Question 1

For every 1 percentage point that the actual unemployment rate exceeds the natural rate,a 2 percentage point negative GDP gap occurs.This is a statement of:

Accepted Answer

A)   Taylor's rule.
B)   Okun's law.
C)   Say's law.
D)   the Coase theorem.E) A) and D)
F) A) and C)

Question 2

Unanticipated inflation helps some groups in the economy.

Accepted Answer

A) True 
 B)False

Question 3

(Consider This) Which of the following best explains why unemployment rises significantly during a recession?

Accepted Answer

A)   Wages are sticky both upward and downward.
B)   Wages are flexible both upward and downward.
C)   Wages are flexible upward but sticky downward.
D)   Wages are sticky upward but flexible downward.E) All of the above
F) A) and D)

Question 4

Most economists agree that the immediate determinant of the volume of output and employment is the:

Accepted Answer

A)   composition of consumer spending.
B)   ratio of public goods to private goods production.
C)   level of total spending.
D)   size of the labor force.E) A) and B)
F) B) and D) C

Question 5

Inflation initiated by increases in wages or other resource prices is labeled:

Accepted Answer

A)   demand-pull inflation.
B)   demand-push inflation.
C)   cost-push inflation.
D)   cost-pull inflation.E) A) and D)
F) B) and C)

Question 6

The unemployment rate is the:

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 D)
F) A) and C)

Question 7

The labor force includes:

Accepted Answer

A)   employed workers and persons who are officially unemployed.
B)   employed workers but excludes persons who are officially unemployed.
C)   full-time workers but excludes part-time workers.
D)   permanent employees but excludes temporary employees.E) A) and D)
F) A) and C)

Question 8

Which of the following statements is true about causes of business cycle fluctuations?

Accepted Answer

A)   Economists all agree that supply shocks are the cause of most business cycle fluctuations.
B)   Economists all agree that productivity shocks are the cause of most business cycle changes.
C)   Economists all agree that monetary changes are primarily responsible for business cycle fluctuations.
D)   There are a wide range of theories as to the underlying causes of business cycle movements.E) B) and D)
F) B) and C)

Question 9

Wait unemployment and search unemployment are both types of:

Accepted Answer

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

Question 10

A lender need not be penalized by inflation if the:

Accepted Answer

A)   long-term rate of inflation is less than the short-term rate of inflation.
B)   short-term rate of inflation is less than the long-term rate of inflation.
C)   lender correctly anticipates inflation and increases the nominal interest rate accordingly.
D)   inflation is unanticipated by both borrower and lender.E) None of the above
F) All of the above

Question 11

The presence of discouraged workers:

Accepted Answer

A)   increases the size of the labor force but does not affect the unemployment rate.
B)   reduces the size of the labor force but does not affect the unemployment rate.
C)   may cause the official unemployment rate to understate the true amount of unemployment.
D)   may cause the official unemployment rate to overstate the true amount of unemployment.E) A) and C)
F) B) and C) C

Question 12

Unanticipated inflation benefits debtors at the expense of creditors.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is correct?

Accepted Answer

A)   During the Great Recession,unemployment rates for men rose above those of women.
B)   Unemployment rates for African-American and white workers are approximately the same.
C)   Teenagers experience approximately the same unemployment rates as do adults.
D)   Laborers are less vulnerable to unemployment than are professional workers.E) B) and D)
F) A) and C)

Question 14

Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP =  $200\$ 200$200  Billion
Natural Rate of Unemployment  =6= 6=6  Percent
Actual Rate of Unemployment  =12= 12=12  Percent Refer to the given data.If the unemployment rate in the economy fell to 6 percent,we could conclude that:

Accepted Answer

A)   only structural unemployment remained.
B)   the economy's production possibilities curve shifted outward.
C)   the economy had moved from a point inside its production possibilities curve to a point on or very near the curve.
D)   nominal GDP would rise,but real GDP would fall. E) All of the above
F) C) and D)

Question 15

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

Question 16

The GDP gap measures the difference between:

Accepted Answer

A)   NDP and GDP.
B)   NI and PI.
C)   actual GDP and potential GDP.
D)   nominal GDP and real GDP.E) B) and C)
F) A) and D)

