Question 1

Which of the following expenditure items is responsible for the decrease in real GDP during a recession?
A)mostly investment spending
B)mostly consumption spending
C)mostly government spending
D)mostly exports

Accepted Answer

During a recession, businesses often cut back on investment spending due to uncertainty and lower expected returns, which significantly contributes to the decrease in real GDP.

Question 2

Which of the following terms refers to a short period of falling incomes and rising unemployment?
A)depression
B)recession
C)expansion
D)business cycle

Accepted Answer

A recession is a short period of falling incomes and rising unemployment, usually lasting six months to a year. It is one phase of the business cycle, which includes periods of expansion and contraction. A depression is a more severe and prolonged period of economic downturn, often lasting several years.

Question 3

Which of the following does real GDP measure?
A)the dollar value of all goods
B)economic activity and income
C)primarily long-run trends
D)profitability of all companies in the economy

Accepted Answer

Real GDP measures the total economic activity and income in an economy, taking into account inflation, changes in prices, and changes in the quantity of goods and services produced. It is a measure of the overall economic performance of a country or region. Real GDP helps to determine the standard of living, economic growth rate, and the health of the economy.

Question 4

What happens to sales and profit during recessions?
A)sales and profits fall
B)sales and profits rise
C)sales rise and profits fall
D)profits fall and sales rise

Accepted Answer

During recessions, consumer spending decreases and demand for goods and services decreases as well. This leads to a decrease in sales and ultimately a decrease in profits for companies.

Question 5

Which of the following happens during recessions?
A)Firms produce less but invest more.
B)Firms have to increase production because of falling prices.
C)Incomes increase because workers have to work overtime.
D)Many workers are laid off.

Accepted Answer

During recessions, demand for goods and services decreases, leading to lower production levels and often layoffs as firms try to cut costs. Option A is unlikely as firms typically decrease investment during recessions. Option B is unlikely as falling prices usually indicate lower demand, which would lead to decreased production. Option C is unlikely as recessions often result in decreased work hours and layoffs, rather than increased overtime.

Question 6

Which of the following does the economy experience during a recession?
A)rising employment and income
B)rising employment and falling income
C)rising income and falling employment
D)falling employment and income

Accepted Answer

During a recession, there is a decrease in economic activity that leads to a decline in employment and income levels. Businesses may not be making as much profit, causing them to reduce their workforce and employees may experience wage cuts or layoffs.

Question 7

Which of the following typically rises during a recession?
A)garbage collection
B)unemployment
C)corporate profits
D)automobile sales

Accepted Answer

During a recession, companies may cut jobs or slow down hiring, leading to an increase in unemployment as people struggle to find work. Garbage collection, corporate profits, and automobile sales may all decrease during a recession.

Question 8

On average over the past 130 years,at about what rate has the Canadian economy grown?
A)1 percent per year
B)2 percent per year
C)4 percent per year
D)6 percent per year

Accepted Answer

According to historical data from Statistics Canada, the average annual growth rate of the Canadian economy between 1870 and 2020 was approximately 2.2 percent. Therefore, option B (2 percent per year) is the closest approximation.

Question 9

How does real GDP change over time?
A)It moves in the same direction as unemployment.
B)It moves in the same direction as inflation.
C)It has a long-term upward trend.
D)It is approximately constant because it is measured in constant dollars.

Accepted Answer

Real GDP has a long-term upward trend due to technological progress, population growth, and increases in capital stock. However, there may be short-term fluctuations caused by business cycles and economic events.

Question 10

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?
A)short-run fluctuations in the economy
B)the effects of macroeconomic policy on the prices of individual goods
C)the long-run effects of international trade policies
D)productivity and economic growth

Accepted Answer

The aggregate demand and aggregate supply model is primarily used to analyze short-run fluctuations in the economy, such as business cycles and recessions. It helps economists understand how changes in aggregate demand and supply can impact output, employment, and prices in the short run. While the model can be used to analyze other economic phenomena as well, this is its primary application.

Question 11

Which of the following best describes the beginning of a recession?
A)Production and unemployment both rise.
B)Production rises and unemployment falls.
C)Production falls and unemployment rises.
D)Production and unemployment both fall.

Accepted Answer

A recession is characterized by a significant decline in economic activity, which includes a drop in production (measured by Gross Domestic Product, or GDP) and an increase in unemployment rates. Therefore, the best description of the beginning of a recession is when production falls and unemployment rises. Option A is incorrect because rising production is not indicative of a recession. Option B is incorrect because a decrease in unemployment is not typical of a recession, and Option D is incorrect because a decline in both production and unemployment is not necessarily a sign of a recession if it is not notable or sustained.

