Question 1

In which industry or sector of the economy is output least likely to be affected by the business cycle?

Accepted Answer

A)  housing construction
B)  automobile production
C)  agricultural commodities
D)  capital goods productionE) None of the above
F) B) and D)

Question 2

A person's real income will increase by 3 percent if her nominal income

Accepted Answer

A)  increases by 5 percent while the price index falls by 2 percent.
B)  increases by 5 percent while the price index rises by 2 percent.
C)  increases by 2 percent while the price index rises by 5 percent.
D)  increases by 2 percent while the price index falls by 5 percent.E) All of the above
F) A) and D)

Question 3

During the Great Depression of the 1930s, U.S.real GDP fell by about percent, in comparison to the percent decline during the Great Recession of 2007-09.

Accepted Answer

A)  27; 4.3
B)  10; 7
C)  25; 20
D)  25; 30E) B) and D)
F) B) and C)

Question 4

If you knew that the per-unit production cost was $8 and that the total cost of inputs was $1,000, then the number of units of output would be

Accepted Answer

A)  75.
B)  100.
C)  125.
D)  150.E) A) and B)
F) A) and C)

Question 5

The GDP gap measures the amount by which

Accepted Answer

A)  nominal GDP exceeds real GDP.
B)  actual GDP exceeds equilibrium GDP.
C)  potential GDP exceeds actual GDP.
D)  actual GDP exceeds national income.E) All of the above
F) None of the above

Question 6

Full-Time Employed = 80 Part- Time Employed = 25 Unemployed = 15 Discouraged
Workers = 5
Members of Underground Economy = 6
Consumer Price Index = 110
Refer to the given information about a hypothetical economy.The unemployment rate is

Accepted Answer

A)  18.8 percent.
B)  12.5 percent.
C)  16.7 percent.
D)  25 percent.E) C) and D)
F) A) and B)

Question 7

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.E) A) and B)
F) None of the above

Question 8

If the unemployment rate for the U.S.economy rises from 7 to 11 percent during a year, we can conclude that

Accepted Answer

A)  actual GDP exceeds potential GDP.
B)  actual GDP is less than potential GDP.
C)  the economy is experiencing only frictional unemployment.
D)  the natural rate of unemployment for the U.S.economy has risen.E) All of the above
F) A) and D)

Question 9

If the negative GDP gap were equal to 4 percent of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by

Accepted Answer

A)  one percentage point.
B)  two percentage points.
C)  three percentage points.
D)  four percentage points.E) All of the above
F) C) and D)

Question 10

(Consider This)  The main point of the Consider This box on clipping coins is that

Accepted Answer

A)  decreases in the money supply cause deflation.
B)  decreases in tax rates often increase tax revenues.
C)  inflation imposes a "hidden tax" on those who hold money.
D)  demand creates its own supply.E) All of the above
F) None of the above

Question 11

The type of unemployment associated with recessions is called

Accepted Answer

A)  frictional unemployment.
B)  structural unemployment.
C)  cyclical unemployment.
D)  seasonal unemployment.E) B) and D)
F) None of the above

Question 12

Governments imposing negative nominal interest rates are attempting to

Accepted Answer

A)  discourage the use of banks.
B)  compete with private banks in the lending market.
C)  discourage consumption and encourage saving.
D)  encourage consumption by discouraging saving.E) C) and D)
F) All of the above

Question 13

The unemployment rate is the Accessibility: Keyboard Navigation Blooms: Understand

Accepted Answer

A)  ratio of unemployed to employed workers.
B)  number of employed workers minus the number of workers who are not in the labor force.
C)  percentage of the labor force that is unemployed.
D)  percentage of the total population that is unemployed.E) A) and C)
F) B) and C)

Question 14

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 receiving 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.E) C) and D)
F) A) and B)

Question 15

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

Accepted Answer

A)  durable purchases of durables are not postponable.
B)  durable purchases of durables are postponable.
C)  the producers of nondurables have monopoly power.
D)  producers of durables are highly competitive.E) B) and C)
F) A) and B)

Question 16

Innovations such as the microchip and the Internet lead to business cycle variations because

Accepted Answer

A)  they cause prices to be sticky.
B)  significant innovations occur irregularly and unexpectedly.
C)  the central bank will often change the money supply in response.
D)  they cause prices to be flexible.E) A) and B)
F) A) and C)

Question 17

A worker who loses a job at a call center because the company moved the call center operations to another country is an example of

Accepted Answer

A)  frictional unemployment.
B)  structural unemployment.
C)  cyclical unemployment.
D)  disguised unemployment.E) B) and D)
F) B) and C)

Question 18

The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million.The unemployment rate for this economy is

Accepted Answer

A)  3.3 percent.
B)  5.8 percent.
C)  6.4 percent.
D)  7.8 percent.E) All of the above
F) C) and D)

Question 19

When a recession begins and unemployment begins to rise, the demand for goods and services will fall.If the decline in demand is precipitous, which of the following will occur?

Accepted Answer

A)  hyperinflation
B)  deflation
C)  rising interest rates
D)  rising inflationE) B) and C)
F) All of the above

Question 20

New college graduates still looking for their first jobs would be classified in the BLS data as

Accepted Answer

A)  frictionally unemployed.
B)  not yet in the labor force.
C)  cyclically unemployed.
D)  part of structural unemployment.E) All of the above
F) None of the above

Exam 29: Business Cycles, Unemployment, and Inflation

The GDP gap measures the amount by which

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

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The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million.The unemployment rate for this economy is

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A person's real income will increase by 3 percent if her nominal income

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New college graduates still looking for their first jobs would be classified in the BLS data as

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A worker who loses a job at a call center because the company moved the call center operations to another country is an example of

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

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The type of unemployment associated with recessions is called

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(Consider This) The main point of the Consider This box on clipping coins is that

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Full-Time Employed = 80 Part- Time Employed = 25 Unemployed = 15 Discouraged Workers = 5 Members of Underground Economy = 6 Consumer Price Index = 110 Refer to the given information about a hypothetical economy.The unemployment rate is

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If you knew that the per-unit production cost was $8 and that the total cost of inputs was $1,000, then the number of units of output would be

Correct AnswerverifiedShow Answer

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 receiving increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

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If the unemployment rate for the U.S.economy rises from 7 to 11 percent during a year, we can conclude that

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In which industry or sector of the economy is output least likely to be affected by the business cycle?

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When a recession begins and unemployment begins to rise, the demand for goods and services will fall.If the decline in demand is precipitous, which of the following will occur?

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During the Great Depression of the 1930s, U.S.real GDP fell by about percent, in comparison to the percent decline during the Great Recession of 2007-09.

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Governments imposing negative nominal interest rates are attempting to

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Innovations such as the microchip and the Internet lead to business cycle variations because

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If the negative GDP gap were equal to 4 percent of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by

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The unemployment rate is the Accessibility: Keyboard Navigation Blooms: Understand

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