Question 1

Unexpected inflation redistributes income:

Accepted Answer

A)  away from workers with cost-of-living adjustments, benefiting employers. 
B)  away from renters, benefiting landlords. 
C)  away from poor people, benefiting the rich. 
D)  away from people with fixed incomes, benefiting people with fixed costs. 
E)  away from debtors, benefiting creditors. 
A)  away from workers with cost-of-living adjustments, benefiting employers. 
B)  away from renters, benefiting landlords. 
C)  away from poor people, benefiting the rich. 
D)  away from people with fixed incomes, benefiting people with fixed costs. 
E)  away from debtors, benefiting creditors.

Question 2

A leading indicator:

Accepted Answer

A)  changes in either direction before a recession starts. 
B)  usually declines before a recession starts. 
C)  generally changes after real GDP changes. 
D)  remains unaffected by changes in real GDP. 
E)  does not change with fluctuations in economic activity. 
A)  changes in either direction before a recession starts. 
B)  usually declines before a recession starts. 
C)  generally changes after real GDP changes. 
D)  remains unaffected by changes in real GDP. 
E)  does not change with fluctuations in economic activity.

Question 3

Technological advancements cause structural unemployment, however they help in:

Accepted Answer

A)  lowering the rate of interest in the economy. 
B)  increasing the price level in the economy and hence makes business more profitable for the firms. 
C)  improving living standards by giving consumers a greater variety of goods at lower costs. 
D)  raising government's tax revenue. 
E)  raising the aggregate income in the economy. 
A)  lowering the rate of interest in the economy. 
B)  increasing the price level in the economy and hence makes business more profitable for the firms. 
C)  improving living standards by giving consumers a greater variety of goods at lower costs. 
D)  raising government's tax revenue. 
E)  raising the aggregate income in the economy.

Question 4

When the economy moves into recession, some companies lay off workers. Those unemployed workers are experiencing cyclical unemployment.

Accepted Answer

A) True 
 B)False

Question 5

Unemployment will decrease over time if:

Accepted Answer

A)  actual GDP increases faster than potential GDP. 
B)  actual GDP increases at the same rate as potential GDP. 
C)  the GDP gap widens. 
D)  actual GDP increases at a less than proportionate rate than potential GDP. 
E)  actual GDP decreases but potential GDP increases. 
A)  actual GDP increases faster than potential GDP. 
B)  actual GDP increases at the same rate as potential GDP. 
C)  the GDP gap widens. 
D)  actual GDP increases at a less than proportionate rate than potential GDP. 
E)  actual GDP decreases but potential GDP increases.

Question 6

If the inflation rate for a given year is 5 percent, then $1.00 in the previous year will buy goods worth approximately $0.95 this year.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following signals the start of an expansion?

Accepted Answer

A)  A boom period 
B)  A peak 
C)  An inflation 
D)  A contraction 
E)  A trough 
A)  A boom period 
B)  A peak 
C)  An inflation 
D)  A contraction 
E)  A trough

Question 8

If the average price level in 2002 was 1.25 relative to the base year in 1992, then:

Accepted Answer

A)  a dollar in 2002 bought just 80 percent of the goods and services that a dollar bought in 1992. 
B)  average prices were 80 percent higher in 2002 than in 1992. 
C)  a dollar in 2002 bought 25 percent more goods and services than a dollar bought in 1992. 
D)  average prices were 125 percent higher in 2000 than in 1992. 
E)  purchasing power rose 25 percent between 1992 and 2002. 
A)  a dollar in 2002 bought just 80 percent of the goods and services that a dollar bought in 1992. 
B)  average prices were 80 percent higher in 2002 than in 1992. 
C)  a dollar in 2002 bought 25 percent more goods and services than a dollar bought in 1992. 
D)  average prices were 125 percent higher in 2000 than in 1992. 
E)  purchasing power rose 25 percent between 1992 and 2002.

Question 9

Leading and lagging indicators show the effects of economic fluctuations but coincident indicators do not.

Accepted Answer

A) True 
 B)False

Question 10

Teenagers are usually the demographic group with the highest unemployment rates.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following could contribute to cost-push inflation?

Accepted Answer

A)  Greater demand for exports 
B)  Lower income taxes 
C)  An increase in consumption demand 
D)  Higher government spending 
E)  Higher wage demands by trade unions 
A)  Greater demand for exports 
B)  Lower income taxes 
C)  An increase in consumption demand 
D)  Higher government spending 
E)  Higher wage demands by trade unions

Question 12

What is another name for the natural unemployment rate?

Accepted Answer

A)  Non-deteriorating low-inflationary unemployment (NDLIU) 
B)  Natural rate of no-inflation unemployment (NRNIU) 
C)  Non-accelerating-inflation rate of unemployment (NAIRU) 
D)  Non-inflationary rate of low unemployment (NIRLU) 
E)  Natural unaffected rate of inflationary unemployment (NURIU) 
A)  Non-deteriorating low-inflationary unemployment (NDLIU) 
B)  Natural rate of no-inflation unemployment (NRNIU) 
C)  Non-accelerating-inflation rate of unemployment (NAIRU) 
D)  Non-inflationary rate of low unemployment (NIRLU) 
E)  Natural unaffected rate of inflationary unemployment (NURIU)

Question 13

The effect of _____ is to produce an unemployment rate that understates actual unemployment.

