Question 1

Which of the following groups has traditionally benefited from unanticipated inflation?

Accepted Answer

A) consumers 
B) business firms 
C) the Federal Government 
D) the foreign sector 
A) consumers 
B) business firms 
C) the Federal Government 
D) the foreign sector

Question 2

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. 
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.

Question 3

A nation has a population of 260 million people.Of these, 60 million are retired, in the military, institutionalized, or under 16 years old.There are 188 million who are employed and 12 million who are unemployed.What is the unemployment rate?

Accepted Answer

A) 4 percent 
B) 6 percent 
C) 9 percent 
D) 27 percent 
A) 4 percent 
B) 6 percent 
C) 9 percent 
D) 27 percent

Question 4

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is

Accepted Answer

A) $510 billion. 
B) $490 billion. 
C) $10 billion. 
D) $990 billion. 
A) $510 billion. 
B) $490 billion. 
C) $10 billion. 
D) $990 billion.

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. 
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.

Question 6

A worker would be hurt least by inflation when the

Accepted Answer

A) worker anticipates inflation and increases savings at the bank. 
B) worker is protected by a cost-of-living adjustment clause in an employment contract. 
C) worker is protected by fixed annual increases in wages and benefits in an employment contract. 
D) government increases the level of Social Security retirement benefits to correct for the effects of anticipated inflation. 
A) worker anticipates inflation and increases savings at the bank. 
B) worker is protected by a cost-of-living adjustment clause in an employment contract. 
C) worker is protected by fixed annual increases in wages and benefits in an employment contract. 
D) government increases the level of Social Security retirement benefits to correct for the effects of anticipated inflation.

Question 7

Cost-push inflation tends to be characterized by all of the following, except

Accepted Answer

A) rising general price level. 
B) falling real output. 
C) being automatically self-limiting. 
D) falling unemployment. 
A) rising general price level. 
B) falling real output. 
C) being automatically self-limiting. 
D) falling unemployment.

Question 8

Unanticipated inflation

Accepted Answer

A) reduces the real burden of the public debt to the federal government. 
B) hurts borrowers and helps lenders. 
C) hurts people whose sole source of income is from Social Security benefits. 
D) helps savers. 
A) reduces the real burden of the public debt to the federal government. 
B) hurts borrowers and helps lenders. 
C) hurts people whose sole source of income is from Social Security benefits. 
D) helps savers.

Question 9

Part-time workers who want full-time work are counted as

Accepted Answer

A) unemployed, and therefore the official unemployment rate may overstate the level of unemployment. 
B) unemployed, and therefore the official unemployment rate may understate the level of unemployment. 
C) fully employed, and therefore the official unemployment rate may overstate the level of unemployment. 
D) fully employed, and therefore the official unemployment rate may understate the level of unemployment. 
A) unemployed, and therefore the official unemployment rate may overstate the level of unemployment. 
B) unemployed, and therefore the official unemployment rate may understate the level of unemployment. 
C) fully employed, and therefore the official unemployment rate may overstate the level of unemployment. 
D) fully employed, and therefore the official unemployment rate may understate the level of unemployment.

Question 10

Ricardo lost his job last year when his company downsized and laid off middle-level managers.He tried to find another job for a year but was unsuccessful and quit looking for work.Which individual is structurally unemployed?

Accepted Answer

A) Mollie 
B) George 
C) Jeanette 
D) Ricardo 
A) Mollie 
B) George 
C) Jeanette 
D) Ricardo

Question 11

Lenders will be willing to reduce the nominal interest rates on loans if the expected inflation increases.

Accepted Answer

A) True 
 B)False

Question 12

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. 
A) reduces real output. 
B) increases real output. 
C) reduces the unemployment rate. 
D) raises the natural rate of unemployment.

Question 13

At the economy's natural rate of unemployment,

Accepted Answer

A) the economy achieves its potential output. 
B) there is only a relatively small amount of cyclical unemployment. 
C) only frictional unemployment exists. 
D) only structural unemployment exists. 
A) the economy achieves its potential output. 
B) there is only a relatively small amount of cyclical unemployment. 
C) only frictional unemployment exists. 
D) only structural unemployment exists.

Question 14

(Last Word) Which of the following statements is true about employment during the Great Recession?

