Question 1

Updated question: What are two criticisms of the unemployment rate data? How do these criticisms
relate to overstating or understating the unemployment rate?

Accepted Answer

One criticism of the unemployment rate d...

Question 2

If the inﬂation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is

Accepted Answer

A)   1 percent.
B)   -1 percent.
C)   7 percent.
D)   0.75 percent.E) None of the above
F) A) and C)

Question 3

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

Question 4

(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 B)
F) A) and D)

Question 5

Demand-pull inﬂation

Accepted Answer

A)   occurs when prices of resources rise, pushing up costs and the price level.
B)   occurs when total spending exceeds the economy's ability to provide output at the existing price level.
C)   occurs only when the economy has reached its absolute production capacity.
D)   is also called cost-push inﬂation.E) B) and C)
F) A) and C)

Question 6

The natural rate of unemployment

Accepted Answer

A)   means that the economy will always operate at that rate.
B)   means that the economy will always realize its potential output.
C)   is equal to the total of frictional and structural unemployment.
D)   is a ﬁxed unemployment rate that does not change over time.E) A) and B)
F) A) and C)

Question 7

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

Accepted Answer

A)   inﬂation of 4 percent.
B)   inﬂation of 3.33 percent.
C)   deﬂation of 3.33 percent.
D)   deﬂation of 4 percent.E) B) and D)
F) B) and C)

Question 8

Inﬂation is a rise in

Accepted Answer

A)   the general level of prices over time.
B)   the standard of living over time.
C)   unemployment over time.
D)   real GDP over time.E) None of the above
F) A) and B)

Question 9

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will

Accepted Answer

A)   fall by about 20 percent.
B)   fall by about 2 percent.
C)   rise by about 15 percent.
D)   rise by about 25 percent.E) A) and D)
F) B) and C)

Question 10

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Accepted Answer

A)   gold market and stock market
B)   international trade and foreign exchange markets
C)   real estate and ﬁnancial markets
D)   consumer and government spendingE) A) and B)
F) All of the above

Question 11

Cross-country studies that bolster the "zero inﬂation" view indicate that lower rates of inﬂation are associated with

Accepted Answer

A)   lower rates of economic growth.
B)   higher rates of economic growth.
C)   recessions.
D)   high rates of unemployment.E) B) and C)
F) All of the above

Question 12

Which types of industries are hit hardest by a recession? Explain.

Accepted Answer

Firms in industries producing capital go...

Question 13

Describe the four phases of the business cycle.

Accepted Answer

The four phases of the business cycle ar...

Question 14

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are

Accepted Answer

A)   excluded from the labor force.
B)   included as part of the unemployed.
C)   treated the same as part-time workers.
D)   used to determine the size of the labor force.E) All of the above
F) A) and D)

Question 15

Cost-push inﬂation

Accepted Answer

A)   reduces real output.
B)   increases real output.
C)   reduces the unemployment rate.
D)   raises the natural rate of unemployment.E) A) and B)
F) None of the above

Question 16

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) All of the above
F) None of the above

Question 17

Updated question: What is the consumer price index? How does the government use the CPI?

Accepted Answer

The consumer price index is an index tha...

Question 18

Which of the following statements is correct?

Accepted Answer

A)   For a given real interest rate, the nominal interest must decrease if expected inﬂation increases.
B)   For a given nominal interest rate, the real interest will decrease if inﬂation decreases.
C)   For a given expected inﬂation rate, the nominal interest must increase if real interest decreases.
D)   For a given real interest rate, the nominal interest must increase if expected inﬂation increases.E) B) and C)
F) C) and D)

Question 19

During the past 10 years, the annual rate of inﬂation in the United States has averaged less than 1
percent.

Accepted Answer

A) True 
 B)False

Question 20

Cost-push inﬂation

Accepted Answer

A)   is caused by excessive total spending.
B)   shifts the nation's production possibilities curve leftward.
C)   moves the economy inward from its production possibilities curve.
D)   is a mixed blessing because it has positive effects on real output and employment.E) B) and D)
F) A) and C)

Exam 9: Business Cycles, Unemployment, and Inflation

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

Correct AnswerverifiedShow Answer

If the inﬂation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is

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Which types of industries are hit hardest by a recession? Explain.

Correct AnswerverifiedFirms in industries producing capital go...View AnswerShow Answer

The natural rate of unemployment

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Updated question: What is the consumer price index? How does the government use the CPI?

Correct AnswerverifiedThe consumer price index is an index tha...View AnswerShow Answer

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

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Describe the four phases of the business cycle.

Correct AnswerverifiedThe four phases of the business cycle ar...View AnswerShow Answer

Cost-push inﬂation

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Demand-pull inﬂation

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Which of the following statements is correct?

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Updated question: What are two criticisms of the unemployment rate data? How do these criticisms relate to overstating or understating the unemployment rate?

Correct AnswerverifiedOne criticism of the unemployment rate d...View AnswerShow Answer

Inﬂation is a rise in

Correct AnswerverifiedShow Answer

During the past 10 years, the annual rate of inﬂation in the United States has averaged less than 1 percent.

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In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are

Correct AnswerverifiedShow Answer

Cost-push inﬂation

Correct AnswerverifiedShow Answer

Cross-country studies that bolster the "zero inﬂation" view indicate that lower rates of inﬂation are associated with

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

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

Correct AnswerverifiedShow Answer

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Correct AnswerverifiedShow Answer

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will

Correct AnswerverifiedShow Answer

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Firms in industries producing capital go...
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The consumer price index is an index tha...
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The four phases of the business cycle ar...
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One criticism of the unemployment rate d...
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