Question 1

The GDP gap is the difference between:

Accepted Answer

A)  full-employment real GDP and real GDP chain price index. 
B)  unemployment rate and real GDP chain price index. 
C)  actual real GDP and full-employment real GDP. 
D)  frictional unemployment and actual real GDP. 
A)  full-employment real GDP and real GDP chain price index. 
B)  unemployment rate and real GDP chain price index. 
C)  actual real GDP and full-employment real GDP. 
D)  frictional unemployment and actual real GDP.

Question 2

Sally lost her job when her company went out of business because of a recession. This is an example of:

Accepted Answer

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

Question 3

Full employment, which is always expected to occur, consists of the frictionally and cyclically unemployed.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a leading business cycle indicator?

Accepted Answer

A)  The unemployment rate. 
B)  The volume of outstanding commercial loans. 
C)  New building permits. 
D)  Personal income. 
A)  The unemployment rate. 
B)  The volume of outstanding commercial loans. 
C)  New building permits. 
D)  Personal income.

Question 5

The point at which real GDP reaches a maximum during a business cycle is called the:

Accepted Answer

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

Question 6

Business cycles vary greatly in duration and intensity.

Accepted Answer

A) True 
 B)False

Question 7

When an economy is operating at its full employment rate of output:

Accepted Answer

A)  the rate of unemployment will be zero. 
B)  output will exceed the economy's maximum sustainable rate. 
C)  the actual rate of unemployment will equal the natural rate. 
D)  the economy's potential rate of output will exceed actual GDP. 
A)  the rate of unemployment will be zero. 
B)  output will exceed the economy's maximum sustainable rate. 
C)  the actual rate of unemployment will equal the natural rate. 
D)  the economy's potential rate of output will exceed actual GDP.

Question 8

Full employment means which of the following is zero?

Accepted Answer

A)  structural unemployment 
B)  cyclical unemployment 
C)  frictional unemployment 
D)  aggregate unemployment 
A)  structural unemployment 
B)  cyclical unemployment 
C)  frictional unemployment 
D)  aggregate unemployment

Question 9

Consider a broom factory that permanently closes because of foreign competition. If the broom factory's workers cannot find new jobs because their skills are no longer marketable, then they are classified as:

Accepted Answer

A)  seasonally unemployed. 
B)  frictionally unemployed. 
C)  structurally unemployed. 
D)  cyclically unemployed. 
A)  seasonally unemployed. 
B)  frictionally unemployed. 
C)  structurally unemployed. 
D)  cyclically unemployed.

Question 10

Structural unemployment results from a lack of education and training.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a variable in the index of leading indicators?

Accepted Answer

A)  Average work week. 
B)  Duration of unemployment. 
C)  Unemployment claims. 
D)  New businesses. 
A)  Average work week. 
B)  Duration of unemployment. 
C)  Unemployment claims. 
D)  New businesses.

Question 12

Recovery is the phase of the business cycle during which real GDP reaches its maximum.

Accepted Answer

A) True 
 B)False

Question 13

Which type of unemployment is experienced by a person who is laid off at an office because word processing equipment and software reduce the need for typists?

Accepted Answer

A)  Seasonal. 
B)  Cyclical. 
C)  Voluntary. 
D)  Structural. 
E)  Frictional. 
A)  Seasonal. 
B)  Cyclical. 
C)  Voluntary. 
D)  Structural. 
E)  Frictional.

Question 14

Which one of the following people is not a member of the civilian labor force?

Accepted Answer

A)  A full-time student who devotes all her time to her classes. 
B)  A person who works 30 hours a week at Burger King and goes to school at night. 
C)  The man who was fired last week and is searching for a new job. 
D)  The President of the United States. 
E)  A professional athlete. 
A)  A full-time student who devotes all her time to her classes. 
B)  A person who works 30 hours a week at Burger King and goes to school at night. 
C)  The man who was fired last week and is searching for a new job. 
D)  The President of the United States. 
E)  A professional athlete.

Question 15

The number of people officially unemployed is not the same as the number of people who can't find a job because:

Accepted Answer

A)  people who have jobs continue to look for better ones. 
B)  the armed forces is included. 
C)  discouraged workers are not counted. 
D)  none of the above. 
E)  all of the above. 
A)  people who have jobs continue to look for better ones. 
B)  the armed forces is included. 
C)  discouraged workers are not counted. 
D)  none of the above. 
E)  all of the above.

Question 16

A mismatch of the skills of unemployed workers and the skills required for existing jobs is defined as:

Accepted Answer

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

Question 17

Louise is unemployed due to a decrease in the demand for workers with a knowledge of a certain word processing language. This is an example of:

Accepted Answer

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

Question 18

Jamal (now age 54) lost his job. He has very specialized skills that are no longer in demand. Jamal's unemployment is best classified as:

Accepted Answer

A)  cyclical. 
B)  structural. 
C)  seasonal. 
D)  frictional. 
E)  voluntary. 
A)  cyclical. 
B)  structural. 
C)  seasonal. 
D)  frictional. 
E)  voluntary.

Question 19

Consider an economy made up of 100 people, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The unemployment rate is approximately:

Accepted Answer

A)  10 percent. 
B)  12 percent. 
C)  17 percent. 
D)  20 percent. 
E)  25 percent. 
A)  10 percent. 
B)  12 percent. 
C)  17 percent. 
D)  20 percent. 
E)  25 percent.

Exam 12: Business Cycles and Unemployment

The GDP gap is the difference between:

Sally lost her job when her company went out of business because of a recession. This is an example of:

Full employment, which is always expected to occur, consists of the frictionally and cyclically unemployed.

Which of the following is a leading business cycle indicator?

The point at which real GDP reaches a maximum during a business cycle is called the:

Business cycles vary greatly in duration and intensity.

When an economy is operating at its full employment rate of output:

Full employment means which of the following is zero?

Consider a broom factory that permanently closes because of foreign competition. If the broom factory's workers cannot find new jobs because their skills are no longer marketable, then they are classified as:

Structural unemployment results from a lack of education and training.

Which of the following is not a variable in the index of leading indicators?

Recovery is the phase of the business cycle during which real GDP reaches its maximum.

Which type of unemployment is experienced by a person who is laid off at an office because word processing equipment and software reduce the need for typists?

Which one of the following people is not a member of the civilian labor force?

The number of people officially unemployed is not the same as the number of people who can't find a job because:

A mismatch of the skills of unemployed workers and the skills required for existing jobs is defined as:

Louise is unemployed due to a decrease in the demand for workers with a knowledge of a certain word processing language. This is an example of:

Jamal (now age 54) lost his job. He has very specialized skills that are no longer in demand. Jamal's unemployment is best classified as:

Consider an economy made up of 100 people, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The unemployment rate is approximately:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters