Question 1

In the expansion phase of a business cycle:

Accepted Answer

A)  The inflation rate decreases, but productive capacity increases 
B)  The inflation rate and productive capacity decrease 
C)  Employment increases, but output decreases 
D)  Employment and output increase 
A)  The inflation rate decreases, but productive capacity increases 
B)  The inflation rate and productive capacity decrease 
C)  Employment increases, but output decreases 
D)  Employment and output increase

Question 2

Inflation means that the prices of all items in the economy are increasing.

Accepted Answer

A) True 
 B)False

Question 3

Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining. Could the union statement be correct?

Accepted Answer

A)  No, because real income may rise if price increases are proportionately greater than the increases in nominal income 
B)  Yes, because real income may fall if price increases are proportionately smaller than the increases in nominal income 
C)  Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income 
D)  No, because real income may rise if price increases are proportionately greater than declines in nominal income 
A)  No, because real income may rise if price increases are proportionately greater than the increases in nominal income 
B)  Yes, because real income may fall if price increases are proportionately smaller than the increases in nominal income 
C)  Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income 
D)  No, because real income may rise if price increases are proportionately greater than declines in nominal income

Question 4

Unanticipated inflation tends to penalize:

Accepted Answer

A)  People who save money in financial institutions 
B)  Individuals who borrow money from financial institutions 
C)  Businesses which borrow money from financial institutions 
D)  Governments which have a progressive personal income tax 
A)  People who save money in financial institutions 
B)  Individuals who borrow money from financial institutions 
C)  Businesses which borrow money from financial institutions 
D)  Governments which have a progressive personal income tax

Question 5

The natural rate of unemployment:

Accepted Answer

A)  Means that the economy will always operate at that rate 
B)  Means that the economy will always realize its potential output 
C)  Is equal to the total of frictional and structural unemployment 
D)  Is a fixed unemployment rate that does not change over time 
A)  Means that the economy will always operate at that rate 
B)  Means that the economy will always realize its potential output 
C)  Is equal to the total of frictional and structural unemployment 
D)  Is a fixed unemployment rate that does not change over time

Question 6

The economy has an annual inflation rate of 3.5%. It will take approximately how many years for the price level to double?

Accepted Answer

A)  10 years 
B)  20 years 
C)  25 years 
D)  30 years 
A)  10 years 
B)  20 years 
C)  25 years 
D)  30 years

Question 7

Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is $100 million, then the per-unit production costs in this economy are:

Accepted Answer

A)  $0.67 
B)  $1.50 
C)  $2.00 
D)  $3.00 
A)  $0.67 
B)  $1.50 
C)  $2.00 
D)  $3.00

Question 8

Economists who are willing to accept mild inflation consider it to be a necessary by-product of high and growing spending that produces high levels of output, full employment, and economic growth.

Accepted Answer

A) True 
 B)False

Question 9

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Accepted Answer

A)  2 percent 
B)  4 percent 
C)  6 percent 
D)  10 percent 
A)  2 percent 
B)  4 percent 
C)  6 percent 
D)  10 percent

Question 10

Official unemployment rate statistics may:

Accepted Answer

A)  Overstate the amount of unemployment by including part-time workers in the calculations 
B)  Understate the amount of unemployment by excluding part-time workers in the calculations 
C)  Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment 
D)  Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment 
A)  Overstate the amount of unemployment by including part-time workers in the calculations 
B)  Understate the amount of unemployment by excluding part-time workers in the calculations 
C)  Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment 
D)  Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

Question 11

Inflation rates in the U.S. reached double-digit rates in the:

Accepted Answer

A)  1960's 
B)  1970's 
C)  1990's 
D)  2000's 
A)  1960's 
B)  1970's 
C)  1990's 
D)  2000's

Question 12

When unanticipated deflation occurs:

Accepted Answer

A)  Both creditors and debtors benefit 
B)  Both creditors and debtors are hurt 
C)  Debtors are hurt, but creditors benefit 
D)  Creditors are hurt, but debtors benefit 
A)  Both creditors and debtors benefit 
B)  Both creditors and debtors are hurt 
C)  Debtors are hurt, but creditors benefit 
D)  Creditors are hurt, but debtors benefit

Question 13

When there is demand-pull inflation, people's total spending in the economy will be falling.

