Business Cycles, Unemployment and Inflation

question

A business cycle is:

answer

a short-run alteration between economic upturns and downturns

question

Inflation is when there is:

answer

a rising aggregate price level

question

The labor force is the sum of the _______ and ______.

answer

employed; unemployed

question

Which of the following is a major factor in preventing the economy from rapidly adjusting to shocks

answer

sticky prices

question

One reason teenagers have a higher unemployment rate than adults is because they:

answer

have lower skill levels

question

Inflation redistributes:

answer

real income

question

An expansion usually follows _________ in the business cycle.

answer

e recession

question

When inflation occurs, each dollar of income will buy ______ goods and services than before.

answer

less

question

__________ reduces the purchasing power of money.

answer

Inflation

question

Which of the following explain why flexible-income receives may be unaffected or benefit by unanticipated inflation.

Cost-push inflation may cause some nominal incomes to decline faster than inflation and lead to real income increases.

They receive COLAs.

Demand-pull inflation may cause some nominal incomes to increase faster than inflation and lead to real income increases

Business owners profits may rise if product prices rise faster than resource prices.

Their incomes may automatically increase when the CPI increases.

answer

They receive COLAs.

Demand-pull inflation may cause some nominal incomes to increase faster than inflation and lead to real income increases

Business owners profits may rise if product prices rise faster than resource prices.

Their incomes may automatically increase when the CPI increases.

question

Workers in lower skilled occupations have ________ unemployment rates than workers in higher-skilled occupations.

answer

higher

question

Which of the following is a consequence of unexpected lower total spending in the short-run when prices are sticky?

Unemployment decreases

Prices increase

Firms sell fewer units of output

Employment increases

answer

Firms sell fewer units of output

question

Recessions are periods when:

answer

output and employment are falling

question

_______ income will be affected if the change in the price level differs from the change in a person's nominal income.

answer

Real

question

The portion of unemployment that is due to the mismatch between skills and jobs is called:

answer

structural

question

Income that has been adjusted for changes in prices over time is called:

answer

real income

question

The unemployment rate equals

answer

(labor force - employed)/ labor force

question

When inflation occurs, people with _______ incomes see their real incomes ________.

answer

fixed; decreases

question

Several possible sources of shocks that can cause business cycles include

unexpected political events

productivity changes

irregular innovation

monetary factors

financial stability

answer

unexpected political events

productivity changes

irregular innovation

monetary factors

question

The rate of inflation is equal to the percentage change of the ______ from one year to the next.

answer

consumer price index

question

Inflation caused by an excess of total spending beyond the economy's capacity to produce is called:

answer

demand-pull inflation

question

Which of the following are hurt by unanticipated inflation?

savers

flexible-income recipients

fixed-income recipients

debtors

creditors

answer

savers

fixed-income

creditors

question

During hyperinflation, the value of money:

answer

falls rapidly

question

Income that is received as wages and is not adjusted for inflation is called:

answer

nominal income

question

Those who are working are defined as _________ and those who are not working but actively seeking work are defined as ________.

answer

employed; unemployed

question

People who are _________ are hurt by unanticipated inflation.

answer

creditors

on fixed incomes

savers

question

A worker who, after unsuccessfully seeking employment for some time, becomes frustrated and drops out of the labor force is defined as a ___________ worker.

answer

discouraged

question

Real interest rates are the:

answer

interest rates quoted in the market minus the inflation rate

question

The BLS's unemployment rate is understated because:

answer

it counts part-time workers as fully employed

question

Real income equals nominal income divided by the ____________.

answer

price index

question

Which of the following could be considered a cost of unemployment?

