Deck 3: Business Cycle Measurement

Question 1

Average labour productivity

A)cannot be measured.
B)is measured as total output divided by the number of unemployed workers.
C)is output minus the capital stock.
D)is measured as the ratio of aggregate output to total employment.
E)is the ratio of employment to aggregate output.

Answer 1

D

Question 2

Comovement relates to

A)macroeconomic variables fluctuating together in patterns that exhibit strong regularities.
B)the movement of business cycles over time.
C)the relationship between real and nominal interest rates.
D)the movement between price levels and real GDP over time.
E)the frequency of the business cycles.

Answer 2

A

Question 3

Amplitude of the business cycle is

A)the size of the maximum deviation from trend.
B)the size of the minimum deviation from trend.
C)where the turning points of the business cycle occur.
D)the amount of employment and real GDP changes during one year.
E)the amount of volatility in the business during one year.

Answer 3

B

Question 4

If real GDP helps to predict the path of a particular macroeconomic variable, it is said to be a

A)leading variable.
B)lagging variable.
C)correlated variable.
D)conventional variable.
E)coincident variable.

Question 5

Employment is

A)more variable than real GDP.
B)about as variable as real investment.
C)less variable than real GDP.
D)acyclical.
E)much more variable than consumption.

Question 6

The property that macroeconomic variables fluctuate together in patterns that exhibit strong regularities is called

A)coexistence.
B)correlation.
C)coincidence.
D)a leading indicator.
E)comovement.

Question 7

Robert Lucas has popularized the notion that with respect to

A)deviations from trend real GDP, business cycles over time are all alike.
B)qualitative behaviour of comovements among series, business cycles are all alike.
C)severity, business cycles are all alike.
D)causation, business cycles are all alike.
E)quantitative behaviour of comovements among series, business cycles are all alike.

Question 8

If deviations from trend in a macroeconomic variable are positively correlated with deviations from trend in real GDP, that variable is said to be

A)useful in predicting future movements in real GDP.
B)procyclical.
C)countercyclical.
D)uncorrelated.
E)acyclical.

Question 9

Average labour productivity tends to be

A)countercyclical and more variable than real GDP.
B)acyclical with real GDP.
C)procyclical and less variable than real GDP.
D)procyclical and more variable than real GDP.
E)countercyclical and less variable than real GDP.

Question 10

If the correlation between GDP and y is -0.75, we say y is

A)procyclical.
B)countercyclical.
C)persistent.
D)positively correlated.
E)acyclical.

Question 11

A business cycle trough is a

A)relatively large negative deviation from trend in real GDP.
B)small negative deviation from trend in real GDP.
C)relatively large positive deviation from trend in real GDP.
D)minimum deviation from trend in real GDP.
E)small positive deviation from trend in real GDP.

Question 12

Average labour productivity

A)is more variable than real GDP.
B)is procyclical.
C)is about as variable as investment.
D)is a leading economic variable.
E)is a lagging economic variable.

Question 13

In Canada, three important recessions occurred between

A)1978-1979, 1984-1985, and 1988-1989.
B)1944-1946, 1951-1952, and 1962-1964.
C)1987-1988, 1994-1995, and 2002-2003.
D)1974-1975, 1981-1982, and 1990-1992.
E)1981-1982, 1996-1997, and 2003-2004.

Question 14

Average labour productivity is computed as the

A)ratio of real output in manufacturing to the level of real GDP.
B)ratio of labour input to real GDP.
C)ratio of real GDP to the unemployment rate.
D)ratio of real GDP to the level of employment.
E)ratio of industrial production to the employment rate.

Question 15

If the correlation coefficient between x and y is equal to -1, we say that x and y are

A)lagging variables.
B)imperfectly negatively correlated.
C)perfectly positively correlated.
D)perfectly negatively correlated.
E)countercyclical.

Question 16

The TSE composite index tends to

A)lag income growth.
B)lead employment growth.
C)lead real GDP.
D)lead inflation.
E)lag employment growth.

Question 17

For the period 1976 2018, employment in Canada was

A)countercyclical and lagging.
B)coincident.
C)procyclical and lagging.
D)procyclical and leading.
E)countercyclical and leading.

Question 18

If the correlation coefficient between x and y is equal to 1, we say that x and y are

A)perfectly negatively correlated.
B)leading variables.
C)perfectly positively correlated.
D)acyclical.
E)lagging variables.

Question 19

The 2008-2009 recession was more severe than all recent recessions EXCEPT the one in

A)2001-2002.
B)1969-1973.
C)1981-1982.
D)1990-1991.
E)1974-1975.

Question 20

Forecasting the future path of real GDP by exploiting past statistical relationships

A)can be accomplished by the construction and use of an index of coincident variables.
B)can be accomplished by the construction and use of an index of lagging variables.
C)can be accomplished by the construction and use of an index of leading variables.
D)can only be accomplished if there is a perfectly positive correlation.
E)is never very reliable.

