Understanding Economic Principles Flashcards
7 cards from real IFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Understanding Economic Principles flashcards as text
Which economic indicator measures the total market value of all goods and services produced within a country's borders in a given year?
Answer: Gross Domestic Product (GDP)
GDP measures the total market value of all goods and services produced within a country's borders, regardless of who produces them.
When the Bank of Canada raises its overnight lending rate, what is the most likely immediate effect on the Canadian economy?
Answer: Reduced inflationary pressure as credit becomes more expensive
Raising the overnight rate increases the cost of borrowing, which reduces consumer spending and business investment, thereby cooling inflation.
In economics, the term 'opportunity cost' refers to:
Answer: The value of the next best alternative foregone when making a decision
Opportunity cost is the value of the best alternative you give up when you choose one option over another.
Which phase of the business cycle is characterized by rising employment, increasing GDP, and growing consumer confidence?
Answer: Expansion
The expansion phase features rising output, employment, and consumer confidence as the economy grows from its trough toward its peak.
What does a country's current account surplus indicate?
Answer: The country exports more goods and services than it imports
A current account surplus means a country's exports of goods, services, and income exceed its imports, resulting in net inflows of foreign currency.
Which of the following best describes the concept of 'deflation' and its typical impact on investment?
Answer: Falling price levels that increase the real burden of debt and can discourage investment
Deflation causes prices to fall, increasing the real value of debt and often leading consumers to delay purchases, which can harm corporate profits and investment returns.
In the context of Canadian monetary policy, what is the primary mandate of the Bank of Canada?
Answer: Keeping inflation low, stable, and predictable (targeting 2%)
The Bank of Canada's primary mandate is to maintain low, stable, and predictable inflation, targeting 2% within a 1%–3% control range.