Question 1

Inflation rates in the United States from 2005 to 2015 were within the range of about

Accepted Answer

A) 0 percent to 4 percent. 
B) 5 percent to 8 percent. 
C) 8 percent to 15 percent. 
D) 12 percent to 25 percent. 
A) 0 percent to 4 percent. 
B) 5 percent to 8 percent. 
C) 8 percent to 15 percent. 
D) 12 percent to 25 percent.

Question 2

Real income can be determined by

Accepted Answer

A) dividing the price level by nominal income. 
B) inflating nominal income for inflation. 
C) dividing the annual rate of inflation into the number "70." 
D) deflating nominal income for inflation. 
A) dividing the price level by nominal income. 
B) inflating nominal income for inflation. 
C) dividing the annual rate of inflation into the number "70." 
D) deflating nominal income for inflation.

Question 3

The phrase "too much money chasing too few goods" best describes

Accepted Answer

A) the GDP gap. 
B) demand-pull inflation. 
C) the inflation premium. 
D) cost-push inflation. 
A) the GDP gap. 
B) demand-pull inflation. 
C) the inflation premium. 
D) cost-push inflation.

Question 4

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. 
A) frictional unemployment. 
B) structural unemployment. 
C) cyclical unemployment. 
D) compositional unemployment.

Question 5

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

Accepted Answer

A) 9 percent. 
B) 10 percent. 
C) 11 percent. 
D) 12 percent. 
A) 9 percent. 
B) 10 percent. 
C) 11 percent. 
D) 12 percent.

Question 6

The percentage change in one's real income can be approximated by

Accepted Answer

A) the percentage change in price level divided by the percentage change in nominal income. 
B) the percentage change in nominal income divided by the percentage change in price level. 
C) the percentage change in price level minus the percentage change in nominal income. 
D) the percentage change in nominal income minus the percentage change in the price level. 
A) the percentage change in price level divided by the percentage change in nominal income. 
B) the percentage change in nominal income divided by the percentage change in price level. 
C) the percentage change in price level minus the percentage change in nominal income. 
D) the percentage change in nominal income minus the percentage change in the price level.

Question 7

Compared to other industrial nations, inflation rates in the United States are

Accepted Answer

A) significantly higher. 
B) significantly lower. 
C) significantly higher than those in Europe and significantly lower than those in Japan. 
D) neither significantly higher nor significantly lower. 
A) significantly higher. 
B) significantly lower. 
C) significantly higher than those in Europe and significantly lower than those in Japan. 
D) neither significantly higher nor significantly lower.

Question 8

The natural rate of unemployment is

Accepted Answer

A) higher than the full-employment rate of unemployment. 
B) lower than the full-employment rate of unemployment. 
C) that rate of unemployment occurring when the economy is at its potential output. 
D) found by dividing total unemployment by the size of the labor force. 
A) higher than the full-employment rate of unemployment. 
B) lower than the full-employment rate of unemployment. 
C) that rate of unemployment occurring when the economy is at its potential output. 
D) found by dividing total unemployment by the size of the labor force.

Question 9

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. 
A) 15 percent. 
B) 33 percent. 
C) 25 percent. 
D) 40 percent.

Question 10

What is an advantage of mild inflation according to some economists?

Accepted Answer

A) It helps to close the GDP gap. 
B) It reduces the inflation premium. 
C) It makes it easier for firms to adjust real wages downward as demand for their products falls. 
D) It reduces frictional, structural, and cyclical unemployment in the economy to make the economy more productive. 
A) It helps to close the GDP gap. 
B) It reduces the inflation premium. 
C) It makes it easier for firms to adjust real wages downward as demand for their products falls. 
D) It reduces frictional, structural, and cyclical unemployment in the economy to make the economy more productive.

Question 11

During a severe recession, we would expect output to fall the most in

Accepted Answer

A) the health care industry. 
B) the clothing industry. 
C) agriculture. 
D) the construction industry. 
A) the health care industry. 
B) the clothing industry. 
C) agriculture. 
D) the construction industry.

