Question 1

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 C)
F) A) and B)

Question 2

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) All of the above
F) None of the above

Question 3

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) All of the above
F) A) and D)

Question 4

The rate of unemployment tends to be lower the:

Accepted Answer

A)   slower the economy grows.
B)   the younger the workers are.
C)   lower are the education level and the skill of workers.
D)   higher are the education level and the skill of workers.E) A) and C)
F) C) and D)

Question 5

Suppose the nominal annual interest rate on a two year loan is 16 percent and lenders expect inflation to be 10 percent in each of the two years.The annual real rate of interest is:

Accepted Answer

A)   12 percent.
B)   16 percent.
C)   4 percent.
D)   6 percent.E) A) and D)
F) B) and C)

Question 6

If the annual inflation rate is 5 percent a year,about how many years will it take for the price level to double?

Accepted Answer

A)   10 years
B)   12 years
C)   14 years
D)   16 yearsE) A) and B)
F) C) and D)

Question 7

A nation has a population of 260 million people.Of these,60 million are retired,in the military,in institutions,or under 15 years old.There are 188 million who are employed.What is the unemployment rate?

Accepted Answer

A)   4 percent
B)   6 percent
C)   9 percent
D)   27 percentE) A) and B)
F) B) and C)

Question 8

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 D)

Question 9

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) A) and B)

Question 10

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) All of the above
F) B) and C)

Question 11

Compared to the United States,Canada's recent unemployment rate has been:

Accepted Answer

A)   higher.
B)   lower.
C)   about the same.
D)   more variable.E) B) and D)
F) C) and D)

Question 12

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 2005E) A) and B)
F) None of the above

Question 13

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.E) None of the above
F) A) and B)

Question 14

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

Question 15

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

Question 16

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 C)

Question 17

If the average level of nominal income in a nation is $44,000 and the price level index is 175,the average real income would be about:

Accepted Answer

A)   $18,857
B)   $25,143
C)   $44,000
D)   $77,000E) All of the above
F) None of the above

Question 18

The natural rate of unemployment is the:

Accepted Answer

A)   unemployment rate experienced at the depth of a depression.
B)   full-employment unemployment rate.
C)   unemployment rate experienced by the least-skilled workers in the economy.
D)   unemployment rate experienced by the most-skilled workers in the economy.E) C) and D)
F) None of the above

Question 19

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

Question 20

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 B)
F) B) and D)

Exam 9: Business Cycles, Unemployment, and Inflation

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

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

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

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

A nation has a population of 260 million people.Of these,60 million are retired,in the military,in institutions,or under 15 years old.There are 188 million who are employed.What is the unemployment rate?

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

The natural rate of unemployment is the:

Correct AnswerverifiedShow Answer

Inflation is undesirable because it:

Correct AnswerverifiedShow Answer

Compared to the United States,Canada's recent unemployment rate has been:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the CPI was 160 in 2008 and 40 in 2005,the cost of living was:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

The rate of unemployment tends to be lower the:

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

If the average level of nominal income in a nation is $44,000 and the price level index is 175,the average real income would be about:

Correct AnswerverifiedShow Answer

The rate of inflation can be found by subtracting:

Correct AnswerverifiedShow Answer

If the annual inflation rate is 5 percent a year,about how many years will it take for the price level to double?

Correct AnswerverifiedShow Answer

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

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

Suppose the nominal annual interest rate on a two year loan is 16 percent and lenders expect inflation to be 10 percent in each of the two years.The annual real rate of interest is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified