Question 1

A country's actual output ________ its potential output.

Accepted Answer

A)  can never exceed
B)  can never fall below
C)  can only temporarily exceed
D)  is always be approximately equal toE) None of the above
F) B) and D)

Question 2

In an expansion, the cyclical rate of unemployment is often:

Accepted Answer

A)  positive.
B)  zero.
C)  negative.
D)  equal to the natural rate of unemployment.E) A) and C)
F) None of the above

Question 3

The decline in the natural rate of unemployment between the 1979 and the 2000s might be the result of:

Accepted Answer

A)  the changing age structure of the population and more efficient labor markets.
B)  advances in computer technology and globalization.
C)  increasing wage inequality and skill-biased technological change.
D)  greater quantities of human capital and increased average labor productivity.E) A) and B)
F) A) and C)

Question 4

An expansion occurs when ________, when ________, or when both of these occur.

Accepted Answer

A)  potential output grows rapidly; actual output rises above potential output.
B)  potential output grows slowly; actual output rises above potential output
C)  potential output grows rapidly; actual output equals potential output
D)  potential output grows slowly; actual output equals potential outputE) B) and D)
F) All of the above

Question 5

An expansion is:

Accepted Answer

A)  a period in which the economy is growing at a rate significantly below normal.
B)  a period in which the economy is growing at a rate significantly above normal.
C)  the high point of economic activity prior to a downturn.
D)  the low point of economic activity prior to a recovery.E) None of the above
F) A) and C)

Question 6

If there is 2 percent frictional unemployment, 3 percent structural unemployment, and 1 percent cyclical unemployment, then the natural rate of unemployment equals:

Accepted Answer

A)  3 percent.
B)  4 percent.
C)  5 percent.
D)  6 percent.E) A) and D)
F) None of the above

Question 7

A recession occurs when ________, when ________, or when both of these occur.

Accepted Answer

A)  potential output grows slowly; actual output falls below potential output
B)  potential output grows slowly; actual output rises above potential output
C)  potential output grows rapidly; actual output equals potential output
D)  potential output grows rapidly; actual output falls below potential outputE) A) and B)
F) None of the above

Question 8

Short-term economic fluctuations are ________ in length and severity and ________ to predict.

Accepted Answer

A)  regular; difficult
B)  regular; easy
C)  irregular; easy
D)  irregular; difficultE) None of the above
F) B) and D)

Question 9

Suppose the natural rate of unemployment is 4 percent. What is the actual rate of unemployment if actual output is 2 percent above potential output?

Accepted Answer

A)  0 percent
B)  2 percent
C)  3 percent
D)  6 percentE) All of the above
F) A) and B)

Question 10

In the long run, total spending only influences:

Accepted Answer

A)  actual output.
B)  potential output.
C)  productive capacity.
D)  inflation.E) C) and D)
F) A) and B)

Question 11

Cyclical unemployment is equal to zero when:

Accepted Answer

A)  there is no recessionary gap.
B)  there is no expansionary gap.
C)  actual GDP and potential GDP are equal.
D)  frictional unemployment equals structural unemployment.E) A) and B)
F) None of the above

Question 12

Which of the following does not describe a characteristic of short-term economic fluctuations?

Accepted Answer

A)  Expansions and recessions are felt throughout the economy.
B)  Expansions and recessions are irregular in length and severity.
C)  The unemployment rate rises during recessions.
D)  Durable-goods industries are less sensitive to short-term fluctuations than service and non-durable industries.E) B) and D)
F) A) and D)

Question 13

The aging of the labor force in the United States is likely to ________ the natural rate of unemployment; an increase in the efficiency of the labor market is likely to ________ the natural rate of unemployment.

Accepted Answer

A)  decrease; decrease
B)  increase; increase
C)  increase; decrease
D)  decrease; increaseE) A) and B)
F) A) and C)

Question 14

Recessions tend to be ________ by ________ the rate of inflation.

Accepted Answer

A)  followed; an increase in
B)  followed; a decrease in
C)  preceded; a decrease in the stability of
D)  neither preceded nor followed; any change inE) A) and C)
F) B) and C)

Question 15

Indicators of economic activity that move at the same time as the overall economy are called ________ indicators.