Severe psychological costs to the job loser

Higher crime, suicide and divorce rates

Higher dropout rate in schools

Wasted resources because a worker is not being utilized

answer

Severe psychological costs to the job loser

Higher crime, suicide and divorce rates

Wasted resources because a worker is not being utilized

question

Too much spending chasing too few goods is the essence of ___________ inflation.

answer

demand-pull

question

In the trough of a ____________,(one word) output and employment "bottom out" at their lowest levels.

answer

recession

question

True or false: In the United States, inflation reached double-digit rates in the 1970s and early 1980s but declined and recently, has been relatively mild.

answer

True

question

When prices are sticky in the short-run, the economy is forced to respond by changes in:

answer

Employment
Output

question

The major source of cost-push inflation has been so called _________ shocks.

answer

supply

question

The phase of the business cycle at which the economy is at full employment is known as a(n) _______.

answer

peak

question

Cost-push inflation is caused by:

answer

the increase in the per-unit production costs at each level of spending

question

What does the Consumer Price Index (CPI) measure?

answer

The cost of living over time

question

Unexpected events that drive economic cycles and fluctuations are called economic _________.

answer

shock

question

When the expected rate of inflation is added to the real interest rate, the result is called the ___________.

answer

nominal interest rate

question

A GDP gap equals actual GDP minus __________ GDP.

answer

potential

question

The difference between actual and potential GDP is called a GDP ______.

answer

gap

question

Fictional unemployment is defined as:

answer

unemployment for workers who are searching for jobs or waiting to take jobs in the future

question

If Sally's nominal income increases by 10% and the price level increases by 6%, Sally's real income will:

answer

rise by 4%

question

Which of the following are categories by which unemployment rates are broken down?

Duration

Gender

Occupation

Education

Race and ethnicity

Age

Socioeconomic status

answer

Duration

Gender

Occupation

Education

Race and ethnicity

Age

question

_________ unemployed workers live in areas where jobs exist and they have marketable skills while _________ unemployed workers do not.

answer

Frictionally; Structurally

question

True or false: The unemployment rate for African Americans and Hispanics is lower than that for whites.

answer

False

question

The natural rate of employment is generally thought of as the:

answer

sum of the frictional unemployment and structural unemployment rates

question

Sticky prices prevent the economy from adjusting to a shock because priced cannot quickly equalize the demand and ______ of goods.

answer

supply

question

An increase in the price level caused by an excess of total spending beyond the economy's capacity to produce is called _______-pull inflation while in an increase in the price level caused by factors that raise per-unit production cost is called ______-push inflation.

answer

demand; supply

question

By not counting discouraged workers as unemployed, the BLS official unemployment rate is ___________.

answer

understated

question

The formula for the ________ ______ ________ (full name) is the price of the most recent market basket in a particular year divided by the price estimate of the market basket in 1982-1984 multiplied by 100.

answer

consumer price index

question

Real income will remain the same when nominal income rises at the same percentage rate as does the ________.

answer

price index

question

Foregone output is a basic economic cost of ________.

answer

unemployment

question

Which of the following are characteristic of lower skilled workers?

Longer spells of frictional unemployment

Less likely to bear the brunt of resources

Less likely to be self-employed

Longer spells of structural unemployment

answer

Less likely to be self-employed

Longer spells of structural unemployment

question

The number of persons unemployed for long periods as a percentage of the labor force is _________ the overall unemployment rate.

answer

lower than

question

True or false: The Bureau of Labor Statistics list all part-time workers as fully employed.

answer

True

question

Full employment is _________ 100 percent employment of the labor force.

answer

less than

question

If the 3 percent annual rate of inflation persists, the price level will double in _______ years while a persistent 5 percent annual rate of inflation will double the price level in ___ years.

answer

23.3; 14

question

Changes in unemployment that occur as the economy expands and contracts is called:

answer

cyclical unemployment

question

The unemployment rate is calculated by dividing the number of _________ by the ________ times 100.

answer

unemployed; labor force

question

Suppose that the expected inflation is 5% and the actual inflation is 7%. Then borrowers:

answer

are better off and lenders are worse off

question

__________ consumer goods are affected more by the business cycle than ________ consumer goods.

answer

Durable, nondurable

question

Which of the following is inevitable and, at least in part, desirable?

