question

Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:

answer

8 percent.

question

Part-time workers are counted as:

answer

fully employed and therefore the official unemployment rate may understate the level of unemployment.

question

Unanticipated inflation:

answer

reduces the real burden of the public debt to the Federal government.

question

Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon where she anticipates that a new job will be available. We can say that Susie is faced with:

answer

structural unemployment.

question

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is:

answer

3 percent.

question

Answer the next question(s) on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.

answer

102 million.

question

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

answer

business cycles.

question

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

answer

$360 billion.

question

In which of the following cases would real income rise?

answer

Nominal income rises by 2 percent, and the price level remains unchanged.

question

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

answer

structural and frictional unemployment.

question

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

answer

expansion

question

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of:

answer

Okun's law.

question

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is:

answer

$510 billion.

question

Refer to the above information. If the natural rate of unemployment in Scoob is 5 percent, then:

answer

cyclical unemployment is about 2 percent.

question

Refer to the above data. If the unemployment rate in the above economy declined to 6 percent, we could conclude that:

answer

the economy had moved from a point inside its production possibilities curve to a point on or near the curve.

question

In 2005, 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:

answer

rose by approximately 3 percent.

question

Inflation initiated by increases in wages or other resource prices is labeled:

answer

cost-push inflation.

question

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

answer

African-American teenagers.

question

Innovations such as the microchip and the Internet lead to business cycle variations because:

answer

significant innovations occur irregularly and unexpectedly.

question

The type of unemployment associated with recessions is called:

answer

cyclical unemployment.

question

The official unemployment rate:

answer

is the percentage of the labor force that is unemployed.

question

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:

answer

3 percent.

question

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

answer

deflation of 3.33 percent.

question

The rate of inflation can be found by subtracting:

answer

last year's price index from this year's price index and dividing the difference by last year's price index.

question

Official unemployment statistics:

answer

understate unemployment because discouraged workers are not counted as unemployed.

question

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:

answer

employed.

question

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

answer

level of total spending.

question

Compared to other industrial nations, inflation rates in the United States are:

answer

neither significantly higher nor significantly lower.

question

Refer to the above data. The size of the negative GDP gap as a percent of potential GDP for the above economy is:

answer

12 percent.

question

Inflation is undesirable because it:

answer

arbitrarily redistributes real income and wealth.

question

The labor force includes:

answer

employed workers and persons who are officially unemployed.

question

During a severe recession, we would expect output to fall the most in:

answer

the construction industry.

question

Refer to the above information. The rate of inflation:

answer

cannot be determined from the data

question

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

answer

calculate the number of years required for the price level to double.

question

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

answer

dividing the annual rate of inflation into "70."

question

The phase of the business cycle in which real GDP is at a minimum is called:

answer

the trough.

question

Demand-pull inflation:

answer

occurs when total spending in the economy is excessive

question

Which of the following statements is correct? Unanticipated inflation:

answer

arbitrarily "taxes" fixed-income groups.

question

Which of the following is not seen by economists as an underlying cause of business cycle fluctuations?

answer

All of the above are identified as causes of business cycle changes

question

An unexpected increase in total spending will cause an increase in GDP:

answer

if prices are sticky.

question

Cost-push inflation:

answer

reduces real output

question

The production of durable goods varies more than the production of nondurable goods because:

answer

durables purchases are postponable.

question

The aggregate cost of unemployment can be measured by the:

answer

amount by which potential GDP exceeds actual GDP

question

Which of the following would most likely occur during the expansionary phase of the business cycle?

answer

Demand-pull inflation

question

Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is:

answer

not in the labor force.

question

Cost-of-living adjustment clauses (COLAs):

answer

tie wage increases to changes in the price level

question

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

answer

Capital goods

question

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

answer

frictionally unemployed.

question

Real income can be determined by

answer

deflating nominal income for inflation.

question

Cost-push inflation may be caused by:

answer

a negative supply shock.

question

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:

answer

structural unemployment

question

The GDP gap measures the difference between:

answer

actual GDP and potential GDP.

question

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 acquiring increases in the nominal incomes of its members through collective bargaining. Is the critic correct?

answer

No, because real income may fall if prices increase more proportionately than the increase in nominal income.

question

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is:

answer

6 percent

question

If actual GDP is less than potential GDP:

answer

the actual unemployment rate will be higher than the natural unemployment rate.

question

unemployment and wait unemployment are types of:

answer

frictional unemployment

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