Question 1

The inflation rate measures the percentage growth rate of:

Accepted Answer

A)   Real GDP from the base period 1982-84 to a given year
B)   Real GDP from one year to the next
C)   The CPI from the base period 1982-84 to a given year
D)   The CPI from one year to the nextE) A) and D)
F) B) and C)

Question 2

Inflation rates in the U.S. from 2000 to 2012 were within the range of:

Accepted Answer

A)   0% - 4%
B)   3% - 8%
C)   8% - 15%
D)   12% - 25%E) A) and D)
F) A) and C)

Question 3

The full-employment unemployment rate for the United States economy is now generally considered to be:

Accepted Answer

A)   2 percent of the labor force
B)   4 percent of the labor force
C)   5 to 6 percent of the labor force
D)   8 to 9 percent of the labor forceE) All of the above
F) B) and C)

Question 4

Which of the following statistics can turn negative?

Accepted Answer

A)   Inflation rate
B)   GDP
C)   CPI
D)   Unemployment rateE) A) and B)
F) None of the above

Question 5

Deflation is when the inflation rate turns negative.

Accepted Answer

A) True 
 B)False

Question 6

The duration of a recession measures the depth of decline in real output during the recession.

Accepted Answer

A) True 
 B)False

Question 7

Potential GDP is the output that would be produced if the economy was experiencing:

Accepted Answer

A)   No unemployment
B)   Free markets and international trade
C)   No inflation
D)   Full employmentE) A) and D)
F) None of the above

Question 8

If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by:

Accepted Answer

A)   One percentage point
B)   Two percentage points
C)   Three percentage points
D)   Four percentage pointsE) B) and D)
F) C) and D)

Question 9

After the Great Recession of 2007-09 ended, real GDP increased:

Accepted Answer

A)   And unemployment fell in pace with the rising GDP
B)   But unemployment fell more rapidly than the increase in GDP
C)   But unemployment fell much slower than the increase in GDP
D)   But unemployment continued to rise for three more yearsE) B) and C)
F) None of the above

Question 10

Which of the following statements is correct?

Accepted Answer

A)   Frictional unemployment is the result of friction between labor and management over how best to perform work
B)   Structural unemployment is unemployment resulting from changes in the structure of consumer demand or technology
C)   Cyclical unemployment is also called wait unemployment because this unemployment depends on the timing of the business cycle
D)   Search unemployment is the broadest unemployment category because it covers all other types of unemploymentE) A) and B)
F) A) and C)

Question 11

Possible reasons why the level of employment remained lower than before the Great Recession began, even three years after the recession ended, includes the following, except:

Accepted Answer

A)   There was an extension of the period of eligibility for unemployment benefits
B)   Structural adjustments that were needed were happening very slowly, if at all
C)   Worries about rising labor costs were dampening the willingness of firms to increase hiring
D)   The production of output continued to decline, so that firms had no real need to increase hiringE) A) and B)
F) None of the above

Question 12

The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is:

Accepted Answer

A)   6 million
B)   9 million
C)   12 million
D)   24 millionE) All of the above
F) A) and B)

Question 13

If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inflation is about:

Accepted Answer

A)   9 percent
B)   10 percent
C)   11 percent
D)   12 percentE) A) and D)
F) A) and C)

Question 14

The one quirk that labor markets have, which helps explain why unemployment goes up so much in a recession is that:

Accepted Answer

A)   A price floor called a "minimum wage law" exists for the labor market
B)   Wages are flexible upward but "sticky" downward
C)   Firms are "demanders" of labor, rather than suppliers
D)   Machines could "replace" humans in the labor marketE) B) and C)
F) A) and B)

Question 15

Inflation caused by a rise in the prices of inputs is referred to as:

Accepted Answer

A)   Cost-push inflation
B)   Demand-pull inflation
C)   Unanticipated inflation
D)   HyperinflationE) A) and C)
F) C) and D)

Question 16

A statement that is often used to describe demand-pull inflation is:

Accepted Answer

A)   "A rising tide lifts all boats"
B)   "Money is easily earned, but not easily saved"
C)   "Too much money chasing too few goods"
D)   "There is no such thing as a free lunch"E) A) and B)
F) B) and C)

Question 17

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 levelE) B) and D)
F) A) and D)

Question 18

General sources of shocks that can cause business cycles include the following, except:

Accepted Answer

A)   Irregular occurrence of innovations and productivity changes
B)   Monetary factors and financial instability
C)   Unemployment jumps and production drops
D)   Political events, either domestic or globalE) B) and C)
F) A) and C)

Question 19

Search and wait unemployment is another way to describe:

Accepted Answer

A)   Noncyclical unemployment
B)   Cyclical unemployment
C)   Frictional unemployment
D)   Structural unemploymentE) A) and D)
F) A) and B)

Question 20

If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is:

Accepted Answer

A)   2 percent
B)   3 percent
C)   4 percent
D)   6 percentE) A) and B)
F) A) and C)

Exam 9: Business Cycles, Unemployment, and Inflation

After the Great Recession of 2007-09 ended, real GDP increased:

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The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is:

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Inflation rates in the U.S. from 2000 to 2012 were within the range of:

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The duration of a recession measures the depth of decline in real output during the recession.

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Search and wait unemployment is another way to describe:

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A statement that is often used to describe demand-pull inflation is:

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Which of the following statements is correct?

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If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is:

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The inflation rate measures the percentage growth rate of:

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The one quirk that labor markets have, which helps explain why unemployment goes up so much in a recession is that:

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Potential GDP is the output that would be produced if the economy was experiencing:

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General sources of shocks that can cause business cycles include the following, except:

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Inflation caused by a rise in the prices of inputs is referred to as:

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Which of the following statistics can turn negative?

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If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inflation is about:

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A trough in the business cycle occurs when:

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The full-employment unemployment rate for the United States economy is now generally considered to be:

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If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by:

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Deflation is when the inflation rate turns negative.

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Possible reasons why the level of employment remained lower than before the Great Recession began, even three years after the recession ended, includes the following, except:

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