Question 1

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

Accepted Answer

A)   Frictional unemployment
B)   Cyclical unemployment
C)   Structural unemployment
D)   Natural unemploymentE) B) and D)
F) B) and C)

Question 2

Refer to the diagram above. The straight line E drawn through the wavy lines would provide an estimate of the:

Accepted Answer

A)   Recession fluctuation
B)   Economic growth trend
C)   Natural rate of unemployment
D)   Recovery trendE) A) and B)
F) A) and C)

Question 3

If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was:

Accepted Answer

A)   20% higher than the average price in the base period 1982-84
B)   About $120 per basket of consumer goods and services
C)   120% higher than the average price in the base period 1982-84
D)   20% higher than the average price of the preceding yearE) A) and B)
F) None of the above

Question 4

Which of the following groups has traditionally benefited from unanticipated inflation?

Accepted Answer

A)   Consumers
B)   Business firms
C)   Federal government
D)   Foreign sectorE) B) and C)
F) None of the above

Question 5

Lenders will be willing to reduce the nominal interest rates on loans if the expected inflation increases.

Accepted Answer

A) True 
 B)False

Question 6

Anyone who is not employed is classified as unemployed in the Bureau of Labor Statistics data on the labor force.

Accepted Answer

A) True 
 B)False

Question 7

What is the main problem with mild inflation according to some economists?

Accepted Answer

A)   It reduces the size of the GDP gap
B)   It leads to unanticipated deflation
C)   It increases frictional and structural unemployment in the economy
D)   It diverts productive time towards activities to hedge against inflationE) A) and D)
F) A) and C)

Question 8

If the actual rate of unemployment is above the natural rate of unemployment, then potential GDP is:

Accepted Answer

A)   Equal to the GDP gap
B)   Equal to actual GDP
C)   Less than actual GDP
D)   Greater than actual GDPE) A) and B)
F) All of the above

Question 9

Which of the following countries experienced deflation for several years in the period 2002-2012?

Accepted Answer

A)   France
B)   Germany
C)   Italy
D)   JapanE) A) and B)
F) A) and C)

Question 10

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) C) and D)
F) A) and B)

Question 11

Inflation is a rise in:

Accepted Answer

A)   The general level of prices over time
B)   The standard of living over time
C)   Unemployment over time
D)   Real GDP over timeE) B) and D)
F) All of the above

Question 12

If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest rate is:

Accepted Answer

A)   1%
B)   -1%
C)   7%D) B) and C)
E) A) and C)

Question 13

The higher the rate of unemployment:

Accepted Answer

A)   The larger is the GDP gap
B)   The smaller is the GDP gap
C)   The higher is the level of actual GDP
D)   The lower is the level of potential GDPE) B) and C)
F) A) and D)

Question 14

"Depression means idleness. And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest." This quote describes some of the:

Accepted Answer

A)   Consequences of the hyperinflation that accompanies a recession
B)   Reasons for the natural rate of unemployment
C)   Noneconomic costs of unemployment
D)   Characteristics of structural unemploymentE) B) and C)
F) All of the above

Question 15

What are the primary effects of cost-push inflation?

Accepted Answer

A)   It raises real output, and redistributes an increased level of real income
B)   It reduces real output and redistributes a decreased level of real income
C)   It raises real output, but redistributes a decreased level of real income
D)   It reduces real output, but redistributes an increased level of real incomeE) B) and C)
F) C) and D)

Question 16

The downward-stickiness of wages serves like a _____ in the labor market.

Accepted Answer

A)   Price floor
B)   Price ceiling
C)   Demand determinant
D)   Supply determinantE) A) and D)
F) A) and C)

Question 17

The unemployed are those people who:

Accepted Answer

A)   Do not have jobs
B)   Are not employed but are seeking work
C)   Are not working
D)   Are not in the workforceE) A) and B)
F) A) and C)

Question 18

The recurrent ups and downs in the level of economic activity extending over several years are referred to as:

Accepted Answer

A)   Economic phases
B)   Business startups
C)   Business cycles
D)   Noncyclical fluctuationsE) B) and C)
F) A) and D)

Question 19

If the economy's actual GDP is greater than its potential GDP, then there is high unemployment in that economy.

Accepted Answer

A) True 
 B)False

Question 20

Cost-push inflation tends to be characterized by all of the following, except:

Accepted Answer

A)   Rising general price level
B)   Falling real output
C)   Automatically self-limiting
D)   Falling unemploymentE) A) and D)
F) A) and C)

Exam 9: Business Cycles, Unemployment, and Inflation

The downward-stickiness of wages serves like a _____ in the labor market.

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What are the primary effects of cost-push inflation?

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Cost-push inflation tends to be characterized by all of the following, except:

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Inflation is a rise in:

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Anyone who is not employed is classified as unemployed in the Bureau of Labor Statistics data on the labor force.

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The unemployed are those people who:

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Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

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If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was:

Correct AnswerverifiedShow Answer

Lenders will be willing to reduce the nominal interest rates on loans if the expected inflation increases.

Correct AnswerverifiedShow Answer

"Depression means idleness. And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest." This quote describes some of the:

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The higher the rate of unemployment:

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Refer to the diagram above. The straight line E drawn through the wavy lines would provide an estimate of the:

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Which of the following groups has traditionally benefited from unanticipated inflation?

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Which of the following countries experienced deflation for several years in the period 2002-2012?

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If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest rate is:

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If the economy's actual GDP is greater than its potential GDP, then there is high unemployment in that economy.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the actual rate of unemployment is above the natural rate of unemployment, then potential GDP is:

Correct AnswerverifiedShow Answer

The recurrent ups and downs in the level of economic activity extending over several years are referred to as:

Correct AnswerverifiedShow Answer

What is the main problem with mild inflation according to some economists?

Correct AnswerverifiedShow Answer

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