Deck 7: Money, Prices and the Reserve Bank

Question 1

Economic activity moves from a peak into a period of _______ until it reaches a _______ and then into a period of _______.

A) expansion;trough;recession
B) recession;trough;expansion
C) expansion;peak;recession
D) recession;peak;expansion
E) expansion;trough;expansion

Answer 1

recession;trough;expansion

Question 2

Economic activity moves through a period of recession to a _______ and then moves into a period of _______ until it reaches a ________.

A) peak;expansion;trough
B) peak,recession;trough
C) trough;expansion;peak
D) trough;recession;peak
E) peak;recession;peak

Answer 2

trough;expansion;peak

Question 3

A period in which the economy is growing at a rate significantly above normal is called a(n)

A) depression.
B) expansion.
C) peak.
D) recession.
E) trough.

Answer 3

expansion.

Question 4

A depression is

A) a period in which the economy is growing at a rate significantly above normal.
B) the high point of economic activity prior to a downturn.
C) the low point of economic activity prior to a recovery.
D) a particularly strong and protracted expansion.
E) a particularly severe and protracted recession.

Question 5

The high point of economic activity prior to a recession is called the

A) depression.
B) expansion.
C) peak.
D) boom.
E) trough.

Question 6

A recession is

A) a period in which the economy is growing at a rate significantly below normal.
B) a period in which the economy is growing at a rate significantly above normal.
C) the high point of economic activity prior to a downturn.
D) the low point of economic activity prior to a recovery.
E) a particularly strong and protracted expansion.

Question 7

In reference to short-term economic fluctuations,the "peak" refers to

A) a period in which the economy is growing at a rate significantly above normal.
B) the high point of economic activity prior to a downturn.
C) the low point of economic activity prior to a recovery.
D) a particularly strong and protracted expansion.
E) a particularly severe and protracted recession.

Question 8

In reference to short-term economic fluctuations,the "trough" refers to

A) a period in which the economy is growing at a rate significantly below normal.
B) the high point of economic activity prior to a downturn.
C) the low point of economic activity prior to a recovery.
D) a particularly strong and protracted expansion.
E) a particularly severe and protracted recession.

Question 9

The following data give the dates of successive turning points in Canadian economic activity and the corresponding levels of real GDP at the time:
Which of the following periods is most likely to correspond to a recession?

A) June 1980 through July 1981.
B) June 1980 through October 1982.
C) July 1981 through April 1990.
D) October 1982 through April 1990.
E) July 1981 through October 1982.

Question 10

The following data give the dates of successive turning points in Canadian economic activity and the corresponding levels of real GDP at the time:
Which of the turning points are peaks?

A) (A), (B),and (C).
B) (C), (D),and (E).
C) (A), (C),and (E).
D) (B)and (D).
E) (A)and (E).

Question 11

A period in which the economy is growing at a rate significantly below normal is called a(n)

A) expansion.
B) boom.
C) peak.
D) recession.
E) trough.

Question 12

The duration of a recession is from

A) peak to trough.
B) trough to peak.
C) peak to peak.
D) trough to trough.
E) peak to boom.

Question 13

The low point of economic activity prior to the beginning of a recovery is called the

A) depression.
B) expansion.
C) peak.
D) boom.
E) trough.

Question 14

A particularly strong and protracted phase of an expansion is called a

A) depression.
B) boom.
C) peak.
D) recession.
E) trough.

Question 15

A particularly severe or protracted recession is called a(n)

A) depression.
B) boom.
C) peak.
D) expansion.
E) trough.

Question 16

A boom is

A) a period in which the economy is growing at a rate significantly below normal.
B) the high point of economic activity prior to a downturn.
C) the low point of economic activity prior to a recovery.
D) a particularly strong and protracted phase of an expansion.
E) a particularly severe and protracted recession.

Question 17

An expansion is

A) a period in which the economy is growing at a rate significantly below normal.
B) a period in which the economy is growing at a rate significantly above normal.
C) the high point of economic activity prior to a downturn.
D) the low point of economic activity prior to a recovery.
E) a particularly severe or protracted recession.

Question 18

Economic activity moves through a period of expansion to a _______ and then moves into a period of _______ until it reaches a _______.

A) peak;expansion;trough
B) peak;recession;trough
C) trough;expansion;peak
D) trough;recession;peak
E) peak;recession;peak

Question 19

Economic activity moves from a trough into a period of _______ until it reaches a ________ and then into a period of _______.

A) expansion;trough;recession
B) recession;trough;expansion
C) expansion;peak;recession
D) recession;peak;expansion
E) expansion;trough;expansion

Question 20

The duration of an expansion is from

A) peak to trough.
B) trough to peak.
C) peak to peak.
D) trough to trough.
E) peak to boom.