Question 21

Comovement can be determined by

A)determining whether a series leads or lags.
B)determining the persistence in a series.
C)marking peaks and troughs.
D)economic forecasting models.
E)examining a scatter plot.

Question 22

Real wages are defined as

A)the average money wage for all workers.
B)income after adjusting for productivity.
C)the purchasing power of the wage earned per hour worked.
D)inflation-adjusted wages.
E)nominal wages plus the expected rate of inflation.

Question 23

If deviations from trend in a macroeconomic variable are negatively correlated with deviations from trend in real GDP, that variable is said to be

A)acyclical.
B)uncorrelated.
C)countercyclical.
D)useless in predicting future movements in real GDP.
E)procyclical.

Question 24

For the period 1961 2018 in Canada, the price level

A)was coincident with changes in real GDP.
B)was uncorrelated with real GDP.
C)led changes in real GDP.
D)lagged changes in real GDP.
E)was acyclical.

Question 25

Comovement can be discerned by

A)looking at the composite index of business leading indicators.
B)determining if it is a lagging or leading indicator.
C)calculating the correlation coefficient between the percentage deviations from trend.
D)whether it is a procyclical or countercyclical variable.
E)calculating the percentage deviations from trend in real GDP.

Question 26

Phillips curves are

A)hard to find in the data and stable.
B)easy to find in the data, and stable.
C)hard to find in the data and unstable.
D)easy to find in the data and unstable.
E)obvious from the data.

Question 27

A business cycle peak is a

A)minimum deviation from trend in real GDP.
B)relatively large negative deviation from trend in real GDP.
C)relatively large positive deviation from trend in real GDP.
D)small negative deviation from trend in real GDP.
E)small positive deviation from trend in real GDP.

Question 28

If a macroeconomic variable tends to aid in predicting the future path of real GDP, it is said to be a

A)leading variable.
B)coincident variable.
C)convenient variable.
D)correlated variable.
E)lagging variable.

Question 29

One example of a Phillips Curve would be a

A)negative relationship between deviations from trend in real and nominal interest rates.
B)positive relationship between deviations from trend in the level of a money price (the wage rate)prices and the level of aggregate economic activity.
C)positive relationship between deviations from trend in real and nominal interest rates.
D)negative relationship between deviations from trend in the level of prices and the level of aggregate economic activity.
E)positive relationship between deviations from trend in the level of prices and the level of aggregate economic activity.

Question 30

Which of the following is a feature of Canadian business cycles?

A)There is regularity in fluctuations in real GDP about trend.
B)There is no regularity in the amplitude of fluctuations in real GDP about trend.
C)There is regularity in the amplitude of fluctuations in real GDP about trend.
D)They are not persistent.
E)The time series of deviations from trend in real GDP is quite smooth.

Question 31

For the period 1961 2018 in Canada, the price level was

A)leading.
B)procyclical.
C)acyclical.
D)countercyclical.
E)bicyclical.

Question 32

Forecasting real GDP is

A)done as well by the average person as by economic forecasters.
B)easiest in terms of predicting turning points.
C)easy in the short term, but hard in the long term.
D)easy in the long term, but hard in the short term.
E)always easy.

Question 33

If the deviations from trend in a macroeconomic variable is neither procyclical not countercyclical, it is

A)coincident.
B)positively correlated.
C)a correlation coefficient.
D)lagging.
E)acyclical.

Question 34

Negative correlation between x and y implies that

A)when x is high, y is low.
B)when x is high, y is high.
C)x/y < 0.
D)xy < 0.
E)the trend is unpredictable.

Question 35

The defining feature of business cycles is that they

A)are inherently bad.
B)measure prospects for future growth in the economy.
C)represent the underlying trend of real GDP in the economy.
D)are fluctuations about trend in real GDP.
E)measure standards of living and productivity.

Question 36

Why is forecasting GDP in the long run so difficult?

A)Structural and statistical forecasting provide differing results.
B)There is no regularity in the frequency and amplitude of fluctuations in real GDP.
C)Current models are not sophisticated enough to conduct this exercise.
D)There is no expertise in forecasting the long-run trend in real GDP.
E)These is an absence of data that provides any information on future trends.

Question 37

Why is it difficult to measure the cyclical properties of the real wage?

A)The composition of employed workers changes over the business cycle.
B)Firms refuse to report data on workers' wages.
C)Workers have money illusion.
D)monetary and fiscal policy intervention
E)Wages are sticky.

Question 38

A reverse Phillips Curve would consist of a

A)positive relationship between deviations from trend in the level of prices and the level of aggregate economic activity.
B)relationship between lagging and leading indicators.
C)negative relationship between deviations from trend in real and nominal interest rates.
D)negative relationship between deviations from trend in the level of prices and the level of aggregate economic activity.
E)positive relationship between deviations from trend in real and nominal interest rates.

