Question 1

What are three factors that threaten stability?
A) Purchasing power parity, productivity, and inflation
B) Productivity, inflation, and deflation
C) Purchasing power parity, inflation, and deflation
D) Inflation, deflation, and unemployment
E) Productivity, unemployment, and inflation

Accepted Answer

Inflation, deflation, and unemployment are three key factors that can threaten economic stability. Inflation erodes purchasing power, deflation can lead to decreased consumer spending and investment, and unemployment signifies a lack of job opportunities, affecting overall economic health.

Question 2

Which of the following statements about inflation is true?
A) The consumer price index is a good way of measuring inflation.
B) Productivity decreases the purchasing power of consumer dollars.
C) Inflation increases the purchasing power of consumer dollars.
D) Localized price increases can cause inflation across the economic system.
E) The amount of money tends to be distributed evenly during inflationary periods.

Accepted Answer

The consumer price index (CPI) is a commonly used measurement of inflation as it tracks the prices of a standard set of goods and services purchased by consumers. Increases in the CPI over time indicate that the cost of living is increasing due to inflation.

B) is incorrect because productivity increases the purchasing power of consumer dollars, not decreases.

C) is incorrect because inflation decreases the purchasing power of consumer dollars as the same amount of money can purchase fewer goods and services over time.

D) is incorrect because localized price increases only affect specific markets and do not necessarily cause inflation across the entire economy.

E) is incorrect because inflation often results in uneven distribution of wealth and can actually exacerbate income inequality.

Question 3

A financial analyst has noticed a serious increase in inflation. What course of action might the financial analyst advise the government to take to reduce inflation?
A) The government can lower taxes.
B) The government can raise taxes.
C) Encourage the government to increase spending.
D) Encourage consumers to increase spending.
E) Encourage the government to increase spending and lower taxes.

Accepted Answer

One of the ways to reduce inflation is to decrease the demand for goods and services. Raising taxes would decrease disposable income, leading to a decrease in demand for goods and services, which can ultimately reduce inflation. Lowering taxes or increasing government spending would have the opposite effect, leading to greater demand and potentially worsening inflation. Encouraging consumers to increase spending would also worsen inflation. Thus, option B is the best choice for reducing inflation.

Question 4

Which of the following statements about inflation is true?
A) Inflation increases the purchasing power of consumer dollars.
B) Inflation occurs when people have more money to spend as the quantity of goods available increases.
C) Inflation occurs when the amount of money taken out of the economy exceeds the amount of money put into the economy.
D) Inflation and deflation are really almost synonymous in practice.
E) None of these.

Accepted Answer

Inflation is defined as the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Choices A, B, C, and D all contain misconceptions about inflation. A) is incorrect because inflation actually decreases the purchasing power of consumer dollars. B) is incorrect because inflation typically occurs when the money supply increases faster than the quantity of goods available, not when both money and goods increase together. C) is incorrect because inflation is more often associated with more money being put into the economy without a corresponding increase in goods and services, not the other way around. D) is incorrect because inflation and deflation are opposites; inflation is when prices increase, and deflation is when prices decrease.

Question 5

Don is unemployed because of a downturn in economic activity; this is an example of ________ unemployment.
A) frictional
B) seasonal
C) structural
D) cyclical
E) none of these

Accepted Answer

The situation described in the scenario is an example of cyclical unemployment, which occurs due to fluctuations in economic activity and business cycles.

Question 6

Ben is unemployed, but he is currently in a training program designed to increase the skills he needs to perform the kinds of jobs that are available. Ben is experiencing ________ unemployment.
A) frictional
B) seasonal
C) cyclical
D) structural
E) none of these

Accepted Answer

Ben's situation fits the definition of structural unemployment, which occurs due to a mismatch between the skills that workers have and the skills that employers demand. Ben's participation in a training program indicates that his skills were no longer in demand, and he needed to learn new skills to find suitable employment.

Question 7

The ________ is a measure of the prices of a typical "basket of products" purchased by consumers.
A) consumer price index
B) national debt
C) balance of trade
D) gross national product
E) real GDP

Accepted Answer

The consumer price index measures the prices of a typical "basket of products" purchased by consumers, which includes goods and services such as food, housing, transportation, and healthcare. It is used to track inflation over time and is a key indicator of the health of an economy. The national debt, balance of trade, gross national product, and real GDP are all important economic indicators, but they are not measures of the prices of consumer goods and services.