Question 21

The following data give the dates of successive turning points in Canadian economic activity and the corresponding levels of real GDP at the time:
Which of the following periods is most likely to correspond to an expansion?

A) July 1981 through October 1982.
B) October 1982 through April 1990.
C) June 1980 through October 1982.
D) October 1982 through April 1992.
E) April 1990 through April 1992.

Question 22

Short-term economic fluctuations are ________ in both length and severity and are ________ to predict.

A) regular;difficult
B) regular;easy
C) constant;easy
D) irregular;difficult
E) irregular;easy

Question 23

An informal definition of a recession is at least __________ consecutive quarters of declining real GDP.

A) 2
B) 4
C) 6
D) 8
E) 10

Question 24

The evidence shows that Canadian recessions after 1960 were all followed by

A) a decline in the inflation rate.
B) an increase in the inflation rate.
C) price stability.
D) zero inflation.
E) unexpected inflation.

Question 25

All of the following are characteristics of short-term economic fluctuations EXCEPT

A) expansions and recessions are felt throughout the economy.
B) recessions occur at regular and predictable intervals.
C) unemployment rises during recessions.
D) durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.
E) recessions tend to be followed by a decline in inflation.

Question 26

From 1947 - 2010,the longest recession in Canada lasted _________ months.

A) 3
B) 6
C) 13
D) 19
E) 24

Question 27

All of the following are characteristics of short-term economic fluctuations EXCEPT

A) expansions and recessions are felt throughout the economy.
B) expansions and recessions are irregular in length and severity.
C) unemployment rises during recessions.
D) durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.
E) recessions tend to be followed by an increase in inflation.

Question 28

The recurrent ups and downs in the level of economic activity extending over several years are a description of

A) a recession.
B) a business trough.
C) a business cycle.
D) a noncyclical fluctuation.
E) an expansionary phasE.

Question 29

The largest recessions tend to have an impact that

A) stays within the local area,not affecting other cities.
B) stays within the province,not affecting other provinces.
C) stays within the region,not affecting the rest of the country.
D) stays within the country,not affecting the rest of the world.
E) is global,spreading from country to country.

Question 30

One definition of a recession,often cited by the media,is

A) a fall in the natural rate of unemployment.
B) a rise in the natural rate of unemployment.
C) a fall in real GDP that lasts six months or longer.
D) the minimum point in the business cycle before the recovery phase.
E) the full-employment unemployment rate over a year.

Question 31

All of the following are characteristics of short-term economic fluctuations EXCEPT

A) expansions and recessions are felt throughout the economy.
B) expansions and recessions are irregular in length and severity.
C) unemployment rises during recessions.
D) durable-goods industries are less sensitive to short-term fluctuations than service and non-durable industries.
E) recessions tend to be followed by a decline in inflation.

Question 32

In the recovery phase of a business cycle,

A) the inflation rate decreases,but productive capacity increases.
B) the inflation rate and productive capacity decrease.
C) employment increases,but output decreases.
D) employment and output increase.
E) employment decreases,but output increases.

Question 33

Which of the following terms is NOT equivalent to the rest?

A) Business cycles.
B) Short-term fluctuations.
C) Cyclical fluctuations.
D) Recessions and expansions.
E) GDP per capita.

Question 34

All of the following are characteristics of short-term economic fluctuations EXCEPT

A) expansions and recessions are felt in only a few sectors of the economy.
B) expansions and recessions are irregular in length and severity.
C) unemployment rises during recessions.
D) durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.
E) recessions tend to be followed by a decline in inflation.

Question 35

From 1947 - 2010,the longest expansion in Canada lasted ________ months.

A) 36
B) 59
C) 108
D) 112
E) 186

Question 36

Recessions in the U.S.have a major impact on the

A) automobile sector of the Canadian economy.
B) manufacturing sector of the Canadian economy.
C) services sector of the Canadian economy.
D) mining sector of the Canadian economy.
E) Canadian economy as a wholE.

Question 37

All of the following are characteristics of short-term economic fluctuations EXCEPT

A) expansions and recessions are felt throughout the economy.
B) expansions and recessions are irregular in length and severity.
C) unemployment falls sharply during recessions.
D) durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.
E) recessions tend to be followed by a decline in inflation.

Question 38

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

A) Peak.
B) Recession.
C) Trough.
D) Recovery.
E) Boom.

Question 39

A period of decline in total output,income,employment,and trade,lasting six months or longer,is one definition of a

A) trough.
B) recession.
C) business cycle.
D) secular trend.
E) deflationary phasE.

Question 40

A trough in the business cycle occurs when

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) inflation is at the highest level.

Question 41

If potential output equals $5 billion and actual output equals $6.5 billion,then this economy has a(n)

A) budget deficit.
B) trade deficit.
C) expansionary gap.
D) recessionary gap.
E) value-added gap.

