Question 1

Which of the following statements is correct?

Accepted Answer

A)  For a given real interest rate, the nominal interest must decrease if expected inflation increases.
B)  For a given nominal interest rate, the real interest will decrease if inflation decreases.
C)  For a given expected inflation rate, the nominal interest must increase if real interest decreases.
D)  For a given real interest rate, the nominal interest must increase if expected inflation increases.E) A) and B)
F) A) and D)

Question 2

The amount by which actual GDP falls short of potential GDP is one measure of the

Accepted Answer

A)  natural rate of unemployment.
B)  macroeconomic cost of unemployment.
C)  difference between real and nominal GDP.
D)  potential to produce outside the nation's PPC.E) A) and B)
F) None of the above

Question 3

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 nonindustrialized countries.E) A) and B)
F) B) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Recently, a teachers' union argued that the standard of living of teachers working for the school district was falling.The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining.Could the union statement be correct?

Accepted Answer

A)  No, because real income may rise if price increases are proportionately greater than the increases in nominal income.
B)  Yes, because real income may fall if price increases are proportionately smaller than the increases in nominal income.
C)  Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income.
D)  No, because real income may rise if price increases are proportionately greater than declines in nominal income.E) A) and D)
F) None of the above

Question 6

Okun's law indicates that for

Accepted Answer

A)  every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated.
B)  every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 5 percent GDP gap is generated.
C)  a 5 percent GDP gap, a 1 percent increase in the natural unemployment rate is generated.
D)  a 2 percent GDP gap, a 2 percent increase in the actual unemployment rate is generated.E) None of the above
F) A) and C)

Question 7

The CPI compiled by the Bureau of Labor Statistics is used in the computations for

Accepted Answer

A)  the unemployment rate.
B)  the inflation rate.
C)  the interest rate.
D)  the foreign exchange rate.E) None of the above
F) A) and B)

Question 8

The government agency responsible for collecting and reporting unemployment data is the

Accepted Answer

A)  Bureau of Labor Statistics.
B)  Bureau of Unemployment.
C)  Bureau of Economic Analysis.
D)  Bureau of Economic Research.E) None of the above
F) A) and B)

Question 9

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about

Accepted Answer

A)  8 to 9 years.
B)  10 to 11 years.
C)  5 to 6 years.
D)  19 to 20 years.E) A) and B)
F) None of the above

Question 10

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

Accepted Answer

A)  inflation of 4 percent.
B)  inflation of 3.33 percent.
C)  deflation of 3.33 percent.
D)  deflation of 4 percent.E) All of the above
F) B) and C)

Question 11

Unanticipated inflation benefits debtors at the expense of creditors.

Accepted Answer

A) True 
 B)False

Question 12

In calculating the unemployment rate, part-time workers are

Accepted Answer

A)  counted as unemployed because they are not working full time.
B)  counted as employed because they are receiving payment for work.
C)  used to determine the size of the labor force but not the unemployment rate.
D)  treated the same as "discouraged" workers who are not actively seeking employment.E) A) and D)
F) None of the above

Question 13

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 GDP.E) C) and D)
F) B) and D)

Question 14

The unemployment rate in an economy is 6 percent.The total population of the economy is 290 million, and the size of the civilian labor force is 150 million.The number of unemployed workers in this economy is

Accepted Answer

A)  6 million.
B)  9 million.
C)  12 million.
D)  24 million.E) All of the above
F) B) and C)

Question 15

In the United States, business cycles have occurred against a backdrop of a long-run trend of

Accepted Answer

A)  declining unemployment.
B)  stagnant productivity growth.
C)  rising real GDP.
D)  rising inflation.E) B) and C)
F) All of the above

Question 16

Which of the following would most likely move the economy into a recession in the short term?

