Question 1

The major component of the 9.5 percent unemployment rate in 1981-82 was most likely ________ unemployment.

Accepted Answer

A)  frictional 
B)  structural 
C)  cyclical 
D)  global 
E)  inflationary 
A)  frictional 
B)  structural 
C)  cyclical 
D)  global 
E)  inflationary

Question 2

Both aggregate demand and aggregate supply curves are relationships between

Accepted Answer

A)  income and employment. 
B)  output and income. 
C)  the price level and real output. 
D)  interest rates and the prices of financial assets. 
E)  inflation and unemployment. 
A)  income and employment. 
B)  output and income. 
C)  the price level and real output. 
D)  interest rates and the prices of financial assets. 
E)  inflation and unemployment.

Question 3

Frictional unemployment

Accepted Answer

A)  exists when jobs are available for qualified workers but the unemployed lack the required qualifications. 
B)  refers to the social frictions caused by unemployment. 
C)  results from the entrance of new workers into the labor market and the voluntary movement of workers between positions. 
D)  was the major component of unemployment during the Great Depression. 
E)  can and should be completely eliminated. 
A)  exists when jobs are available for qualified workers but the unemployed lack the required qualifications. 
B)  refers to the social frictions caused by unemployment. 
C)  results from the entrance of new workers into the labor market and the voluntary movement of workers between positions. 
D)  was the major component of unemployment during the Great Depression. 
E)  can and should be completely eliminated.

Question 4

The unemployment rate

Accepted Answer

A)  indicates the extent to which people are unemployed. 
B)  measures only cyclical unemployment. 
C)  uses a definition of unemployment that places attention on the serious cases of joblessness. 
D)  measures the percent of the population that does not have a job. 
E)  is a measure of the jobless proportion of the labor force actively seeking employment. 
A)  indicates the extent to which people are unemployed. 
B)  measures only cyclical unemployment. 
C)  uses a definition of unemployment that places attention on the serious cases of joblessness. 
D)  measures the percent of the population that does not have a job. 
E)  is a measure of the jobless proportion of the labor force actively seeking employment.

Question 5

The following question are based on the following diagram:
  
-If aggregate demand shifts to the right

Accepted Answer

A)  unemployment increases. 
B)  price levels fall. 
C)  real output rises. 
D)  both the demand for money and interest rates fall. 
E)  consumers or investors must have decided to decrease their spending. 
A)  unemployment increases. 
B)  price levels fall. 
C)  real output rises. 
D)  both the demand for money and interest rates fall. 
E)  consumers or investors must have decided to decrease their spending.

Question 6

Say's law

Accepted Answer

A)  states that the total amount paid out for resources must equal the value of the goods produced. 
B)  states that all income spent must have been earned. 
C)  is the intellectual basis for the Keynesian model of income and employment. 
D)  is an integral part of the Marxian analysis of capitalism. 
E)  requires the assumption of wage and price rigidity. 
A)  states that the total amount paid out for resources must equal the value of the goods produced. 
B)  states that all income spent must have been earned. 
C)  is the intellectual basis for the Keynesian model of income and employment. 
D)  is an integral part of the Marxian analysis of capitalism. 
E)  requires the assumption of wage and price rigidity.

Question 7

At full employment,the short-run aggregate supply curve

Accepted Answer

A)  slopes downward. 
B)  becomes vertical. 
C) shifts to the right. 
D)  causes the aggregate demand curve to fluctuate. 
E)  reflects declining costs of production. 
A)  slopes downward. 
B)  becomes vertical. 
C) shifts to the right. 
D)  causes the aggregate demand curve to fluctuate. 
E)  reflects declining costs of production.

Question 8

When the economy is at equilibrium in the horizontal range of the short-run aggregate supply curve

Accepted Answer

A)  there is little upward pressure on prices because of widespread unemployment. 
B)  the aggregate demand curve must be horizontal as well. 
C)  economic conditions similar to those experienced during World War II prevail. 
D)  real output is equal to potential output. 
E)  a change in aggregate demand causes price levels to fall. 
A)  there is little upward pressure on prices because of widespread unemployment. 
B)  the aggregate demand curve must be horizontal as well. 
C)  economic conditions similar to those experienced during World War II prevail. 
D)  real output is equal to potential output. 
E)  a change in aggregate demand causes price levels to fall.

Question 9

If the aggregate demand and supply curves intersect in the horizontal range of the aggregate supply curve,an increase in aggregate demand increases

Accepted Answer

A)  the price level but not the total real output. 
B)  total real output but not the price level. 
C)  both total real output and the price level. 
D)  neither total real output nor the price level. 
E)  total employment while decreasing the price level. 
A)  the price level but not the total real output. 
B)  total real output but not the price level. 
C)  both total real output and the price level. 
D)  neither total real output nor the price level. 
E)  total employment while decreasing the price level.

Question 10

The following question are based on the following diagram:
  
-At equilibrium,the price level and the level of real national output are,respectively

Accepted Answer

A)  100 and $0. 
B)  200 and $1,500 billion. 
C)  300 and $2,500 billion. 
D)  400 and $2,000 billion. 
E)  500 and $3,000 billion. 
A)  100 and $0. 
B)  200 and $1,500 billion. 
C)  300 and $2,500 billion. 
D)  400 and $2,000 billion. 
E)  500 and $3,000 billion.

Question 11

The following question are based on the following diagram:
  
-High levels of resource unemployment and excess capacity would imply a price level of

Accepted Answer

A)  100. 
B)  200. 
C)  300. 
D)  400. 
E)  500. 
A)  100. 
B)  200. 
C)  300. 
D)  400. 
E)  500.

