CSC Chapter 4 Questions and Answers
What is real GDP?
Adjusted for inflation and it measures the dollar value of goods produced
What is nominal GDP?
Based on prices & not adjusted for inflation
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CSC Chapter 4 Questions and Answers
What is real GDP? - answer Adjusted for inflation and it measures the dollar value of
goods produced
What is nominal GDP? - answer Based on prices & not adjusted for inflation
What are the 5 stages in the business cycle? - answer Expansion, Peak,
Contraction, Trough, and Recovery
What happen in the expansion period? - answer The economy is steady expanding.
Inflation is stable, profits & investments are increasing, business start-up & job creation
increases
What happen in the peak period? - answer Demand for goods begins to out number
supply which leads to an increase in interest rates & inflation. As interest rates
increases it leads to an decrease in bond prices & investments
What happen in the contraction period? - answer Goods are worth more than before
by the increase in inflation which leads to a decrease in spending & income from layoffs.
Production & investment decreases
What happen in the trough period? - answer The Bank of Canada will decrease
interest rates & inflation to encourage spending & investment
What happen in the recovery period? - answer As interest rates & inflation
decreases, production increases to meet the demand. But investment remains low &
unemployment remains high
What is a leading indicator? - answer Are used to predict changes in the economy
like housing, stock prices & commodity prices
What is a coincident indicator? - answer It provides the current state of the economic
activity like income, production & sales --> Christmas
What is a lagging indicator? - answer Measures economic factor that changes after
the economy has begun following a trend like unemployment, interest rates & inflation
and labour cost
What is a soft landing? - answer The Bank of Canada slows economic growth by
increasing interest rates, but avoids high inflation and recessions
What is a cyclical unemployment? - answer Works are layoff because of the
fluctuations in the business cycle
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