Question 1

Which of the following statements is correct?

Accepted Answer

A)  The depth and the length of all business cycles are identical. 
B)  The depth and the length of all business cycles are different. 
C)  Business cycles are caused by seasonal unemployment changes. 
D)  Business cycles are caused by unanticipated inflation. 
A)  The depth and the length of all business cycles are identical. 
B)  The depth and the length of all business cycles are different. 
C)  Business cycles are caused by seasonal unemployment changes. 
D)  Business cycles are caused by unanticipated inflation. B

Question 2

An extremely severe recession is known as a

Accepted Answer

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

Question 3

A COLA is

Accepted Answer

A)  unanticipated positive inflation. 
B)  unanticipated negative inflation. 
C)  the cost associated with recalculating prices and printing new price lists when there is inflation. 
D)  an automatic increase in wages that takes into account increases in the price level. 
A)  unanticipated positive inflation. 
B)  unanticipated negative inflation. 
C)  the cost associated with recalculating prices and printing new price lists when there is inflation. 
D)  an automatic increase in wages that takes into account increases in the price level. D

Question 4

The labor force is defined as

Accepted Answer

A)  the number of people over 16 years of age. 
B)  the number of people who are working. 
C)  the sum of the employed and the unemployed. 
D)  the number of people in blue-collar jobs. 
A)  the number of people over 16 years of age. 
B)  the number of people who are working. 
C)  the sum of the employed and the unemployed. 
D)  the number of people in blue-collar jobs.

Question 5

Economists agree that the structure of the Consumer Price Index has some problems that limit its usefulness as a reliable measure of inflation. What is one of these drawbacks?

Accepted Answer

A)  It is based on the faulty assumption that each consumer buys only one unit of each item. 
B)  It is based on the faulty assumption that consumption choices are not influenced by income levels. 
C)  It ignores changes in consumption patterns brought about by changes in the relative prices of consumer goods. 
D)  It is based on a market basket of mail-order items and does not include the goods that consumers typically purchase. 
A)  It is based on the faulty assumption that each consumer buys only one unit of each item. 
B)  It is based on the faulty assumption that consumption choices are not influenced by income levels. 
C)  It ignores changes in consumption patterns brought about by changes in the relative prices of consumer goods. 
D)  It is based on a market basket of mail-order items and does not include the goods that consumers typically purchase.

Question 6

During a recession

Accepted Answer

A)  incomes rise and employment decreases. 
B)  incomes fall and unemployment increases. 
C)  incomes fall and unemployment falls. 
D)  incomes rise and unemployment increases. 
A)  incomes rise and employment decreases. 
B)  incomes fall and unemployment increases. 
C)  incomes fall and unemployment falls. 
D)  incomes rise and unemployment increases.

Question 7

A person who previously had a full-time job has been paroled from prison and has applied for a job is considered

Accepted Answer

A)  a reentrant. 
B)  a job loser. 
C)  a new entrant. 
D)  not in the labor force. 
A)  a reentrant. 
B)  a job loser. 
C)  a new entrant. 
D)  not in the labor force.

Question 8

A period of time in which the overall pace of business activity is rising is known as

Accepted Answer

A)  inflation. 
B)  deflation. 
C)  an expansion. 
D)  a contraction. 
A)  inflation. 
B)  deflation. 
C)  an expansion. 
D)  a contraction.

Question 9

In a small country, the adult population is 10,000. In that country, 7,000 people are in the labor force and 6,300 people are employed. The unemployment rate equals

Accepted Answer

A)  0.63 percent. 
B)  7 percent. 
C)  10 percent. 
D)  an undetermined amount given the lack of information. 
A)  0.63 percent. 
B)  7 percent. 
C)  10 percent. 
D)  an undetermined amount given the lack of information.

Question 10

The greater the inflation rate, the

Accepted Answer

A)  faster the decrease in the purchasing power of money. 
B)  slower the decrease in the purchasing power of money. 
C)  better it is to hold money as cash. 
D)  better it is to put money into savings accounts. 
A)  faster the decrease in the purchasing power of money. 
B)  slower the decrease in the purchasing power of money. 
C)  better it is to hold money as cash. 
D)  better it is to put money into savings accounts.

Question 11

Collin has lost his job with a telemarketing company, which has moved its operation to India. Collin is considered

Accepted Answer

A)  structurally unemployed. 
B)  frictionally unemployed. 
C)  seasonally unemployed. 
D)  a discouraged worker. 
A)  structurally unemployed. 
B)  frictionally unemployed. 
C)  seasonally unemployed. 
D)  a discouraged worker.

Question 12

-Using the above table, the employment rate is

Accepted Answer

A)  65.6 percent. 
B)  48.5 percent. 
C)  95.0 percent. 
D)  69.1 percent. 
A)  65.6 percent. 
B)  48.5 percent. 
C)  95.0 percent. 
D)  69.1 percent.