Question 12

A horizontal short-run aggregate supply curve reflects

Accepted Answer

A)  no upward pressure on prices because of significant levels of unemployed productive capacity. 
B)  full employment of the economy's resources. 
C)  falling price levels. 
D)  stagflation. 
E)  Say's law. 
A)  no upward pressure on prices because of significant levels of unemployed productive capacity. 
B)  full employment of the economy's resources. 
C)  falling price levels. 
D)  stagflation. 
E)  Say's law.

Question 13

A leftward shift in the short-run aggregate supply curve causes

Accepted Answer

A)  price levels to fall. 
B)  real output to rise. 
C)  demand-pull inflation. 
D)  simultaneous inflation and a decrease in total real output. 
E)  unemployment to fall. 
A)  price levels to fall. 
B)  real output to rise. 
C)  demand-pull inflation. 
D)  simultaneous inflation and a decrease in total real output. 
E)  unemployment to fall.

Question 14

In the long run,the aggregate supply curve is vertical because

Accepted Answer

A)  in the long run, potential output is less than actual output. 
B)  input prices and output prices are unaffected by changes in aggregate demand. 
C)  aggregate demand becomes horizontal. 
D)  input prices change by the same proportion as product prices, leaving output levels unchanged. 
E)  excess capacity allows firms more resource flexibility. 
A)  in the long run, potential output is less than actual output. 
B)  input prices and output prices are unaffected by changes in aggregate demand. 
C)  aggregate demand becomes horizontal. 
D)  input prices change by the same proportion as product prices, leaving output levels unchanged. 
E)  excess capacity allows firms more resource flexibility.

Question 15

The total amount of goods and services that could be produced if the economy were at full employment is called the

Accepted Answer

A)  business cycle. 
B)  price level. 
C)  potential GDP. 
D)  GDP deflator. 
E)  aggregate demand curve. 
A)  business cycle. 
B)  price level. 
C)  potential GDP. 
D)  GDP deflator. 
E)  aggregate demand curve.

Question 16

The phase of the business cycle in which output is lowest relative to its potential level is the

Accepted Answer

A)  peak. 
B)  trough. 
C)  recession. 
D)  expansion. 
E)  trend. 
A)  peak. 
B)  trough. 
C)  recession. 
D)  expansion. 
E)  trend.

Question 17

Which of the following best defines the difference between a recession and a depression?

Accepted Answer

A)  The terms are synonymous; there is no difference at all. 
B)  A depression is the correct term for recession experienced on a worldwide scale. 
C)  A depression is a period of economic hardship, while a recession generally is not. 
D)  A depression is a long, very severe recession. 
E)  A depression means potential GDP is falling. In a recession, only the actual GDP is falling. 
A)  The terms are synonymous; there is no difference at all. 
B)  A depression is the correct term for recession experienced on a worldwide scale. 
C)  A depression is a period of economic hardship, while a recession generally is not. 
D)  A depression is a long, very severe recession. 
E)  A depression means potential GDP is falling. In a recession, only the actual GDP is falling.

Question 18

If full employment is defined by an unemployment rate of 5 percent,potential GDP can be estimated by multiplying

Accepted Answer

A)  last year's GDP times 1.05. 
B)  the average output of the workforce times 95 percent. 
C)  the normal hours of work times last year's GDP times 100. 
D)  95 percent of the labor force times the normal hours of work per year times the average output per hour of work. 
E)  the normal hours of work per year times the average output of the white-collar worker at the relevant time times 95. 
A)  last year's GDP times 1.05. 
B)  the average output of the workforce times 95 percent. 
C)  the normal hours of work times last year's GDP times 100. 
D)  95 percent of the labor force times the normal hours of work per year times the average output per hour of work. 
E)  the normal hours of work per year times the average output of the white-collar worker at the relevant time times 95.

Question 19

The following question are based on the following diagram:
  
-The expansion phase of the cycle is best characterized by letter

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E. 
A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E.

Question 20

Since World War I,the highest unemployment rates in the United States occurred during the

Accepted Answer

A)  1930s. 
B)  1950s. 
C)  1960s. 
D)  1970s. 
E)  1980s. 
A)  1930s. 
B)  1950s. 
C)  1960s. 
D)  1970s. 
E)  1980s.

Exam 16: Business Fluctuations and Unemployment

The major component of the 9.5 percent unemployment rate in 1981-82 was most likely ________ unemployment.

Both aggregate demand and aggregate supply curves are relationships between

Frictional unemployment

The unemployment rate

The following question are based on the following diagram: -If aggregate demand shifts to the right

Say's law

At full employment,the short-run aggregate supply curve

When the economy is at equilibrium in the horizontal range of the short-run aggregate supply curve

If the aggregate demand and supply curves intersect in the horizontal range of the aggregate supply curve,an increase in aggregate demand increases

The following question are based on the following diagram: -At equilibrium,the price level and the level of real national output are,respectively

The following question are based on the following diagram: -High levels of resource unemployment and excess capacity would imply a price level of

A horizontal short-run aggregate supply curve reflects

A leftward shift in the short-run aggregate supply curve causes

In the long run,the aggregate supply curve is vertical because

The total amount of goods and services that could be produced if the economy were at full employment is called the

The phase of the business cycle in which output is lowest relative to its potential level is the

Which of the following best defines the difference between a recession and a depression?

If full employment is defined by an unemployment rate of 5 percent,potential GDP can be estimated by multiplying

The following question are based on the following diagram: -The expansion phase of the cycle is best characterized by letter

Since World War I,the highest unemployment rates in the United States occurred during the

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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