Question 1

Real income is found by:

Accepted Answer

A)   dividing nominal income by 70.
B)   multiplying nominal income by 1.03.
C)   dividing the price index (in hundredths) by nominal income.
D)   dividing nominal income by the price index (in hundredths) .E) C) and D)
F) B) and D)

Question 2

In the United States,the rate of unemployment is highest for:

Accepted Answer

A)   white teenagers.
B)   African-American teenagers.
C)   married women.
D)   unmarried women.E) None of the above
F) A) and C)

Question 3

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 C)
F) A) and B)

Question 4

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Accepted Answer

A) True 
 B)False

Question 5

As it relates to economic growth,the term long-run trend refers to:

Accepted Answer

A)   the long-run increase in the relative importance of durable goods in the U.S.economy.
B)   the long-term expansion or contraction of business activity that occurs over 50 or 100 years.
C)   fluctuations in business activity that average 40 months in duration.
D)   fluctuations in business activity that occur around Christmas,Easter,and other major holidays.E) None of the above
F) All of the above

Question 6

Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP =  $200\$ 200$200  Billion
Natural Rate of Unemployment  =6= 6=6  Percent
Actual Rate of Unemployment  =12= 12=12  Percent Refer to the given data.The size of the negative GDP gap as a percent of potential GDP for the economy is:

Accepted Answer

A)   6 percent.
B)   9 percent.
C)   12 percent.
D)   15 percent. E) B) and D)
F) None of the above

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

Question 8

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

Question 9

Suppose the nominal annual interest rate on a two-year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years.The annual real rate of interest is:

Accepted Answer

A)   6 percent.
B)   8 percent.
C)   2 percent.
D)   3 percent.E) B) and C)
F) All of the above

Question 10

The Great Recession of 2007-2009 significantly increased:

Accepted Answer

A)   both the rate of unemployment and the average length of time people were unemployed.
B)   the rate of unemployment but not the average length of time people were unemployed.
C)   the average length of time people were unemployed but not the rate.
D)   both the rate of inflation and the rate of unemployment.E) A) and D)
F) A) and B)

Question 11

If the rate of inflation is 12 percent per year,the price level will double in about:

Accepted Answer

A)   4.1 years.
B)   5.8 years.
C)   10.2 years.
D)   12.4 years.E) B) and C)
F) None of the above

Question 12

In 2010,Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent.We can conclude that Tatum's real income:

Accepted Answer

A)   may have either increased or decreased.
B)   rose by approximately 6.2 percent.
C)   rose by approximately 3 percent.
D)   fell by approximately 13 percent.E) A) and B)
F) A) and C)

Question 13

Inflation affects:

Accepted Answer

A)   both the level and the distribution of income.
B)   neither the level nor the distribution of income.
C)   the distribution,but not the level,of income.
D)   the level,but not the distribution,of income.E) C) and D)
F) A) and B)

Question 14

(Consider This) Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.What is the argument of economists who reject this idea?

Accepted Answer

A)   Consumers would stop buying goods at higher prices,reducing demand,output,and employment.
B)   Firms will pocket the profits resulting from higher prices and have no incentive to expand output and employment.
C)   Wages and other costs would rise with the inflation,keeping firms from expanding employment.
D)   Consumer spending would shift to cheaper imported goods,reducing domestic demand and employment.E) C) and D)
F) A) and B)

Question 15

Official unemployment statistics:

Accepted Answer

A)   understate unemployment because individuals receiving unemployment compensation are counted as employed.
B)   understate unemployment because discouraged workers are not counted as unemployed.
C)   include cyclical and structural unemployment but not frictional unemployment.
D)   overstate unemployment because workers who are involuntarily working part time are counted as being employed.E) None of the above
F) All of the above

Question 16

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

Question 17

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

Accepted Answer

A)   Expansion.
B)   Recession.
C)   Peak.
D)   Trough.E) A) and C)
F) A) and D)

Question 18

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion,real GDP is:

Accepted Answer

A)   $300 billion.
B)   $30 billion.
C)   $360 billion.
D)   $630 billion.E) A) and B)
F) All of the above

Question 19

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

Question 20

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy.Five million of the part-time workers switch to full-time work.As a result:

Accepted Answer

A)   the official unemployment rate will fall.
B)   the official unemployment rate will rise.
C)   the official unemployment rate will remain unchanged.
D)   the size of the labor force will increase.E) None of the above
F) All of the above

Exam 28: Business Cycles, Unemployment, and Inflation

Correct Answer
verified

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Correct Answer
verified

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

Correct Answer
verified

In 2010,Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent.We can conclude that Tatum's real income:

Correct Answer
verified

Cyclical unemployment results from:

Correct Answer
verified

Suppose the nominal annual interest rate on a two-year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years.The annual real rate of interest is:

Correct Answer
verified

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion,real GDP is:

Correct Answer
verified

Official unemployment statistics:

Correct Answer
verified

Real income is found by:

Correct Answer
verified

The Great Recession of 2007-2009 significantly increased:

Correct Answer
verified

As it relates to economic growth,the term long-run trend refers to:

Correct Answer
verified

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

Correct Answer
verified

The unemployment rate of:

Correct Answer
verified

In the United States,the rate of unemployment is highest for:

Correct Answer
verified

Inflation affects:

Correct Answer
verified

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 Answer
verified

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy.Five million of the part-time workers switch to full-time work.As a result:

Correct Answer
verified

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

Correct Answer
verified

(Consider This) Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.What is the argument of economists who reject this idea?

Correct Answer
verified

If the rate of inflation is 12 percent per year,the price level will double in about:

Correct Answer
verified

Exam 28: Business Cycles, Unemployment, and Inflation

Correct AnswerverifiedShow Answer

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 2010,Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6 percent.We can conclude that Tatum's real income:

Correct AnswerverifiedShow Answer

Cyclical unemployment results from:

Correct AnswerverifiedShow Answer

Suppose the nominal annual interest rate on a two-year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years.The annual real rate of interest is:

Correct AnswerverifiedShow Answer

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion,real GDP is:

Correct AnswerverifiedShow Answer

Official unemployment statistics:

Correct AnswerverifiedShow Answer

Real income is found by:

Correct AnswerverifiedShow Answer

The Great Recession of 2007-2009 significantly increased:

Correct AnswerverifiedShow Answer

As it relates to economic growth,the term long-run trend refers to:

Correct AnswerverifiedShow Answer

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

Correct AnswerverifiedShow Answer

The unemployment rate of:

Correct AnswerverifiedShow Answer

In the United States,the rate of unemployment is highest for:

Correct AnswerverifiedShow Answer

Inflation affects:

Correct AnswerverifiedShow Answer

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

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy.Five million of the part-time workers switch to full-time work.As a result:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(Consider This) Some economists believe that modest inflation,say 2-3 percent,might help reduce unemployment during recessions.What is the argument of economists who reject this idea?

Correct AnswerverifiedShow Answer

If the rate of inflation is 12 percent per year,the price level will double in about:

Correct AnswerverifiedShow Answer

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