Question 13

An example of a frictionally unemployed individual is

Accepted Answer

A)  Charles, who has lost his job as an auto worker because of increased imports. 
B)  Mary, who quit her job to find work closer to her home. 
C)  Sam, who lost his job as a real estate salesperson when the housing market went soft. 
D)  Cynthia, who has few skills and is no longer looking for work. 
A)  Charles, who has lost his job as an auto worker because of increased imports. 
B)  Mary, who quit her job to find work closer to her home. 
C)  Sam, who lost his job as a real estate salesperson when the housing market went soft. 
D)  Cynthia, who has few skills and is no longer looking for work.

Question 14

In 2013, the price for a market basket of consumer goods is $800. In the base year, the cost of the identical market basket was $1,000. The price index in this case is

Accepted Answer

A)  80.0. 
B)  130.0. 
C)  800.0. 
D)  180.0. 
A)  80.0. 
B)  130.0. 
C)  800.0. 
D)  180.0.

Question 15

A price index shows

Accepted Answer

A)  the current cost of a basket of goods. 
B)  the relative price of necessities. 
C)  the price of goods in the future. 
D)  the cost of today's goods expressed in terms of the cost of goods in a base year. 
A)  the current cost of a basket of goods. 
B)  the relative price of necessities. 
C)  the price of goods in the future. 
D)  the cost of today's goods expressed in terms of the cost of goods in a base year.

Question 16

What is a price index? How do the CPI, the PPI, the PCE Index and the GDP deflator differ?

Accepted Answer

A price index is the cost of today's mar

Question 17

The GDP deflator is a

Accepted Answer

A)  statistical measure of a weighted average of prices of a specific set of goods and services purchased by wage earners in urban areas. 
B)  statistical measure of a weighted average of prices of commodities that firms produce and sell. 
C)  price index measuring the changes in prices of all new goods and services produced in the economy. 
D)  price index that tracks the price level of commodities that firms purchase from other firms. 
A)  statistical measure of a weighted average of prices of a specific set of goods and services purchased by wage earners in urban areas. 
B)  statistical measure of a weighted average of prices of commodities that firms produce and sell. 
C)  price index measuring the changes in prices of all new goods and services produced in the economy. 
D)  price index that tracks the price level of commodities that firms purchase from other firms.

Question 18

The real rate of interest equals 5% and the expected rate of inflation equals 2%. The nominal rate of interest equals

Accepted Answer

A)  2%. 
B)  3%. 
C)  5%. 
D)  7%. 
A)  2%. 
B)  3%. 
C)  5%. 
D)  7%.

Question 19

-According to the above table, in Year 3, the price index for widgets is

Accepted Answer

A)  100. 
B)  213.3. 
C)  46.9. 
D)  180. 
A)  100. 
B)  213.3. 
C)  46.9. 
D)  180.

Question 20

Structural unemployment is

Accepted Answer

A)  due to the fact that workers must search for appropriate job offers. 
B)  a result of a poor match of worker's abilities and skills with current requirements of employers. 
C)  a result of business recessions that occur when aggregate demand is insufficient to create full employment. 
D)  a result of the seasonal pattern of work in specific industries. 
A)  due to the fact that workers must search for appropriate job offers. 
B)  a result of a poor match of worker's abilities and skills with current requirements of employers. 
C)  a result of business recessions that occur when aggregate demand is insufficient to create full employment. 
D)  a result of the seasonal pattern of work in specific industries.

Exam 7: The Macroeconomy: Unemployment, Inflation, and Deflation

Which of the following statements is correct?

An extremely severe recession is known as a

A COLA is

The labor force is defined as

Economists agree that the structure of the Consumer Price Index has some problems that limit its usefulness as a reliable measure of inflation. What is one of these drawbacks?

During a recession

A person who previously had a full-time job has been paroled from prison and has applied for a job is considered

A period of time in which the overall pace of business activity is rising is known as

In a small country, the adult population is 10,000. In that country, 7,000 people are in the labor force and 6,300 people are employed. The unemployment rate equals

The greater the inflation rate, the

Collin has lost his job with a telemarketing company, which has moved its operation to India. Collin is considered

-Using the above table, the employment rate is

An example of a frictionally unemployed individual is

In 2013, the price for a market basket of consumer goods is $800. In the base year, the cost of the identical market basket was $1,000. The price index in this case is

A price index shows

What is a price index? How do the CPI, the PPI, the PCE Index and the GDP deflator differ?

The GDP deflator is a

The real rate of interest equals 5% and the expected rate of inflation equals 2%. The nominal rate of interest equals

-According to the above table, in Year 3, the price index for widgets is

Structural unemployment is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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