Accepted Answer

A)  invention of a new product that most consumers want to buy
B)  innovations in management that enhance worker productivity
C)  the central bank printing less money than was anticipated
D)  Congress passing a reduction in personal income tax ratesE) None of the above
F) A) and B)

Question 17

Between 1980 and 2000, the price level approximately doubled.The average annual rate of inflation over this 20-year period was about

Accepted Answer

A)  5.5 percent.
B)  4.7 percent.
C)  3.5 percent.
D)  2.8 percent.E) B) and C)
F) A) and C)

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

Question 19

In Year 1, the price level was 120 and the average nominal income was $30,000.In Year 2, the price level was 125 and the average nominal level of income was $32,000.What happened to real income from Year 1 to Year 2?

Accepted Answer

A)  It fell by $400.
B)  It rose by $400.
C)  It rose by $600.
D)  It rose by $2,000.E) C) and D)
F) All of the above

Question 20

Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the economy's real output.

Accepted Answer

A) True 
 B)False

Exam 29: Business Cycles, Unemployment, and Inflation

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

Correct Answer
verified

Between 1980 and 2000, the price level approximately doubled.The average annual rate of inflation over this 20-year period was about

Correct Answer
verified

In calculating the unemployment rate, part-time workers are

Correct Answer
verified

The government agency responsible for collecting and reporting unemployment data is the

Correct Answer
verified

In Year 1, the price level was 120 and the average nominal income was $30,000.In Year 2, the price level was 125 and the average nominal level of income was $32,000.What happened to real income from Year 1 to Year 2?

Correct Answer
verified

Which of the following would most likely move the economy into a recession in the short term?

Correct Answer
verified

In the United States, business cycles have occurred against a backdrop of a long-run trend of

Correct Answer
verified

The amount by which actual GDP falls short of potential GDP is one measure of the

Correct Answer
verified

Correct Answer
verified

Unemployment rates in industrialized nations

Correct Answer
verified

Okun's law indicates that for

Correct Answer
verified

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

Correct Answer
verified

Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the economy's real output.

Correct Answer
verified

The CPI compiled by the Bureau of Labor Statistics is used in the computations for

Correct Answer
verified

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

Correct Answer
verified

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about

Correct Answer
verified

Demand-pull inflation

Correct Answer
verified

Unanticipated inflation benefits debtors at the expense of creditors.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

The unemployment rate in an economy is 6 percent.The total population of the economy is 290 million, and the size of the civilian labor force is 150 million.The number of unemployed workers in this economy is

Correct Answer
verified

Exam 29: Business Cycles, Unemployment, and Inflation

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

Correct AnswerverifiedShow Answer

Between 1980 and 2000, the price level approximately doubled.The average annual rate of inflation over this 20-year period was about

Correct AnswerverifiedShow Answer

In calculating the unemployment rate, part-time workers are

Correct AnswerverifiedShow Answer

The government agency responsible for collecting and reporting unemployment data is the

Correct AnswerverifiedShow Answer

In Year 1, the price level was 120 and the average nominal income was $30,000.In Year 2, the price level was 125 and the average nominal level of income was $32,000.What happened to real income from Year 1 to Year 2?

Correct AnswerverifiedShow Answer

Which of the following would most likely move the economy into a recession in the short term?

Correct AnswerverifiedShow Answer

In the United States, business cycles have occurred against a backdrop of a long-run trend of

Correct AnswerverifiedShow Answer

The amount by which actual GDP falls short of potential GDP is one measure of the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unemployment rates in industrialized nations

Correct AnswerverifiedShow Answer

Okun's law indicates that for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the economy's real output.

Correct AnswerverifiedShow Answer

The CPI compiled by the Bureau of Labor Statistics is used in the computations for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about

Correct AnswerverifiedShow Answer

Demand-pull inflation

Correct AnswerverifiedShow Answer

Unanticipated inflation benefits debtors at the expense of creditors.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The unemployment rate in an economy is 6 percent.The total population of the economy is 290 million, and the size of the civilian labor force is 150 million.The number of unemployed workers in this economy is

Correct AnswerverifiedShow Answer

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