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EC250 Final Exam Questions with Detailed
Verified Answers
Q: 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
Q: 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
Q: 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
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
Q: 4. When inflation in Canada reached around 8%, the Bank of
Canada
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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
Q: 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
Ans: d) Only b) and c) are true
Q: 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
Q: 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
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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
Q: 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
c) consumers became pessimistic about the future and cut
consumption
d) all of the above
Ans: d) all of the above
Q: 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
Q: 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
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Ans: a) income, life expectancy at birth and education
Q: 11. A couple buys a house, putting down 10% of the total. This
means that their leverage is
a) 10
b) 11
c) 90
d) none of the above
Ans: a) 10
Q: 12. A couple buys a house, putting down 10% of the total. The
value of the house increases by 20%. This means that the return on
the down payment is
a) 10%
b) 20%
c) 100%
d) 200%
Ans: d) 200%
House is 100, down payment is 10, mortgage is 90. The value of the
house increases 20% to 120; mortgage is 90, own money is 30.
Return: 20 on 10 down payment = 200%
Q: 13. GDP does not include
a) household work
b) effects on the environment
c) harmful activities
d) only a) and b) are true
Ans: d) only a) and b) are true
Q: 14. To calculate GDP, we use value added because
EC250 Final Exam Questions with Detailed
Verified Answers
Q: 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
Q: 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
Q: 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
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
Q: 4. When inflation in Canada reached around 8%, the Bank of
Canada
, Page | 2
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
Q: 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
Ans: d) Only b) and c) are true
Q: 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
Q: 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
, Page | 3
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
Q: 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
c) consumers became pessimistic about the future and cut
consumption
d) all of the above
Ans: d) all of the above
Q: 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
Q: 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
, Page | 4
Ans: a) income, life expectancy at birth and education
Q: 11. A couple buys a house, putting down 10% of the total. This
means that their leverage is
a) 10
b) 11
c) 90
d) none of the above
Ans: a) 10
Q: 12. A couple buys a house, putting down 10% of the total. The
value of the house increases by 20%. This means that the return on
the down payment is
a) 10%
b) 20%
c) 100%
d) 200%
Ans: d) 200%
House is 100, down payment is 10, mortgage is 90. The value of the
house increases 20% to 120; mortgage is 90, own money is 30.
Return: 20 on 10 down payment = 200%
Q: 13. GDP does not include
a) household work
b) effects on the environment
c) harmful activities
d) only a) and b) are true
Ans: d) only a) and b) are true
Q: 14. To calculate GDP, we use value added because