Question 42

Which of the following statements is NOT true about the labour market during economic fluctuations?

A) The unemployment rate rises during recessions.
B) The unemployment rate drops during expansions.
C) The part of unemployment that is associated with recessions is called cyclical unemployment.
D) Real wages grow slowly or decline during recessions.
E) Workers are more likely to receive promotions during recessions.

Question 43

If potential output equals $8 billion and actual output equals $7 billion,then this economy has a(n)

A) budget deficit.
B) trade deficit.
C) expansionary gap.
D) recessionary gap.
E) value-added gap.

Question 44

If potential output equals $8 billion and actual output equals $9 billion,then this economy has a(n)

A) budget deficit.
B) trade deficit.
C) expansionary gap.
D) recessionary gap.
E) value-added gap.

Question 45

When actual output is greater than potential output,there is a(n)

A) budget deficit
B) budget surplus.
C) trade deficit.
D) recessionary gap.
E) expansionary gap.

Question 46

According to IMF data,the Japanese slump of the 1990s was the result of

A) a slowdown in the growth of potential output.
B) a recessionary gap.
C) an expansionary gap.
D) both a recessionary gap and a slowdown in the growth of potential output.
E) both an expansionary gap and a slowdown in the growth of potential output.

Question 47

Potential output is the

A) same as actual output.
B) same as the output gap.
C) same as the natural rate of unemployment.
D) amount of output produced when resources are used at normal rates.
E) amount of output produced when there is an expansionary gap.

Question 48

Workers in ________ industries are more likely than workers in ________ industries to lose their jobs during a recession.

A) automotive;manufacturing
B) manufacturing: automotive
C) service;durable
D) durable;non-durable
E) non-durable;durable

Question 49

The difference between the economy's actual output and its potential output at a point in time is called the

A) budget deficit.
B) trade deficit.
C) output gap.
D) full-employment rate.
E) cyclical peak.

Question 50

The output gap is the difference between

A) exports and imports.
B) government spending and government revenues.
C) actual output and potential output.
D) nominal GDP and real GDP.
E) value added and average labour productivity.

Question 51

The amount of output produced when resources are used at normal rates is called

A) a recessionary gap.
B) an expansion.
C) an output gap.
D) potential output.
E) a boom.

Question 52

If potential output equals $5 billion and actual output equals $4.5 billion,then this economy has a(n)

A) budget deficit.
B) trade deficit.
C) expansionary gap.
D) recessionary gap.
E) value-added gap.

Question 53

Which of the following workers is most likely to lose his or her job in a recession?

A) A hairstylist.
B) A baker.
C) A grocery-store bagger.
D) A construction worker.
E) A waiter.

Question 54

An expansionary gap occurs when actual output is __________ potential output.

A) equal to
B) greater than
C) less than
D) growing at the same rate as
E) growing more slowly than

Question 55

Which of the following statements is NOT true about the labour market during economic fluctuations?

A) The unemployment rate drops during recessions.
B) The unemployment rate drops during expansions.
C) The part of unemployment that is associated with recessions is called cyclical unemployment.
D) Real wages grow slowly or decline during recessions.
E) Workers are less likely to receive promotions during recessions.

Question 56

When actual output is less than potential output,there is a(n)

A) budget deficit.
B) budget surplus.
C) trade deficit.
D) recessionary gap.
E) expansionary gap.

Question 57

Which of the following statements is NOT true about the labour market during economic fluctuations?

A) The unemployment rate rises during recessions.
B) The unemployment rate rises during expansions.
C) The part of unemployment that is associated with recessions is called cyclical unemployment.
D) Real wages grow slowly or decline during recessions.
E) Workers are less likely to receive promotions during recessions.

Question 58

Which of the following statements is NOT true about the labour market during economic fluctuations?

A) The unemployment rate rises during recessions.
B) The unemployment rate drops during expansions.
C) The part of unemployment that is associated with recessions is called recessional unemployment.
D) Real wages grow slowly or decline during recessions.
E) Workers are less likely to receive promotions during recessions.

Question 59

Which of the following statements is NOT true about the labour market during economic fluctuations?

A) The unemployment rate rises during recessions.
B) The unemployment rate drops during expansions.
C) The part of unemployment that is associated with recessions is called cyclical unemployment.
D) Real wages grow quickly during recessions.
E) Workers are less likely to receive promotions during recessions.

Question 60

A recessionary gap occurs when actual output is ________ potential output.

A) equal to
B) greater than
C) less than
D) growing at the same rate as
E) growing more rapidly than

Question 61

In Macroland,potential GDP equals $20 billion and real GDP equals $21.5 billion.Macroland has a(n)_________ gap equal to ________% of potential GDP.

