Chapter - 4

Question 1

Canada’s interactions with the rest of the world which are captured here in the current account and capital account

Answer 1

balance of payments

Question 2

The recurrence of periods of expansion and recession in economic activity. Each cycle is expected to move through five phases – the trough, recovery, expansion, peak, contraction (recession). Given an understanding of the relationship between the business cycle and security prices an investor or fund manager would select an asset mix to maximize returns.

Answer 2

business cycle

Question 3

Statistical data that, on average, change at approximately the same time and in the same direction as the economy as a whole

Answer 3

coincident indicators

Question 4

Price index which measures the cost of living by measuring the prices of a given basket of goods. It is often used as an indicator of inflation.

Answer 4

Consumer Price Index (CPI)

Question 5

A type of inflation that develops due to an increase in the costs of production. For example, an increase in the price of oil may contribute to higher input costs for a company and could lead to higher inflation.

Answer 5

cost-push inflation

Question 6

The amount of unemployment that rises when the economy softens, firms’ demand for labour moderates, and some firms lay off workers in response to lower sales. It drops when the economy strengthens again.

Answer 6

cyclical unemployment

Question 7

A sustained fall in prices where the consumer price index is negative

Answer 7

deflation

Question 8

The quantity demanded of a good or service based on a particular price during a given period. The lower the price, the higher the demand.

Answer 8

demand

Question 9

A type of inflation that develops when continued consumer demand pushes prices higher

Answer 9

demand-pull inflation

Question 10

Individuals that are available and willing to work but cannot find jobs and have not made specific efforts to find a job within the previous month

Answer 10

discouraged workers

Question 11

A decline in the rate at which prices rise – i.e., a decrease in the rate of inflation. Prices are still rising, but at a slower rate

Answer 11

disinflation

Question 12

Statistics or data series that are used to analyze business conditions and current economic activity

Answer 12

economic indicators

Question 13

A social science that is concerned with an understanding of production, distribution, and consumption of goods and services

Answer 13

economics

Question 14

The price at which the quantity demanded equals the quantity supplied

Answer 14

equilibrium price

Question 15

The price at which one currency exchanges for another

Answer 15

exchange rate

Question 16

A finished product, one that is purchased by the ultimate end user

Answer 16

final good

Question 17

Unemployment that results from normal labour turnover, from people entering and leaving the workforce and from the ongoing creation and destruction of jobs

Answer 17

frictional unemployment

Question 18

The value of all goods and services produced in a country in a year

Answer 18

gross domestic product (GDP)

Question 19

A generalized, sustained trend of rising prices

Answer 19

inflation

Question 20

The proportion of the loan calculated as interest that is payable by the borrower. Also referred to as the ___.

Answer 20

interest rates, cost of credit

Question 21

The sum of the population aged 15 years and over who are either employed or unemployed

Answer 21

labour force

Question 22

A selection of statistical data, that on average, indicate highs and lows in the business cycle behind the economy as a whole. These relate to business expenditures for new plant and equipment, consumers’ instalment credit, short-term business loans, the overall value of manufacturing and trade inventories.

Answer 22

lagging indicators

Question 23

A selection of statistical data that, on average, indicate highs and lows in the business cycle ahead of the economy as a whole. These relate to employment, capital investment, business starts and failures, profits, stock prices, inventory adjustment, housing starts and certain commodity prices.

Answer 23

leading indicators

Question 24

It focuses on the performance of the economy as a whole. It looks at the broader picture and to the challenges facing society as a result of the limited amounts of natural resources, human effort and skills, and technology.

Answer 24

macroeconomics

Question 25

An economic system where the decisions regarding investment, production, and distribution of goods and services are guided by the price signals created by the forces of supply and demand

Answer 25

market economy

Question 26

Analyzes the market behaviour of individual consumers and firms, how prices are determined, and how prices determine the production, distribution, and use of goods and services

Answer 26

microeconomics

Question 27

Also called the ___. At this level of unemployment, the economy is thought to be operating at close to its full potential or capacity.

Answer 27

natural unemployment rate, full employment unemployment rate

Question 28

Interest rate falls below zero. In a negative interest rate environment, banks may charge their customers for keeping deposits and banks may pay customers to take a loan.

Answer 28

negative interest rates

Question 29

Gross domestic product based on prices prevailing in the same year not corrected for inflation. Also referred to as ___ or ___.

Answer 29

nominal gross domestic product, current dollar, chained dollar GDP

Question 30

The quoted or stated rate on an investment or a loan. This rate allows for comparisons but does not take into account the effects of inflation.

Answer 30

nominal interest rate

Question 31

The share of the working-age population (15 and older) that is in the labour market, either working or looking for work. Also, the limit on the return paid by an issuer to an investor is known as the ___.

Answer 31

participation rate

Question 32

A graph showing the relationship between inflation and unemployment. The theory states that unemployment can be reduced in the short run by increasing the price level (inflation) at a faster rate. Conversely, inflation can be lowered at the cost of possibly increased unemployment and slower economic growth.

Answer 32

Phillips curve

Question 33

The amount of output per worker used as a measure of efficiency with which people and capital are combined in the output of the economy. Productivity gains lead to improvements in the standard of living, because as labour, capital, etc. produce more, they generate greater income.

Answer 33

productivity

Question 34

Gross Domestic Product adjusted for changes in the price level. Also referred to as ___.

Answer 34

real gross domestic product, constant dollar GDP

Question 35

The nominal rate of interest minus the percentage change in the Consumer Price Index (i.e., the rate of inflation)

Answer 35

real interest rate

Question 36

Unemployment that results from a company or industry that only operates during specific seasons of the year

Answer 36

seasonal unemployment

Question 37

Unemployment that results when workers are unable to find work or fill available jobs because they lack the necessary skills, do not live where the jobs are available, or decide not to work at the wage rate offered by the market

Answer 37

structural unemployment

Question 38

The quantity supplied of a good or service based on a particular price during a given period of time. The higher the price of the good or service, the greater the quantity of supply.

Answer 38

supply

Question 39

People who are working part-time, often at jobs that do not make good use of their skills, when they would rather be working full-time

Answer 39

underemployed

Question 40

The percentage of the work force that is looking for work but unable to find jobs

Answer 40

unemployment rate