Question 1

The natural rate of unemployment is:

Accepted Answer

A)  higher than the full-employment rate of unemployment. 
B)  lower than the full-employment rate of unemployment. 
C)  that rate of unemployment occurring when the economy is at its potential output. 
D)  found by dividing total unemployment by the size of the labor force. 
A)  higher than the full-employment rate of unemployment. 
B)  lower than the full-employment rate of unemployment. 
C)  that rate of unemployment occurring when the economy is at its potential output. 
D)  found by dividing total unemployment by the size of the labor force.

Question 2

Which of the following best describes why unemployment rates remained high well after the end of the Great Recession of 2007-2009?

Accepted Answer

A)  Falling wages discouraged workers from taking on new employment. 
B)  The 20 percent of U.S.workers employed at minimum-wage jobs were unable to take wage cuts. 
C)  Workers that were initially cyclically unemployed,like construction workers,effectively became structurally unemployed as they needed to transition to new industries to find work. 
D)  Deflation in the economy discouraged spending,preventing output and employment from recovering. 
A)  Falling wages discouraged workers from taking on new employment. 
B)  The 20 percent of U.S.workers employed at minimum-wage jobs were unable to take wage cuts. 
C)  Workers that were initially cyclically unemployed,like construction workers,effectively became structurally unemployed as they needed to transition to new industries to find work. 
D)  Deflation in the economy discouraged spending,preventing output and employment from recovering.

Question 3

Under which of the following circumstances would we observe the greatest increase in real income?

Accepted Answer

A)  Nominal income falls by 2 percent and the price level falls by 10 percent. 
B)  Nominal income rises by 8 percent and the price level rises by 4 percent. 
C)  Nominal income rises by 12 percent and the price level rises by 15 percent. 
D)  Nominal income falls by 4 percent and the price level rises by 6 percent. 
A)  Nominal income falls by 2 percent and the price level falls by 10 percent. 
B)  Nominal income rises by 8 percent and the price level rises by 4 percent. 
C)  Nominal income rises by 12 percent and the price level rises by 15 percent. 
D)  Nominal income falls by 4 percent and the price level rises by 6 percent.

Question 4

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

Accepted Answer

A)  Military goods. 
B)  Capital goods. 
C)  Textile products. 
D)  Agricultural commodities. 
A)  Military goods. 
B)  Capital goods. 
C)  Textile products. 
D)  Agricultural commodities.

Question 5

Answer the question on the basis of the following information about the hypothetical economy of Scoob.All figures are in millions. $\begin{array} { l l } 
\text { Unemployed } & 7 \
\text { Total Population } & 145 \
\text { Employed } & 95 \
\text { Discouraged Workers } & 3
\end{array}$ Refer to the given information.If the natural rate of unemployment in Scoob is 5 percent,then:

Accepted Answer

A)  structural unemployment is about 3 percent. 
B)  frictional unemployment is about 2 percent. 
C)  cyclical unemployment is about 2 percent. 
D)  hidden unemployment is about 5 percent. 
A)  structural unemployment is about 3 percent. 
B)  frictional unemployment is about 2 percent. 
C)  cyclical unemployment is about 2 percent. 
D)  hidden unemployment is about 5 percent.

Question 6

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

Accepted Answer

A)  Government is unable to respond by changing the amount of money in circulation. 
B)  Changes in total spending cause supply shocks that cause cyclical variation. 
C)  Prices are sticky in the short run. 
D)  Prices are flexible in the long run. 
A)  Government is unable to respond by changing the amount of money in circulation. 
B)  Changes in total spending cause supply shocks that cause cyclical variation. 
C)  Prices are sticky in the short run. 
D)  Prices are flexible in the long run.

Question 7

The production of durable goods varies more than the production of nondurable goods because:

Accepted Answer

A)  durables purchases are nonpostponable. 
B)  durables purchases are postponable. 
C)  the producers of nondurables have monopoly power. 
D)  producers of durables are highly competitive. 
A)  durables purchases are nonpostponable. 
B)  durables purchases are postponable. 
C)  the producers of nondurables have monopoly power. 
D)  producers of durables are highly competitive.

Question 8

If Fred's annual real income rises by 8 percent each year,his annual real income will double in about:

Accepted Answer

A)  8-9 years. 
B)  10-11 years. 
C)  5-6 years. 
D)  19-20 years. 
A)  8-9 years. 
B)  10-11 years. 
C)  5-6 years. 
D)  19-20 years.

Question 9

A recession is defined as a period in which:

Accepted Answer

A)  cost-push inflation is present. 
B)  nominal domestic output falls. 
C)  demand-pull inflation is present. 
D)  real domestic output falls. 
A)  cost-push inflation is present. 
B)  nominal domestic output falls. 
C)  demand-pull inflation is present. 
D)  real domestic output falls.

Question 10

Unanticipated inflation:

Accepted Answer

A)  reduces the real burden of the public debt to the federal government. 
B)  hurts borrowers and helps lenders. 
C)  hurts people whose sole source of income is from Social Security benefits. 
D)  helps savers. 
A)  reduces the real burden of the public debt to the federal government. 
B)  hurts borrowers and helps lenders. 
C)  hurts people whose sole source of income is from Social Security benefits. 
D)  helps savers.

