Question 1

The unemployment rate is the

Accepted Answer

A)  ratio of unemployed to employed workers. 
B)  number of employed workers minus the number of workers who are not in the labor force. 
C)  percentage of the labor force that is unemployed. 
D)  percentage of the total population that is unemployed. 
A)  ratio of unemployed to employed workers. 
B)  number of employed workers minus the number of workers who are not in the labor force. 
C)  percentage of the labor force that is unemployed. 
D)  percentage of the total population that is unemployed.

Question 2

Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is
$100 million, then the per-unit production costs in this economy are

Accepted Answer

A)  $0.67. 
B)  $1.50. 
C)  $2.00. 
D)  $3.00. 
A)  $0.67. 
B)  $1.50. 
C)  $2.00. 
D)  $3.00.

Question 3

In the accompanying diagram, the straight line E drawn through the wavy lines would provide an estimate of the

Accepted Answer

A)  recession ﬂuctuation. 
B)  economic growth trend. 
C)  natural rate of unemployment. 
D)  recovery trend. 
A)  recession ﬂuctuation. 
B)  economic growth trend. 
C)  natural rate of unemployment. 
D)  recovery trend.

Question 4

What is the main problem with mild inﬂation, according to some economists?

Accepted Answer

A)  It reduces the size of the GDP gap. 
B)  It leads to unanticipated deﬂation. 
C)  It increases frictional and structural unemployment in the economy. 
D)  It diverts productive time toward activities to hedge against inﬂation. 
A)  It reduces the size of the GDP gap. 
B)  It leads to unanticipated deﬂation. 
C)  It increases frictional and structural unemployment in the economy. 
D)  It diverts productive time toward activities to hedge against inﬂation.

Question 5

Over a 10-year period, the Consumer Price Index doubled. Based on this information and using the rule of 70, we can say that the average annual rate of inﬂation over this period was approximately

Accepted Answer

A)  10 percent. 
B)  9 percent. 
C)  7 percent. 
D)  5 percent. 
A)  10 percent. 
B)  9 percent. 
C)  7 percent. 
D)  5 percent.

Question 6

New college graduates still looking for their ﬁrst jobs would be classiﬁed in the BLS data as

Accepted Answer

A)  frictionally unemployed. 
B)  not yet in the labor force. 
C)  cyclically unemployed. 
D)  part of structural unemployment. 
A)  frictionally unemployed. 
B)  not yet in the labor force. 
C)  cyclically unemployed. 
D)  part of structural unemployment.

Question 7

Proponents of zero inﬂation argue that even mild inﬂation (1 to 3 percent) reduces the economy's
real output.

Accepted Answer

A) True 
 B)False

Question 8

A recession is deﬁned as a period in which

Accepted Answer

A)  cost-push inﬂation is present. 
B)  nominal domestic output falls. 
C)  demand-pull inﬂation is present. 
D)  real domestic output falls. 
A)  cost-push inﬂation is present. 
B)  nominal domestic output falls. 
C)  demand-pull inﬂation is present. 
D)  real domestic output falls.

Question 9

People who work part time, but desire to work full time, are considered to be oﬃcially unemployed.

Accepted Answer

A) True 
 B)False

Question 10

The annual rate of inﬂation can be found by subtracting

Accepted Answer

A)  the real income from the nominal income. 
B)  last year's price index from this year's price index. 
C)  this year's price index from last year's price index and dividing the difference by this year's price index. 
D)  last year's price index from this year's price index and dividing the difference by last year's price index. 
A)  the real income from the nominal income. 
B)  last year's price index from this year's price index. 
C)  this year's price index from last year's price index and dividing the difference by this year's price index. 
D)  last year's price index from this year's price index and dividing the difference by last year's price index.

Question 11

The diagram illustrates the pattern of

Accepted Answer

A)  business cycles. 
B)  wage movements over time. 
C)  price level movements. 
D)  economic growth patterns. 
A)  business cycles. 
B)  wage movements over time. 
C)  price level movements. 
D)  economic growth patterns.

Question 12

Which statement about inﬂation is correct?

