question

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

answer

business cycles.

question

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

answer

rising real GDP.

question

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

answer

the long-term expansion or contraction of business activity that occurs over 50 or 100 years.

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

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are:

answer

capital goods and durable consumer goods.

question

The phase of the business cycle in which real GDP declines is called:

answer

a recession.

question

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

answer

the trough.

question

A recession is defined as a period in which:

answer

real domestic output falls.

question

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

answer

Expansion.

question

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

answer

Prices are sticky in the short run.

question

Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions. Refer to the given information. The labor force in Scoob is:

answer

102 million.

question

Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions. Refer to the given information. The unemployment rate in Scoob is:

answer

6.9 percent.

question

Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions. Refer to the given information. If the natural rate of unemployment in Scoob is 5 percent, then:

answer

cyclical unemployment is about 2 percent.

question

The United States' economy is considered to be at full employment when:

answer

about 4-5 percent of the labor force is unemployed.

question

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is:

answer

frictionally unemployed.

question

The natural rate of unemployment is:

answer

that rate of unemployment occurring when the economy is at its potential output.

question

The labor force includes:

answer

employed workers and persons who are officially unemployed.

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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.

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Official unemployment statistics:

answer

understate unemployment because discouraged workers are not counted as unemployed.

question

Part-time workers who want full-time work are counted as:

answer

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

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

The unemployment rate is the:

answer

percentage of the labor force that is unemployed.

question

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would:

answer

decline.

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

A college graduate using the summer following graduation to search for a job would best be classified as:

answer

a part of frictional unemployment.

question

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

answer

structural unemployment.

question

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

answer

Structural and frictional unemployment.

question

The type of unemployment associated with recessions is called:

answer

cyclical unemployment.

question

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:

answer

the official unemployment rate will remain unchanged.

question

The government agency responsible for collecting and reporting unemployment data is the:

answer

Bureau of Labor Statistics.

question

At the economy's natural rate of unemployment:

answer

the economy achieves its potential output.

question

In the depth of the Great Depression, the unemployment rate in the United States was about:

answer

25 percent.

question

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

answer

Cyclical unemployment.

question

The GDP gap measures the difference between:

answer

actual GDP and potential GDP.

question

A large negative GDP gap implies:

answer

a high rate of unemployment.

question

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

answer

$510 billion.

question

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

answer

$360 billion.

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

Full-employment output is also called:

answer

potential output.

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

Inflation means that:

answer

prices on average are rising, although some particular prices may be falling.

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

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

answer

11 percent.

question

Demand-pull inflation:

answer

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

question

The phrase "too much money chasing too few goods" best describes:

answer

demand-pull inflation.

question

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

answer

cost-push inflation.

question

Cost-push inflation may be caused by:

answer

a negative supply shock.

question

Real income is found by:

answer

dividing nominal income by the price index (in hundredths).

question

Real income can be determined by:

answer

deflating nominal income for inflation.

question

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:

answer

rise by about 15 percent.

question

Cost-push inflation:

answer

reduces real output.

question

Cost-of-living adjustment clauses (COLAs):

answer

tie wage increases to changes in the price level.

question

During a period of hyperinflation:

answer

people tend to hold goods rather than money.

question

Inflation is undesirable because it:

answer

arbitrarily redistributes real income and wealth.

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.

Macroeconomics Chapter 9 – Flashcards

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