Question 1

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 income.E) B) and C)
F) None of the above

Question 2

The accompanying list describes 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.
Which individual(s)  would be included in the calculation of the natural rate of unemployment?

Accepted Answer

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

Question 3

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

Accepted Answer

A)   $415 billion.
B)   $385 billion.
C)   $15 billion.
D)   $785 billion.E) A) and D)
F) B) and C)

Question 4

Recurring upswings and downswings in an economy's real GDP over time are called

Accepted Answer

A)   recessions.
B)   business cycles.
C)   output yo-yos.
D)   total product oscillations.E) All of the above
F) C) and D)

Question 5

Oﬃcial unemployment statistics overstate unemployment because discouraged workers who are
not actively seeking work are counted as unemployed.

Accepted Answer

A) True 
 B)False

Question 6

Recently, a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been receiving increases in
The nominal incomes of its members through collective bargaining. Is the critic correct?

Accepted Answer

A)   Yes, because when you have a large nominal income, your standard of living automatically increases.
B)   No, because real income may fall if prices increase more proportionately than the increase in nominal income.
C)   No, because real income may fall if prices increase less proportionately than the increases in nominal income.
D)   Yes, because real income may fall if prices increase less proportionately than the increases in nominal income.E) A) and D)
F) B) and D)

Question 7

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) All of the above
F) A) and B)

Question 8

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) B) and C)
F) A) and C)

Question 9

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) A) and B)
F) B) and C)

Question 10

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

Question 11

Part-time workers who want full-time work are counted as

Accepted Answer

A)   unemployed, and therefore the oﬃcial unemployment rate may overstate the level of unemployment.
B)   unemployed, and therefore the oﬃcial unemployment rate may understate the level of unemployment.
C)   fully employed, and therefore the oﬃcial unemployment rate may overstate the level of unemployment.
D)   fully employed, and therefore the oﬃcial unemployment rate may understate the level of unemployment.E) None of the above
F) B) and D)

Question 12

Deﬁne the "full-employment" or "natural" rate of unemployment, and give its approximate
percentage rate as economists currently deﬁne it.

Accepted Answer

The full-employment rate of unemployment...

Question 13

The aggregate cost of unemployment can be measured by the

Accepted Answer

A)   amount by which actual GDP exceeds potential GDP.
B)   amount by which potential GDP exceeds actual GDP.
C)   excess of real GDP over nominal GDP.
D)   excess of nominal GDP over real GDP.E) A) and B)
F) None of the above

Question 14

How does unanticipated inﬂation affect savers?

Accepted Answer

Savers are harmed by unanticipated inﬂat...

Question 15

Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as

Accepted Answer

A)   cyclically unemployed.
B)   frictionally unemployed.
C)   structurally unemployed.
D)   employed.E) A) and D)
F) All of the above

Question 16

With mild demand-pull inﬂation, the economy's output level would tend to be

Accepted Answer

A)   pulled up by the increase in total spending.
B)   pulled down by the decrease in total spending.
C)   pulled up by the rising unemployment.
D)   pulled down by the rising unemployment.E) A) and B)
F) None of the above

Question 17

Full-time homemakers and retirees are classiﬁed in the BLS data as

Accepted Answer

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

Question 18

What is meant by the term "business cycle" as described by economists?

Accepted Answer

Business cycles are recurring ...

Question 19

Which of the following groups declares the start and end of recessions in the United States?

Accepted Answer

A)   the Business Cycle Monitoring Committee of the Federal Reserve System
B)   the Business Cycle Tracking Agency of the Department of Commerce
C)   the Business Cycle Dating Committee of the National Bureau of Economic Research
D)   the Committee on Business Cycles of the Council of Economic AdvisersE) B) and C)
F) C) and D)

Question 20

If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inﬂation was about

Accepted Answer

A)   9 percent.
B)   10 percent.
C)   11 percent.
D)   12 percent.E) A) and C)
F) A) and D)

Exam 9: Business Cycles, Unemployment, and Inflation

What is meant by the term "business cycle" as described by economists?

Correct Answer
verified
Business cycles are recurring ...
View Answer

Correct Answer
verified

Part-time workers who want full-time work are counted as

Correct Answer
verified

How does unanticipated inﬂation affect savers?

Correct Answer
verified
Savers are harmed by unanticipated inﬂat...
View Answer

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

Correct Answer
verified

Which of the following groups declares the start and end of recessions in the United States?

Correct Answer
verified

Recurring upswings and downswings in an economy's real GDP over time are called

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

Full-time homemakers and retirees are classiﬁed in the BLS data as

Correct Answer
verified

Deﬁne the "full-employment" or "natural" rate of unemployment, and give its approximate percentage rate as economists currently deﬁne it.

Correct Answer
verified
The full-employment rate of unemployment...
View Answer

The aggregate cost of unemployment can be measured by the

Correct Answer
verified

Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as

Correct Answer
verified

Oﬃcial unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Correct Answer
verified

Recently, a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been receiving increases in The nominal incomes of its members through collective bargaining. Is the critic correct?

Correct Answer
verified

The GDP gap measures the amount by which

Correct Answer
verified

The presence of discouraged workers

Correct Answer
verified

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

Correct Answer
verified

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

Correct Answer
verified

With mild demand-pull inﬂation, the economy's output level would tend to be

Correct Answer
verified

If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inﬂation was about

Correct Answer
verified

Exam 9: Business Cycles, Unemployment, and Inflation

What is meant by the term "business cycle" as described by economists?

Correct AnswerverifiedBusiness cycles are recurring ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Part-time workers who want full-time work are counted as

Correct AnswerverifiedShow Answer

How does unanticipated inﬂation affect savers?

Correct AnswerverifiedSavers are harmed by unanticipated inﬂat...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following groups declares the start and end of recessions in the United States?

Correct AnswerverifiedShow Answer

Recurring upswings and downswings in an economy's real GDP over time are called

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

Full-time homemakers and retirees are classiﬁed in the BLS data as

Correct AnswerverifiedShow Answer

Deﬁne the "full-employment" or "natural" rate of unemployment, and give its approximate percentage rate as economists currently deﬁne it.

Correct AnswerverifiedThe full-employment rate of unemployment...View AnswerShow Answer

The aggregate cost of unemployment can be measured by the

Correct AnswerverifiedShow Answer

Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as

Correct AnswerverifiedShow Answer

Oﬃcial unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

Correct AnswerverifiedShow Answer

Recently, a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been receiving increases in The nominal incomes of its members through collective bargaining. Is the critic correct?

Correct AnswerverifiedShow Answer

The GDP gap measures the amount by which

Correct AnswerverifiedShow Answer

The presence of discouraged workers

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

Correct AnswerverifiedShow Answer

With mild demand-pull inﬂation, the economy's output level would tend to be

Correct AnswerverifiedShow Answer

If the Consumer Price Index was 90 in one year and 100 in the following year, then the rate of inﬂation was about

Correct AnswerverifiedShow Answer

Correct Answer
verified
Business cycles are recurring ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Savers are harmed by unanticipated inﬂat...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The full-employment rate of unemployment...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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