Question 1

The unemployment rate of:

Accepted Answer

The option D is correct because the unemployment rate of teenagers is generally higher than that of adults due to their lack of work experience and competition with more experienced workers. The other options are incorrect as there is no evidence to suggest that women, retired persons, or white-collar workers have higher unemployment rates than their counterparts.

Question 2

Inflation means:

Accepted Answer

Inflation is the continual rise in the general level of prices. Choice A is incorrect, as prices can rise at different rates or some prices may not rise at all (e.g. if the price of one good decreases while everything else increases). Choice B is also incorrect, as it is highly unlikely that all prices in an economy will rise at exactly the same rate. Choice C is describing deflation, where a unit of currency can buy more goods and services over time.

Question 3

If the natural rate of unemployment was 7 percent, the current unemployment rate was 12 percent, and the nominal GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed:

Accepted Answer

The answer of If the natural rate of unemployment was...

Question 4

The national unemployment rate in Canada:

Accepted Answer

The national unemployment rate in Canada does not reveal the significant diversity in regional unemployment. Different regions in Canada have different industries, job markets, and economic conditions that affect their unemployment rates. Therefore, relying solely on the national unemployment rate as an indicator of unemployment in each region would be misleading.

Question 5

During the Great Recession of 2008 - 2009 in Canada:

Accepted Answer

The answer of During the Great Recession of 2008 -...

Question 6

Which of the following is not correct?

Accepted Answer

Option C contradicts option B, which states that the unemployment rate for teenagers is higher than that of adults. Therefore, option C is not correct. The other options are correct statements in general.

Question 7

"Depression means idleness. And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest." This quote describes some of the:

Accepted Answer

The quote specifically mentions the "loss of self-respect," "family disintegration," and "sociopolitical unrest," which are noneconomic costs of unemployment. The other choices are not related to the quote's content.

Question 8

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

Accepted Answer

According to recent data, Canada's unemployment rate has been consistently lower than that of the United States. In 2019, Canada had an average unemployment rate of 5.7%, while the United States had an average unemployment rate of 3.7%. Additionally, during the COVID-19 pandemic in 2020, Canada's unemployment rate peaked at 13.7%, while the United States' unemployment rate reached a high of 14.8%. Therefore, option B is the best choice.

Question 9

The rate of inflation can be found by subtracting:

Accepted Answer

The rate of inflation is calculated by finding the difference between last year's price index and this year's price index and dividing that difference by last year's price index. This gives the percentage increase in prices from the previous year. Option D is the only choice that accurately describes this calculation.

Question 10

The consumer price index:

Accepted Answer

The consumer price index uses a fixed market basket set in the base year for all subsequent years.

Question 11

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 size of the GDP gap in percentage terms for the above economy is:

Accepted Answer

The answer of The following information is for a specific...

Question 12

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

The answer of The following information is for a specific...

Question 13

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

To find the rate of inflation, we need to use the following formula:

((CPI in Year 2 - CPI in Year 1) / CPI in Year 1) x 100

Plugging in the values, we get:

((180 - 170) / 170) x 100 = 5.88 (rounded to the nearest tenth)

Therefore, the rate of inflation is approximately 5.9 percent, which makes choice (B) the correct answer.

Question 14

The consumer price index (CPI):

Accepted Answer

The CPI measures changes in the prices of a market basket of some 600 goods and services purchased by urban consumers, therefore option B is the correct choice. Option A is incorrect, as the CPI only measures the prices of a specific market basket, not all consumer goods. Option C is incorrect, as the CPI does include services in its market basket. Option D is incorrect, as the GDP price index measures changes in the prices of all goods and services produced in an economy, not just those purchased by consumers.

Question 15

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

Accepted Answer

To compare the cost of living between the two years, we need to calculate the inflation rate using the formula:

Inflation rate = ((CPI in 2008 - CPI in 2005) / CPI in 2005) x 100%

Inflation rate = ((160 - 40) / 40) x 100% = 300%

This means that the cost of living in 2008 was 300% higher than in 2005. In other words, it was 4 times higher. Therefore, the correct answer is A.

Question 16

In an economy nominal GDP is $4,000 billion. The actual unemployment rate is 8 percent and the natural rate of unemployment is 6 percent. According to Okun's law there will be:

Accepted Answer

Okun's law states that for every 1% increase in unemployment above the natural rate, there is a 2% decrease in potential output. In this case, the unemployment rate is 2% above the natural rate, so there will be a 4% decrease in potential output. 4% of $4,000 billion is $160 billion lost in potential output. Therefore, the answer is C.

Question 17

Suppose rate of inflation for some specific year was 10 percent. If the CPI for that year was 139.7, the previous year's CPI must have been:

Accepted Answer

The answer of Suppose rate of inflation for some specific...

Question 18

The rate of unemployment tends to be lower the:

Accepted Answer

Higher education and skills of workers tend to lead to higher labor productivity and thus more job opportunities, reducing the rate of unemployment.

Question 19

If the natural rate of unemployment is 6 percent and the actual unemployment rate is 9 percent, then Okun's law indicates that the GDP gap is:

Accepted Answer

The answer of If the natural rate of unemployment is...

Question 20

Okun's law indicates that for:

Accepted Answer

Okun's law states that for every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, there is a 2 percent GDP gap. This means that higher unemployment rates lead to lower levels of economic growth, as measured by GDP.

Quiz 7: Business Cycles, Unemployment, and Inflation