Question 8

Sam, an audiologist, lost his job two years ago and still hasn't found work. There is just no market for audiologists at this time. Sam is experiencing
A) structural unemployment.
B) full unemployment.
C) cyclical unemployment.
D) bad luck.
E) frictional unemployment.

Accepted Answer

Sam's job loss is due to a lack of demand for audiologists or a change in the structure of the job market. This is an example of structural unemployment.

Question 9

Which of the following best describes what the consumer price index is used to indicate?
A) The average wage rate for a given region
B) The economic performance of key consumer product companies
C) The changes in the cost of consumer products over time
D) The percentage of consumers in the total population looking for work
E) The number of price increases within a given period of time

Accepted Answer

The consumer price index (CPI) is used to indicate changes in the cost of consumer products over time. It measures the average change in prices over time for a basket of goods and services commonly consumed by households. It is a commonly used measure for inflation.

Question 10

The chance that a society can actually achieve full employment is ________ percent.
A) 10
B) 75
C) 45
D) 1
E) 0

Accepted Answer

It is nearly impossible for any society to achieve 100% employment due to various factors such as technological advancements, cyclical fluctuations in the economy, and the existence of structural unemployment. Therefore, choice E is the most accurate answer.

Question 11

Unemployment is the level of joblessness among
A) people over the age of 18 within a given economic system.
B) people who have been previously employed in an economic system.
C) people who have the skills for employment within an economic system.
D) people over the age of 18 and under the age of 65 in a given economic system.
E) people actively seeking work in an economic system.

Accepted Answer

Unemployment specifically refers to individuals who are actively seeking work but are unable to find employment. Therefore, option E is the best choice. Options A, B, and D are too broad as they include individuals who may not be actively seeking work or who are not affected by joblessness. Option C is also incorrect as individuals with skills may not necessarily be actively seeking employment.

Question 12

Arnold's is a Canadian company engaged in the manufacture of sports shoes. The CEO cautions that there is a disadvantage associated with the company planning increased globalization of production. Which of the following is the most likely disadvantage the CEO is referring to?
A) Heavy job losses can ensue in the domestic market.
B) Greater disparities in living standards will emerge.
C) Trade barriers will be reduced between countries.
D) Substantial job losses will occur in developing markets.
E) Increased competition will emerge between companies.

Accepted Answer

The CEO is cautioning that increased globalization of production may lead to heavy job losses in the domestic market.

Question 13

Deflation refers to
A) a period of falling prices.
B) the occurrence of price increases throughout the economic system.
C) the condition in an economic system in which the amount of money available is greater than the amount of goods produced.
D) the measure of prices in urban areas.
E) the amount of government spending greater than the taxes collected in one year.

Accepted Answer

Deflation refers to a period of falling prices, which is opposite of inflation, where prices are rising.

Question 14

________ is the economic condition characterized by widespread increased prices throughout an economic system.
A) Stability
B) Deflation
C) Unemployment
D) Stagflation
E) Inflation

Accepted Answer

Inflation is the economic condition characterized by widespread increased prices throughout an economic system. This means that the value of money decreases over time, and consumers and businesses need more money to buy the same goods and services. This can have negative impacts on economic growth, investment, and purchasing power for individuals and businesses.

Question 15

Which of the following best describes economic stability?
A) The measure of economic growth that compares how much a system produces with the resources needed to produce it
B) A condition in an economic system in which the amount of money available and the number of goods and services produced are growing at about the same rate
C) The economic condition in which a country's exports exceed its imports
D) A relative equality between what the government owes its creditors and the revenue it gets from imports
E) The economic value of all the products that a country exports minus the economic value of all the products it imports

Accepted Answer

Economic stability refers to a condition in which the economy is consistent and growing steadily without encountering any major shocks or disruptions. This includes ensuring that the money supply and the production of goods and services are increasing at similar rates. Therefore, Option B is the best choice. Option A describes economic efficiency, Option C describes trade balance, Option D describes fiscal stability, and Option E describes balance of trade.

Question 16

A computer programmer who has just quit her job but who will find a new one soon is an example of ________ unemployment.
A) seasonal
B) frictional
C) cyclical
D) structural
E) none of these

Accepted Answer

Frictional unemployment refers to the temporary unemployment that workers experience as they search for new jobs or transition between jobs. The computer programmer in this scenario is voluntarily unemployed and actively seeking new employment, making it an example of frictional unemployment.

