Question 1

Cross-country studies that bolster the "zero inflation" view indicate that lower rates of inflation are associated with:

Accepted Answer

A)   Lower rates of economic growth
B)   Higher rates of economic growth
C)   Recessions
D)   High rates of unemploymentE) None of the above
F) A) and C)

Question 2

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

Accepted Answer

A)   4 percent
B)   6 percent
C)   9 percent
D)   27 percentE) None of the above
F) B) and C)

Question 3

Which statement about inflation is correct?

Accepted Answer

A)   Families are always hurt by inflation
B)   Inflation "subsidizes" those who receive relatively fixed money income
C)   The redistributive effects of inflation are arbitrary with respect to people and groups in society
D)   Inflation will decrease the real value of property assets and increase the real value of fixed-value assetsE) All of the above
F) A) and C)

Question 4

Real income will rise from one year to the next if nominal income:

Accepted Answer

A)   Falls and the price level falls faster
B)   Rises and the price level rises faster
C)   Falls and the price level rises
D)   Falls faster than the price levelE) All of the above
F) A) and B)

Question 5

The full-employment rate of unemployment is also called the:

Accepted Answer

A)   Potential rate of unemployment
B)   Cyclical rate of unemployment
C)   Frictional rate of unemployment
D)   Natural rate of unemploymentE) All of the above
F) A) and B)

Question 6

Cost-push inflation increases real output and employment.

Accepted Answer

A) True 
 B)False

Question 7

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Accepted Answer

A)   Gold market and stock market
B)   International trade and foreign exchange markets
C)   Real estate and financial markets
D)   Consumer and government spendingE) None of the above
F) A) and C)

Question 8

The rate of unemployment tends to be lowest for:

Accepted Answer

A)   Black teenagers
B)   White teenagers
C)   Black adult males
D)   White adult malesE) A) and D)
F) None of the above

Question 9

Unemployment that is the result of deregulation, corporate downsizing, and the closure of military bases is best categorized as frictional unemployment.

Accepted Answer

A) True 
 B)False

Question 10

On the issue of whether or not a little inflation helps reduce unemployment:

Accepted Answer

A)   Economists generally agree that it does, because a little inflation enhances firm's profitability
B)   Economists generally agree that it does not, because wages will rise along with inflation
C)   The issue is still hotly debated by opposing camps of economists
D)   The issue is largely settled in that inflation does not affect unemployment at allE) A) and C)
F) B) and D)

Question 11

When the economy goes into a recession and firms require less labor, managers tend to:

Accepted Answer

A)   Reduce wages, to reflect the lower demand for labor
B)   Avoid cutting wages, for fear of drops in worker-productivity
C)   Lay off workers, and keep wages of remaining workers constant
D)   Keep all of their workers, by spreading work more thinlyE) A) and B)
F) A) and C)

Question 12

You are given the following information about the economy: the nominal interest rate = 8 percent; the real rate of interest = 6 percent. The inflation premium is:

Accepted Answer

A)   2 percent
B)   6 percent
C)   8 percent
D)   14 percentE) C) and D)
F) A) and C)

Question 13

When oil and energy prices rise, the economy tends to experience:

Accepted Answer

A)   Natural inflation
B)   Demand-pull inflation
C)   Cost-push inflation
D)   Unanticipated inflationE) B) and C)
F) None of the above

Question 14

Inflation caused by an increase in aggregate spending is referred to as:

Accepted Answer

A)   Cost-push inflation
B)   Anticipated inflation
C)   Demand-pull inflation
D)   HyperinflationE) C) and D)
F) A) and B)

Question 15

Which measure of inflation would include consumer goods and capital goods?

Accepted Answer

A)   The GDP Price Index
B)   The Consumer Price Index
C)   The Retail Trade Survey
D)   The Employment Cost IndexE) All of the above
F) B) and C)

Question 16

If the GDP gap is positive, then:

Accepted Answer

A)   The inflation rate is falling
B)   The unemployment rate is rising
C)   Potential GDP is greater than actual GDP
D)   Actual GDP is greater than potential GDPE) None of the above
F) A) and B)

Question 17

"Full employment" refers to the situation when there is:

Accepted Answer

A)   100% employment of the labor force
B)   0% unemployment rate
C)   No frictional or structural unemployment
D)   No cyclical unemploymentE) B) and C)
F) A) and B)

Question 18

Over a ten-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately:

Accepted Answer

A)   10 percent
B)   9 percent
C)   7 percent
D)   5 percentE) A) and D)
F) B) and C)

Question 19

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 unemploymentE) None of the above
F) A) and B)

Question 20

The percentage change in real income can be approximated by subtracting the percentage change in the price level from the percentage change in nominal income.

Accepted Answer

A) True 
 B)False

Exam 9: Business Cycles, Unemployment, and Inflation

When oil and energy prices rise, the economy tends to experience:

Correct AnswerverifiedShow Answer

The full-employment rate of unemployment is also called the:

Correct AnswerverifiedShow Answer

When the economy goes into a recession and firms require less labor, managers tend to:

Correct AnswerverifiedShow Answer

Cross-country studies that bolster the "zero inflation" view indicate that lower rates of inflation are associated with:

Correct AnswerverifiedShow Answer

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

Correct AnswerverifiedShow Answer

Real income will rise from one year to the next if nominal income:

Correct AnswerverifiedShow Answer

Unemployment that is the result of deregulation, corporate downsizing, and the closure of military bases is best categorized as frictional unemployment.

Correct AnswerverifiedShow Answer

You are given the following information about the economy: the nominal interest rate = 8 percent; the real rate of interest = 6 percent. The inflation premium is:

Correct AnswerverifiedShow Answer

Over a ten-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately:

Correct AnswerverifiedShow Answer

Which measure of inflation would include consumer goods and capital goods?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the GDP gap is positive, then:

Correct AnswerverifiedShow Answer

Cost-push inflation increases real output and employment.

Correct AnswerverifiedShow Answer

The rate of unemployment tends to be lowest for:

Correct AnswerverifiedShow Answer

The percentage change in real income can be approximated by subtracting the percentage change in the price level from the percentage change in nominal income.

Correct AnswerverifiedShow Answer

"Full employment" refers to the situation when there is:

Correct AnswerverifiedShow Answer

Which statement about inflation is correct?

Correct AnswerverifiedShow Answer

Inflation caused by an increase in aggregate spending is referred to as:

Correct AnswerverifiedShow Answer

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Correct AnswerverifiedShow Answer

On the issue of whether or not a little inflation helps reduce unemployment:

Correct AnswerverifiedShow Answer

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