IFC Chapter 1-6 Exam Prep
IFC CHAPTER 1-6 EXAM PREP NEWEST 2026/2027 ACTUAL
EXAM COMPLETE 100 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY GRADED A+||BRAND
NEW VERSION!!
The political environment in Canada is very stable. In addition, the government
decides to decrease taxes on foreign investment. Select the effect on the Canadian
dollar.
A) The demand for CAD will never change
B) The CAD will increase in value
C) The CAD will decrease in value
D) The supply of CAD will stay the same - Correct Answer-B) The CAD will increase
in value
What is the effect of using income approach or expenditure approach when
measuring the GDP?
A) GDP is higher when measured. by income approach
B) GDP measured by the income approach and by expenditure approach should
be the same.
C) GDP is higher when measured by expenditure approach
D) GDP is lower when measured by income approach - Correct Answer-B) GDP
measured by the income approach and by expenditure approach should be the
same.
1|Page
, IFC Chapter 1-6 Exam Prep
What do changes in the nominal GDP from year to year reflect?
A) They reflect only the changes in the prices of goods and services in a year
B) They reflect the change in total cost of doing business from year to year
C) They reflect only the change in the amount of output produced in a year
D) They reflect both changes in the prices of goods and services and changes in
the amount of output produced in a year. - Correct Answer-D) They reflect both
changes in the prices of goods and services and changes in the amount of output
produced in a year.
Define what is meant by increases in productivity.
A) Increases in output per production plant
B) Increases in output per hour
C) Increases in output per worker
D) Increases in output per industry - Correct Answer-C) Increases in output per
worker
Which is a characteristic of the expansion phase?
A) Corporate profit is falling
B) Unemployment is falling
C) Stock market activity is weak
D) Employment is falling - Correct Answer-B) Unemployment is falling
How do economists use the output gap?
A) As a leading indicator of the economy
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, IFC Chapter 1-6 Exam Prep
B) As an indicator to measure inflationary pressures
C) As an indicator of recessions
D) As an indicator to measure unemployment pressure - Correct Answer-B) As an
indicator to measure inflationary pressures
The price level for most goods has fallen and the annual change in the Consumer
Price Index (CPI) has been negative over the past two years. What type of inflation
is characterized by this scenario?
A) Deflation
B) Potential inflation
C) Cost push inflation
D) Disinflation - Correct Answer-A) Deflation
Mary performs a brief analysis of recent financial information for several Canadian
equity mutual funds. Based on this analysis, she predicts superior performance for
ABC Canadian Equity Fund and purchases units in the fund. Which behavioural
bias has she demonstrated?
A) Overconfidence
B) Representativeness
C) Hindsight
D) Availability - Correct Answer-Overconfidence
An investor watched the price of the stock fall and he took a large loss. He
indicated to his friend that he knew all along that the price was going to take a
large downturn in price. Which behavioural bias has the investor demonstrated?
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, IFC Chapter 1-6 Exam Prep
A) Standardization
B) Availability
C) Hindsight
D) Overconfidence - Correct Answer-Hindsight
When people believe in their ability to predict an outcome, even though it wasn't
predictable at all, and therefore overestimate the accuracy of their predictions,
the investor suffers from hindsight bias.
Which would be excluded from a list of cognitive biases?
A) Overconfidence
B) Representativeness
C) Availability
D) Loss aversion - Correct Answer-Loss aversion
Loss aversion bias states that people generally feel a stronger impulse to avoid
losses than to acquire gains. The possibility of a loss is, on average, twice as
powerful a motivator as the possibility of making a gain of equal magnitude. That
is, a loss-averse person might demand, at minimum, a two-dollar gain for every
one dollar placed at risk. In this scenario, risks that don't "pay double" are
unacceptable. Loss aversion can prevent people from unloading unprofitable
investments, even when they see little to no prospect of a turnaround. Some
industry veterans have coined a diagnosis, "get-even-itis", to describe this
condition whereby a person waits too long for an investment to rebound following
a loss.
