40 Questions
What does the Consumer Price Index (CPI) reflect?
The current market value of a basket of goods and services
Why is the Consumer Price Index (CPI) always calculated in relation to a base year?
To give an accurate reflection of the price of goods and services
What does an increase in the Consumer Price Index (CPI) indicate?
Less money available for investment and increased living expenses
What happens to the purchasing power with a rise in the rate of inflation?
Purchasing power falls
What is the term used to describe a fall in the general price level in an economy?
Deflation
Why are items in the Consumer Price Index (CPI) basket weighted?
To reflect consumer spending habits
What is the index calculated by dividing the current market value of the CPI basket by its value in the base year, then multiplying by 100?
Consumer Price Index
What economic indicator is the rate of change in the general price level over a year called?
Inflation rate
What impact does increased mobility of capital have?
Increases efficiency and can lead to financial crises
Why is sensitivity important in the world of investments?
To analyze the degree of influence of financial markets and the broader economy on investment capital
What is the role of banks in the economy according to the text?
Help grow local infrastructures by lending money
How do financial markets contribute to the long-term prosperity of an economy?
By converting idle savings into investment capital
What happens when nations have low levels of savings according to the text?
Economic growth rates decrease
How do corporations typically finance the expansion of their operations?
By issuing securities
What effect does the growing amount of investment options have on investors?
Makes investors more selective in their choices
Why is the ability to convert idle savings into investment capital critical for an economy?
To support long-term economic prosperity
What is the formula to calculate the inflation rate as mentioned in the text?
Previous Year CPI Value - Current Year CPI Value ÷ Previous Year CPI Value X 100
In the context of inflation, what is the impact of unanticipated inflation on lenders?
Decrease in real income
If the inflation rate is 4.8% and CPI was 105 in the current year, what was the CPI in the previous year?
100
How does unanticipated inflation affect borrowers in terms of loan repayments?
Decreases the real cost of loans
What happens to Terence's real income when prices rise by 5% according to the example provided in the text?
It decreases by $3
How does the redistribution of real income occur between lenders and borrowers due to unanticipated inflation?
Lenders lose real income while borrowers gain
What does $102 represent in the example involving Caitlyn and Terence?
The real cost of the loan to Caitlyn
When prices rise by 5%, what amount would Terence need to buy what $100 bought a year ago?
$105
Which economic indicator is most directly related to the purchasing power of a currency?
Consumer Price Index (CPI)
Which phase of the business cycle is characterized by a decline in economic activity?
Contraction
Which fiscal policy tool is most commonly used to stimulate the economy during a recession?
Increasing Government Spending
Which monetary policy tool is most commonly used to curb inflation?
Increasing Interest Rates
What role does the Bank of Canada play in the Canadian financial system?
It acts as the lender of last resort for commercial banks.
Which of the following economic indicators is lagging?
Unemployment Rate
Which of the following is not an element of Canada's financial system?
Central Bank
Which of the following is not a tool of monetary policy?
Fiscal Stimulus
What is the main reason why corporations issue new shares?
To raise funds for various business needs
How does the exchange rate affect Jane's investment decision?
A lower exchange rate increases the amount of U.S. dollars Jane can purchase
What is the role of an investment dealer in the issuance of new shares?
An investment dealer is responsible for selling new shares to the primary market
What is the meaning of the term 'primary market'?
The primary market is where shares are initially offered to investors
How does Jane's initial investment in U.S. dollars increase over time?
The value of Jane's initial investment increases due to the growth of the U.S. Growth Fund
What is the main benefit of a private corporation going public?
A private corporation going public can increase the value of its shares
Why might a corporation issue new shares for the sale of an owner's share of the business?
To provide liquidity for the owner
What is the relationship between the value of new shares and existing shares?
The value of new shares decreases the value of existing shares
Prepare for your role as a Dealing Representative by learning about the Canadian financial markets and the economic factors that influence them. Explore topics such as business cycles, government policies, and Canada's financial system. This unit consists of lessons on Economic Factors, Financial Markets, and Canada's Financial System.
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