  18.8 percent.
B)  12.5 percent.
C)  16.7 percent.
D)  25 percent.E) A) and D)
F) A) and C)

Question 7

The sequence of events by which inflation can reduce output is:

Accepted Answer

A)  as prices rise, the quantity of goods and services demanded increases, the firms therefore, produce more output which causes the unemployment to increase.
B)  as prices rise, the quantity of goods and services demanded increases, the firms therefore, produce more output which causes the unemployment to decrease.
C)  as prices rise, the quantity of goods and services demanded falls, the firms therefore, produce less output which causes the unemployment to increase.
D)  as prices rise, the quantity of goods and services demanded falls, the firms therefore, produce less output which causes the unemployment to decrease.E) A) and B)
F) B) and D)

Question 8

Which of the following formulas is correct? Percentage change in:

Accepted Answer

A)  price level approximates percentage change in real income minus percentage change in nominal income.
B)  real income approximates percentage change in nominal income minus percentage change in price level.
C)  nominal income approximates percentage change in price level minus percentage change in real income.
D)  real income approximates percentage change in price level minus percentage change in nominal income.E) All of the above
F) C) and D)

Question 9

The GDP gap measures the:

Accepted Answer

A)  difference between NDI and GDP.
B)  amount by which potential GDP exceeds actual GDP.
C)  amount by which actual GDP exceeds NDI.
D)  amount by which nominal GDP exceeds real GDP.E) C) and D)
F) A) and D)

Question 10

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

Accepted Answer

A)  Recession
B)  Expansion
C)  Peak
D)  ContractionE) B) and C)
F) A) and B)

Question 11

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line.Kevin plans to go to technical school to learn how to repair microcomputers.The type of unemployment Kevin is faced with is:

Accepted Answer

A)  cyclical.
B)  frictional.
C)  structural.
D)  natural.E) A) and B)
F) C) and D)

Question 12

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

Question 13

Cyclical unemployment is a consequence of:

Accepted Answer

A)  a decline in aggregate spending.
B)  the decreasing relative importance of goods and the increasing relative importance of services in our economy.
C)  the everyday dynamics of a free labour market.
D)  technological change.E) All of the above
F) A) and D)

Question 14

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 amount of output being forgone by the above economy is:

Accepted Answer

A)  $12 billion.
B)  $15 billion.
C)  $18 billion.
D)  $24 billion.E) All of the above
F) A) and D)

Question 15

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

Question 16

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 would be included in the calculation of the full-employment unemployment rate?

Accepted Answer

A)  1 only
B)  2 only
C)  1 and 3
D)  2 and 4E) C) and D)
F) B) 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) All of the above
F) B) and D)

Question 18

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Accepted Answer

A) True 
 B)False

Question 19

Canada's economy is considered to be at "full employment" when:

Accepted Answer

A)  90 percent of the total population is employed.
B)  90 percent of the labour force is employed.
C)  about 6-7 percent of the labour force is unemployed.
D)  100 percent of the labour force is employed.E) A) and D)
F) B) and C)

Question 20

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

Accepted Answer

A) True 
 B)False

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

Demand-pull inflation:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Cyclical unemployment is a consequence of:

Correct Answer
verified

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 amount of output being forgone by the above economy is:

Correct Answer
verified

Canada's economy is considered to be at "full employment" when:

Correct Answer
verified

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line.Kevin plans to go to technical school to learn how to repair microcomputers.The type of unemployment Kevin is faced with is:

Correct Answer
verified

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

Correct Answer
verified

The sequence of events by which inflation can reduce output is:

Correct Answer
verified

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Correct Answer
verified

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:

Correct Answer
verified

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.The unemployment rate is:

Correct Answer
verified

Assuming the total population is 100 million, the civilian labour force is 50 million, and 47 million workers are employed, the unemployment rate:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Inflation initiated by increases in wages or other resource prices is labelled:

Correct Answer
verified

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

Correct Answer
verified

A lender need not be penalized by inflation if the:

Correct Answer
verified

Which of the following formulas is correct? Percentage change in:

Correct Answer
verified

The GDP gap measures the:

Correct Answer
verified

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

Demand-pull inflation:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cyclical unemployment is a consequence of:

Correct AnswerverifiedShow Answer

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 amount of output being forgone by the above economy is:

Correct AnswerverifiedShow Answer

Canada's economy is considered to be at "full employment" when:

Correct AnswerverifiedShow Answer

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line.Kevin plans to go to technical school to learn how to repair microcomputers.The type of unemployment Kevin is faced with is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The sequence of events by which inflation can reduce output is:

Correct AnswerverifiedShow Answer

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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.The unemployment rate is:

Correct AnswerverifiedShow Answer

Assuming the total population is 100 million, the civilian labour force is 50 million, and 47 million workers are employed, the unemployment rate:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inflation initiated by increases in wages or other resource prices is labelled:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A lender need not be penalized by inflation if the:

Correct AnswerverifiedShow Answer

Which of the following formulas is correct? Percentage change in:

Correct AnswerverifiedShow Answer

The GDP gap measures the:

Correct AnswerverifiedShow Answer

Correct Answer
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