Canadian Securities Course (CSC) Level 1 Practice Exam

What are the characteristics of expansion?

1. Stable rise in the prices of goods and services, corporate profits rise, new business startups outnumber bankruptcies, strong stock market, unemployment steady or falling.

2. Widespread unemployment, falling stock market, decrease in corporate profits, economic decline.

3. Business closures increase, stock market fluctuates, inflation decreases.

4. Government spending rises, corporate profits fall, unemployment rises.

The correct answer is: Stable rise in the prices of goods and services, corporate profits rise, new business startups outnumber bankruptcies, strong stock market, unemployment steady or falling.

The correct answer identifies the characteristics of an expansion phase in the economic cycle. During expansion, the economy experiences growth reflected in several key indicators: - A stable rise in prices suggests that demand for goods and services is increasing, which is typical in a growing economy. - Corporate profits tend to rise as businesses benefit from higher consumer spending and demand. - The number of new business startups often surpasses the number of bankruptcies, indicating a healthy entrepreneurial environment. - A strong stock market usually accompanies economic expansion, as investor confidence grows with positive economic indicators. - Unemployment rates remain steady or decrease as more jobs are created to support the expanding economy. Overall, these elements come together to create a positive economic climate characteristic of expansion, making this the most accurate representation of the phase. Other options describe conditions associated with economic contraction or decline, which highlight negative indicators rather than the growth and optimism seen in an expansion phase.