Question 1

Which of the following would most likely occur during the expansionary phase of the business cycle?

Accepted Answer

A)  Demand-pull inflation. 
B)  Cost-push inflation. 
C)  Structural inflation. 
D)  Frictional inflation. 
A)  Demand-pull inflation. 
B)  Cost-push inflation. 
C)  Structural inflation. 
D)  Frictional inflation.

Question 2

Recently a labor union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Accepted Answer

A)  Yes,because when you have a large nominal income,your standard of living automatically increases. 
B)  No,because real income may fall if prices increase more proportionately than the increase in nominal income. 
C)  No,because real income may fall if prices increase less proportionately than the increases in nominal income. 
D)  Yes,because real income may fall if prices increase less proportionately than the increases in nominal income. 
A)  Yes,because when you have a large nominal income,your standard of living automatically increases. 
B)  No,because real income may fall if prices increase more proportionately than the increase in nominal income. 
C)  No,because real income may fall if prices increase less proportionately than the increases in nominal income. 
D)  Yes,because real income may fall if prices increase less proportionately than the increases in nominal income.

Question 3

The aggregate cost of unemployment can be measured by the:

Accepted Answer

A)  amount by which actual GDP exceeds potential GDP. 
B)  amount by which potential GDP exceeds actual GDP. 
C)  excess of real GDP over nominal GDP. 
D)  excess of nominal GDP over real GDP. 
A)  amount by which actual GDP exceeds potential GDP. 
B)  amount by which potential GDP exceeds actual GDP. 
C)  excess of real GDP over nominal GDP. 
D)  excess of nominal GDP over real GDP.

Question 4

Cost-of-living adjustment clauses (COLAs):

Accepted Answer

A)  invalidate the "rule of 70." 
B)  apply only to demand-pull inflation. 
C)  increase the gap between nominal and real income. 
D)  tie wage increases to changes in the price level. 
A)  invalidate the "rule of 70." 
B)  apply only to demand-pull inflation. 
C)  increase the gap between nominal and real income. 
D)  tie wage increases to changes in the price level.

Question 5

If the price level doubled in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Accepted Answer

A) True 
 B)False

Question 6

Following the Great Recession that ended mid-2009,by December 2012:

Accepted Answer

A)  employment had reached prerecession levels. 
B)  employment was still 3.4 million below prerecession levels. 
C)  the unemployment rate was still around 10 percent. 
D)  unemployment had fallen below its lowest prerecession rate. 
A)  employment had reached prerecession levels. 
B)  employment was still 3.4 million below prerecession levels. 
C)  the unemployment rate was still around 10 percent. 
D)  unemployment had fallen below its lowest prerecession rate.

Question 7

If the Consumer Price Index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

Accepted Answer

A)  11 percent. 
B)  33 percent. 
C)  91 percent. 
D)  10 percent. 
A)  11 percent. 
B)  33 percent. 
C)  91 percent. 
D)  10 percent.

Question 8

(Consider This)If wages were more downwardly flexible,then we would expect:

Accepted Answer

A)  fewer layoffs during recessions. 
B)  more layoffs during recessions. 
C)  more severe recessions. 
D)  no business cycle fluctuations. 
A)  fewer layoffs during recessions. 
B)  more layoffs during recessions. 
C)  more severe recessions. 
D)  no business cycle fluctuations.

Question 9

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

Accepted Answer

A)  Search unemployment. 
B)  Wait unemployment. 
C)  Cyclical unemployment. 
D)  Frictional unemployment. 
A)  Search unemployment. 
B)  Wait unemployment. 
C)  Cyclical unemployment. 
D)  Frictional unemployment.

Question 10

Inflation is undesirable because it:

Accepted Answer

A)  arbitrarily redistributes real income and wealth. 
B)  invariably leads to hyperinflation. 
C)  usually is accompanied by declining real GDP. 
D)  reduces everyone's standard of living. 
A)  arbitrarily redistributes real income and wealth. 
B)  invariably leads to hyperinflation. 
C)  usually is accompanied by declining real GDP. 
D)  reduces everyone's standard of living.

Question 11

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130.The person's real income will:

Accepted Answer

A)  fall by about 1 percent. 
B)  remain constant. 
C)  rise by about 4 percent. 
D)  rise by about 1 percent. 
A)  fall by about 1 percent. 
B)  remain constant. 
C)  rise by about 4 percent. 
D)  rise by about 1 percent.

Question 12

(Consider This)Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?

Accepted Answer

A)  Inflation will cause workers' real income to decline,encouraging them to work harder to find more and better employment. 
B)  Higher prices will increase firm profitability,making them want to hire more workers. 
C)  Higher prices will correspond with higher wages,which will stimulate demand and employment. 
D)  Anticipating this inflation,consumers will increase spending to beat the price increases,increasing demand,output,and employment. 
A)  Inflation will cause workers' real income to decline,encouraging them to work harder to find more and better employment. 
B)  Higher prices will increase firm profitability,making them want to hire more workers. 
C)  Higher prices will correspond with higher wages,which will stimulate demand and employment. 
D)  Anticipating this inflation,consumers will increase spending to beat the price increases,increasing demand,output,and employment.

