Question 1

Inflation is undesirable because it:

Accepted Answer

A)   arbitrarily redistributes real income and wealth.
B)   invariably leads to hyperinflation.
C)   usually is accompanied by declining real GDP.
D)   reduces everyone's standard of living.E) None of the above
F) B) and D)

Question 2

If both the real interest rate and the nominal interest rate are 3 percent,then the:

Accepted Answer

A)   inflation premium is zero.
B)   real GDP must exceed the nominal GDP.
C)   nominal GDP must exceed the real GDP.
D)   inflation premium also is 3 percent.E) B) and C)
F) A) and D)

Question 3

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 unemployment.E) A) and B)
F) All of the above

Question 4

Recently a labor union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Accepted Answer

A)   Yes,because when you have a large nominal income,your standard of living automatically increases.
B)   No,because real income may fall if prices increase more proportionately than the increase in nominal income.
C)   No,because real income may fall if prices increase less proportionately than the increases in nominal income.
D)   Yes,because real income may fall if prices increase less proportionately than the increases in nominal income.E) B) and D)
F) B) and C)

Question 5

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) B) and C)
F) None of the above

Question 6

In response to the Great Recession,Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks.While this was done to help workers financially and to help the economy by stimulating demand,it had what unintended consequence?

Accepted Answer

A)   It significantly increased the rate of inflation.
B)   It drove the unemployment rate lower than the lowest prerecession rate.
C)   It encouraged millions of unemployed workers to return to school,driving up projected future rates of labor productivity.
D)   It prompted inefficiently long searches that kept the unemployment rate higher.E) None of the above
F) C) and D)

Question 7

Following the Great Recession that ended mid-2009,by December 2012:

Accepted Answer

A)   employment had reached prerecession levels.
B)   employment was still 3.4 million below prerecession levels.
C)   the unemployment rate was still around 10 percent.
D)   unemployment had fallen below its lowest prerecession rate.E) A) and C)
F) A) and B)

Question 8

If the price level doubled in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Accepted Answer

A) True 
 B)False

Question 9

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 B)

Question 10

(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 11

(Consider This) Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?

Accepted Answer

A)   Inflation will cause workers' real income to decline,encouraging them to work harder to find more and better employment.
B)   Higher prices will increase firm profitability,making them want to hire more workers.
C)   Higher prices will correspond with higher wages,which will stimulate demand and employment.
D)   Anticipating this inflation,consumers will increase spending to beat the price increases,increasing demand,output,and employment.E) All of the above
F) A) and B)

Question 12

The aggregate cost of unemployment can be measured by the:

Accepted Answer

A)   amount by which actual GDP exceeds potential GDP.
B)   amount by which potential GDP exceeds actual GDP.
C)   excess of real GDP over nominal GDP.
D)   excess of nominal GDP over real GDP.E) B) and C)
F) A) and D)

Question 13

If the Consumer Price Index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

Accepted Answer

A)   11 percent.
B)   33 percent.
C)   91 percent.
D)   10 percent.E) A) and C)
F) A) and B)

Question 14

Rising per-unit production costs are most directly associated with:

Accepted Answer

A)   frictional unemployment.
B)   structural unemployment.
C)   demand-pull inflation.
D)   cost-push inflation.E) B) and D)
F) A) and D)

Question 15

An unexpected increase in total spending will cause an increase in GDP:

Accepted Answer

A)   if prices are sticky.
B)   if prices are fully flexible.
C)   regardless of whether prices are sticky or fully flexible.
D)   only if prices are stuck in the long term.E) All of the above
F) B) and D)

Question 16

In the depth of the Great Depression,the unemployment rate in the United States was about:

Accepted Answer

A)   15 percent.
B)   33 percent.
C)   25 percent.
D)   40 percent.E) None of the above
F) A) and B)

Question 17

Which of the following would most likely occur during the expansionary phase of the business cycle?

