Question 1

If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about

Accepted Answer

A)  $18,857.
B)  $25,143.
C)  $44,000.
D)  $77,000.E) B) and C)
F) All of the above

Question 2

"Depression means idleness.And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest." This quote describes some of the

Accepted Answer

A)  consequences of the hyperinflation that accompanies a recession.
B)  reasons for the natural rate of unemployment.
C)  noneconomic costs of unemployment.
D)  characteristics of structural unemployment.E) B) and C)
F) A) and D)

Question 3

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the

Accepted Answer

A)  frictional unemployment rate is 5 percent.
B)  cyclical unemployment rate and the frictional unemployment rate together are 5 percent.
C)  cyclical unemployment rate is 4 percent.
D)  natural rate of unemployment will eventually increase.E) None of the above
F) B) and D)

Question 4

The economy has an annual inflation rate of 3.5 percent.It will take approximately how many years for the price level to double?

Accepted Answer

A)  10 years
B)  20 years
C)  25 years
D)  30 yearsE) All of the above
F) A) and B)

Question 5

The best example of a "frictionally unemployed" worker is one who

Accepted Answer

A)  reduces productivity by causing friction in a business.
B)  is laid off during a recessionary period in the economy.
C)  is in the process of voluntarily switching jobs.
D)  is discouraged and not actively seeking work.E) A) and D)
F) A) and C)

Question 6

The downward stickiness of wages serves like a in the labor market.

Accepted Answer

A)  price floor
B)  price ceiling
C)  demand determinant
D)  supply determinantE) C) and D)
F) A) and B)

Question 7

If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is

Accepted Answer

A)  2 percent.
B)  3 percent.
C)  4 percent.
D)  6 percent.E) B) and C)
F) A) and D) C

Question 8

Full-time homemakers and retirees are classified in the BLS data as

Accepted Answer

A)  employed.
B)  unemployed.
C)  part of the labor force.
D)  not in the labor force.E) None of the above
F) A) and B)

Question 9

Anyone who is not employed is classified as unemployed in the Bureau of Labor Statistics data on the labor force.

Accepted Answer

A) True 
 B)False  False

Question 10

With mild demand-pull inflation, the economy's output level would tend to be

Accepted Answer

A)  pulled up by the increase in total spending.
B)  pulled down by the decrease in total spending.
C)  pulled up by the rising unemployment.
D)  pulled down by the rising unemployment.E) None of the above
F) B) and D)

Question 11

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

Accepted Answer

A)  search unemployment
B)  wait unemployment
C)  cyclical unemployment
D)  frictional unemploymentE) A) and B)
F) A) and C) C

Question 12

Full-employment output is also called

Accepted Answer

A)  zero-unemployment output.
B)  equilibrium output.
C)  potential output.
D)  zero-savings output.E) A) and C)
F) All of the above

Question 13

(Consider This)  If wages were more downwardly flexible, then we would expect

Accepted Answer

A)  fewer layoffs during recessions.
B)  more layoffs during recessions.
C)  more severe recessions.
D)  no business cycle fluctuations.E) B) and C)
F) A) and B)

Question 14

If the rate of inflation is 12 percent per year, the price level will double in about

Accepted Answer

A)  4.1 years.
B)  5.8 years.
C)  10.2 years.
D)  12.4 years.E) None of the above
F) A) and B)

Question 15

Under which of the following circumstances would we observe the greatest increase in real income?

Accepted Answer

A)  Nominal income falls by 2 percent, and the price level falls by 10 percent.
B)  Nominal income rises by 8 percent, and the price level rises by 4 percent.
C)  Nominal income rises by 15 percent, and the price level rises by 12 percent.
D)  Nominal income falls by 4 percent, and the price level rises by 6 percent.E) B) and C)
F) A) and D)

Question 16

Cost-push inflation may be caused by

Accepted Answer

A)  a decline in per-unit production costs.
B)  a decrease in wage rates.
C)  a negative supply shock.
D)  an increase in resource availability.E) All of the above
F) A) and B)

Question 17

In response to slow recoveries after the Great Recession, several governments made the nominal interest rates in their nations turn negative with the intent of stimulating their economies.

Accepted Answer

A) True 
 B)False

Question 18

Inflation affects

Accepted Answer

A)  both the level and the distribution of income.
B)  neither the level nor the distribution of income.
C)  the distribution, but not the level, of income.
D)  the level, but not the distribution, of income.E) C) and D)
F) None of the above

Question 19

A recession is a decline in

Accepted Answer

A)  the inflation rate that lasts six months or longer.
B)  the unemployment rate that lasts six months or longer.
C)  real GDP that lasts six months or longer.
D)  potential GDP that lasts six months or longer.E) None of the above
F) All of the above

Question 20

A peak in the business cycle

Accepted Answer

A)  occurs when the unemployment rate is its greatest.
B)  occurs when the inflation rate is its lowest.
C)  is a temporary maximum point.
D)  is a temporary minimum point.E) A) and B)
F) B) and D)

Exam 29: Business Cycles, Unemployment, and Inflation

If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about

Correct AnswerverifiedShow Answer

"Depression means idleness.And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest." This quote describes some of the

Correct AnswerverifiedShow Answer

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the

Correct AnswerverifiedShow Answer

The economy has an annual inflation rate of 3.5 percent.It will take approximately how many years for the price level to double?

Correct AnswerverifiedShow Answer

The best example of a "frictionally unemployed" worker is one who

Correct AnswerverifiedShow Answer

The downward stickiness of wages serves like a in the labor market.

Correct AnswerverifiedShow Answer

If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is

Correct AnswerverifiedC

Full-time homemakers and retirees are classified in the BLS data as

Correct AnswerverifiedShow Answer

Anyone who is not employed is classified as unemployed in the Bureau of Labor Statistics data on the labor force.

Correct AnswerverifiedFalse

With mild demand-pull inflation, the economy's output level would tend to be

Correct AnswerverifiedShow Answer

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

Correct AnswerverifiedC

Full-employment output is also called

Correct AnswerverifiedShow Answer

(Consider This) If wages were more downwardly flexible, then we would expect

Correct AnswerverifiedShow Answer

If the rate of inflation is 12 percent per year, the price level will double in about

Correct AnswerverifiedShow Answer

Under which of the following circumstances would we observe the greatest increase in real income?

Correct AnswerverifiedShow Answer

Cost-push inflation may be caused by

Correct AnswerverifiedShow Answer

In response to slow recoveries after the Great Recession, several governments made the nominal interest rates in their nations turn negative with the intent of stimulating their economies.

Correct AnswerverifiedShow Answer

Inflation affects

Correct AnswerverifiedShow Answer

A recession is a decline in

Correct AnswerverifiedShow Answer

A peak in the business cycle

Correct AnswerverifiedShow Answer

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C

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False

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C

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