4|Page
IFC CHAPTER 1-6 EXAM PREP NEWEST 2026/2027 ACTUAL
EXAM COMPLETE 100 QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY GRADED A+||BRAND
NEW VERSION!!
The political environment in Canada is very stable. In addition, the government
decides to decrease taxes on foreign investment. Select the effect on the Canadian
dollar.
A) The demand for CAD will never change
B) The CAD will increase in value
C) The CAD will decrease in value
D) The supply of CAD will stay the same - Correct Answer-B) The CAD will increase
in value
What is the effect of using income approach or expenditure approach when
measuring the GDP?
A) GDP is higher when measured. by income approach
B) GDP measured by the income approach and by expenditure approach should
be the same.
C) GDP is higher when measured by expenditure approach
D) GDP is lower when measured by income approach - Correct Answer-B) GDP
measured by the income approach and by expenditure approach should be the
same.
1|Page
, IFC Chapter 1-6 Exam Prep
What do changes in the nominal GDP from year to year reflect?
A) They reflect only the changes in the prices of goods and services in a year
B) They reflect the change in total cost of doing business from year to year
C) They reflect only the change in the amount of output produced in a year
D) They reflect both changes in the prices of goods and services and changes in
the amount of output produced in a year. - Correct Answer-D) They reflect both
changes in the prices of goods and services and changes in the amount of output
produced in a year.
Define what is meant by increases in productivity.
A) Increases in output per production plant
B) Increases in output per hour
C) Increases in output per worker
D) Increases in output per industry - Correct Answer-C) Increases in output per
worker
Which is a characteristic of the expansion phase?
A) Corporate profit is falling
B) Unemployment is falling
C) Stock market activity is weak
D) Employment is falling - Correct Answer-B) Unemployment is falling
How do economists use the output gap?
A) As a leading indicator of the economy
2|Page
, IFC Chapter 1-6 Exam Prep
B) As an indicator to measure inflationary pressures
C) As an indicator of recessions
D) As an indicator to measure unemployment pressure - Correct Answer-B) As an
indicator to measure inflationary pressures
The price level for most goods has fallen and the annual change in the Consumer
Price Index (CPI) has been negative over the past two years. What type of inflation
is characterized by this scenario?
A) Deflation
B) Potential inflation
C) Cost push inflation
D) Disinflation - Correct Answer-A) Deflation
Mary performs a brief analysis of recent financial information for several Canadian
equity mutual funds. Based on this analysis, she predicts superior performance for
ABC Canadian Equity Fund and purchases units in the fund. Which behavioural
bias has she demonstrated?
A) Overconfidence
B) Representativeness
C) Hindsight
D) Availability - Correct Answer-Overconfidence
An investor watched the price of the stock fall and he took a large loss. He
indicated to his friend that he knew all along that the price was going to take a
large downturn in price. Which behavioural bias has the investor demonstrated?
3|Page
, IFC Chapter 1-6 Exam Prep
A) Standardization
B) Availability
C) Hindsight
D) Overconfidence - Correct Answer-Hindsight
When people believe in their ability to predict an outcome, even though it wasn't
predictable at all, and therefore overestimate the accuracy of their predictions,
the investor suffers from hindsight bias.
Which would be excluded from a list of cognitive biases?
A) Overconfidence
B) Representativeness
C) Availability
D) Loss aversion - Correct Answer-Loss aversion
Loss aversion bias states that people generally feel a stronger impulse to avoid
losses than to acquire gains. The possibility of a loss is, on average, twice as
powerful a motivator as the possibility of making a gain of equal magnitude. That
is, a loss-averse person might demand, at minimum, a two-dollar gain for every
one dollar placed at risk. In this scenario, risks that don't "pay double" are
unacceptable. Loss aversion can prevent people from unloading unprofitable
investments, even when they see little to no prospect of a turnaround. Some
industry veterans have coined a diagnosis, "get-even-itis", to describe this
condition whereby a person waits too long for an investment to rebound following
a loss.
4|Page