Accepted Answer

A) Employment for all age groups fell. 
B) Older workers lost jobs at a higher rate than younger workers. 
C) Women lost jobs at a higher rate than men. 
D) The number of jobs held by people 55 or older increased. 
A) Employment for all age groups fell. 
B) Older workers lost jobs at a higher rate than younger workers. 
C) Women lost jobs at a higher rate than men. 
D) The number of jobs held by people 55 or older increased.

Question 15

The percentage change in real income can be approximated by subtracting the percentage change in the price level from the percentage change in nominal income.

Accepted Answer

A) True 
 B)False

Question 16

If the natural rate of unemployment was 6 percent, the current unemployment rate was 10 percent, and the potential GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed

Accepted Answer

A) $160 billion in output not produced. 
B) $240 billion in output not produced. 
C) $320 billion in output not produced. 
D) $480 billion in output not produced. 
A) $160 billion in output not produced. 
B) $240 billion in output not produced. 
C) $320 billion in output not produced. 
D) $480 billion in output not produced.

Question 17

Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are

Accepted Answer

A) lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries. 
B) higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry. 
C) higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry. 
D) lower, because skilled workers tend to be primarily employed by government at the local, state, and federal levels. 
A) lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries. 
B) higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry. 
C) higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry. 
D) lower, because skilled workers tend to be primarily employed by government at the local, state, and federal levels.

Question 18

If actual GDP is less than potential GDP,

Accepted Answer

A) potential GDP will fall. 
B) the price level will rise. 
C) investment spending will fall. 
D) the actual unemployment rate will be higher than the natural unemployment rate. 
A) potential GDP will fall. 
B) the price level will rise. 
C) investment spending will fall. 
D) the actual unemployment rate will be higher than the natural unemployment rate.

Question 19

In which of the following cases would real income rise?

Accepted Answer

A) Nominal income rises by 8 percent, and the price level rises by 10 percent. 
B) Nominal income rises by 2 percent, and the price level remains unchanged. 
C) Nominal income falls by 4 percent, and the price level falls by 2 percent. 
D) Real income will rise in all of these cases. 
A) Nominal income rises by 8 percent, and the price level rises by 10 percent. 
B) Nominal income rises by 2 percent, and the price level remains unchanged. 
C) Nominal income falls by 4 percent, and the price level falls by 2 percent. 
D) Real income will rise in all of these cases.

Question 20

Full-Time Employed = 80 Part- Time Employed = 25 Unemployed = 15 Discouraged
Workers = 5
Members of Underground Economy = 6
Consumer Price Index = 110
Refer to the given information about a hypothetical economy.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. 
A) is 110 percent. 
B) is 10 percent. 
C) is 0 percent. 
D) cannot be determined from the data.

Exam 29: Business Cycles, Unemployment, and Inflation

Which of the following groups has traditionally benefited from unanticipated inflation?

Cost-of-living adjustment clauses (COLAs)

A nation has a population of 260 million people.Of these, 60 million are retired, in the military, institutionalized, or under 16 years old.There are 188 million who are employed and 12 million who are unemployed.What is the unemployment rate?

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is

Demand-pull inflation

A worker would be hurt least by inflation when the

Cost-push inflation tends to be characterized by all of the following, except

Unanticipated inflation

Part-time workers who want full-time work are counted as

Ricardo lost his job last year when his company downsized and laid off middle-level managers.He tried to find another job for a year but was unsuccessful and quit looking for work.Which individual is structurally unemployed?

Lenders will be willing to reduce the nominal interest rates on loans if the expected inflation increases.

Cost-push inflation

At the economy's natural rate of unemployment,

(Last Word) Which of the following statements is true about employment during the Great Recession?

The percentage change in real income can be approximated by subtracting the percentage change in the price level from the percentage change in nominal income.

If the natural rate of unemployment was 6 percent, the current unemployment rate was 10 percent, and the potential GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed

Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are

If actual GDP is less than potential GDP,

In which of the following cases would real income rise?

Full-Time Employed = 80 Part- Time Employed = 25 Unemployed = 15 Discouraged Workers = 5 Members of Underground Economy = 6 Consumer Price Index = 110 Refer to the given information about a hypothetical economy.The rate of inflation

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

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The Demand for Resources

Wage Determination

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Income Inequality, Poverty, and Discrimination

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An Introduction to Macroeconomics

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Money, Banking, and Financial Institutions

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Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

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The Balance of Payments, Exchange Rates, and Trade Deficits

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