Question 1

When there is demand-pull inﬂation, people's total spending in the economy will be falling.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Alex works in his own home as a homemaker and full-time caretaker of his children. Oﬃcially, he is

Accepted Answer

A)  unemployed. 
B)  employed. 
C)  not in the labor force. 
D)  in the labor force. 
A)  unemployed. 
B)  employed. 
C)  not in the labor force. 
D)  in the labor force.

Question 4

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 5

Cyclical unemployment results from

Accepted Answer

A)  a deﬁciency of spending on goods and services. 
B)  the decreasing relative importance of goods and the increasing relative importance of services in the U.S. economy. 
C)  the everyday dynamics of a free labor market, with workers voluntarily changing jobs. 
D)  technological change. 
A)  a deﬁciency of spending on goods and services. 
B)  the decreasing relative importance of goods and the increasing relative importance of services in the U.S. economy. 
C)  the everyday dynamics of a free labor market, with workers voluntarily changing jobs. 
D)  technological change.

Question 6

The type of unemployment associated with recessions is called

Accepted Answer

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

Question 7

Structural unemployment

Accepted Answer

A)  is also known as frictional unemployment. 
B)  is the main component of cyclical unemployment. 
C)  is said to occur when people are waiting to be called back to previous jobs. 
D)  may involve a locational mismatch between unemployed workers and job openings. 
A)  is also known as frictional unemployment. 
B)  is the main component of cyclical unemployment. 
C)  is said to occur when people are waiting to be called back to previous jobs. 
D)  may involve a locational mismatch between unemployed workers and job openings.

Question 8

Assume that there is a ﬁxed rate of interest on contracts for borrowers and lenders. If unanticipated inﬂation occurs in the economy, then

Accepted Answer

A)  both lenders and borrowers beneﬁt. 
B)  both lenders and borrowers are hurt. 
C)  borrowers are hurt, but lenders beneﬁt. 
D)  lenders are hurt, but borrowers beneﬁt. 
A)  both lenders and borrowers beneﬁt. 
B)  both lenders and borrowers are hurt. 
C)  borrowers are hurt, but lenders beneﬁt. 
D)  lenders are hurt, but borrowers beneﬁt.

Question 9

Most economists agree that the immediate cause of most business cycle variation is

Accepted Answer

A)  an unexpected change in the productivity of workers. 
B)  an unexpected change in the level of total spending. 
C)  the invention of new products. 
D)  the growth and subsequent bursting of ﬁnancial bubbles. 
A)  an unexpected change in the productivity of workers. 
B)  an unexpected change in the level of total spending. 
C)  the invention of new products. 
D)  the growth and subsequent bursting of ﬁnancial bubbles.

Question 10

The inﬂation rate measures the percentage growth rate of

Accepted Answer

A)  real GDP from the base period 1982-84 to a given year. 
B)  real GDP from one year to the next. 
C)  the CPI from the base period 1982-84 to a given year. 
D)  the CPI from one year to the next. 
A)  real GDP from the base period 1982-84 to a given year. 
B)  real GDP from one year to the next. 
C)  the CPI from the base period 1982-84 to a given year. 
D)  the CPI from one year to the next.

Question 11

If the negative GDP gap were equal to 4 percent of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by

Accepted Answer

A)  one percentage point. 
B)  two percentage points. 
C)  three percentage points. 
D)  four percentage points. 
A)  one percentage point. 
B)  two percentage points. 
C)  three percentage points. 
D)  four percentage points.

Question 12

(Last Word) One reason that many jobs are going unﬁlled today is because when advertising a
position, employers ask that applicants have a college degree, whether or not it is actually
necessary for the job.

Accepted Answer

A) True 
 B)False

Question 13

What has been the range for the duration in months of U.S. recessions between 1950 and 2009?

Accepted Answer

A)  2 months to 5 months 
B)  6 months to 18 months 
C)  19 months to 25 months 
D)  26 months to 30 months 
A)  2 months to 5 months 
B)  6 months to 18 months 
C)  19 months to 25 months 
D)  26 months to 30 months

Question 14

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial ﬁshing boat in Alaska. That year, Professor Simpson would be oﬃcially counted as

Accepted Answer

A)  structurally unemployed. 
B)  frictionally unemployed. 
C)  not in the labor force. 
D)  employed. 
A)  structurally unemployed. 
B)  frictionally unemployed. 
C)  not in the labor force. 
D)  employed.

Question 15

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 non-industrialized 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 non-industrialized countries.

Question 16

What is core inﬂation? Why is it used?

Accepted Answer

Core inﬂation is deﬁned as the underlyin

Question 17

Search unemployment is a type of

Accepted Answer

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

Question 18

Describe cost-push inﬂation and its major source.

Accepted Answer

Cost-push inﬂation is deﬁned as increase

Question 19

General sources of shocks that can cause business cycles include the following, except

Accepted Answer

A)  irregular occurrence of innovations and productivity changes. 
B)  monetary factors and ﬁnancial instability. 
C)  unemployment jumps and production drops. 
D)  political events, either domestic or global. 
A)  irregular occurrence of innovations and productivity changes. 
B)  monetary factors and ﬁnancial instability. 
C)  unemployment jumps and production drops. 
D)  political events, either domestic or global.

Question 20

For a given amount of nominal income, the real income will

Accepted Answer

A)  fall if the price level rises. 
B)  fall if the price level falls. 
C)  be unaffected if the price level falls. 
D)  rise as the price level rises. 
A)  fall if the price level rises. 
B)  fall if the price level falls. 
C)  be unaffected if the price level falls. 
D)  rise as the price level rises.

Exam 9: Business Cycles, Unemployment, and Inflation

When there is demand-pull inﬂation, people's total spending in the economy will be falling.

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

Alex works in his own home as a homemaker and full-time caretaker of his children. Oﬃcially, he is

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

Cyclical unemployment results from

The type of unemployment associated with recessions is called

Structural unemployment

Assume that there is a ﬁxed rate of interest on contracts for borrowers and lenders. If unanticipated inﬂation occurs in the economy, then

Most economists agree that the immediate cause of most business cycle variation is

The inﬂation rate measures the percentage growth rate of

If the negative GDP gap were equal to 4 percent of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by

(Last Word) One reason that many jobs are going unﬁlled today is because when advertising a position, employers ask that applicants have a college degree, whether or not it is actually necessary for the job.

What has been the range for the duration in months of U.S. recessions between 1950 and 2009?

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial ﬁshing boat in Alaska. That year, Professor Simpson would be oﬃcially counted as

Unemployment rates in industrialized nations

What is core inﬂation? Why is it used?

Search unemployment is a type of

Describe cost-push inﬂation and its major source.

General sources of shocks that can cause business cycles include the following, except

For a given amount of nominal income, the real income will

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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