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Exam 9: Business Cycles, Unemployment, and Inflation

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Question 1

Multiple Choice

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Which of the following is a correct statement?

A) It is relatively easy to distinguish between cost-push and demand-pull inflation even if you don't know the source of the inflation.
B) A supply shock will cause a variation of demand-pull inflation that can lead to hyperinflation.
C) Demand-pull inflation will continue so long as there is excess total spending in the economy.
D) Demand-pull inflation is usually accompanied by higher unemployment rates.

E) B) and C)
F) C) and D)

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C

Question 2

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If the total population is 175 million, the labor force is 100 million, and 89 million workers are employed, then the unemployment rate is 11 percent.

A) True
B) False

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Question 3

Multiple Choice

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The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1) Mollie just graduated from college and is now looking for work. She has had three job interviews in The past month but still has not gotten a job offer. 2) George used to work in an automotive assembly plant. He was laid off six months ago as the Economy weakened. He expects to return to work in a few months when national economic Conditions improve. 3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until She lost her job last year when the Federal government cut defense spending. She has been Looking for similar work for a year, but no company seems interested in her aircraft design skills. 4) 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 is cyclically unemployed?

Which of the following would most likely concern policymakers?

Unanticipated inflation

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6 percent. But if the rate of inflation was anticipated to be 4 percent, the bank would most likely Charge the firm an annual interest rate of

How does the size of the 2007-2009 recession compare with the Great Depression of the 1930s?

What is hyperinflation? What is its cause?

"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

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1) Mollie just graduated from college and is now looking for work. She has had three job interviews in The past month but still has not gotten a job offer. 2) George used to work in an automotive assembly plant. He was laid off six months ago as the Economy weakened. He expects to return to work in a few months when national economic Conditions improve. 3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until She lost her job last year when the Federal government cut defense spending. She has been Looking for similar work for a year, but no company seems interested in her aircraft design skills. 4) 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?

$\begin{array} { | l | r | } \hline \text { Full-time Employed } & 80 \\\hline \text { Part-time Employed } & 25 \\\hline \text { Unemployed } & 15 \\\hline \text { Discouraged Workers } & 5 \\\hline \text { Members of Underground Economy } & 6 \\\hline \text { Consumer Price Index } & 110 \\\hline\end{array}$ Refer to the given information about a hypothetical economy. The rate of in?ation

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

What is "demand-pull" inflation?

The natural rate of unemployment in the United States today is about 4 to 5 percent.

The relationship between the size of the negative GDP gap and the unemployment rate is

A college graduate using the summer following graduation to search for a job would best be classified as

When inflation occurs,

Explain the difference between real and nominal income. How can you get an approximation of the percentage change in real income from one time period to another?

The unemployed are those people who