Accepted Answer

A)  short-term
B)  long-term
C)  real
D)  coincidentE) C) and D)
F) B) and C)

Question 16

A particularly severe or protracted recession is called a(n) :

Accepted Answer

A)  depression.
B)  boom.
C)  peak.
D)  expansion.E) C) and D)
F) B) and C)

Question 17

Which of the following does not describe a characteristic of short-term economic fluctuations?

Accepted Answer

A)  Expansions and recessions are felt in only a few sectors of the economy.
B)  Expansions and recessions are irregular in length and severity.
C)  The unemployment rate rises during recessions.
D)  Durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.E) None of the above
F) B) and C)

Question 18

If firms maintain preset prices in the short run, then the primary cause of output gaps is changes in:

Accepted Answer

A)  potential output.
B)  prices.
C)  capital and technology.
D)  economy-wide spending.E) B) and C)
F) All of the above

Question 19

If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:

Accepted Answer

A)  −7 percent.
B)  9 percent.
C)  12.5 percent.
D)  7 percent.E) C) and D)
F) None of the above

Question 20

If the actual rate of unemployment equals the natural rate of unemployment, then:

Accepted Answer

A)  potential output is greater than real GDP.
B)  potential output equals real GDP.
C)  potential output is less than real GDP.
D)  there is a recessionary gap.E) B) and C)
F) A) and B)

Exam 24: Short-Term Economic Fluctuations: An Introduction

A recession occurs when ________, when ________, or when both of these occur.

Correct AnswerverifiedShow Answer

An expansion is:

Correct AnswerverifiedShow Answer

Which of the following does not describe a characteristic of short-term economic fluctuations?

Correct AnswerverifiedShow Answer

A country's actual output ________ its potential output.

Correct AnswerverifiedShow Answer

If there is 2 percent frictional unemployment, 3 percent structural unemployment, and 1 percent cyclical unemployment, then the natural rate of unemployment equals:

Correct AnswerverifiedShow Answer

Short-term economic fluctuations are ________ in length and severity and ________ to predict.

Correct AnswerverifiedShow Answer

In the long run, total spending only influences:

Correct AnswerverifiedShow Answer

Recessions tend to be ________ by ________ the rate of inflation.

Correct AnswerverifiedShow Answer

If firms maintain preset prices in the short run, then the primary cause of output gaps is changes in:

Correct AnswerverifiedShow Answer

The aging of the labor force in the United States is likely to ________ the natural rate of unemployment; an increase in the efficiency of the labor market is likely to ________ the natural rate of unemployment.

Correct AnswerverifiedShow Answer

Cyclical unemployment is equal to zero when:

Correct AnswerverifiedShow Answer

If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:

Correct AnswerverifiedShow Answer

An expansion occurs when ________, when ________, or when both of these occur.

Correct AnswerverifiedShow Answer

Indicators of economic activity that move at the same time as the overall economy are called ________ indicators.

Correct AnswerverifiedShow Answer

In an expansion, the cyclical rate of unemployment is often:

Correct AnswerverifiedShow Answer

Which of the following does not describe a characteristic of short-term economic fluctuations?

Correct AnswerverifiedShow Answer

Suppose the natural rate of unemployment is 4 percent. What is the actual rate of unemployment if actual output is 2 percent above potential output?

Correct AnswerverifiedShow Answer

A particularly severe or protracted recession is called a(n) :

Correct AnswerverifiedShow Answer

The decline in the natural rate of unemployment between the 1979 and the 2000s might be the result of:

Correct AnswerverifiedShow Answer

If the actual rate of unemployment equals the natural rate of unemployment, then:

Correct AnswerverifiedShow Answer

A recession occurs when , when , or when both of these occur.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Short-term economic fluctuations are in length and severity and to predict.

Correct Answer
verified

Correct Answer
verified

Recessions tend to be by the rate of inflation.

Correct Answer
verified

Correct Answer
verified

The aging of the labor force in the United States is likely to the natural rate of unemployment; an increase in the efficiency of the labor market is likely to the natural rate of unemployment.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An expansion occurs when , when , or when both of these occur.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified