Chapter 9 Quiz Test Questions – Flashcards

Unlock all answers in this set

Unlock answers
question
In sequential order, the four phases of the business cycle are
answer
Peak, recession, trough, and expansion
question
The length of a complete cycle
answer
Varies from about 2 to 3 years to as long as 15 years
question
Seasonal variations and long-run trends complicate the measurement of the business cycle because normal season variation does not signal boom or ____.
answer
Recession
question
The business cycle affects output and employment in capital goods industries and consumer durable goods industries more severely than in industries producing nondurables because capital goods and durable goods
answer
Last and these purchases can be postponed
question
A financial crisis can lead to a recession because it can cause wealth and income to ____, reducing spending and ultimately reducing employment.
answer
Fall
question
A major new invention can lead to an expansion if there are ____ in investment, consumption, output, and employment.
answer
Increases
question
How is the labor force defined and who measures it?
answer
The U.S. Bureau of Labor Statistics (BLS) measures the labor force as people over 16 years of age who are actively seeking work
question
The unemployment rate is the
answer
Number of unemployed persons divided by the labor force
question
If the unemployment rate increases, the size of the labor force
answer
Could increase or decrease
question
A positive unemployment rate—one more than zero percent—is fully compatible with full employment because at full employment,
answer
Unemployment includes frictional unemployment, which is always positive because people are transitioning to new jobs
question
In general, unemployment rates are higher for
answer
African Americans, Hispanics, workers in lower-skilled occupations, and less-educated workers
question
The average length of time people are unemployed rises during a recession because
answer
Businesses continue to lay-off workers as a result of the decrease in demand
question
A difficult aspect of measuring the unemployment rate is
answer
Determining who is eligible and available to work
question
Which of the following illustrates the difficulty of distinguishing between frictional, structural, and cyclical unemployment?
answer
A person quits his job in search of a better one, but the former job is in a declining industry and disappears completely
question
Unemployment is an economic problem because
answer
A unit of labor resource that could be engaged in production is sitting idle
question
The consequence of a ____ GDP gap is that what is not produced is lost forever and future economic growth will be less
answer
Negative
question
The noneconomic effects of unemployment include
answer
A sense of failure created in parents and in their children
question
The United States has an unemployment compensation program that provides income for those out of work. Unemployment is
answer
Still a problem because the unemployment compensation program merely gives the unemployed enough funds for basic needs
question
The Consumer Price Index (CPI) is constructed by
answer
Comparing the value of a "market basket" of goods that consumers typically purchase to the value of the basket in a base year
question
The Bureau of Labor Statistics (BLS) would calculate the rate of inflation in year 5 by
answer
Subtracting the CPI of year 4 from the CPI of year 5, and then dividing by the CPI of year 4
question
Reduces the purchasing power of the dollar
answer
Inflation
question
The nominal interest rate
answer
Minus the inflation rate is the real interest rate
question
____ means that the price level is falling, whereas with ____, overall prices are rising.
answer
Deflation, Inflation
question
Demand-pull inflation occurs when
answer
Prices rise because of an increase in aggregate spending not fully matched by an increase in aggregate output
question
A negative GDP gap is associated with
answer
Cost-push inflation
question
A positive GDP gap is associated with
answer
Demand-pull inflation
question
An increase in your nominal income and a decrease in your real income can occur simultaneously if your nominal income increases ____ than the cost of living increases.
answer
Less
question
The losers from inflation are those with
answer
Fixed incomes in nominal terms
question
Those who lose the most from unemployment are
answer
Minority groups and those with the least skill
question
Consider the choice between (a) full employment with a 6 percent annual rate of inflation or (b) price stability with an 8 percent unemployment rate. Which of the following statements is true?
answer
Option (a) risks inflationary expectations that will give rise to creeping inflation, whereas option (b) might lower spending and push the economy toward deflation
question
Hyperinflation might lead to a severe decline in total output if
answer
Everyone starts speculating and searching for ways to avoid inflation
question
Most economists agree that the immediate cause of the large majority of cyclical changes in the levels of real output and employment is unexpected changes in:
answer
The level of total spending
question
Suppose that an economy has 9 million people working full-time. It also has 1 million people who are actively seeking work but currently unemployed as well as 2 million discouraged workers who have given up looking for work and are currently unemployed. What is this economy's unemployment rate?
answer
10%
question
Label each of the following scenarios as either frictional unemployment, structural unemployment, or cyclical unemployment. Tim just graduated and is looking for a job
answer
Frictional unemployment
question
Label each of the following scenarios as either frictional unemployment, structural unemployment, or cyclical unemployment. A recession causes a local factory to lay off 30 workers
answer
Cyclical unemployment
question
Label each of the following scenarios as either frictional unemployment, structural unemployment, or cyclical unemployment. Thousands of bus and truck drivers permanently lose their jobs when driverless, computer-driven vehicles make human drivers redundant
answer
Structural unemployment
question
Label each of the following scenarios as either frictional unemployment, structural unemployment, or cyclical unemployment. Hundreds of New York legal jobs permanently disappear when a lot of legal work gets outsourced to lawyers in India
answer
Structural unemployment
question
The unemployment rate that is consistent with full employment is known as:
answer
The natural rate of unemployment
question
A country's current unemployment rate is 11 percent. Economists estimate that its natural rate of unemployment is 6 percent. About how large is this economy's negative GDP gap?
answer
10%
question
Cost-push inflation occurs when there is:
answer
Rising per-unit production costs
question
Jimmer's nominal income will go up by 10 percent next year. Inflation is expected to be - 2 percent next year. By approximately how much will Jimmer's real income change next year?
answer
12%
question
Kaitlin has $10,000 of savings that she may deposit with her local bank. Kaitlin wants to earn a real rate of return of at least 4 percent and she is expecting inflation to be exactly 3 percent. What is the lowest nominal interest rate that Kaitlin would be willing to accept from her local bank?
answer
7%
question
Lenders are helped by unanticipated inflation. True or False?
answer
False
question
Economists agree that ____ inflation reduces real output.
answer
Cost-push
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New