Test Answers on Chapter 9 Quiz
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Cost-push inflation may be caused by:
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a negative supply shock.
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Official unemployment statistics:
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understate unemployment because discouraged workers are not counted as unemployed.
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Demand-pull inflation:
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occurs when total spending in the economy is excessive.
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Recurring upswings and downswings in an economy's real GDP over time are called:
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business cycles.
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A lender need not be penalized by inflation if the:
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lender correctly anticipates inflation and increases the nominal interest rate accordingly.
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Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:
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structural unemployment.
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Given the annual rate of inflation, the "rule of 70" allows one to:
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calculate the number of years required for the price level to double.
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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:
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Okun's law.
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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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not in the labor force.
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The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about:
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1.6 percent.
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In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
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Expansion.
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The GDP gap measures the difference between:
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actual GDP and potential GDP.
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Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:
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rise by about 15 percent.
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Part-time workers who want full-time work are counted as:
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fully employed and therefore the official unemployment rate may understate the level of unemployment.
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The phase of the business cycle in which real GDP declines is called:
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a recession.
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Wait unemployment and search unemployment are both types of:
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frictional unemployment.
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Innovations such as the microchip and the Internet lead to business cycle variations because:
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significant innovations occur irregularly and unexpectedly.
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If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is:
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3 percent.
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The unemployed are those people who:
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Are not employed but are seeking work
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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:
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structural unemployment.
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The natural rate of unemployment is:
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that rate of unemployment occurring when the economy is at its potential output.
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Cost-of-living adjustment clauses (COLAs):
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tie wage increases to changes in the price level.
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The type of unemployment associated with recessions is called:
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cyclical unemployment.
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Inflation means that:
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prices on average are rising, although some particular prices may be falling.
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(Consider This) If wages were more downwardly flexible, then we would expect:
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fewer layoffs during recessions.
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A college graduate using the summer following graduation to search for a job would best be classified as:
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a part of frictional unemployment.
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If actual GDP is less than potential GDP:
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the actual unemployment rate will be higher than the natural unemployment rate.