Accepted Answer

A)  the underground economy 
B)  discouraged workers and underemployment 
C)  the growth in real GDP 
D)  institutionalized and retired labor force 
E)  seasonally unemployed workers 
A)  the underground economy 
B)  discouraged workers and underemployment 
C)  the growth in real GDP 
D)  institutionalized and retired labor force 
E)  seasonally unemployed workers

Question 14

Hyperinflation is usually accompanied by a great macroeconomic expansion.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true of expected inflation?

Accepted Answer

A)  It increases the efficiency of the economy. 
B)  It is more of a problem than unexpected inflation. 
C)  It results in lower prices over time as people make adjustments. 
D)  It is not a major problem if people can make the right interest rate and income level adjustments. 
E)  It is necessarily tied to a decline in purchasing power. 
A)  It increases the efficiency of the economy. 
B)  It is more of a problem than unexpected inflation. 
C)  It results in lower prices over time as people make adjustments. 
D)  It is not a major problem if people can make the right interest rate and income level adjustments. 
E)  It is necessarily tied to a decline in purchasing power.

Question 16

The figure given below represents the demand and supply conditions of an economy.
Figure 7.3

-Refer to Figure 7.3. Which of the following explains the shift in supply curve from S1 to S2?

Accepted Answer

A)  decreases in oil supplies as experienced in the 1970s. 
B)  wage concessions by union members. 
C)  businesses reducing their profit margins. 
D)  discoveries of natural gas. 
E)  increased foreign demand for domestic products. 
A)  decreases in oil supplies as experienced in the 1970s. 
B)  wage concessions by union members. 
C)  businesses reducing their profit margins. 
D)  discoveries of natural gas. 
E)  increased foreign demand for domestic products.

Question 17

If the average price level in 1991 was 1.20 relative to the base year in 1986, then a dollar in 1991 bought 20 percent more goods and services than a dollar in 1986.

Accepted Answer

A) True 
 B)False

Question 18

Economists call a severe prolonged economic recession a:

Accepted Answer

A)  slump. 
B)  depression. 
C)  stagnation. 
D)  stagflation. 
E)  trend. 
A)  slump. 
B)  depression. 
C)  stagnation. 
D)  stagflation. 
E)  trend.

Question 19

Other things equal, the equation for the real interest rate indicates that:

Accepted Answer

A)  as inflation increases, the real interest rate will rise. 
B)  as inflation increases, the nominal interest rate will fall. 
C)  as inflation decreases, real income will fall. 
D)  as inflation decreases, the real interest rate will rise. 
E)  as inflation changes, the real interest rate will not change. 
A)  as inflation increases, the real interest rate will rise. 
B)  as inflation increases, the nominal interest rate will fall. 
C)  as inflation decreases, real income will fall. 
D)  as inflation decreases, the real interest rate will rise. 
E)  as inflation changes, the real interest rate will not change.

Question 20

Because there is no way to account for them, the official unemployment rate does not include discouraged workers. What would happen to the unemployment rate if, because of a program that gave them new hope, all discouraged workers suddenly begin reporting themselves as ready to work?

Accepted Answer

A)  The official unemployment rate would remain unchanged. 
B)  The size of the labor force would increase. 
C)  The number of individuals officially in the labor force would remain unchanged. 
D)  The official unemployment rate would decrease. 
E)  The size of the underground economy would shrink. 
A)  The official unemployment rate would remain unchanged. 
B)  The size of the labor force would increase. 
C)  The number of individuals officially in the labor force would remain unchanged. 
D)  The official unemployment rate would decrease. 
E)  The size of the underground economy would shrink.

Exam 7: Unemployment and Inflation

Unexpected inflation redistributes income:

A leading indicator:

Technological advancements cause structural unemployment, however they help in:

When the economy moves into recession, some companies lay off workers. Those unemployed workers are experiencing cyclical unemployment.

Unemployment will decrease over time if:

If the inflation rate for a given year is 5 percent, then $1.00 in the previous year will buy goods worth approximately $0.95 this year.

Which of the following signals the start of an expansion?

If the average price level in 2002 was 1.25 relative to the base year in 1992, then:

Leading and lagging indicators show the effects of economic fluctuations but coincident indicators do not.

Teenagers are usually the demographic group with the highest unemployment rates.

Which of the following could contribute to cost-push inflation?

What is another name for the natural unemployment rate?

The effect of _____ is to produce an unemployment rate that understates actual unemployment.

Hyperinflation is usually accompanied by a great macroeconomic expansion.

Which of the following is true of expected inflation?

The figure given below represents the demand and supply conditions of an economy. Figure 7.3 -Refer to Figure 7.3. Which of the following explains the shift in supply curve from S1 to S2?

If the average price level in 1991 was 1.20 relative to the base year in 1986, then a dollar in 1991 bought 20 percent more goods and services than a dollar in 1986.

Economists call a severe prolonged economic recession a:

Other things equal, the equation for the real interest rate indicates that:

Because there is no way to account for them, the official unemployment rate does not include discouraged workers. What would happen to the unemployment rate if, because of a program that gave them new hope, all discouraged workers suddenly begin reporting themselves as ready to work?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The figure given below represents the demand and supply conditions of an economy. Figure 7.3 -Refer to Figure 7.3. Which of the following explains the shift in supply curve from S₁ to S₂?