Essentials of Economics (Schiller) – Chapter 10

Flashcard maker : Lily Taylor
1. According to macroeconomists, a goal for the economy is a:
A) Zero unemployment rate. C) Steadily increasing unemployment rate.
B) High unemployment rate. D) Low unemployment rate.

2. Which of the following types of unemployment would best characterize a swimming instructor’s unemployment during the winter months?
A) Structural unemployment. C) Seasonal unemployment.
B) Frictional unemployment. D) Cyclical unemployment.

4. Structural unemployment occurs:
A) Because of a mismatch between skills and jobs.
B) When firms fail because of a seasonal downturn.
C) When an industry experiences a cyclical downturn.
D) When there is inadequate demand for jobs.

5. Which of the following is likely to reduce the level of structural unemployment?
A) A lower GDP level for the economy.
B) Longer periods of unemployment between jobs.
C) Federally funded job-training programs.
D) An increase in the number of youth and women in the labor force.

6. Which of the following government policies or programs is most likely to reduce cyclical unemployment?
A) Those that stimulate economic growth. C) Additional job-placement services.
B) Increased job training. D) Additional health services.

7. Inflation is defined as:
A) The prices of certain goods stay the same or are rising.
B) An increase in relative prices.
C) An increase in the average level of prices.
D) All of the above.

8. Inflation acts like a tax because:
A) The government tends to benefit during periods of inflation.
B) It takes purchasing power from some people and gives it to others.
C) Inflation pushes everyone into higher tax brackets.
D) Everyone loses purchasing power during periods of inflation just like everyone must pay taxes.

9. The Consumer Price Index is used specifically to measure:
A) The unemployment rate. C) The growth rate of the economy.
B) The inflation rate. D) The business cycle.

10. Price stability refers to:
A) A constant average price level.
B) The absence of significant changes in the average price level.
C) An inflation rate of zero.
D) Increases in prices equal to or less than the growth rate of the economy.

11. Business cycles in the United States:
A) Are similar in length but vary greatly in magnitude.
B) Vary greatly in length, frequency, and magnitude.
C) Are similar in frequency and magnitude.
D) Are similar in length, frequency, and magnitude.

12. As the economy falls from the peak to the trough of the business cycle:
A) Inflationary pressures should increase as unemployment rises.
B) Cyclical unemployment should increase and real GDP should decline.
C) Frictional unemployment should fall because people find jobs more quickly.
D) Structural unemployment will be eliminated.

13. Real GDP measures changes in:
A) Prices, but not production. C) Prices and production.
B) Production, but not prices. D) Wages.

14. A decline in an economy’s level of output can lead to:
A) A lower standard of living. C) Higher opportunity costs.
B) A decrease in unemployment. D) All of the above.

15. People are unemployed if they are over 16 and not working due to:
A) The inability to find a job.
B) A two-week summer vacation.
C) A strike.
D) The lack of motivation to look for work.

16. If the population of a country is 500,000, its labor force consists of 300,000, and 15,000 people are unemployed, the labor force participation rate is:
A) 3 percent. B) 5 percent. C) 6 percent. D) 60 percent.

T F 17. Throughout the business cycle, unemployment and production typically move in opposite directions.

T F 18. A person who quits one job and waits two months before taking another job is considered to be unemployed.

T F 19. “Full employment” means that some people in the labor force are still unemployed.

T F 20. If all prices and wages in the economy rise by the same percentage during the same time period, inflation does not cause a redistribution of income.

21. The study of aggregate economic behavior is referred to as:
A) Microeconomics. C) Government policy.
B) Macroeconomics. D) The business cycle.

22. The growth and contraction in the production of goods and services over time define:
A) The business cycle. B) Unemployment. C) Inflation. D) Macro policy.

23. Which of the following is characteristic of a downturn in the business cycle?
A) Lower unemployment rates. C) Lower real output.
B) Higher prices. D) All of the above.

24. Which of the following should decrease during the expansion phase of the business cycle?
A) The unemployment rate. C) Real GDP.
B) The inflation rate. D) All of the above.

25. The production possibilities will definitely shift outward if:
A) Available resources increase and, at the same time, the labor force decreases.
B) Available resources decrease and, at the same time, technology improves.
C) The labor force increases and, at the same time, technology improves.
D) The labor force decreases and, at the same time, available resources decrease.

1. D
2. C
3. D
4. A
5. C
6. A
7. C
8. B
9. B
10. B
11. B
12. B
13. B
14. A
15. A
16. D
17. True
18. True
19. True
20. True
21. B
22. A
23. C
24. A
25. C
3. Frictional unemployment can be distinguished from other types of unemployment in that we assume:
A) There is an adequate demand for labor to employ the frictionally unemployed.
B) The frictionally unemployed possess the necessary education and skills to become employed.
C) Search time is relatively short for frictionally unemployed persons.
D) All of the above.

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