CHAPTER 4 | OVERVIEW OF ECONOMICS

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. Is often used as an indicator of inflation.

Answer 4

Consumer Price Index

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. See also leading, lagging, and coincident indicators.

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

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 cost of credit.

Answer 20

interest rates