Question 1

Okun's law expresses the relationship between:

Accepted Answer

A) unemployment and inflation. 
B) frictional unemployment and structural unemployment. 
C) the money supply and the velocity of money. 
D) cyclical unemployment and the output gap. 
A) unemployment and inflation. 
B) frictional unemployment and structural unemployment. 
C) the money supply and the velocity of money. 
D) cyclical unemployment and the output gap.

Question 2

During recessions, the change in real GDP is:

Accepted Answer

A) always positive. 
B) always negative. 
C) most often positive, but occasionally negative. 
D) most often negative, but occasionally positive. 
A) always positive. 
B) always negative. 
C) most often positive, but occasionally negative. 
D) most often negative, but occasionally positive.

Question 3

The economy of Omega operates according to Okun's law. In Omega, the actual and the natural rates of unemployment both equal 5 percent, and potential GDP equals $10 trillion. What is real GDP in Omega?

Accepted Answer

A) $9.0 trillion 
B) $9.5 trillion 
C) $10.0 trillion 
D) $10.5 trillion 
A) $9.0 trillion 
B) $9.5 trillion 
C) $10.0 trillion 
D) $10.5 trillion

Question 4

The dates of the "official" peaks and troughs of business cycles in the United States are determined by the:

Accepted Answer

A) Federal Reserve Board. 
B) Congressional Budget Office. 
C) National Bureau of Economic Research. 
D) Council of Economic Advisers. 
A) Federal Reserve Board. 
B) Congressional Budget Office. 
C) National Bureau of Economic Research. 
D) Council of Economic Advisers.

Question 5

In the short run, total spending affects ________, and in the long run total spending affects ________.

Accepted Answer

A) prices; output 
B) prices; unemployment 
C) output; prices 
D) output; unemployment 
A) prices; output 
B) prices; unemployment 
C) output; prices 
D) output; unemployment

Question 6

According to Okun's law, when the output gap is negative, cyclical unemployment:

Accepted Answer

A) equals structural unemployment. 
B) equals frictional unemployment. 
C) is negative. 
D) is positive. 
A) equals structural unemployment. 
B) equals frictional unemployment. 
C) is negative. 
D) is positive.

Question 7

In the short run, ________ determines output, and in the long run ________ determines output.

Accepted Answer

A) potential output; prices 
B) potential output; total spending 
C) total spending; potential output 
D) total spending; prices 
A) potential output; prices 
B) potential output; total spending 
C) total spending; potential output 
D) total spending; prices

Question 8

In determining the beginning of recessions, the NBER Business Cycle Dating Committee looks for evidence of decline in:

Accepted Answer

A) specific sectors of the economy. 
B) the rate of inflation. 
C) the entire economy. 
D) the stock market. 
A) specific sectors of the economy. 
B) the rate of inflation. 
C) the entire economy. 
D) the stock market.

Question 9

The economy of Alpha operates according to Okun's law. In Alpha, potential GDP equals $500 billion, actual GDP equals $520 billion, and the natural rate of unemployment is 5 percent. What is the actual rate of unemployment in Alpha?

Accepted Answer

A) 1 percent 
B) 3 percent 
C) 4 percent 
D) 7 percent 
A) 1 percent 
B) 3 percent 
C) 4 percent 
D) 7 percent

Question 10

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 a recession 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 11

A period in which the economy is growing at a rate significantly below normal is called a(n):

Accepted Answer

A) expansion. 
B) boom. 
C) peak. 
D) recession. 
A) expansion. 
B) boom. 
C) peak. 
D) recession.

Question 12

Since 1925, the longest expansion in the United States lasted:

Accepted Answer

A) 120 months. 
B) 21 months. 
C) 43 months. 
D) 60 months. 
A) 120 months. 
B) 21 months. 
C) 43 months. 
D) 60 months.

Question 13

The longest and most severe recession in the United States since 1925 began in:

Accepted Answer

A) 1929. 
B) 1945. 
C) 1957. 
D) 1982. 
A) 1929. 
B) 1945. 
C) 1957. 
D) 1982.