A) expansionary;7.5
B) expansionary;7.0
C) expansionary;1.5
D) recessionary;7.5
E) recessionary;7.0

Question 62

If actual output equals potential output,but potential is growing very slowly,then an economy

A) is in a recession.
B) is in an expansion.
C) has an output gap.
D) has a recessionary gap.
E) is experiencing deflation.

Question 63

If the natural rate of unemployment equals 5% and the actual rate of unemployment equals 6%,then cyclical unemployment equals

A) - 1%.
B) 0%.
C) 1%.
D) 6%.
E) 11%.

Question 64

The unemployment rate attributable to frictional,structural and seasonal unemployment is called the ________ unemployment rate.

A) potential
B) cyclical
C) real
D) nominal
E) natural

Question 65

In Macroland,potential GDP equals $20 billion and actual GDP equals $19.2 billion.Macroland has a(n)_________ gap equal to ________% of potential GDP.

A) expansionary;4.2
B) expansionary;4.0
C) recessionary;4.2
D) recessionary;4.0
E) recessionary;8.0

Question 66

In Macroland,potential GDP equals $500 billion and actual GDP equals $450 billion.Macroland has a(n)_________ gap equal to __________% of potential GDP.

A) expansionary;10
B) expansionary;11
C) recessionary;11
D) recessionary;10
E) recessionary;50

Question 67

If the cyclical rate of employment equals 2% and the actual rate of unemployment equals 8%,then the natural rate of unemployment must equal

A) - 6%.
B) 0%.
C) 2%.
D) 6%.
E) 10%.

Question 68

The natural rate of unemployment is the unemployment rate when there is only

A) structural unemployment.
B) frictional unemployment.
C) cyclical unemployment.
D) structural and cyclical unemployment.
E) structural,frictional and seasonal unemployment.

Question 69

If the output gap equals $50 million,then

A) cyclical unemployment equals the sum of structural and frictional unemployment.
B) there is a recessionary gap.
C) there is an expansionary gap
D) there is no cyclical unemployment.
E) potential GDP is greater than actual GDP.

Question 70

If the cyclical rate of employment equals 1% and the actual rate of unemployment equals 8%,then the natural rate of unemployment must equal

A) -7%.
B) 0%.
C) 1%.
D) 7%.
E) 9%.

Question 71

In Macroland,potential GDP equals $8 trillion and actual GDP equals $7.52 trillion.Macroland has a(n)_________ gap equal to _________% of potential GDP.

A) expansionary;6.4
B) expansionary;6.0
C) recessionary;6.4
D) recessionary;6.0
E) recessionary;48.0

Question 72

If the natural rate of unemployment equals 6% and the actual rate of unemployment equals 4%,then cyclical unemployment equals

A) - 2%.
B) 0%.
C) 2%.
D) 6%.
E) 10%.

Question 73

In Macroland,potential GDP equals $500 billion and real GDP equals $560 billion.Macroland has a(n)_________ gap equal to ________% of potential GDP.

A) expansionary;12
B) expansionary;11
C) expansionary;60
D) recessionary;12
E) recessionary;11

Question 74

If the natural rate of unemployment equals 6% and the actual rate of unemployment equals 5%,then cyclical unemployment equals

A) - 1%.
B) 0%.
C) 1%.
D) 6%.
E) 11%.

Question 75

If the output gap equals-$50 million,then

A) cyclical unemployment equals the sum of structural and frictional unemployment.
B) there is a recessionary gap.
C) there is an expansionary gap
D) there is no cyclical unemployment.
E) potential GDP is less than actual GDP.

Question 76

Compared to the previous decades,in many years throughout the 1990s,potential output in Japan grew _________ and there was a(n)_________ gap.

A) more rapidly;recessionary
B) more slowly;recessionary
C) at a constant rate;expansionary
D) more rapidly;expansionary
E) more slowly;expansionary

Question 77

If the cyclical rate of employment equals - 2% and the actual rate of unemployment equals 8%,then the natural rate of unemployment must equal

A) - 6%.
B) 0%.
C) 2%.
D) 6%.
E) 10%.

Question 78

In Macroland,potential GDP equals $8 trillion and actual GDP equals $8.8 trillion.Macroland has a(n)_________ gap equal to ________% of potential GDP.

A) expansionary;10
B) expansionary;9
C) expansionary;0.8
D) recessionary;10
E) recessionary;9

Question 79

If the cyclical rate of employment equals - 1% and the actual rate of unemployment equals 8%,then the natural rate of unemployment must equal

A) - 7%.
B) 0%.
C) 1%.
D) 7%.
E) 9%.

Question 80

If the natural rate of unemployment equals 4% and the actual rate of unemployment equals 6%,then cyclical unemployment equals

A) - 2%.
B) 0%.
C) 2%.
D) 6%.
E) 10%.