Question 1

Cost-of-living adjustment clauses (COLAs)

Accepted Answer

A)   invalidate the "rule of 70."
B)   apply only to demand-pull inﬂation.
C)   increase the gap between nominal and real income.
D)   tie wage increases to changes in the price level.E) B) and C)
F) A) and D)

Question 2

"Full employment" refers to the situation when there is

Accepted Answer

A)   100 percent employment of the labor force.
B)   0 percent unemployment rate.
C)   no frictional or structural unemployment.
D)   no cyclical unemployment.E) None of the above
F) B) and C)

Question 3

During a period of hyperinﬂation,

Accepted Answer

A)   creditors gain because their loans are repaid with dollars of higher value.
B)   people tend to hold goods rather than money.
C)   income is redistributed away from borrowers.
D)   the real value of the national currency rises.E) None of the above
F) A) and D)

Question 4

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 C)
F) B) and C)

Question 5

If the GDP gap is positive, then

Accepted Answer

A)   the inﬂation rate is falling.
B)   the unemployment rate is rising.
C)   potential GDP is greater than actual GDP.
D)   actual GDP is greater than potential GDP.E) C) and D)
F) A) and D)

Question 6

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will

Accepted Answer

A)   fall by about 1 percent.
B)   remain constant.
C)   rise by about 4 percent.
D)   rise by about 1 percent.E) C) and D)
F) A) and B)

Question 7

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called

Accepted Answer

A)   frictional unemployment.
B)   structural unemployment.
C)   cyclical unemployment.
D)   compositional unemployment.E) C) and D)
F) A) and B)

Question 8

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

Accepted Answer

A)   hyperinﬂation
B)   deﬂation
C)   rising interest rates
D)   rising inﬂationE) B) and C)
F) A) and D)

Question 9

Unanticipated inﬂation helps some groups in the economy.

Accepted Answer

A) True 
 B)False

Question 10

Which statement is correct?

Accepted Answer

A)   All sectors of the economy are affected to similar degrees by business ﬂuctuations.
B)   Real output and employment generally show little variance over the business cycle.
C)   The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle.
D)   Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy.E) B) and D)
F) A) and B)

Question 11

Some economists prefer to use the term business ﬂuctuations rather than business cycles to describe the historical growth record in the United States because

Accepted Answer

A)   cycles include a trough phase, while ﬂuctuations do not.
B)   cycles implies regularity, while ﬂuctuations does not.
C)   ﬂuctuations include an expansion phase, while cycles do not.
D)   ﬂuctuations are relatively predictable events.E) All of the above
F) A) and B)

Question 12

The unemployment rate is interpreted as the percentage of the

Accepted Answer

A)   adult population who are unemployed.
B)   labor force that are not employed.
C)   able-bodied population who are not working.
D)   workforce that have been laid off.E) B) and D)
F) All of the above

Question 13

A large negative GDP gap implies

Accepted Answer

A)   an excess of imports over exports.
B)   a low rate of unemployment.
C)   a high rate of unemployment.
D)   a sharply rising price level.E) C) and D)
F) A) and B)

Question 14

Core inﬂation measures

Accepted Answer

A)   changes in the prices of the most commonly used goods, including food and energy.
B)   underlying changes in the CPI, after accounting for the price volatility of high-tech goods.
C)   underlying increases in the CPI after removing volatile food and energy prices.
D)   changes in key input prices.E) None of the above
F) All of the above

Question 15

Which of the following statements is true about causes of business cycle ﬂuctuations?

Accepted Answer

A)   Economists all agree that supply shocks are the cause of most business cycle ﬂuctuations.
B)   Economists all agree that productivity shocks are the cause of most business cycle changes.
C)   Economists all agree that monetary changes are primarily responsible for business cycle ﬂuctuations.
D)   There are a wide range of theories as to the underlying causes of business cycle movements.E) A) and C)
F) All of the above

Question 16

Which phase of the business cycle would be most closely associated with an economic contraction?

Accepted Answer

A)   peak
B)   recession
C)   trough
D)   recoveryE) None of the above
F) A) and B)

Question 17

Between 1980 and 2000, the price level approximately doubled. The average annual rate of inﬂation over this 20-year period was about

Accepted Answer

A)   5.5 percent.
B)   4.7 percent.
C)   3.5 percent.
D)   2.8 percent.E) B) and D)
F) All of the above

Question 18

Search unemployment is another way to describe

Accepted Answer

A)   noncyclical unemployment.
B)   cyclical unemployment.
C)   frictional unemployment.
D)   structural unemployment.E) A) and B)
F) A) and D)

Exam 9: Business Cycles, Unemployment, and Inflation

Which statement is correct?

Correct Answer
verified

The unemployment rate is interpreted as the percentage of the

Correct Answer
verified

Some economists prefer to use the term business ﬂuctuations rather than business cycles to describe the historical growth record in the United States because

Correct Answer
verified

Cost-of-living adjustment clauses (COLAs)

Correct Answer
verified

Unanticipated inﬂation helps some groups in the economy.

Correct Answer
verified

Search unemployment is another way to describe

Correct Answer
verified

Between 1980 and 2000, the price level approximately doubled. The average annual rate of inﬂation over this 20-year period was about

Correct Answer
verified

During a period of hyperinﬂation,

Correct Answer
verified

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will

Correct Answer
verified

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 Answer
verified

"Full employment" refers to the situation when there is

Correct Answer
verified

Which of the following statements is true about causes of business cycle ﬂuctuations?

Correct Answer
verified

Core inﬂation measures

Correct Answer
verified

A large negative GDP gap implies

Correct Answer
verified

Which phase of the business cycle would be most closely associated with an economic contraction?

Correct Answer
verified

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

Correct Answer
verified

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called

Correct Answer
verified

If the GDP gap is positive, then

Correct Answer
verified

Exam 9: Business Cycles, Unemployment, and Inflation

Which statement is correct?

Correct AnswerverifiedShow Answer

The unemployment rate is interpreted as the percentage of the

Correct AnswerverifiedShow Answer

Some economists prefer to use the term business ﬂuctuations rather than business cycles to describe the historical growth record in the United States because

Correct AnswerverifiedShow Answer

Cost-of-living adjustment clauses (COLAs)

Correct AnswerverifiedShow Answer

Unanticipated inﬂation helps some groups in the economy.

Correct AnswerverifiedShow Answer

Search unemployment is another way to describe

Correct AnswerverifiedShow Answer

Between 1980 and 2000, the price level approximately doubled. The average annual rate of inﬂation over this 20-year period was about

Correct AnswerverifiedShow Answer

During a period of hyperinﬂation,

Correct AnswerverifiedShow Answer

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will

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

"Full employment" refers to the situation when there is

Correct AnswerverifiedShow Answer

Which of the following statements is true about causes of business cycle ﬂuctuations?

Correct AnswerverifiedShow Answer

Core inﬂation measures

Correct AnswerverifiedShow Answer

A large negative GDP gap implies

Correct AnswerverifiedShow Answer

Which phase of the business cycle would be most closely associated with an economic contraction?

Correct AnswerverifiedShow Answer

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

Correct AnswerverifiedShow Answer

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called

Correct AnswerverifiedShow Answer

If the GDP gap is positive, then

Correct AnswerverifiedShow Answer

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