Question 1

If actual GDP equals potential GDP, then:

Accepted Answer

A) the actual unemployment rate is greater than the natural rate of unemployment. 
B) the actual unemployment rate equals the natural rate of unemployment. 
C) the actual unemployment rate is less than the natural rate of unemployment. 
D) there is a recessionary gap. 
A) the actual unemployment rate is greater than the natural rate of unemployment. 
B) the actual unemployment rate equals the natural rate of unemployment. 
C) the actual unemployment rate is less than the natural rate of unemployment. 
D) there is a recessionary gap. B

Question 2

A depression is:

Accepted Answer

A) a particularly severe and protracted recession. 
B) the high point of economic activity prior to a downturn. 
C) the low point of economic activity prior to a recovery. 
D) a particularly strong and protracted expansion. 
A) a particularly severe and protracted recession. 
B) the high point of economic activity prior to a downturn. 
C) the low point of economic activity prior to a recovery. 
D) a particularly strong and protracted expansion. A

Question 3

In Macroland, a country whose economy operates according to Okun's law, potential GDP equals $10 trillion, the actual rate of unemployment is 8 percent, and the natural unemployment rate is 6 percent. What is real actual GDP in Macroland?

Accepted Answer

A) $9.6 trillion 
B) $9.8 trillion 
C) $10 trillion 
D) $10.2 trillion 
A) $9.6 trillion 
B) $9.8 trillion 
C) $10 trillion 
D) $10.2 trillion A

Question 4

Refer to the accompanying figure.   In the figure, a business cycle trough is shown by which point(s)?

Accepted Answer

A) A and C and E 
B) B and D 
C) A only 
D) D only 
A) A and C and E 
B) B and D 
C) A only 
D) D only

Question 5

Falling growth rates during the 2007-2009 recession occurred:

Accepted Answer

A) only in the high-tech sectors of the U.S. economy. 
B) only in the United States. 
C) in the United States, China, Germany, the United Kingdom, and Japan. 
D) in the United States and China, but not in Germany, the United Kingdom, or Japan. 
A) only in the high-tech sectors of the U.S. economy. 
B) only in the United States. 
C) in the United States, China, Germany, the United Kingdom, and Japan. 
D) in the United States and China, but not in Germany, the United Kingdom, or Japan.

Question 6

The beginning of a recession is called the:

Accepted Answer

A) depression. 
B) expansion. 
C) peak. 
D) trough. 
A) depression. 
B) expansion. 
C) peak. 
D) trough.

Question 7

In reference to short-term economic fluctuations, the "trough" refers to:

Accepted Answer

A) a period in which the economy is growing at a rate significantly below normal. 
B) the low point of economic activity prior to a downturn. 
C) the low point of economic activity prior to a recovery. 
D) a particularly strong and protracted recession. 
A) a period in which the economy is growing at a rate significantly below normal. 
B) the low point of economic activity prior to a downturn. 
C) the low point of economic activity prior to a recovery. 
D) a particularly strong and protracted recession.

Question 8

The following data give the dates of successive turning points in U.S. economic activity and the corresponding levels of real GDP at the time. $$\begin{array} { | c | c | c | } 
\hline \text { Turning Paint } & \text { Date } & \text { Real GDP (1996 \$ billims) } \
\hline \text { (A) } & \text { July } 1953 & 1992.2 \
\hline \text { (B) } & \text { May } 1954 & 1941.0 \
\hline \text { (C) } & \text { Apr. } 1957 & 2182.7 \
\hline \text { (D) } & \text { Apr. } 1958 & 2117.4 \
\hline \text { (E) } & \text { Apr. } 1960 & 2391.0 \
\hline
\end{array}$$  
The economy experienced an expansion that lasted from:

Accepted Answer

A) July 1953 to May 1954. 
B) May 1954 to April 1957. 
C) July 1953 to April 1957. 
D) May 1954 to April 1958. 
A) July 1953 to May 1954. 
B) May 1954 to April 1957. 
C) July 1953 to April 1957. 
D) May 1954 to April 1958.

Question 9

If the natural rate of unemployment equals 4 percent and the actual rate of unemployment equals 6 percent, then cyclical unemployment equals:

Accepted Answer

A) −2 percent. 
B) 10 percent. 
C) 2 percent. 
D) 6 percent. 
A) −2 percent. 
B) 10 percent. 
C) 2 percent. 
D) 6 percent.

Question 10

The increase in the unemployment rate during a recession is associated with which type of unemployment?

Accepted Answer

A) Frictional unemployment 
B) Cyclical unemployment 
C) Structural unemployment 
D) Nominal unemployment 
A) Frictional unemployment 
B) Cyclical unemployment 
C) Structural unemployment 
D) Nominal unemployment

Question 11

According to the Congressional Budget Office, from 1979 to 1999, the natural rate of unemployment in the United States:

Accepted Answer

A) increased. 
B) remained relatively stable. 
C) fell. 
D) fell to zero, and has since become negative. 
A) increased. 
B) remained relatively stable. 
C) fell. 
D) fell to zero, and has since become negative.

Question 12

Economic activity moves from a trough into a period of ________ until it reaches a ________ and then into a period of ________.