Seasonal unemployment

Cyclical unemployment

Frictional unemployment

Structural unemployment

answer

Frictional unemployment

question

Economists say that the economy is at "full employment" when the:

answer

cyclical unemployment rate is zeo

question

Which of the following describe why unemployment rates are higher for African Americans and Hispanics than for whites?

Greater concentration in higher-skilled occupations

Greater concentration in lower-skilled occupations

Lower rates of educational attainment

Discrimination in he labor market

answer

Greater concentration in lower-skilled occupations

Lower rates of educational attainment

Discrimination in he labor market

question

Cost-push inflation will reduce supply and lower real output and employment which will eventually generate an economic __________.

answer

recession

question

Which of the following are normally very similar between men and women?

Structural unemployment rates

Salary levels

Frictional unemployment rates

Unemployment rates

answer

Unemployment rates

question

Cost-of-living adjustments are

answer

automatic wage changes based on the CPI which are included in some union contracts

question

The rule of 70 says that the number of years it will tale for some metric to double, given its annual percentage increase, can be found by

answer

dividing 70 by the annual percentage increase

question

If the CPI was 208.5 in 2009, up from 200.5 in 2008, what is the rate of inflation?

answer

3.99%

question

Why the economy sees business cycle fluctuation rather than slow, smooth growth is a central issue of:

answer

macroeconomics

question

Okun's law indicates that for every percentage point by which the __________ unemployment rate exceeds the ______ rate, a negative GDP gap of about 2% occurs.

answer

actual; natural

question

Borrowers benefit form unanticipated inflation because they pay back loans with dollars that have _______ purchasing power than the dollars that were originally borrowed.

answer

less

question

Which of the following explain the business cycle in terms of underlying casual factors?

Unexpected changes in the level of total spending

Printing more or less money than people are expecting that triggers changes in output and employment

Irregular innovation

Unexpected changes in prices of goods and services

Unexpected increases of decreases in productivity

answer

Unexpected changes in the level of total spending

Printing more or less money than people are expecting that triggers changes in output and employment

Irregular innovation

Unexpected increases of decreases in productivity

question

If nominal income rises by 10% from 100% to 110% and the price level index rises by 6% from 100 to 106 then, real income has increased to:

answer

$103.77

question

It is widely accepted that the immediate cause of large cyclical changes in the levels of ________ and ______ is the level of unexpected total spending.

answer

output; emloyment

question

Which of the following statements best summarize how inflation may redistribute real income.

When a change in the price level is equal to the change in a person's real income.

When a change in the price level differs from a change in a person's real income.

When a change in the price level differs from a change in a person's nominal income.

When a change in the price level is equal to the change in a person's nominal income.

answer

When a change in the price level differs from a change in a person's nominal income.

question

The composition of the market basket for the CPI is:

answer

based in spending patterns of urban consumers in the period

question

If there is a 3% annual rate, the price level will double in about _______ years.

answer

question

The business cycle affects output and employment in capital and durable goods industries more severely than in industries producing non-durable goods because:

answer

during a recession business investment in new capital goods and consumer spending on new durable goods decline sharply.

question

Services and nondurable consumer goods are somewhat insulated from severe effects of a recession because:

answer

purchases of services and nondurable goods cannot be postponed

question

The interest rates quoted in the market are known as:

answer

nominal interest rates

question

Cost-push inflation can contribute to a recession by:

answer

increasing prices which reduces output and leads to lower employment and lower real incomes.

question

Identify all of the results of unexpected higher total spending in the short-run when prices are sticky.