Accepted Answer

A)   Demand-pull inflation.
B)   Cost-push inflation.
C)   Structural inflation.
D)   Frictional inflation.E) None of the above
F) A) and B)

Question 18

Answer the question on the basis of the following information about a hypothetical economy: Full-Time Employed =  80\mathbf { 8 0 }80 
Part-Time Employed = 25
Unemployed  =15= 15=15 
Discouraged Workers = 5
Members of Underground Economy = 6
Consumer Price Index  =110= 110=110  Refer to the given information.The rate of inflation:

Accepted Answer

A)   is 110 percent.
B)   is 10 percent.
C)   is 0 percent.
D)   cannot be determined from the data. E) A) and C)
F) None of the above

Question 19

Unlike demand-pull inflation,cost-push inflation:

Accepted Answer

A)   is self-limiting.
B)   drives up the price level.
C)   increases nominal income.
D)   increases real income.E) B) and D)
F) A) and D)

Question 20

Inflation means that:

Accepted Answer

A)   all prices are rising,but at different rates.
B)   all prices are rising and at the same rate.
C)   prices on average are rising,although some particular prices may be falling.
D)   real incomes are rising.E) None of the above
F) B) and D)

Exam 28: Business Cycles, Unemployment, and Inflation

Recently a labor union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Correct Answer
verified

Rising per-unit production costs are most directly associated with:

Correct Answer
verified

The aggregate cost of unemployment can be measured by the:

Correct Answer
verified

Which of the following would most likely occur during the expansionary phase of the business cycle?

Correct Answer
verified

Cost-of-living adjustment clauses (COLAs) :

Correct Answer
verified

If both the real interest rate and the nominal interest rate are 3 percent,then the:

Correct Answer
verified

(Consider This) Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?

Correct Answer
verified

If the Consumer Price Index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

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

Correct Answer
verified

Inflation is undesirable because it:

Correct Answer
verified

Unlike demand-pull inflation,cost-push inflation:

Correct Answer
verified

In the depth of the Great Depression,the unemployment rate in the United States was about:

Correct Answer
verified

An unexpected increase in total spending will cause an increase in GDP:

Correct Answer
verified

Inflation means that:

Correct Answer
verified

If the price level doubled in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Correct Answer
verified

Following the Great Recession that ended mid-2009,by December 2012:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

In response to the Great Recession,Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks.While this was done to help workers financially and to help the economy by stimulating demand,it had what unintended consequence?

Correct Answer
verified

Exam 28: Business Cycles, Unemployment, and Inflation

Recently a labor union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Correct AnswerverifiedShow Answer

Rising per-unit production costs are most directly associated with:

Correct AnswerverifiedShow Answer

The aggregate cost of unemployment can be measured by the:

Correct AnswerverifiedShow Answer

Which of the following would most likely occur during the expansionary phase of the business cycle?

Correct AnswerverifiedShow Answer

Cost-of-living adjustment clauses (COLAs) :

Correct AnswerverifiedShow Answer

If both the real interest rate and the nominal interest rate are 3 percent,then the:

Correct AnswerverifiedShow Answer

(Consider This) Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?

Correct AnswerverifiedShow Answer

If the Consumer Price Index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

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

Correct AnswerverifiedShow Answer

Inflation is undesirable because it:

Correct AnswerverifiedShow Answer

Unlike demand-pull inflation,cost-push inflation:

Correct AnswerverifiedShow Answer

In the depth of the Great Depression,the unemployment rate in the United States was about:

Correct AnswerverifiedShow Answer

An unexpected increase in total spending will cause an increase in GDP:

Correct AnswerverifiedShow Answer

Inflation means that:

Correct AnswerverifiedShow Answer

If the price level doubled in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Correct AnswerverifiedShow Answer

Following the Great Recession that ended mid-2009,by December 2012:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In response to the Great Recession,Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks.While this was done to help workers financially and to help the economy by stimulating demand,it had what unintended consequence?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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