Question 1

(Consider This)  The feudal practice of clipping coins illustrates the idea of

Accepted Answer

A)  taxation through inflation.
B)  good money driving out bad money.
C)  the derived demand for resources.
D)  cost-push inflation.E) B) and C)
F) None of the above

Question 2

The full-employment rate of unemployment is also called the

Accepted Answer

A)  potential rate of unemployment.
B)  cyclical rate of unemployment.
C)  frictional rate of unemployment.
D)  natural rate of unemployment.E) All of the above
F) C) and D)

Question 3

The United States' economy is considered to be at full employment when

Accepted Answer

A)  about 5 to 6 percent of the total population is unemployed.
B)  90 percent of the labor force is employed.
C)  about 5 to 6 percent of the labor force is unemployed.
D)  100 percent of the labor force is employed.E) A) and B)
F) All of the above

Question 4

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, actual GDP is

Accepted Answer

A)  $300 billion.
B)  $30 billion.
C)  $360 billion.
D)  $630 billion.E) A) and B)
F) None of the above

Question 5

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are

Accepted Answer

A)  military goods and capital goods.
B)  services and nondurable consumer goods.
C)  clothing and education.
D)  capital goods and durable consumer goods.E) B) and D)
F) A) and C)

Question 6

Ricardo lost his job last year when his company downsized and laid off middle-level managers.He tried to find another job for a year but was unsuccessful and quit looking for work.Which individual would be classified as a discouraged worker?

Accepted Answer

A)  Mollie
B)  George
C)  Jeanette
D)  RicardoE) C) and D)
F) None of the above

Question 7

When oil and energy prices rise, the economy tends to experience

Accepted Answer

A)  natural inflation.
B)  demand-pull inflation.
C)  cost-push inflation.
D)  unanticipated inflation.E) A) and C)
F) C) and D)

Question 8

Demand-pull inflation is usually accompanied by low unemployment and higher real output.

Accepted Answer

A) True 
 B)False

Question 9

Inflation means that

Accepted Answer

A)  all prices are rising, but at different rates.
B)  all prices are rising at approximately the same rate.
C)  prices on average are rising, although some particular prices may be falling.
D)  real incomes are rising.E) B) and C)
F) All of the above

Question 10

Official unemployment statistics

Accepted Answer

A)  understate unemployment because individuals receiving unemployment compensation are counted as employed.
B)  understate unemployment because discouraged workers are not counted as unemployed.
C)  include cyclical and structural unemployment but not frictional unemployment.
D)  overstate unemployment because workers who are involuntarily working part time are counted as being employed.Difficulty: 02 MediumE) B) and D)
F) A) and D)

Question 11

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is

Accepted Answer

A)  3 percent.
B)  6 percent.
C)  7 percent.
D)  53 percent.E) C) and D)
F) B) and D)

Question 12

You are given the following information about the economy: the nominal interest rate = 8 percent, and the real rate of interest = 6 percent.The inflation premium is

Accepted Answer

A)  2 percent.
B)  6 percent.
C)  8 percent.
D)  14 percent.E) A) and D)
F) C) and D)

Question 13

(Consider This)  Which of the following statements is most accurate about economistsâ€™ concerns about deflation?

Accepted Answer

A)  Economists are not concerned about deflation because consumers benefit from the lower prices.
B)  Central banks will encourage deflation by keeping interest rates too low.
C)  Deflation can lead to bankruptcies that trigger a downward deflationary spiral.
D)  Deflation will make a nationâ€™s exports less attractive to foreign buyers.E) A) and B)
F) C) and D)

Question 14

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the

Accepted Answer

A)  level of total spending.
B)  rate of unemployment.
C)  rate of inflation.
D)  stock market price indexes.E) A) and D)
F) C) and D)

Question 15

(Last Word)  Which of the following statements best represents economistsâ€™ predictions about recovery from the Great Recession?

Accepted Answer

A)  Recovery would occur quickly because of continued rapid advances in technology.
B)  Recovery would take longer than usual because the recession was preceded by a credit bubble.
C)  Recovery of output growth would be rapid, but employment growth would be slow.
D)  Bursting of the credit bubble would facilitate recovery by creating greater price flexibility.E) A) and B)
F) B) and D)

Question 16

A trough in the business cycle occurs when

Accepted Answer

A)  cyclical unemployment is at a minimum point.
B)  employment and output reach their lowest levels.
C)  the natural rate of unemployment is at a minimum point.
D)  the inflation rate is at its lowest level.E) All of the above
F) C) and D)

Question 17

(Consider This)  Which of the following best explains why unemployment rises significantly during a recession?

Accepted Answer

A)  Wages are sticky both upward and downward.
B)  Wages are flexible both upward and downward.
C)  Wages are flexible upward but sticky downward.
D)  Wages are sticky upward but flexible downward.E) A) and C)
F) A) and D)

Question 18

Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is

Accepted Answer

A)  anticipated inflation.
B)  demand-pull inflation.
C)  cost-push inflation.
D)  unanticipated inflation.E) B) and C)
F) None of the above

Question 19

A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment?

Accepted Answer

A)  wait
B)  cyclical
C)  frictional
D)  structuralE) None of the above
F) B) and D)

Question 20

Compared to other industrial nations, unemployment rates in the United States

Accepted Answer

A)  are significantly higher.
B)  are significantly lower.
C)  are significantly higher than those in Europe and significantly lower than those in Japan.
D)  tend to fall somewhere in the middle over time.E) A) and B)
F) A) and C)

Exam 29: Business Cycles, Unemployment, and Inflation

Ricardo lost his job last year when his company downsized and laid off middle-level managers.He tried to find another job for a year but was unsuccessful and quit looking for work.Which individual would be classified as a discouraged worker?

Correct AnswerverifiedShow Answer

(Consider This) Which of the following best explains why unemployment rises significantly during a recession?

Correct AnswerverifiedShow Answer

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, actual GDP is

Correct AnswerverifiedShow Answer

A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment?

Correct AnswerverifiedShow Answer

Inflation means that

Correct AnswerverifiedShow Answer

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is

Correct AnswerverifiedShow Answer

Compared to other industrial nations, unemployment rates in the United States

Correct AnswerverifiedShow Answer

You are given the following information about the economy: the nominal interest rate = 8 percent, and the real rate of interest = 6 percent.The inflation premium is

Correct AnswerverifiedShow Answer

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are

Correct AnswerverifiedShow Answer

Demand-pull inflation is usually accompanied by low unemployment and higher real output.

Correct AnswerverifiedShow Answer

The United States' economy is considered to be at full employment when

Correct AnswerverifiedShow Answer

Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is

Correct AnswerverifiedShow Answer

Official unemployment statistics

Correct AnswerverifiedShow Answer

When oil and energy prices rise, the economy tends to experience

Correct AnswerverifiedShow Answer

(Last Word) Which of the following statements best represents economistsâ€™ predictions about recovery from the Great Recession?

Correct AnswerverifiedShow Answer

The full-employment rate of unemployment is also called the

Correct AnswerverifiedShow Answer

A trough in the business cycle occurs when

Correct AnswerverifiedShow Answer

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the

Correct AnswerverifiedShow Answer

(Consider This) The feudal practice of clipping coins illustrates the idea of

Correct AnswerverifiedShow Answer

(Consider This) Which of the following statements is most accurate about economistsâ€™ concerns about deflation?

Correct AnswerverifiedShow Answer

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