Accepted Answer

A)  Families are always hurt by inﬂation. 
B)  Inﬂation "subsidizes" those who receive relatively ﬁxed money income. 
C)  The redistributive effects of inﬂation are arbitrary with respect to people and groups in society. 
D)  Inﬂation will decrease the real value of property assets and increase the real value of ﬁxed- value assets. 
A)  Families are always hurt by inﬂation. 
B)  Inﬂation "subsidizes" those who receive relatively ﬁxed money income. 
C)  The redistributive effects of inﬂation are arbitrary with respect to people and groups in society. 
D)  Inﬂation will decrease the real value of property assets and increase the real value of ﬁxed- value assets.

Question 13

The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percentage of adults who are not in the labor force is

Accepted Answer

A)  25.3 percent. 
B)  20.6 percent. 
C)  30.3 percent. 
D)  13.9 percent. 
A)  25.3 percent. 
B)  20.6 percent. 
C)  30.3 percent. 
D)  13.9 percent.

Question 14

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 15

Unanticipated inﬂation beneﬁts creditors and savers.

Accepted Answer

A) True 
 B)False

Question 16

The government agency responsible for collecting and reporting unemployment data is the

Accepted Answer

A)  Bureau of Labor Statistics. 
B)  Bureau of Unemployment. 
C)  Bureau of Economic Analysis. 
D)  Bureau of Economic Research. 
A)  Bureau of Labor Statistics. 
B)  Bureau of Unemployment. 
C)  Bureau of Economic Analysis. 
D)  Bureau of Economic Research.

Question 17

Which of the following is correct?

Accepted Answer

A)  During the Great Recession, unemployment rates for men rose above those of women. 
B)  Unemployment rates for African-American and White workers are approximately the same. 
C)  Teenagers experience approximately the same unemployment rates as do adults. 
D)  Laborers are less vulnerable to unemployment than are professional workers. 
A)  During the Great Recession, unemployment rates for men rose above those of women. 
B)  Unemployment rates for African-American and White workers are approximately the same. 
C)  Teenagers experience approximately the same unemployment rates as do adults. 
D)  Laborers are less vulnerable to unemployment than are professional workers.

Question 18

Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect inﬂation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a
Nominal interest rate of

Accepted Answer

A)  2 percent. 
B)  3 percent. 
C)  5 percent. 
D)  7 percent. 
A)  2 percent. 
B)  3 percent. 
C)  5 percent. 
D)  7 percent.

Question 19

Okun's law

Accepted Answer

A)  measures the trade-off between the rate of inﬂation and the rate of unemployment. 
B)  indicates the number of years it will take for a constant rate of inﬂation to double the price level. 
C)  quantiﬁes the relationship between nominal and real incomes. 
D)  shows the relationship between the unemployment rate and the size of the negative GDP gap. 
A)  measures the trade-off between the rate of inﬂation and the rate of unemployment. 
B)  indicates the number of years it will take for a constant rate of inﬂation to double the price level. 
C)  quantiﬁes the relationship between nominal and real incomes. 
D)  shows the relationship between the unemployment rate and the size of the negative GDP gap.

Question 20

Demand-pull inﬂation is usually accompanied by low unemployment and higher real output.

Accepted Answer

A) True 
 B)False

Exam 9: Business Cycles, Unemployment, and Inflation

The unemployment rate is the

Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is $100 million, then the per-unit production costs in this economy are

In the accompanying diagram, the straight line E drawn through the wavy lines would provide an estimate of the

What is the main problem with mild inﬂation, according to some economists?

Over a 10-year period, the Consumer Price Index doubled. Based on this information and using the rule of 70, we can say that the average annual rate of inﬂation over this period was approximately

New college graduates still looking for their ﬁrst jobs would be classiﬁed in the BLS data as

Proponents of zero inﬂation argue that even mild inﬂation (1 to 3 percent) reduces the economy's real output.

A recession is deﬁned as a period in which

People who work part time, but desire to work full time, are considered to be oﬃcially unemployed.

The annual rate of inﬂation can be found by subtracting

The diagram illustrates the pattern of

Which statement about inﬂation is correct?

The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percentage of adults who are not in the labor force is

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?

Unanticipated inﬂation beneﬁts creditors and savers.

The government agency responsible for collecting and reporting unemployment data is the

Which of the following is correct?

Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect inﬂation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a Nominal interest rate of

Okun's law

Demand-pull inﬂation is usually accompanied by low unemployment and higher real output.

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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