Question 11

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion,real GDP is:

Accepted Answer

A)  $415 billion. 
B)  $385 billion. 
C)  $15 billion. 
D)  $785 billion. 
A)  $415 billion. 
B)  $385 billion. 
C)  $15 billion. 
D)  $785 billion.

Question 12

The natural rate of unemployment in the United States today is about 5 to 6 percent.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

Accepted Answer

A)  Frictional and cyclical unemployment. 
B)  Structural and frictional unemployment. 
C)  Cyclical and structural unemployment. 
D)  Frictional,structural,and cyclical unemployment. 
A)  Frictional and cyclical unemployment. 
B)  Structural and frictional unemployment. 
C)  Cyclical and structural unemployment. 
D)  Frictional,structural,and cyclical unemployment.

Question 14

Assume the natural rate of unemployment in the U.S.economy is 5 percent and the actual rate of unemployment is 9 percent.According to Okun's law,the negative GDP gap as a percent of potential GDP is:

Accepted Answer

A)  4 percent. 
B)  8 percent. 
C)  10 percent. 
D)  2 percent. 
A)  4 percent. 
B)  8 percent. 
C)  10 percent. 
D)  2 percent.

Question 15

If the nominal interest rate is 5 percent and the real interest rate is 2 percent,then the inflation premium is:

Accepted Answer

A)  8 percent. 
B)  5 percent. 
C)  3 percent. 
D)  2 percent. 
A)  8 percent. 
B)  5 percent. 
C)  3 percent. 
D)  2 percent.

Question 16

Full-employment output is also called:

Accepted Answer

A)  zero-unemployment output. 
B)  equilibrium output. 
C)  potential output. 
D)  zero-savings output. 
A)  zero-unemployment output. 
B)  equilibrium output. 
C)  potential output. 
D)  zero-savings output.

Question 17

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent,then the:

Accepted Answer

A)  frictional unemployment rate is 5 percent. 
B)  cyclical unemployment rate and the frictional unemployment rate together are 5 percent. 
C)  cyclical unemployment rate is 4 percent. 
D)  natural rate of unemployment will eventually increase. 
A)  frictional unemployment rate is 5 percent. 
B)  cyclical unemployment rate and the frictional unemployment rate together are 5 percent. 
C)  cyclical unemployment rate is 4 percent. 
D)  natural rate of unemployment will eventually increase.

Question 18

The government agency responsible for collecting and reporting unemployment data is the:

Accepted Answer

A)  Bureau of Labor Statistics. 
B)  Bureau of Unemployment. 
C)  Bureau of Economic Analysis. 
D)  Bureau of Economic Research. 
A)  Bureau of Labor Statistics. 
B)  Bureau of Unemployment. 
C)  Bureau of Economic Analysis. 
D)  Bureau of Economic Research.

Question 19

Structural unemployment:

Accepted Answer

A)  is also known as frictional unemployment. 
B)  is the main component of cyclical unemployment. 
C)  is said to occur when people are waiting to be called back to previous jobs. 
D)  may involve a locational mismatch between unemployed workers and job openings. 
A)  is also known as frictional unemployment. 
B)  is the main component of cyclical unemployment. 
C)  is said to occur when people are waiting to be called back to previous jobs. 
D)  may involve a locational mismatch between unemployed workers and job openings.

Question 20

According to the Bureau of Labor Statistics,to be officially unemployed a person must:

Accepted Answer

A)  be in the labor force. 
B)  be 21 years of age or older. 
C)  have lost a job. 
D)  be waiting to be called back from a layoff. 
A)  be in the labor force. 
B)  be 21 years of age or older. 
C)  have lost a job. 
D)  be waiting to be called back from a layoff.

Exam 28: Business Cycles, Unemployment, and Inflation

The natural rate of unemployment is:

Which of the following best describes why unemployment rates remained high well after the end of the Great Recession of 2007-2009?

Under which of the following circumstances would we observe the greatest increase in real income?

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

Answer the question on the basis of the following information about the hypothetical economy of Scoob.All figures are in millions. Unemployed 7 Total Population 145 Employed 95 Discouraged Workers 3 Refer to the given information.If the natural rate of unemployment in Scoob is 5 percent,then:

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

The production of durable goods varies more than the production of nondurable goods because:

If Fred's annual real income rises by 8 percent each year,his annual real income will double in about:

A recession is defined as a period in which:

Unanticipated inflation:

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion,real GDP is:

The natural rate of unemployment in the United States today is about 5 to 6 percent.

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

Assume the natural rate of unemployment in the U.S.economy is 5 percent and the actual rate of unemployment is 9 percent.According to Okun's law,the negative GDP gap as a percent of potential GDP is:

If the nominal interest rate is 5 percent and the real interest rate is 2 percent,then the inflation premium is:

Full-employment output is also called:

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent,then the:

The government agency responsible for collecting and reporting unemployment data is the:

Structural unemployment:

According to the Bureau of Labor Statistics,to be officially unemployed a person must:

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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