More goods and services are purchased
Prices decline

Employment rises

GDP rises

Output rises

Unemployment rises

answer

More goods and services are purchased

Employment rises

GDP rises

Output rises

Unemployment rises

question

According to Okun's law, if the employment rate in 2009 was 9.6, the natural rate of employment was 7.4, and the potential GDP was $8500 billion dollars, what is the loss of output associated with above-natural unemployment rate?

answer

$374 billion

question

Inflation is a problem because when it occurs:

answer

the "purchasing power" of money is reduced

question

True or false: Unanticipated inflation reduces the real burden of the public debt because the nominal national income and the tax collections rise with inflation; the amount of the public dept does not.

answer

True

question

Output moves up and down rather than staying on a smooth growth trend line because of:

answer

unexpected changes in the level of total spending

question

As the result of unanticipated inflation, workers are better off while firms are worse off if the actual inflation rate:

answer

is less than the expected inflation rate

question

The intensity and the duration of the decline in GDP during the Great Depression was ________________ the more recent U.S. recessions.

answer

more severe than

question

Savers can balance their losses due to inflation if:

answer

the interest rate earned on savings is equal to or greater than the unexpected inflation

question

Fixed-income recipients, savers and creditors are hurt by unanticipated inflation because:

answer

inflation redistributes real income away from them and toward others

question

Firms and industries producing capital goods are affected most by the business cycle and the negative effects of a recession because:

answer

purchases of capital goods can be postponed

question

Deflation when there is:

answer

a decreasing aggregate price level

question

Frictional unemployment is inevitable and in part, desirable because:

answer

many workers voluntarily moving between jobs leads to greater income for workers, better allocation of labor resources and a larger real GDP

question

__________ inflation will continue for a long time, while __________ inflation is self-limiting.

answer

Demand-pull; cost-push

question

The means by which the US Bureau of Labor Statistics determines who is employed and unemployed is a:

answer

random survey of households

question

Which statement best articulates the choice between full employment with 10% annual inflation or price stability with an 8% unemployment rate.

It is better to have less spending, unemployment and deflation as this keeps the prices lower

It is better to have strong spending, full employment, economic growth and inflation as this moves the economy forward

answer

It is better to have strong spending, full employment, economic growth and inflation as this moves the economy forward

question

The formula for calculating per-unit production costs include _________ as the denominator.

answer

output

question

Flexible-income receivers and debtors are unaffected or helped by inflation because:

answer

inflation redistributes real income toward them and away from others

question

Suppose that in a particular year the natural rate of an employment is 5 percent and the actual rate of unemployment is 8 percent. Using Okun's law, the size of GDP gap in percentage point terms is:

answer

6 percent

question

A lender who charges an inflation premium to a borrower is altering the redistribution of income due to:

answer

anticipated inflation

question

When the actual inflation rate is higher than the expected rate of inflation:

answer

lenders may receive a negative real rate of return

question

The four phases of the business cycle can be illustrated by:

answer

a series of alternating rising and declining curves

question

Which of the following explains why the BLS official unemployment rate could be understated?

Part time workers are considered fully employed

Discouraged workers are considered unemployed

Part-time workers are considered unemployed

Discouraged workers are classified as "not in the labor force"

answer

Part time workers are considered fully employed

Discouraged workers are classified as "not in the labor force"

question

If the number of people employed is 11,000, there are currently 2,500 people unemployed and 3,000 people who are not in the labor force, what is the unemployment rate?

answer

18.5%

question

If Sue saves $1000 in the bank and earns 6% interest and inflation is greater than 6%, then the:

real value or purchasing power of the savings will decline

real value or purchasing power of the savings will rise

real value of the savings will decline

answer

real value or purchasing power of the savings will decline

question

True or false: Core inflation excludes volatile prices of goods like food and energy.

