Question 1

General sources of shocks that can cause business cycles include the following, except

Accepted Answer

A)   irregular occurrence of innovations and productivity changes.
B)   monetary factors and ﬁnancial instability.
C)   unemployment jumps and production drops.
D)   political events, either domestic or global.E) None of the above
F) A) and D)

Question 2

For a given amount of nominal income, the real income will

Accepted Answer

A)   fall if the price level rises.
B)   fall if the price level falls.
C)   be unaffected if the price level falls.
D)   rise as the price level rises.E) All of the above
F) A) and C)

Question 3

Alex works in his own home as a homemaker and full-time caretaker of his children. Oﬃcially, he is

Accepted Answer

A)   unemployed.
B)   employed.
C)   not in the labor force.
D)   in the labor force.E) A) and B)
F) A) and C)

Question 4

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

Accepted Answer

A)   Government is unable to respond by changing the amount of money in circulation.
B)   Changes in total spending cause supply shocks that cause cyclical variation.
C)   Prices are sticky in the short run.
D)   Prices are ﬂexible in the long run.E) A) and B)
F) A) and C)

Question 5

If the natural rate of unemployment was 6 percent, the current unemployment rate was 10 percent, and the potential GDP was $4,000 billion, then according to Okun's law the economy would have
Sacriﬁced

Accepted Answer

A)   $160 billion in output not produced.
B)   $240 billion in output not produced.
C)   $320 billion in output not produced.
D)   $480 billion in output not produced.E) C) and D)
F) A) and B)

Question 6

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial ﬁshing boat in Alaska. That year, Professor Simpson would be oﬃcially counted as

Accepted Answer

A)   structurally unemployed.
B)   frictionally unemployed.
C)   not in the labor force.
D)   employed.E) A) and B)
F) B) and C)

Question 7

Most economists agree that the immediate cause of most business cycle variation is

Accepted Answer

A)   an unexpected change in the productivity of workers.
B)   an unexpected change in the level of total spending.
C)   the invention of new products.
D)   the growth and subsequent bursting of ﬁnancial bubbles.E) A) and B)
F) A) and C)

Question 8

The type of unemployment associated with recessions is called

Accepted Answer

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

Question 9

Cyclical unemployment results from

Accepted Answer

A)   a deﬁciency of spending on goods and services.
B)   the decreasing relative importance of goods and the increasing relative importance of services in the U.S. economy.
C)   the everyday dynamics of a free labor market, with workers voluntarily changing jobs.
D)   technological change.E) A) and B)
F) A) and C)

Question 10

Unemployment rates in industrialized nations

Accepted Answer

A)   all exceeded 10 percent at some point during the Great Recession.
B)   vary considerably from each other.
C)   tend to be about the same in each country and move together over time.
D)   are less subject to business cycle ﬂuctuations than in non-industrialized countries.E) C) and D)
F) A) and B)

Question 11

Structural unemployment

Accepted Answer

A)   is also known as frictional unemployment.
B)   is the main component of cyclical unemployment.
C)   is said to occur when people are waiting to be called back to previous jobs.
D)   may involve a locational mismatch between unemployed workers and job openings.E) B) and C)
F) A) and D)

Question 12

What has been the range for the duration in months of U.S. recessions between 1950 and 2009?

Accepted Answer

A)   2 months to 5 months
B)   6 months to 18 months
C)   19 months to 25 months
D)   26 months to 30 monthsE) C) and D)
F) All of the above

Question 13

What is core inﬂation? Why is it used?

Accepted Answer

Core inﬂation is deﬁned as the underlyin...

Question 14

When there is demand-pull inﬂation, people's total spending in the economy will be falling.

Accepted Answer

A) True 
 B)False

Question 15

Describe cost-push inﬂation and its major source.

Accepted Answer

Cost-push inﬂation is deﬁned as increase...

Question 16

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) None of the above
F) A) and D)

Question 17

Search unemployment is a type of

Accepted Answer

A)   cyclical unemployment.
B)   hidden unemployment.
C)   frictional unemployment.
D)   structural unemployment.E) All of the above
F) A) and C)

Question 18

Assume that there is a ﬁxed rate of interest on contracts for borrowers and lenders. If unanticipated inﬂation occurs in the economy, then

Accepted Answer

A)   both lenders and borrowers beneﬁt.
B)   both lenders and borrowers are hurt.
C)   borrowers are hurt, but lenders beneﬁt.
D)   lenders are hurt, but borrowers beneﬁt.E) None of the above
F) All of the above

Question 19

The inﬂation rate measures the percentage growth rate of

Accepted Answer

A)   real GDP from the base period 1982-84 to a given year.
B)   real GDP from one year to the next.
C)   the CPI from the base period 1982-84 to a given year.
D)   the CPI from one year to the next.E) A) and B)
F) None of the above

Question 20

(Last Word) One reason that many jobs are going unﬁlled today is because when advertising a
position, employers ask that applicants have a college degree, whether or not it is actually
necessary for the job.

Accepted Answer

A) True 
 B)False

Exam 9: Business Cycles, Unemployment, and Inflation

Unemployment rates in industrialized nations

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Describe cost-push inﬂation and its major source.

Correct AnswerverifiedCost-push inﬂation is deﬁned as increase...View AnswerShow Answer

Most economists agree that the immediate cause of most business cycle variation is

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Alex works in his own home as a homemaker and full-time caretaker of his children. Oﬃcially, he is

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Structural unemployment

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Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial ﬁshing boat in Alaska. That year, Professor Simpson would be oﬃcially counted as

Correct AnswerverifiedShow Answer

What has been the range for the duration in months of U.S. recessions between 1950 and 2009?

Correct AnswerverifiedShow Answer

The type of unemployment associated with recessions is called

Correct AnswerverifiedShow Answer

Assume that there is a ﬁxed rate of interest on contracts for borrowers and lenders. If unanticipated inﬂation occurs in the economy, then

Correct AnswerverifiedShow Answer

If the natural rate of unemployment was 6 percent, the current unemployment rate was 10 percent, and the potential GDP was $4,000 billion, then according to Okun's law the economy would have Sacriﬁced

Correct AnswerverifiedShow Answer

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

Correct AnswerverifiedShow Answer

For a given amount of nominal income, the real income will

Correct AnswerverifiedShow Answer

General sources of shocks that can cause business cycles include the following, except

Correct AnswerverifiedShow Answer

When there is demand-pull inﬂation, people's total spending in the economy will be falling.

Correct AnswerverifiedShow Answer

The inﬂation rate measures the percentage growth rate of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is core inﬂation? Why is it used?

Correct AnswerverifiedCore inﬂation is deﬁned as the underlyin...View AnswerShow Answer

Search unemployment is a type of

Correct AnswerverifiedShow Answer

(Last Word) One reason that many jobs are going unﬁlled today is because when advertising a position, employers ask that applicants have a college degree, whether or not it is actually necessary for the job.

Correct AnswerverifiedShow Answer

Cyclical unemployment results from

Correct AnswerverifiedShow Answer

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Cost-push inﬂation is deﬁned as increase...
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Core inﬂation is deﬁned as the underlyin...
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