EC 250 Final Exam - Questions and
Answers Complete Solutions 2025
Graded A+
1. The biggest economic problem at present is
a) decline in output
b) high inflation
c) bear market in stocks
d) high unemployment - Answer- b) high inflation
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 - Answer- a) greater in both the
Pandemic and the Great recessions
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) - Answer- a) return of
the economy to normal, without a recession
,4. When inflation in Canada reached around 8%, the Bank of Canada
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 - Answer-
d) Bank of Canada raised the Bank rate substantially, except for the current situation
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 - Answer- d) Only b) and c) are true
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 - Answer- c) was around 5 times greater than in
the Great recession
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
,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 - Answer- a) was smaller in
the Pandemic recession than during the Great recession, because of zero lower bound
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 - Answer- d) all of the above
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 - Answer- c) means that the central bank buys assets of longer maturity, as
well as non-government assets
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 - Answer- a) income, life expectancy at birth and education
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 - Answer- a) 10
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% - Answer- 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%
13. GDP does not include
a) household work
b) effects on the environment
c) harmful activities
d) only a) and b) are true - Answer- d) only a) and b) are true
14. To calculate GDP, we use value added because
a) otherwise, the value of intermediate products may be counted more than once
b) otherwise, the value of final products may be counted more than once
c) value added is always positive
Answers Complete Solutions 2025
Graded A+
1. The biggest economic problem at present is
a) decline in output
b) high inflation
c) bear market in stocks
d) high unemployment - Answer- b) high inflation
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 - Answer- a) greater in both the
Pandemic and the Great recessions
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) - Answer- a) return of
the economy to normal, without a recession
,4. When inflation in Canada reached around 8%, the Bank of Canada
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 - Answer-
d) Bank of Canada raised the Bank rate substantially, except for the current situation
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 - Answer- d) Only b) and c) are true
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 - Answer- c) was around 5 times greater than in
the Great recession
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
,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 - Answer- a) was smaller in
the Pandemic recession than during the Great recession, because of zero lower bound
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 - Answer- d) all of the above
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 - Answer- c) means that the central bank buys assets of longer maturity, as
well as non-government assets
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 - Answer- a) income, life expectancy at birth and education
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 - Answer- a) 10
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% - Answer- 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%
13. GDP does not include
a) household work
b) effects on the environment
c) harmful activities
d) only a) and b) are true - Answer- d) only a) and b) are true
14. To calculate GDP, we use value added because
a) otherwise, the value of intermediate products may be counted more than once
b) otherwise, the value of final products may be counted more than once
c) value added is always positive