Question 39

Comovement can be discussed by

A)looking at the peaks and troughs of the business cycle.
B)economic forecasting models.
C)looking at the frequency of the business cycle.
D)looking at the amplitude of the business cycle.
E)plotting the percentage deviations from trend in two economic variables.

Question 40

The defining feature of business cycles is that they are

A)fluctuations about trend in real GDP.
B)fluctuations about trend in the level of employment.
C)fluctuations about trend in the unemployment rate.
D)changes in the trend component of real GDP.
E)fluctuations about trend in standards of living.

Question 41

The real wage is

A)acyclical.
B)higher than real GDP.
C)countercyclical.
D)procyclical.
E)always too low.

Question 42

Positive correlation between x and y implies that

A)when x is high, y is high.
B)the trend is unpredictable.
C)when x is high, y is low.
D)x and y are positively unrelated.
E)when x is zero, y is positive.

Question 43

In the 1961 2018 Canadian data, the inflation rate is

A)acyclical.
B)procyclical.
C)countercyclical.
D)indicative of a reverse Phillips curve.
E)negatively correlated with real GDP.

Question 44

Business cycle persistence refers to the property that

A)booms and recessions last a long time.
B)when real GDP is above trend, it tends to stay above trend, and when it is below trend, it tends to stay below trend.
C)real GDP tends to stay in the peaks and troughs of the business cycle.
D)real GDP is rarely exactly at trend.
E)business cycles are persistently hard to predict.

Question 45

Which of the following is a feature of Canadian business cycles?

A)They are difficult to measure.
B)The time series of deviations from trend in real GDP is quite smooth.
C)There is no regularity to the amplitude of fluctuations in GDP below trend.
D)The time series of deviations from trend in real GDP is quite choppy.
E)There is no regularity to the frequency of fluctuations in GDP below trend.

Question 46

Inventory investment tends to be

A)leading.
B)so unchanging that it is hard to classify.
C)lagging.
D)procyclical.
E)coincident.

Question 47

Real investment tends to be

A)procyclical and less variable than real GDP.
B)countercyclical and more variable than real GDP.
C)countercyclical and less variable than real GDP.
D)procyclical and more variable than real GDP.
E)acyclical with real GDP.

Question 48

The value of macroeconomic knowledge is in

A)accurately forecasting stock prices.
B)understanding macro phenomena and guiding policy.
C)understanding firm level behaviour.
D)accurately predicting recessions.
E)producing forecasts.

Question 49

If we plotted cigarettes smoked per year against the incidence of lung cancer, we would observe a(n)

A)negative correlation.
B)zero correlation.
C)positive correlation.
D)time series.
E)uncertain result.

Question 50

Before 2000, the three most recent Canadian recessions occurred in

A)1969-1973, 1979-1982, and 1994-1995.
B)1981-1982, 1990-1991, and 1998-1999.
C)1973-1975, 1982-1985, and 1990-1991.
D)1974-1975, 1981-1982, and 1990-1992.
E)1944-1945, 1955-1956, and 1990-1992.

Question 51

Investment tends to be a(n)

A)coincident variable.
B)lagging variable.
C)leading variable.
D)procyclical variable.
E)acyclical variable.

Question 52

A measure of the degree of correlation between two variables is a

A)correlation statistic.
B)financial correlation.
C)correlation coefficient.
D)correlation variable.
E)statistical correlation.

Question 53

Stock prices tend to lead real GDP because

A)stock prices and real GDP are negatively correlated.
B)stock prices are volatile.
C)stock prices are part of the Phillips curve relationship.
D)stock prices increase in a recession.
E)stock prices reflect market participants' views about the future.

Question 54

The Phillips curve shows the relationship between

A)lagging an leading variables.
B)money prices and aggregate economic activity.
C)real and nominal interest rates.
D)procyclical and countercyclical variables.
E)real and nominal GDP.

Question 55

Average labour productivity tends to be a(n)

A)leading variable.
B)lagging variable.
C)coincident variable.
D)acyclical variable.
E)variable that is difficult to classify.

Question 56

Why is forecasting GDP over the long term so difficult?

Question 57

If the correlation between GDP and y is 0.75, we say y is

A)acyclical.
B)procyclical.
C)cyclical.
D)countercyclical.
E)negatively correlated.

Question 58

If we plotted the level of good cholesterol in the blood against the incidence of heart disease, we would observe a(n)

A)uncertain result.
B)time series.
C)negative correlation.
D)zero correlation.
E)positive correlation.

Question 59

Real consumption tends to be

A)countercyclical and less variable than real GDP.
B)countercyclical and more variable than real GDP.
C)acyclical with real GDP.
D)procyclical and less variable than real GDP.
E)procyclical and more variable than real GDP.