EC250 Final Exam Questions with Detailed Verified Answers

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EC250 Final Exam Questions with
Detailed Verified Answers

Question: 1. The biggest economic problem at present is


a) decline in output
b) high inflation
c) bear market in stocks
d) high unemployment


Ans: b) high inflation


Question: 2. The effect of last two recession on the US unemployment was,
compared to unemployment in Canada


a) greater in both the Pandemic and the Great recessions
b) greater in the Pandemic recession but not in the Great recession
c) smaller in the Pandemic recession but greater in the Great recession
d) smaller in both the Pandemic and the Great recessions


Ans: a) greater in both the Pandemic and the Great recessions


Question: 3. Soft landing is:


a) return of the economy to normal, without a recession
b) gradual reduction in inflation, at the cost of a recession

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c) return of inflation to the Bank of Canada target over several years
d) rapid return of inflation to the Bank of Canada target (within a year)


Ans: a) return of the economy to normal, without a recession


Question: 4. When inflation in Canada reached around 8%, the Bank of
Canada


a) always raised the Bank rate at least 2% above the rate of inflation
b) in the past, Bank of Canada raised the Bank rate substantially, but never
above 6%
c) Bank of Canada raised the Bank rate to over 14%, except for the current
situation
d) Bank of Canada raised the Bank rate substantially, except for the current
situation


Ans: d) Bank of Canada raised the Bank rate substantially, except for the
current situation


Question: 5. The boom in housing in the U.S. prior to the Great Recession


a) Was not as large as the boom in housing in Canada
b) Was caused in part by the decline in lending standards
c) Was caused in part by securitization which reduced risk to banks from
nonperforming mortgages
d) Only b) and c) are true

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Ans: d) Only b) and c) are true


Question: 6. Federal deficit, in the Pandemic recession


a) was about the same as in the Great recession
b) was smaller than in the Great recession
c) was around 5 times greater than in the Great recession
d) was twice greater than in the Great recession


Ans: c) was around 5 times greater than in the Great recession


Question: 7. The reduction in interest rates in Canada


a) was smaller in the Pandemic recession than during the Great recession,
because of zero lower bound
b) was smaller in the Great recession than during the Pandemic recession,
because of zero lower bound
c) led to negative policy rate in Canada during the Pandemic recession
d) led to negative policy rate in the US during the Great recession


Ans: a) was smaller in the Pandemic recession than during the Great
recession, because of zero lower bound


Question: 8. When Lehman Brothers failed, the result was a panic in the
credit market and it was difficult to obtain credit. As a result


a) investment declined
b) output fell

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c) consumers became pessimistic about the future and cut consumption
d) all of the above


Ans: d) all of the above


Question: 9. Quantitative easing


a) is a policy that permits banks to create a greater quantity of deposits
b) means that the central bank buys more short-term bonds
c) means that the central bank buys assets of longer maturity, as well as non-
government assets
d) none of the above


Ans: c) means that the central bank buys assets of longer maturity, as well as
non-government assets


Question: 10. The Human Development Index includes


a) income, life expectancy at birth and education
b) income, life expectancy at birth and average age at retirement
c) income, life expectancy at birth and proportion of income spent on health
care
d) income and education


Ans: a) income, life expectancy at birth and education


Question: 11. A couple buys a house, putting down 10% of the total. This
means that their leverage is