Accepted Answer

A) expansion; trough; recession. 
B) recession; trough; expansion 
C) expansion; peak; recession 
D) recession; peak; expansion 
A) expansion; trough; recession. 
B) recession; trough; expansion 
C) expansion; peak; recession 
D) recession; peak; expansion

Question 13

If all prices adjusted immediately to balance the quantities supplied and demanded for all goods and services:

Accepted Answer

A) output gaps would not exist. 
B) output gaps would be positive more often than they would be negative. 
C) cyclical unemployment would be positive. 
D) potential GDP would rise much more quickly. 
A) output gaps would not exist. 
B) output gaps would be positive more often than they would be negative. 
C) cyclical unemployment would be positive. 
D) potential GDP would rise much more quickly.

Question 14

Recessions begin at ________ and end at ________.

Accepted Answer

A) the highest unemployment rate; the lowest unemployment rate 
B) the lowest unemployment rate; the highest unemployment rate 
C) a peak; a trough 
D) a trough; a peak 
A) the highest unemployment rate; the lowest unemployment rate 
B) the lowest unemployment rate; the highest unemployment rate 
C) a peak; a trough 
D) a trough; a peak

Question 15

According to Okun's law, when cyclical unemployment increases by one percentage point, the recessionary gap ________ by ________ percent of potential output.

Accepted Answer

A) widens; one 
B) widens; two 
C) closes; one 
D) closes; two 
A) widens; one 
B) widens; two 
C) closes; one 
D) closes; two

Question 16

In Okunland, a country whose economy operates according to Okun's law, real GDP equals $7,520 billion, potential GDP equals $8,000 billion, and the actual unemployment rate is 8 percent. What is the natural rate of unemployment in Okunland?

Accepted Answer

A) 2 percent 
B) 5 percent 
C) 6 percent 
D) 11 percent 
A) 2 percent 
B) 5 percent 
C) 6 percent 
D) 11 percent

Question 17

Suppose the actual rate of unemployment is 4 percent. What is the natural rate of unemployment if actual output equals potential output?

Accepted Answer

A) 0 percent 
B) −4 percent 
C) 2 percent 
D) 4 percent 
A) 0 percent 
B) −4 percent 
C) 2 percent 
D) 4 percent

Question 18

If potential output equals $8 billion and actual output equals $9 billion, then this economy has a(n):

Accepted Answer

A) budget deficit. 
B) trade deficit. 
C) expansionary gap. 
D) recessionary gap. 
A) budget deficit. 
B) trade deficit. 
C) expansionary gap. 
D) recessionary gap.

Question 19

According to Okun's law, when cyclical unemployment increases from 1 percent to 2 percent, the recessionary gap increases from ________.

Accepted Answer

A) −2 percent to −4 percent 
B) −1 percent to −2 percent 
C) 2 percent to 4 percent 
D) 1 percent to 2 percent 
A) −2 percent to −4 percent 
B) −1 percent to −2 percent 
C) 2 percent to 4 percent 
D) 1 percent to 2 percent

Question 20

Potential output is:

Accepted Answer

A) equal to actual output. 
B) also known as the output gap. 
C) the same as the natural rate of unemployment. 
D) the maximum sustainable amount of output. 
A) equal to actual output. 
B) also known as the output gap. 
C) the same as the natural rate of unemployment. 
D) the maximum sustainable amount of output.

Exam 24: Short-Term Economic Fluctuations: An Introduction

If actual GDP equals potential GDP, then:

A depression is:

In Macroland, a country whose economy operates according to Okun's law, potential GDP equals $10 trillion, the actual rate of unemployment is 8 percent, and the natural unemployment rate is 6 percent. What is real actual GDP in Macroland?

Refer to the accompanying figure. In the figure, a business cycle trough is shown by which point(s)?

Falling growth rates during the 2007-2009 recession occurred:

The beginning of a recession is called the:

In reference to short-term economic fluctuations, the "trough" refers to:

If the natural rate of unemployment equals 4 percent and the actual rate of unemployment equals 6 percent, then cyclical unemployment equals:

The increase in the unemployment rate during a recession is associated with which type of unemployment?

According to the Congressional Budget Office, from 1979 to 1999, the natural rate of unemployment in the United States:

Economic activity moves from a trough into a period of ________ until it reaches a ________ and then into a period of ________.

If all prices adjusted immediately to balance the quantities supplied and demanded for all goods and services:

Recessions begin at ________ and end at ________.

According to Okun's law, when cyclical unemployment increases by one percentage point, the recessionary gap ________ by ________ percent of potential output.

In Okunland, a country whose economy operates according to Okun's law, real GDP equals $7,520 billion, potential GDP equals $8,000 billion, and the actual unemployment rate is 8 percent. What is the natural rate of unemployment in Okunland?

Suppose the actual rate of unemployment is 4 percent. What is the natural rate of unemployment if actual output equals potential output?

If potential output equals $8 billion and actual output equals $9 billion, then this economy has a(n):

According to Okun's law, when cyclical unemployment increases from 1 percent to 2 percent, the recessionary gap increases from ________.

Potential output is:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Economic activity moves from a trough into a period of until it reaches a and then into a period of .

Recessions begin at and end at .

According to Okun's law, when cyclical unemployment increases by one percentage point, the recessionary gap by percent of potential output.