Question 1

Updated question: What is the consumer price index? How does the government use the CPI?

Accepted Answer

The consumer price index is an index tha

Question 2

The downward stickiness of wages serves like a _____ in the labor market.

Accepted Answer

A)  price ﬂoor 
B)  price ceiling 
C)  demand determinant 
D)  supply determinant 
A)  price ﬂoor 
B)  price ceiling 
C)  demand determinant 
D)  supply determinant

Question 3

A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment?

Accepted Answer

A)  wait 
B)  cyclical 
C)  frictional 
D)  structural 
A)  wait 
B)  cyclical 
C)  frictional 
D)  structural

Question 4

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will

Accepted Answer

A)  fall by about 20 percent. 
B)  fall by about 2 percent. 
C)  rise by about 15 percent. 
D)  rise by about 25 percent. 
A)  fall by about 20 percent. 
B)  fall by about 2 percent. 
C)  rise by about 15 percent. 
D)  rise by about 25 percent.

Question 5

Cost-push inﬂation

Accepted Answer

A)  is caused by excessive total spending. 
B)  shifts the nation's production possibilities curve leftward. 
C)  moves the economy inward from its production possibilities curve. 
D)  is a mixed blessing because it has positive effects on real output and employment. 
A)  is caused by excessive total spending. 
B)  shifts the nation's production possibilities curve leftward. 
C)  moves the economy inward from its production possibilities curve. 
D)  is a mixed blessing because it has positive effects on real output and employment.

Question 6

The natural rate of unemployment

Accepted Answer

A)  means that the economy will always operate at that rate. 
B)  means that the economy will always realize its potential output. 
C)  is equal to the total of frictional and structural unemployment. 
D)  is a ﬁxed unemployment rate that does not change over time. 
A)  means that the economy will always operate at that rate. 
B)  means that the economy will always realize its potential output. 
C)  is equal to the total of frictional and structural unemployment. 
D)  is a ﬁxed unemployment rate that does not change over time.

Question 7

During the past 10 years, the annual rate of inﬂation in the United States has averaged less than 1
percent.

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

If the inﬂation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is

Accepted Answer

A)  1 percent. 
B)  -1 percent. 
C)  7 percent. 
D)  0.75 percent. 
A)  1 percent. 
B)  -1 percent. 
C)  7 percent. 
D)  0.75 percent.

Question 10

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 11

Updated question: What are two criticisms of the unemployment rate data? How do these criticisms
relate to overstating or understating the unemployment rate?

Accepted Answer

One criticism of the unemployment rate d

Question 12

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 13

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Accepted Answer

A)  gold market and stock market 
B)  international trade and foreign exchange markets 
C)  real estate and ﬁnancial markets 
D)  consumer and government spending 
A)  gold market and stock market 
B)  international trade and foreign exchange markets 
C)  real estate and ﬁnancial markets 
D)  consumer and government spending

Question 14

Cross-country studies that bolster the "zero inﬂation" view indicate that lower rates of inﬂation are associated with

Accepted Answer

A)  lower rates of economic growth. 
B)  higher rates of economic growth. 
C)  recessions. 
D)  high rates of unemployment. 
A)  lower rates of economic growth. 
B)  higher rates of economic growth. 
C)  recessions. 
D)  high rates of unemployment.

Question 15

(Consider This) Which of the following best explains why unemployment rises signiﬁcantly during a recession?

Accepted Answer

A)  Wages are sticky both upward and downward. 
B)  Wages are ﬂexible both upward and downward. 
C)  Wages are ﬂexible upward but sticky downward. 
D)  Wages are sticky upward but ﬂexible downward. 
A)  Wages are sticky both upward and downward. 
B)  Wages are ﬂexible both upward and downward. 
C)  Wages are ﬂexible upward but sticky downward. 
D)  Wages are sticky upward but ﬂexible downward.

Question 16

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 17

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 18

Which types of industries are hit hardest by a recession? Explain.

Accepted Answer

Firms in industries producing capital go

Question 19

Describe the four phases of the business cycle.

Accepted Answer

The four phases of the business cycle ar

Question 20

Inﬂation is a rise in

Accepted Answer

A)  the general level of prices over time. 
B)  the standard of living over time. 
C)  unemployment over time. 
D)  real GDP over time. 
A)  the general level of prices over time. 
B)  the standard of living over time. 
C)  unemployment over time. 
D)  real GDP over time.

Exam 9: Business Cycles, Unemployment, and Inflation

Updated question: What is the consumer price index? How does the government use the CPI?

The downward stickiness of wages serves like a _____ in the labor market.

A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment?

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will

Cost-push inﬂation

The natural rate of unemployment

During the past 10 years, the annual rate of inﬂation in the United States has averaged less than 1 percent.

Which of the following statements is correct?

If the inﬂation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is

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

Updated question: What are two criticisms of the unemployment rate data? How do these criticisms relate to overstating or understating the unemployment rate?

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

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Cross-country studies that bolster the "zero inﬂation" view indicate that lower rates of inﬂation are associated with

(Consider This) Which of the following best explains why unemployment rises signiﬁcantly during a recession?

Demand-pull inﬂation

Cost-push inﬂation

Which types of industries are hit hardest by a recession? Explain.

Describe the four phases of the business cycle.

Inﬂation is a rise in

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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

Filters