Question 1

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

Question 2

Unanticipated inflation benefits debtors at the expense of creditors.

Accepted Answer

A) True 
 B)False

Question 3

Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the economy's real output.

Accepted Answer

A) True 
 B)False

Question 4

If the actual rate of unemployment is above the natural rate of unemployment, then potential GDP is

Accepted Answer

A) equal to the GDP gap. 
B) equal to actual GDP. 
C) less than actual GDP. 
D) greater than actual GDP. 
A) equal to the GDP gap. 
B) equal to actual GDP. 
C) less than actual GDP. 
D) greater than actual GDP.

Question 5

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about

Accepted Answer

A) 8 to 9 years. 
B) 10 to 11 years. 
C) 5 to 6 years. 
D) 19 to 20 years. 
A) 8 to 9 years. 
B) 10 to 11 years. 
C) 5 to 6 years. 
D) 19 to 20 years.

Question 6

The government agency responsible for collecting and reporting unemployment data is the

Accepted Answer

A) Bureau of Labor Statistics. 
B) Bureau of Unemployment. 
C) Bureau of Economic Analysis. 
D) Bureau of Economic Research. 
A) Bureau of Labor Statistics. 
B) Bureau of Unemployment. 
C) Bureau of Economic Analysis. 
D) Bureau of Economic Research.

Question 7

Okun's law indicates that for

Accepted Answer

A) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated. 
B) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 5 percent GDP gap is generated. 
C) a 5 percent GDP gap, a 1 percent increase in the natural unemployment rate is generated. 
D) a 2 percent GDP gap, a 2 percent increase in the actual unemployment rate is generated. 
A) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated. 
B) every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 5 percent GDP gap is generated. 
C) a 5 percent GDP gap, a 1 percent increase in the natural unemployment rate is generated. 
D) a 2 percent GDP gap, a 2 percent increase in the actual unemployment rate is generated.

Question 8

The unemployment rate in an economy is 6 percent.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 million. 
A) 6 million. 
B) 9 million. 
C) 12 million. 
D) 24 million.

Question 9

Unemployment rates in industrialized nations

Accepted Answer

A) all exceeded 10 percent at some point during the Great Recession. 
B) vary considerably from each other. 
C) tend to be about the same in each country and move together over time. 
D) are less subject to business cycle fluctuations than in nonindustrialized countries. 
A) all exceeded 10 percent at some point during the Great Recession. 
B) vary considerably from each other. 
C) tend to be about the same in each country and move together over time. 
D) are less subject to business cycle fluctuations than in nonindustrialized countries.

Question 10

In calculating the unemployment rate, part-time workers are

Accepted Answer

A) counted as unemployed because they are not working full time. 
B) counted as employed because they are receiving payment for work. 
C) used to determine the size of the labor force but not the unemployment rate. 
D) treated the same as "discouraged" workers who are not actively seeking employment. 
A) counted as unemployed because they are not working full time. 
B) counted as employed because they are receiving payment for work. 
C) used to determine the size of the labor force but not the unemployment rate. 
D) treated the same as "discouraged" workers who are not actively seeking employment.

Question 11

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. 
A) 5.5 percent. 
B) 4.7 percent. 
C) 3.5 percent. 
D) 2.8 percent.

Question 12

Recently, a teachers' union argued that the standard of living of teachers working for the school district was falling.The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining.Could the union statement be correct?

Accepted Answer

A) No, because real income may rise if price increases are proportionately greater than the increases in nominal income. 
B) Yes, because real income may fall if price increases are proportionately smaller than the increases in nominal income. 
C) Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income. 
D) No, because real income may rise if price increases are proportionately greater than declines in nominal income. 
A) No, because real income may rise if price increases are proportionately greater than the increases in nominal income. 
B) Yes, because real income may fall if price increases are proportionately smaller than the increases in nominal income. 
C) Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income. 
D) No, because real income may rise if price increases are proportionately greater than declines in nominal income.

Question 13

In the United States, business cycles have occurred against a backdrop of a long-run trend of

Accepted Answer

A) declining unemployment. 
B) stagnant productivity growth. 
C) rising real GDP. 
D) rising inflation. 
A) declining unemployment. 
B) stagnant productivity growth. 
C) rising real GDP. 
D) rising inflation.

Question 14

Which of the following would most likely move the economy into a recession in the short term?

Accepted Answer

A) invention of a new product that most consumers want to buy 
B) innovations in management that enhance worker productivity 
C) the central bank printing less money than was anticipated 
D) Congress passing a reduction in personal income tax rates 
A) invention of a new product that most consumers want to buy 
B) innovations in management that enhance worker productivity 
C) the central bank printing less money than was anticipated 
D) Congress passing a reduction in personal income tax rates

Question 15

In Year 1, the price level was 120 and the average nominal income was $30,000.In Year 2, the price level was 125 and the average nominal level of income was $32,000.What happened to real income from Year 1 to Year 2?

Accepted Answer

A) It fell by $400. 
B) It rose by $400. 
C) It rose by $600. 
D) It rose by $2,000. 
A) It fell by $400. 
B) It rose by $400. 
C) It rose by $600. 
D) It rose by $2,000.

Question 16

The amount by which actual GDP falls short of potential GDP is one measure of the

Accepted Answer

A) natural rate of unemployment. 
B) macroeconomic cost of unemployment. 
C) difference between real and nominal GDP. 
D) potential to produce outside the nation's PPC. 
A) natural rate of unemployment. 
B) macroeconomic cost of unemployment. 
C) difference between real and nominal GDP. 
D) potential to produce outside the nation's PPC.

Question 17

A recession is defined as a situation where the average price level in the economy is increasing.

Accepted Answer

A) True 
 B)False

Question 18

Demand-pull inflation

Accepted Answer

A) occurs when total spending in the economy is excessive. 
B) is measured differently than cost-push inflation. 
C) can be present even during an economic depression. 
D) is also called "hyperinflation." 
A) occurs when total spending in the economy is excessive. 
B) is measured differently than cost-push inflation. 
C) can be present even during an economic depression. 
D) is also called "hyperinflation."

Question 19

The CPI compiled by the Bureau of Labor Statistics is used in the computations for

Accepted Answer

A) the unemployment rate. 
B) the inflation rate. 
C) the interest rate. 
D) the foreign exchange rate. 
A) the unemployment rate. 
B) the inflation rate. 
C) the interest rate. 
D) the foreign exchange rate.

Question 20

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. 
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.

Exam 29: Business Cycles, Unemployment, and Inflation

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

Unanticipated inflation benefits debtors at the expense of creditors.

Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the economy's real output.

If the actual rate of unemployment is above the natural rate of unemployment, then potential GDP is

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about

The government agency responsible for collecting and reporting unemployment data is the

Okun's law indicates that for

The unemployment rate in an economy is 6 percent.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

Unemployment rates in industrialized nations

In calculating the unemployment rate, part-time workers are

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

In the United States, business cycles have occurred against a backdrop of a long-run trend of

Which of the following would most likely move the economy into a recession in the short term?

In Year 1, the price level was 120 and the average nominal income was $30,000.In Year 2, the price level was 125 and the average nominal level of income was $32,000.What happened to real income from Year 1 to Year 2?

The amount by which actual GDP falls short of potential GDP is one measure of the

A recession is defined as a situation where the average price level in the economy is increasing.

Demand-pull inflation

The CPI compiled by the Bureau of Labor Statistics is used in the computations for

Which of the following statements is correct?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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