Question 12

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs.Which of the following pairs of GDP growth rates and unemployment rates is most realistic?
A)6 percent, 0 percent
B)3 percent, 20 percent
C)-1 percent, 6 percent
D)-3 percent, 2 percent

Accepted Answer

The answer of Below are pairs of GDP growth rates...

Question 13

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?
A)Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP.
B)Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
C)Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP.
D)Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Accepted Answer

Investment is typically a small part of real GDP, but it can have a large impact on economic fluctuations. This is because investment is generally a volatile component of GDP, with firms making large adjustments to their investment plans in response to changes in the economic environment. As a result, even small changes in investment can have a significant impact on overall GDP growth.

Question 14

Which of the following explains why production rises in most years?
A)increases in prices of goods and services
B)increases in stock prices
C)aging population
D)technological innovation

Accepted Answer

Technological innovation leads to increased productivity and efficiency in production processes, which results in higher levels of production.

Question 15

During Canada's three last recessions,investment spending accounted for what percentage of the decline in GDP?
A)20 percent
B)30 percent
C)50 percent
D)80 percent

Accepted Answer

The answer of During Canada's three last recessions,investment spending accounted...

Question 16

Which of the following characterizes business cycles?
A)They are mainly fluctuations in consumption.
B)They are no longer very important due to government policy.
C)They are fluctuations in real GDP and related variables over time.
D)They are easily predicted by competent economists.

Accepted Answer

Business cycles are fluctuations in real GDP (gross domestic product) and related variables, such as employment, investment, and prices, over time. They are important because they can affect the overall health of the economy, including job growth and inflation. While government policy can have an impact on business cycles, they have not been eliminated entirely and can still be observed. However, predicting business cycles is difficult and not always accurate, even for experienced economists.

Question 17

According to the classical view in economics,which of the following variables or policies can influence economic growth in the long run?
A)an increase in capital stock
B)an increase in money supply
C)an increase in unemployment benefits
D)an increase in nominal interest rates

Accepted Answer

According to the classical view in economics, an increase in the capital stock (e.g. through investments in physical or human capital) is a primary driver of long-term economic growth. This is due to the idea of increasing productivity through the availability of more resources for production. The other options (B, C, D) may have short-term effects on the economy, but are unlikely to have a sustained impact on economic growth in the long run.

Question 18

Which of the following parts of real GDP fluctuates most over the course of the business cycle?
A)consumption
B)government expenditures
C)investment
D)net exports

Accepted Answer

Investment is typically the most volatile component of real GDP over the course of the business cycle as it is heavily influenced by changes in business confidence and economic uncertainty. Consumption and government expenditures are typically more stable, while net exports can be influenced by factors outside of the domestic economy such as global trade, exchange rates, and international events.

Question 19

In 1982,Canada was in a recession.Which of the following things would you expect NOT to have happened?
A)layoffs and firings
B)a higher rate of bankruptcy
C)increased claims for unemployment insurance
D)increased investment spending

Accepted Answer

During a recession, it is unlikely that there would be an increase in investment spending as businesses and individuals tend to reduce their spending and investment in order to conserve resources. Therefore, option D is the most unlikely to have happened.

Question 20

Which of the following best defines business cycles?
A)long-term trends in economic activity
B)regular, predictable fluctuations in GDP
C)the rise and fall of multinational companies
D)fluctuations in the economy

Accepted Answer

Business cycles refer to fluctuations in economic activity, including periods of growth (expansion) and periods of contraction (recession). These cycles are not always regular or predictable, but are impacted by a variety of factors such as changes in consumer spending, government policies, and global economic conditions.

Quiz 14: Aggregate Demand and Aggregate Supply

Which of the following expenditure items is responsible for the decrease in real GDP during a recession?

Which of the following terms refers to a short period of falling incomes and rising unemployment?

Which of the following does real GDP measure?

What happens to sales and profit during recessions?

Which of the following happens during recessions?

Which of the following does the economy experience during a recession?

Which of the following typically rises during a recession?

On average over the past 130 years,at about what rate has the Canadian economy grown?

How does real GDP change over time?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Which of the following best describes the beginning of a recession?

Below are pairs of GDP growth rates and unemployment rates.Economists would be shocked to see most of these pairs.Which of the following pairs of GDP growth rates and unemployment rates is most realistic?

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

Which of the following explains why production rises in most years?

During Canada's three last recessions,investment spending accounted for what percentage of the decline in GDP?

Which of the following characterizes business cycles?

According to the classical view in economics,which of the following variables or policies can influence economic growth in the long run?

Which of the following parts of real GDP fluctuates most over the course of the business cycle?

In 1982,Canada was in a recession.Which of the following things would you expect NOT to have happened?

Which of the following best defines business cycles?