Question 12

The GDP gap measures the difference between

Accepted Answer

A) NDP and GDP. 
B) NI and PI. 
C) actual GDP and potential GDP. 
D) nominal GDP and real GDP. 
A) NDP and GDP. 
B) NI and PI. 
C) actual GDP and potential GDP. 
D) nominal GDP and real GDP.

Question 13

Having negative real interest rates could stimulate the economy if, in response,

Accepted Answer

A) consumers saved more. 
B) firms invested less. 
C) consumers saved less. 
D) firms borrowed less. 
A) consumers saved more. 
B) firms invested less. 
C) consumers saved less. 
D) firms borrowed less.

Question 14

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are

Accepted Answer

A) excluded from the labor force. 
B) included as part of the unemployed. 
C) treated the same as part-time workers. 
D) used to determine the size of the labor force. 
A) excluded from the labor force. 
B) included as part of the unemployed. 
C) treated the same as part-time workers. 
D) used to determine the size of the labor force.

Question 15

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation was approximately

Accepted Answer

A) 5.5 percent. 
B) 5.9 percent. 
C) 6.3 percent. 
D) 7.2 percent. 
A) 5.5 percent. 
B) 5.9 percent. 
C) 6.3 percent. 
D) 7.2 percent.

Question 16

According to the Bureau of Labor Statistics, to be officially unemployed a person must

Accepted Answer

A) be in the labor force. 
B) be 21 years of age or older. 
C) have lost a job. 
D) be waiting to be called back from a layoff. 
A) be in the labor force. 
B) be 21 years of age or older. 
C) have lost a job. 
D) be waiting to be called back from a layoff.

Question 17

In the aftermath of the Great Recession, several governments engineered a negative nominal interest rate.Using the formula that relates nominal interest and real interest, negative nominal rates could imply any of the following, except

Accepted Answer

A) negative inflation premium or negative real interest rates. 
B) zero inflation premium and negative real interest rates. 
C) zero inflation premium and high positive real interest rates. 
D) low inflation premium and a significantly negative real interest. 
A) negative inflation premium or negative real interest rates. 
B) zero inflation premium and negative real interest rates. 
C) zero inflation premium and high positive real interest rates. 
D) low inflation premium and a significantly negative real interest.

Question 18

If the CPI rises from 125 to 140 from one year to the next, then the rate of inflation is 15 percent.

Accepted Answer

A) True 
 B)False

Question 19

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

Accepted Answer

A) Government is unable to respond by changing the amount of money in circulation. 
B) Changes in total spending cause supply shocks that cause cyclical variation. 
C) Prices are sticky in the short run. 
D) Prices are flexible in the long run. 
A) Government is unable to respond by changing the amount of money in circulation. 
B) Changes in total spending cause supply shocks that cause cyclical variation. 
C) Prices are sticky in the short run. 
D) Prices are flexible in the long run.

Question 20

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. 
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.

Exam 29: Business Cycles, Unemployment, and Inflation

Inflation rates in the United States from 2005 to 2015 were within the range of about

Real income can be determined by

The phrase "too much money chasing too few goods" best describes

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

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

The percentage change in one's real income can be approximated by

Compared to other industrial nations, inflation rates in the United States are

The natural rate of unemployment is

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

What is an advantage of mild inflation according to some economists?

During a severe recession, we would expect output to fall the most in

The GDP gap measures the difference between

Having negative real interest rates could stimulate the economy if, in response,

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation was approximately

According to the Bureau of Labor Statistics, to be officially unemployed a person must

In the aftermath of the Great Recession, several governments engineered a negative nominal interest rate.Using the formula that relates nominal interest and real interest, negative nominal rates could imply any of the following, except

If the CPI rises from 125 to 140 from one year to the next, then the rate of inflation is 15 percent.

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

Inflation is undesirable because it

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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