Question 1

"Full employment" refers to the situation when there is

Accepted Answer

A)  100 percent employment of the labor force. 
B)  0 percent unemployment rate. 
C)  no frictional or structural unemployment. 
D)  no cyclical unemployment. 
A)  100 percent employment of the labor force. 
B)  0 percent unemployment rate. 
C)  no frictional or structural unemployment. 
D)  no cyclical unemployment.

Question 2

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 3

Which statement is correct?

Accepted Answer

A)  All sectors of the economy are affected to similar degrees by business ﬂuctuations. 
B)  Real output and employment generally show little variance over the business cycle. 
C)  The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle. 
D)  Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy. 
A)  All sectors of the economy are affected to similar degrees by business ﬂuctuations. 
B)  Real output and employment generally show little variance over the business cycle. 
C)  The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle. 
D)  Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy.

Question 4

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will

Accepted Answer

A)  fall by about 1 percent. 
B)  remain constant. 
C)  rise by about 4 percent. 
D)  rise by about 1 percent. 
A)  fall by about 1 percent. 
B)  remain constant. 
C)  rise by about 4 percent. 
D)  rise by about 1 percent.

Question 5

Which of the following statements is true about causes of business cycle ﬂuctuations?

Accepted Answer

A)  Economists all agree that supply shocks are the cause of most business cycle ﬂuctuations. 
B)  Economists all agree that productivity shocks are the cause of most business cycle changes. 
C)  Economists all agree that monetary changes are primarily responsible for business cycle ﬂuctuations. 
D)  There are a wide range of theories as to the underlying causes of business cycle movements. 
A)  Economists all agree that supply shocks are the cause of most business cycle ﬂuctuations. 
B)  Economists all agree that productivity shocks are the cause of most business cycle changes. 
C)  Economists all agree that monetary changes are primarily responsible for business cycle ﬂuctuations. 
D)  There are a wide range of theories as to the underlying causes of business cycle movements.

Question 6

Some economists prefer to use the term business ﬂuctuations rather than business cycles to describe the historical growth record in the United States because

Accepted Answer

A)  cycles include a trough phase, while ﬂuctuations do not. 
B)  cycles implies regularity, while ﬂuctuations does not. 
C)  ﬂuctuations include an expansion phase, while cycles do not. 
D)  ﬂuctuations are relatively predictable events. 
A)  cycles include a trough phase, while ﬂuctuations do not. 
B)  cycles implies regularity, while ﬂuctuations does not. 
C)  ﬂuctuations include an expansion phase, while cycles do not. 
D)  ﬂuctuations are relatively predictable events.

Question 7

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the

Accepted Answer

A)  level of total spending. 
B)  rate of unemployment. 
C)  rate of inﬂation. 
D)  stock market price indexes. 
A)  level of total spending. 
B)  rate of unemployment. 
C)  rate of inﬂation. 
D)  stock market price indexes.

Question 8

Which phase of the business cycle would be most closely associated with an economic contraction?

Accepted Answer

A)  peak 
B)  recession 
C)  trough 
D)  recovery 
A)  peak 
B)  recession 
C)  trough 
D)  recovery

Question 9

Unanticipated inﬂation helps some groups in the economy.

Accepted Answer

A) True 
 B)False

Question 10

Search unemployment is another way to describe

Accepted Answer

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

Question 11

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 12

A large negative GDP gap implies

Accepted Answer

A)  an excess of imports over exports. 
B)  a low rate of unemployment. 
C)  a high rate of unemployment. 
D)  a sharply rising price level. 
A)  an excess of imports over exports. 
B)  a low rate of unemployment. 
C)  a high rate of unemployment. 
D)  a sharply rising price level.

Question 13

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

Accepted Answer

A)  hyperinﬂation 
B)  deﬂation 
C)  rising interest rates 
D)  rising inﬂation 
A)  hyperinﬂation 
B)  deﬂation 
C)  rising interest rates 
D)  rising inﬂation

Question 14

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 15

During a period of hyperinﬂation,

Accepted Answer

A)  creditors gain because their loans are repaid with dollars of higher value. 
B)  people tend to hold goods rather than money. 
C)  income is redistributed away from borrowers. 
D)  the real value of the national currency rises. 
A)  creditors gain because their loans are repaid with dollars of higher value. 
B)  people tend to hold goods rather than money. 
C)  income is redistributed away from borrowers. 
D)  the real value of the national currency rises.

Question 16

Core inﬂation measures

Accepted Answer

A)  changes in the prices of the most commonly used goods, including food and energy. 
B)  underlying changes in the CPI, after accounting for the price volatility of high-tech goods. 
C)  underlying increases in the CPI after removing volatile food and energy prices. 
D)  changes in key input prices. 
A)  changes in the prices of the most commonly used goods, including food and energy. 
B)  underlying changes in the CPI, after accounting for the price volatility of high-tech goods. 
C)  underlying increases in the CPI after removing volatile food and energy prices. 
D)  changes in key input prices.

Question 17

The unemployment rate is interpreted as the percentage of the

Accepted Answer

A)  adult population who are unemployed. 
B)  labor force that are not employed. 
C)  able-bodied population who are not working. 
D)  workforce that have been laid off. 
A)  adult population who are unemployed. 
B)  labor force that are not employed. 
C)  able-bodied population who are not working. 
D)  workforce that have been laid off.

Question 18

If the GDP gap is positive, then

Accepted Answer

A)  the inﬂation rate is falling. 
B)  the unemployment rate is rising. 
C)  potential GDP is greater than actual GDP. 
D)  actual GDP is greater than potential GDP. 
A)  the inﬂation rate is falling. 
B)  the unemployment rate is rising. 
C)  potential GDP is greater than actual GDP. 
D)  actual GDP is greater than potential GDP.

"Full employment" refers to the situation when there is

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

Which statement is correct?

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will

Which of the following statements is true about causes of business cycle ﬂuctuations?

Some economists prefer to use the term business ﬂuctuations rather than business cycles to describe the historical growth record in the United States because

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the

Which phase of the business cycle would be most closely associated with an economic contraction?

Unanticipated inﬂation helps some groups in the economy.

Search unemployment is another way to describe

Cost-of-living adjustment clauses (COLAs)

A large negative GDP gap implies

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

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

During a period of hyperinﬂation,

Core inﬂation measures

The unemployment rate is interpreted as the percentage of the

If the GDP gap is positive, then

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

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Exam 9: Business Cycles, Unemployment, and Inflation

"Full employment" refers to the situation when there is

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

Which statement is correct?

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will

Which of the following statements is true about causes of business cycle ﬂuctuations?

Some economists prefer to use the term business ﬂuctuations rather than business cycles to describe the historical growth record in the United States because

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the

Which phase of the business cycle would be most closely associated with an economic contraction?

Unanticipated inﬂation helps some groups in the economy.

Search unemployment is another way to describe

Cost-of-living adjustment clauses (COLAs)

A large negative GDP gap implies

When a recession begins and unemployment begins to rise, the demand for goods and services will fall. If the decline in demand is precipitous, which of the following will occur?

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

During a period of hyperinﬂation,

Core inﬂation measures

The unemployment rate is interpreted as the percentage of the

If the GDP gap is positive, then

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