Question 1

When inflation occurs:

Accepted Answer

A)   All prices are rising
B)   Each dollar of income will buy more output than before
C)   The purchasing power of money increases
D)   The purchasing power of money decreasesE) None of the above
F) All of the above

Question 2

A worker would be hurt least by inflation when the:

Accepted Answer

A)   Worker anticipates inflation and increases savings at the bank
B)   Worker is protected by a cost-of-living adjustment clause in an employment contract
C)   Worker is protected by fixed annual increases in wages and benefits in an employment contract
D)   Government increases the level of social security retirement benefits to correct for the effects of anticipated inflationE) B) and C)
F) All of the above

Question 3

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Accepted Answer

A)   Structural
B)   Cyclical
C)   Frictional
D)   NaturalE) A) and B)
F) A) and C)

Question 4

If the unemployment rate for the United States 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 United States economy has risenE) A) and D)
F) None of the above

Question 5

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS)  survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer.
2)  George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve.
3)  Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills.
4)  Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work.
Refer to the above information. Which individual is cyclically unemployed?

Accepted Answer

A)   Mollie
B)   George
C)   Jeanette
D)   RicardoE) A) and B)
F) A) and C)

Question 6

A recession is defined as a situation where the average price level in the economy is increasing.

Accepted Answer

A) True 
 B)False

Question 7

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

Accepted Answer

A)   4 percent
B)   6 percent
C)   8 percent
D)   10 percentE) A) and B)
F) A) and C)

Question 8

The percentage change in one's real income can be approximated by:

Accepted Answer

A)   The percentage change in price level divided by the percentage change in nominal income
B)   The percentage change in nominal income divided by the percentage change in price level
C)   The percentage change in price level minus the percentage change in nominal income
D)   The percentage change in nominal income minus the percentage change in the price levelE) B) and C)
F) A) and C)

Question 9

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 unemploymentE) All of the above
F) B) and C)

Question 10

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

Accepted Answer

A)   Increases by 5% while the price index falls by 2%
B)   Increases by 5% while the price index rises by 2%
C)   Increases by 2% while the price index rises by 5%
D)   Increases by 2% while the price index falls by 5%E) None of the above
F) C) and D)

Question 11

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 unemploymentE) All of the above
F) A) and D)

Question 12

What is an advantage of mild inflation according to some economists?

Accepted Answer

A)   It helps to close the GDP gap
B)   It reduces the inflation premium
C)   It makes it easier for firms to adjust real wages downward as demand for their products falls
D)   It reduces frictional, structural, and cyclical unemployment in the economy to make the economy more productiveE) A) and B)
F) B) and C)

Question 13

Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because:

Accepted Answer

A)   Cycles include a trough phase while fluctuations do not
B)   Cycles imply regularity while fluctuations do not
C)   Fluctuations include an expansion phase while cycles do not
D)   Fluctuations are relatively predictable eventsE) A) and D)
F) C) and D)

Question 14

Unanticipated inflation arbitrarily:

Accepted Answer

A)   "Subsidizes" those who receive fixed money incomes
B)   "Taxes" those who receive fixed money incomes
C)   "Penalizes" those who borrow money
D)   "Benefits" those who save moneyE) B) and D)
F) C) and D)

Question 15

The unemployment rate among teenagers tends to be lower than the unemployment rate among adults.

Accepted Answer

A) True 
 B)False

Question 16

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 incomeE) A) and D)
F) B) and D)

Question 17

Core inflation refers to the inflation picture after stripping away the:

Accepted Answer

A)   Capital goods prices
B)   Food and energy prices
C)   Government-regulated prices
D)   Service-sector pricesE) C) and D)
F) A) and B)

Question 18

When the government prints money faster than output is expanding, the inflation that will occur is a form of:

Accepted Answer

A)   Subsidy
B)   Quota
C)   Production
D)   TaxationE) C) and D)
F) B) and D)

Question 19

A peak in the business cycle:

Accepted Answer

A)   Occurs when the unemployment rate is its greatest
B)   Occurs when the inflation rate is its lowest
C)   Is a temporary maximum point
D)   Is a temporary minimum pointE) None of the above
F) B) and C)

Question 20

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

Accepted Answer

A)   Cyclical
B)   Frictional
C)   Structural
D)   NaturalE) B) and C)
F) A) and D)

Exam 9: Business Cycles, Unemployment, and Inflation

A peak in the business cycle:

Correct Answer
verified

If the unemployment rate for the United States economy rises from 7 to 11 percent during a year, we can conclude that:

Correct Answer
verified

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:

Correct Answer
verified

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

Correct Answer
verified

Unanticipated inflation arbitrarily:

Correct Answer
verified

A worker would be hurt least by inflation when the:

Correct Answer
verified

Correct Answer
verified

When the government prints money faster than output is expanding, the inflation that will occur is a form of:

Correct Answer
verified

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Correct Answer
verified

Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because:

Correct Answer
verified

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

Correct Answer
verified

When inflation occurs:

Correct Answer
verified

The unemployment rate among teenagers tends to be lower than the unemployment rate among adults.

Correct Answer
verified

What is an advantage of mild inflation according to some economists?

Correct Answer
verified

Core inflation refers to the inflation picture after stripping away the:

Correct Answer
verified

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

Correct Answer
verified

The GDP gap measures the amount by which:

Correct Answer
verified

The percentage change in one's real income can be approximated by:

Correct Answer
verified

A recession is defined as a situation where the average price level in the economy is increasing.

Correct Answer
verified

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

Correct Answer
verified

Exam 9: Business Cycles, Unemployment, and Inflation

A peak in the business cycle:

Correct AnswerverifiedShow Answer

If the unemployment rate for the United States economy rises from 7 to 11 percent during a year, we can conclude that:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

Correct AnswerverifiedShow Answer

Unanticipated inflation arbitrarily:

Correct AnswerverifiedShow Answer

A worker would be hurt least by inflation when the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the government prints money faster than output is expanding, the inflation that will occur is a form of:

Correct AnswerverifiedShow Answer

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

Correct AnswerverifiedShow Answer

Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When inflation occurs:

Correct AnswerverifiedShow Answer

The unemployment rate among teenagers tends to be lower than the unemployment rate among adults.

Correct AnswerverifiedShow Answer

What is an advantage of mild inflation according to some economists?

Correct AnswerverifiedShow Answer

Core inflation refers to the inflation picture after stripping away the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The GDP gap measures the amount by which:

Correct AnswerverifiedShow Answer

The percentage change in one's real income can be approximated by:

Correct AnswerverifiedShow Answer

A recession is defined as a situation where the average price level in the economy is increasing.

Correct AnswerverifiedShow Answer

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

Correct AnswerverifiedShow Answer

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