Question 14

If potential output for an economy equals $8 billion and actual output equals $7 billion, then this economy's output gap should be expressed as:

Accepted Answer

A) −$1 billion. 
B) $1 billion. 
C) 12.5 percent. 
D) −12.5 percent. 
A) −$1 billion. 
B) $1 billion. 
C) 12.5 percent. 
D) −12.5 percent.

Question 15

When actual output is less than potential output there is a(n):

Accepted Answer

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

Question 16

Refer to the accompanying figure.   In the figure, which interval represents a business cycle expansion?

Accepted Answer

A) A to B 
B) B to C 
C) A to C 
D) B to D 
A) A to B 
B) B to C 
C) A to C 
D) B to D

Question 17

In a recession, the cyclical unemployment:

Accepted Answer

A) is positive. 
B) is zero. 
C) is negative. 
D) equals the natural rate of unemployment. 
A) is positive. 
B) is zero. 
C) is negative. 
D) equals the natural rate of unemployment.

Question 18

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.  
$$\begin{array} { | c | c | c | } 
\hline \text { Turning Paint } & \text { Date } & \text { Real GDP (1996 \$ billims) } \
\hline \text { (A) } & \text { Feb. } 1961 & 2352.9 \
\hline \text { (B) } & \text { Dec. } 1969 & 3571.4 \
\hline \text { (C) } & \text { Nov. } 1970 & 3566.5 \
\hline \text { (D) } & \text { Nov. } 1973 & 4151.1 \
\hline \text { (E) } & \text { Mar. } 1975 & 4010.0 \
\hline
\end{array}$$  
Which of the following periods was an expansion?

Accepted Answer

A) November 1970 through November 1973 
B) December 1969 through November 1970 
C) November 1970 through March 1975 
D) December 1969 through November 1973 
A) November 1970 through November 1973 
B) December 1969 through November 1970 
C) November 1970 through March 1975 
D) December 1969 through November 1973

Question 19

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

Accepted Answer

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

Question 20

Compared to older workers, younger workers change jobs more frequently, so they are more prone to ________ unemployment; also, younger workers have fewer skills, so they are more prone to ________ unemployment.

Accepted Answer

A) cyclical; frictional 
B) frictional; structural 
C) structural; frictional 
D) frictional; cyclical 
A) cyclical; frictional 
B) frictional; structural 
C) structural; frictional 
D) frictional; cyclical

Exam 24: Short-Term Economic Fluctuations: An Introduction

Okun's law expresses the relationship between:

During recessions, the change in real GDP is:

The economy of Omega operates according to Okun's law. In Omega, the actual and the natural rates of unemployment both equal 5 percent, and potential GDP equals $10 trillion. What is real GDP in Omega?

The dates of the "official" peaks and troughs of business cycles in the United States are determined by the:

In the short run, total spending affects ________, and in the long run total spending affects ________.

According to Okun's law, when the output gap is negative, cyclical unemployment:

In the short run, ________ determines output, and in the long run ________ determines output.

In determining the beginning of recessions, the NBER Business Cycle Dating Committee looks for evidence of decline in:

The economy of Alpha operates according to Okun's law. In Alpha, potential GDP equals $500 billion, actual GDP equals $520 billion, and the natural rate of unemployment is 5 percent. What is the actual rate of unemployment in Alpha?

A period in which the economy is growing at a rate significantly below normal is called a(n):

Since 1925, the longest expansion in the United States lasted:

The longest and most severe recession in the United States since 1925 began in:

If potential output for an economy equals $8 billion and actual output equals $7 billion, then this economy's output gap should be expressed as:

When actual output is less than potential output there is a(n):

Refer to the accompanying figure. In the figure, which interval represents a business cycle expansion?

In a recession, the cyclical unemployment:

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

Compared to older workers, younger workers change jobs more frequently, so they are more prone to ________ unemployment; also, younger workers have fewer skills, so they are more prone to ________ unemployment.

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

In the short run, total spending affects , and in the long run total spending affects .

In the short run, determines output, and in the long run determines output.

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

Compared to older workers, younger workers change jobs more frequently, so they are more prone to unemployment; also, younger workers have fewer skills, so they are more prone to unemployment.