Question 1

The phase of the business cycle in which real GDP declines is called

Accepted Answer

A)  the peak.
B)  an expansion.
C)  a recession.
D)  the trough.E) B) and C)
F) All of the above

Question 2

Unanticipated inflation tends to penalize

Accepted Answer

A)  people who save money in financial institutions.
B)  individuals who borrow money from financial institutions.
C)  businesses which borrow money from financial institutions.
D)  governments that have a progressive personal income tax.E) B) and C)
F) None of the above

Question 3

The full-employment unemployment rate for the United States economy is now generally considered to be

Accepted Answer

A)  2 percent of the labor force.
B)  4 percent of the labor force.
C)  5 to 6 percent of the labor force.
D)  8 to 9 percent of the labor force.E) C) and D)
F) None of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would most likely concern policymakers?

Accepted Answer

A)  high core inflation and low CPI inflation
B)  high CPI inflation and low core inflation
C)  core inflation and CPI inflation that moved consistently over time
D)  stable core inflation and volatile CPI inflationE) B) and C)
F) C) and D)

Question 6

Rising per-unit production costs are most directly associated with

Accepted Answer

A)  frictional unemployment.
B)  structural unemployment.
C)  demand-pull inflation.
D)  cost-push inflation.E) All of the above
F) A) and B)

Question 7

The unemployment rate of

Accepted Answer

A)  women greatly exceeds that of men.
B)  whites is roughly equal to that of African Americans.
C)  managerial and professional workers exceeds that of construction and extraction workers.
D)  teenagers is much higher than that of adults.E) A) and B)
F) None of the above

Question 8

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 D)
F) None of the above

Question 9

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 B)
F) All of the above

Question 10

If the real interest rate and the nominal interest rate are both negative and equal to each other, then the

Accepted Answer

A)  inflation premium is zero.
B)  inflation premium is also negative.
C)  inflation premium is positive.
D)  economy must be in a recession.E) A) and D)
F) A) and B)

Question 11

Deflation is when the inflation rate turns negative.

Accepted Answer

A) True 
 B)False

Question 12

The natural rate of unemployment in the United States today is about 5 to 6 percent.

Accepted Answer

A) True 
 B)False

Question 13

If the inflation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is

Accepted Answer

A)  1 percent.
B)  −1 percent.
C)  7 percent.
D)  0.75 percent.E) A) and B)
F) B) and D)

Question 14

In the expansion phase of a business cycle,

Accepted Answer

A)  the inflation rate decreases, but productive capacity increases.
B)  the inflation rate and productive capacity decrease.
C)  employment increases, but output decreases.
D)  employment and output increase.E) B) and C)
F) C) and D)

Question 15

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 16

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 percent.E) A) and B)
F) C) and D)

Question 17

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

Question 18

The unemployed are those people who

Accepted Answer

A)  do not have jobs.
B)  are not employed but are seeking work.
C)  are not working.
D)  are not in the workforce.E) B) and D)
F) A) and D)

Question 19

"Full employment" refers to the situation when there is

Accepted Answer

A)  100 percent employment of the labor force.
B)  0 percent unemployment rate.
C)  no frictional or structural unemployment.
D)  no cyclical unemployment.E) A) and C)
F) A) and B)

Question 20

Given the annual rate of inflation, the "rule of 70" allows one to

Accepted Answer

A)  determine whether the inflation is demand-pull or cost-push.
B)  calculate the accompanying rate of unemployment.
C)  determine when the value of a real asset will approach zero.
D)  calculate the number of years required for the price level to double.E) C) and D)
F) A) and B)

Exam 29: Business Cycles, Unemployment, and Inflation

In the expansion phase of a business cycle,

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

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Unanticipated inflation tends to penalize

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Which of the following would most likely concern policymakers?

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The phase of the business cycle in which real GDP declines is called

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The natural rate of unemployment in the United States today is about 5 to 6 percent.

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Rising per-unit production costs are most directly associated with

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The full-employment unemployment rate for the United States economy is now generally considered to be

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The unemployment rate of

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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

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

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If the inflation premium is 3 percent and the real interest on a loan is 4 percent, then the nominal interest rate is

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If the real interest rate and the nominal interest rate are both negative and equal to each other, then the

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The unemployed are those people who

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Given the annual rate of inflation, the "rule of 70" allows one to

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Deflation is when the inflation rate turns negative.

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

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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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"Full employment" refers to the situation when there is

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