Question 17

Real income can be determined by:

Accepted Answer

A)   dividing the price level by nominal income.
B)   inflating nominal income for inflation.
C)   dividing the annual rate of inflation into the number "70."
D)   deflating nominal income for inflation.E) All of the above
F) A) and D)

Question 18

Demand-pull inflation:

Accepted Answer

A)   occurs when total spending in the economy is excessive.
B)   is measured differently than cost-push inflation.
C)   can be present even during an economic depression.
D)   is also called "hyperinflation."E) B) and D)
F) B) and C)

Question 19

Okun's law:

Accepted Answer

A)   measures the trade-off between the rate of inflation and the rate of unemployment.
B)   indicates the number of years it will take for a constant rate of inflation to double the price level.
C)   quantifies the relationship between nominal and real incomes.
D)   shows the relationship between the unemployment rate and the size of the negative GDP gap.E) None of the above
F) A) and B)

Question 20

Cost-push inflation:

Accepted Answer

A)   reduces real output.
B)   increases real output.
C)   reduces the unemployment rate.
D)   raises the natural rate of unemployment.E) A) and B)
F) A) and C)

Exam 28: Business Cycles, Unemployment, and Inflation

For every 1 percentage point that the actual unemployment rate exceeds the natural rate,a 2 percentage point negative GDP gap occurs.This is a statement of:

Correct Answer
verified

Unanticipated inflation helps some groups in the economy.

Correct Answer
verified

(Consider This) Which of the following best explains why unemployment rises significantly during a recession?

Correct Answer
verified

Most economists agree that the immediate determinant of the volume of output and employment is the:

Correct Answer
verified
C

Inflation initiated by increases in wages or other resource prices is labeled:

Correct Answer
verified

The unemployment rate is the:

Correct Answer
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The labor force includes:

Correct Answer
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Which of the following statements is true about causes of business cycle fluctuations?

Correct Answer
verified

Wait unemployment and search unemployment are both types of:

Correct Answer
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A lender need not be penalized by inflation if the:

Correct Answer
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The presence of discouraged workers:

Correct Answer
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C

Unanticipated inflation benefits debtors at the expense of creditors.

Correct Answer
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Which of the following is correct?

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

Correct Answer
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B

The GDP gap measures the difference between:

Correct Answer
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Real income can be determined by:

Correct Answer
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Demand-pull inflation:

Correct Answer
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Okun's law:

Correct Answer
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Cost-push inflation:

Correct Answer
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Exam 28: Business Cycles, Unemployment, and Inflation

For every 1 percentage point that the actual unemployment rate exceeds the natural rate,a 2 percentage point negative GDP gap occurs.This is a statement of:

Correct AnswerverifiedShow Answer

Unanticipated inflation helps some groups in the economy.

Correct AnswerverifiedShow Answer

(Consider This) Which of the following best explains why unemployment rises significantly during a recession?

Correct AnswerverifiedShow Answer

Most economists agree that the immediate determinant of the volume of output and employment is the:

Correct AnswerverifiedC

Inflation initiated by increases in wages or other resource prices is labeled:

Correct AnswerverifiedShow Answer

The unemployment rate is the:

Correct AnswerverifiedShow Answer

The labor force includes:

Correct AnswerverifiedShow Answer

Which of the following statements is true about causes of business cycle fluctuations?

Correct AnswerverifiedShow Answer

Wait unemployment and search unemployment are both types of:

Correct AnswerverifiedShow Answer

A lender need not be penalized by inflation if the:

Correct AnswerverifiedShow Answer

The presence of discouraged workers:

Correct AnswerverifiedC

Unanticipated inflation benefits debtors at the expense of creditors.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

The GDP gap measures the difference between:

Correct AnswerverifiedShow Answer

Real income can be determined by:

Correct AnswerverifiedShow Answer

Demand-pull inflation:

Correct AnswerverifiedShow Answer

Okun's law:

Correct AnswerverifiedShow Answer

Cost-push inflation:

Correct AnswerverifiedShow Answer

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C

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C

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B

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