Question 13

Unlike demand-pull inflation,cost-push inflation:

Accepted Answer

A)  is self-limiting. 
B)  drives up the price level. 
C)  increases nominal income. 
D)  increases real income. 
A)  is self-limiting. 
B)  drives up the price level. 
C)  increases nominal income. 
D)  increases real income.

Question 14

An unexpected increase in total spending will cause an increase in GDP:

Accepted Answer

A)  if prices are sticky. 
B)  if prices are fully flexible. 
C)  regardless of whether prices are sticky or fully flexible. 
D)  only if prices are stuck in the long term. 
A)  if prices are sticky. 
B)  if prices are fully flexible. 
C)  regardless of whether prices are sticky or fully flexible. 
D)  only if prices are stuck in the long term.

Question 15

Rising per-unit production costs are most directly associated with:

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  demand-pull inflation. 
D)  cost-push inflation. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  demand-pull inflation. 
D)  cost-push inflation.

Question 16

Inflation means that:

Accepted Answer

A)  all prices are rising,but at different rates. 
B)  all prices are rising and at the same rate. 
C)  prices on average are rising,although some particular prices may be falling. 
D)  real incomes are rising. 
A)  all prices are rising,but at different rates. 
B)  all prices are rising and at the same rate. 
C)  prices on average are rising,although some particular prices may be falling. 
D)  real incomes are rising.

Question 17

In response to the Great Recession,Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks.While this was done to help workers financially and to help the economy by stimulating demand,it had what unintended consequence?

Accepted Answer

A)  It significantly increased the rate of inflation. 
B)  It drove the unemployment rate lower than the lowest prerecession rate. 
C)  It encouraged millions of unemployed workers to return to school,driving up projected future rates of labor productivity. 
D)  It prompted inefficiently long searches that kept the unemployment rate higher. 
A)  It significantly increased the rate of inflation. 
B)  It drove the unemployment rate lower than the lowest prerecession rate. 
C)  It encouraged millions of unemployed workers to return to school,driving up projected future rates of labor productivity. 
D)  It prompted inefficiently long searches that kept the unemployment rate higher.

Question 18

If both the real interest rate and the nominal interest rate are 3 percent,then the:

Accepted Answer

A)  inflation premium is zero. 
B)  real GDP must exceed the nominal GDP. 
C)  nominal GDP must exceed the real GDP. 
D)  inflation premium also is 3 percent. 
A)  inflation premium is zero. 
B)  real GDP must exceed the nominal GDP. 
C)  nominal GDP must exceed the real GDP. 
D)  inflation premium also is 3 percent.

Question 19

Answer the question on the basis of the following information about a hypothetical economy: Full-Time Employed = $\mathbf { 8 0 }$
Part-Time Employed = 25
Unemployed $= 15$
Discouraged Workers = 5
Members of Underground Economy = 6
Consumer Price Index $= 110$ Refer to the given information.The rate of inflation:

Accepted Answer

A)  is 110 percent. 
B)  is 10 percent. 
C)  is 0 percent. 
D)  cannot be determined from the data. 
A)  is 110 percent. 
B)  is 10 percent. 
C)  is 0 percent. 
D)  cannot be determined from the data.

Question 20

In the depth of the Great Depression,the unemployment rate in the United States was about:

Accepted Answer

A)  15 percent. 
B)  33 percent. 
C)  25 percent. 
D)  40 percent. 
A)  15 percent. 
B)  33 percent. 
C)  25 percent. 
D)  40 percent.

Which of the following would most likely occur during the expansionary phase of the business cycle?

Recently a labor union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

The aggregate cost of unemployment can be measured by the:

Cost-of-living adjustment clauses (COLAs):

If the price level doubled in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Following the Great Recession that ended mid-2009,by December 2012:

If the Consumer Price Index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

(Consider This)If wages were more downwardly flexible,then we would expect:

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

Inflation is undesirable because it:

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130.The person's real income will:

(Consider This)Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?

Unlike demand-pull inflation,cost-push inflation:

An unexpected increase in total spending will cause an increase in GDP:

Rising per-unit production costs are most directly associated with:

Inflation means that:

In response to the Great Recession,Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks.While this was done to help workers financially and to help the economy by stimulating demand,it had what unintended consequence?

If both the real interest rate and the nominal interest rate are 3 percent,then the:

In the depth of the Great Depression,the unemployment rate in the United States was about:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

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Exam 28: Business Cycles, Unemployment, and Inflation

Which of the following would most likely occur during the expansionary phase of the business cycle?

Recently a labor union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

The aggregate cost of unemployment can be measured by the:

Cost-of-living adjustment clauses (COLAs):

If the price level doubled in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Following the Great Recession that ended mid-2009,by December 2012:

If the Consumer Price Index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

(Consider This)If wages were more downwardly flexible,then we would expect:

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

Inflation is undesirable because it:

Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130.The person's real income will:

(Consider This)Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.Which of the following best explains their argument?

Unlike demand-pull inflation,cost-push inflation:

An unexpected increase in total spending will cause an increase in GDP:

Rising per-unit production costs are most directly associated with:

Inflation means that:

In response to the Great Recession,Congress extended the maximum period for drawing unemployment benefits from 26 to 99 weeks.While this was done to help workers financially and to help the economy by stimulating demand,it had what unintended consequence?

If both the real interest rate and the nominal interest rate are 3 percent,then the:

In the depth of the Great Depression,the unemployment rate in the United States was about:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters