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 B)
F) B) and C)

Question 2

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) A) and B)
F) B) and D)

Question 3

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) None of the above
F) All of the above

Question 4

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) A) and B)
F) A) and C)

Question 5

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

Question 6

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) A) and B)
F) B) and D)

Question 7

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) A) and D)
F) A) and C)

Question 8

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

Question 9

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) B) and C)

Question 10

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) All of the above

Question 11

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

Question 12

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

Question 13

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 14

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) None of the above
F) All of the above

Question 15

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) None of the above
F) B) and C)

Question 16

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) B) and C)
F) A) and B)

Question 17

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) A) and D)

Question 18

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) A) and B)
F) C) and D)

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) A) and C)
F) B) and C)

Question 20

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

Exam 9: Business Cycles, Unemployment, and Inflation

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?

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

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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:

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

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

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

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

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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:

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

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Inflation is undesirable because it:

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The natural rate of unemployment is the:

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The rate of inflation can be found by subtracting:

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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:

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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:

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The rate of unemployment tends to be lower the:

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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:

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

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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:

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

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

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