Question 17

________ unemployment results because workers lack the right skills, while ________ unemployment results when people are temporarily out of work while they are looking for a new job.
A) Cyclical; seasonal
B) Frictional; seasonal
C) Seasonal; structural
D) Cyclical; structural
E) Structural; frictional

Accepted Answer

Structural unemployment occurs when there is a mismatch between the skills that workers possess and the skills demanded by employers. Frictional unemployment occurs when individuals are temporarily out of work while they look for a new job. Cyclical unemployment occurs when there is a downturn in the business cycle and overall demand for labor decreases. Seasonal unemployment occurs when the demand for labor varies by season, such as in agricultural or tourism industries. Based on this, the best choice is E, because structural unemployment is caused by a lack of skills, while frictional unemployment is temporary and caused by individuals looking for new jobs.

Question 18

Which of the following is correct regarding unemployment rates in Canada?
A) Unemployment rates have been fairly stable at about 6 percent for the last 30 years.
B) Unemployment rates have been fairly stable at about 2 percent for the last 30 years.
C) Unemployment rates for women have generally been slightly lower than unemployment rates for men.
D) The government did not keep track of unemployment rates for women until the 1980s.
E) The unemployment rate for women is about half the unemployment rate for men.

Accepted Answer

Unemployment rates in Canada have not been stable at a consistent percentage for the past 30 years. As such, options A and B are incorrect. However, option C is correct as on average, the unemployment rate for women in Canada has been slightly lower than men. Option D is incorrect as the Canadian government has been tracking unemployment rates for both genders for decades. Lastly, while the unemployment rate for women is often lower than the unemployment rate for men, it is not typically half, making option E incorrect.

Question 19

John is experiencing ________ unemployment because he is out of work temporarily while looking for a new job, while Sally is experiencing ________ unemployment because she is out work because of a downturn in the business cycle.
A) seasonal; structural
B) structural; seasonal
C) frictional; cyclical
D) cyclical; frictional
E) seasonal; cyclical

Accepted Answer

Frictional unemployment occurs when individuals are temporarily out of work while transitioning from one job to another, fitting John's situation. Cyclical unemployment happens due to economic downturns affecting the business cycle, which describes Sally's scenario.

Question 20

________ policy involves the collection and spending of government revenues, while ________ policy focuses on controlling the size of the nation's money supply.
A) Productivity; inflation
B) Taxation; monetary
C) Monetary; fiscal
D) Fiscal; monetary
E) National debt; annual deficit

Accepted Answer

Fiscal policy involves the collection and spending of government revenues, while monetary policy focuses on controlling the size of the nation's money supply. Option A is incorrect because productivity is the measure of the efficiency of production, while inflation is the rate at which prices are increasing. Option B is incorrect because while taxation plays a role in fiscal policy, it does not encompass the entire policy. Option C is incorrect because it switches the terms for each policy. Option E is incorrect because while the national debt and annual deficit are related to fiscal policy, they are not the actual policy itself.

Quiz 2: The Environment of Business

What are three factors that threaten stability?

Which of the following statements about inflation is true?

A financial analyst has noticed a serious increase in inflation. What course of action might the financial analyst advise the government to take to reduce inflation?

Which of the following statements about inflation is true?

Don is unemployed because of a downturn in economic activity; this is an example of ________ unemployment.

Ben is unemployed, but he is currently in a training program designed to increase the skills he needs to perform the kinds of jobs that are available. Ben is experiencing ________ unemployment.

The ________ is a measure of the prices of a typical "basket of products" purchased by consumers.

Sam, an audiologist, lost his job two years ago and still hasn't found work. There is just no market for audiologists at this time. Sam is experiencing

Which of the following best describes what the consumer price index is used to indicate?

The chance that a society can actually achieve full employment is ________ percent.

Unemployment is the level of joblessness among

Arnold's is a Canadian company engaged in the manufacture of sports shoes. The CEO cautions that there is a disadvantage associated with the company planning increased globalization of production. Which of the following is the most likely disadvantage the CEO is referring to?

Deflation refers to

________ is the economic condition characterized by widespread increased prices throughout an economic system.

Which of the following best describes economic stability?

A computer programmer who has just quit her job but who will find a new one soon is an example of ________ unemployment.

unemployment results because workers lack the right skills, while unemployment results when people are temporarily out of work while they are looking for a new job.

Which of the following is correct regarding unemployment rates in Canada?

John is experiencing unemployment because he is out of work temporarily while looking for a new job, while Sally is experiencing unemployment because she is out work because of a downturn in the business cycle.

policy involves the collection and spending of government revenues, while policy focuses on controlling the size of the nation's money supply.