Accepted Answer

A) True 
 B)False

Question 14

Unanticipated inflation benefits creditors and savers.

Accepted Answer

A) True 
 B)False

Question 15

Which statement is correct?

Accepted Answer

A)  All sectors of the economy are affected to similar degrees by business fluctuations 
B)  Real output and employment generally show little variance over the business cycle 
C)  The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle 
D)  Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy 
A)  All sectors of the economy are affected to similar degrees by business fluctuations 
B)  Real output and employment generally show little variance over the business cycle 
C)  The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle 
D)  Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy

Question 16

In calculating the unemployment rate, part-time workers are:

Accepted Answer

A)  Counted as unemployed because they are not working full-time 
B)  Counted as employed because they are receiving payment for work 
C)  Used to determine the size of the labor force, but not the unemployment rate 
D)  Treated the same as "discouraged" workers who are not actively seeking employment 
A)  Counted as unemployed because they are not working full-time 
B)  Counted as employed because they are receiving payment for work 
C)  Used to determine the size of the labor force, but not the unemployment rate 
D)  Treated the same as "discouraged" workers who are not actively seeking employment

Question 17

When total input costs rise slower than the total units of output produced, then the per-unit production costs:

Accepted Answer

A)  Will decrease 
B)  Will increase 
C)  Would be unaffected 
D)  May either increase or decrease 
A)  Will decrease 
B)  Will increase 
C)  Would be unaffected 
D)  May either increase or decrease

Question 18

Which of the following groups declares the start and end of recessions in the U.S.?

Accepted Answer

A)  The Business Cycle Monitoring Committee of the Federal Reserve System 
B)  The Business Cycle Tracking Agency of the Department of Commerce 
C)  The Business Cycle Dating Committee of the National Bureau of Economic Research 
D)  The Committee on Business Cycles of the Council of Economic Advisers 
A)  The Business Cycle Monitoring Committee of the Federal Reserve System 
B)  The Business Cycle Tracking Agency of the Department of Commerce 
C)  The Business Cycle Dating Committee of the National Bureau of Economic Research 
D)  The Committee on Business Cycles of the Council of Economic Advisers

Question 19

Full-time homemakers and retirees are classified in the BLS data as:

Accepted Answer

A)  Employed 
B)  Unemployed 
C)  Part of the labor force 
D)  Not in the labor force 
A)  Employed 
B)  Unemployed 
C)  Part of the labor force 
D)  Not in the labor force

Question 20

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the:

Accepted Answer

A)  Level of total spending 
B)  Rate of unemployment 
C)  Rate of inflation 
D)  Stock market price indexes 
A)  Level of total spending 
B)  Rate of unemployment 
C)  Rate of inflation 
D)  Stock market price indexes

Exam 9: Business Cycles, Unemployment, and Inflation

In the expansion phase of a business cycle:

Inflation means that the prices of all items in the economy are increasing.

Unanticipated inflation tends to penalize:

The natural rate of unemployment:

The economy has an annual inflation rate of 3.5%. It will take approximately how many years for the price level to double?

Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is $100 million, then the per-unit production costs in this economy are:

Economists who are willing to accept mild inflation consider it to be a necessary by-product of high and growing spending that produces high levels of output, full employment, and economic growth.

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Official unemployment rate statistics may:

Inflation rates in the U.S. reached double-digit rates in the:

When unanticipated deflation occurs:

When there is demand-pull inflation, people's total spending in the economy will be falling.

Unanticipated inflation benefits creditors and savers.

Which statement is correct?

In calculating the unemployment rate, part-time workers are:

When total input costs rise slower than the total units of output produced, then the per-unit production costs:

Which of the following groups declares the start and end of recessions in the U.S.?

Full-time homemakers and retirees are classified in the BLS data as:

Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

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

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