answer

True

question

The biggest cost associated with unanticipated inflation is:

answer

the arbitrary redistribution of income and wealth

question

If the CPI was 202 in 2009 and 209 in 2010, the rate of inflation for 2010 is:

answer

3.5%

question

The official unemployment rate may be understated because:

answer

part-time workers are counted as employed but discouraged workers are not counted

question

Full employment is something less then 100 percent employment of the labor force because:

answer

economists say that the economy is "fully employed" when it is only experiencing frictional and structural unemployment

question

Household purchases are affected by business cycle and the negative effects of a recession because:

answer

purchases of durable goods can be postponed

question

The rocketing prices of imported oil in 1973-1974 and again in 1979-1980 are good illustrations of:

answer

cost-push inflation

question

A glass blower who is unemployed because his skills are no longer marketable due to automation is an example of __________.

answer

structural unemployment

question

A worker that is unemployed because of an insufficient demand for goods and services is an example of:

answer

cyclical unemployment

question

The economy needs some unemployment to operate efficiently because without it:

answer

firms will find find it difficult to recruit workers, leading in increased wages and prices

question

John quit his current job and has taken a new job for higher pay. The new job starts in two weeks. During the two weeks between jobs, John is __________ unemployed.

answer

frictionally

question

Which of the following describes how to calculate the unemployment rate?

(unemployed/population) x 100%

(unemployed/labor force) x 100%

(unemployed/employed) x 100%

((unemployed-employed)/labor force) x 100%

answer

(unemployed/labor force) x 100%

question

On average, less-educated workers have __________ unemployment rates than workers with more education.

answer

high

question

An expansion is a period level in which:

the price level falls

output rises

the price level may rise

output declines

answer

output rises

the price level may rise

question

Inflation is when there is

answer

a rising aggregate price level.

1 of 124

question

A business cycle is:

answer

a short-run alteration between economic upturns and downturns

question

Inflation is when there is:

answer

a rising aggregate price level

question

The labor force is the sum of the _______ and ______.

answer

employed; unemployed

question

Which of the following is a major factor in preventing the economy from rapidly adjusting to shocks

answer

sticky prices

question

One reason teenagers have a higher unemployment rate than adults is because they:

answer

have lower skill levels

question

Inflation redistributes:

answer

real income

question

An expansion usually follows _________ in the business cycle.

answer

e recession

question

When inflation occurs, each dollar of income will buy ______ goods and services than before.

answer

less

question

__________ reduces the purchasing power of money.

answer

Inflation

question

answer

question

Workers in lower skilled occupations have ________ unemployment rates than workers in higher-skilled occupations.

answer

higher

question

answer

Firms sell fewer units of output

question

Recessions are periods when:

answer

output and employment are falling

question

_______ income will be affected if the change in the price level differs from the change in a person's nominal income.

answer

Real

question

The portion of unemployment that is due to the mismatch between skills and jobs is called:

answer

structural

question

Income that has been adjusted for changes in prices over time is called:

answer

real income

question

The unemployment rate equals

answer

(labor force - employed)/ labor force

question

When inflation occurs, people with _______ incomes see their real incomes ________.

answer

fixed; decreases

question

Several possible sources of shocks that can cause business cycles include

unexpected political events

productivity changes

irregular innovation

monetary factors

financial stability

answer

unexpected political events

productivity changes

irregular innovation

monetary factors

question

The rate of inflation is equal to the percentage change of the ______ from one year to the next.

answer

consumer price index

question

Inflation caused by an excess of total spending beyond the economy's capacity to produce is called:

answer

demand-pull inflation

question

Which of the following are hurt by unanticipated inflation?

savers

flexible-income recipients

fixed-income recipients

debtors

creditors

answer

savers

fixed-income

creditors

question

During hyperinflation, the value of money:

answer

falls rapidly

question

Income that is received as wages and is not adjusted for inflation is called:

answer

nominal income

question

Those who are working are defined as _________ and those who are not working but actively seeking work are defined as ________.

answer

employed; unemployed

question

People who are _________ are hurt by unanticipated inflation.

answer

creditors

on fixed incomes

savers

question

A worker who, after unsuccessfully seeking employment for some time, becomes frustrated and drops out of the labor force is defined as a ___________ worker.

answer

discouraged

question

Real interest rates are the:

answer

interest rates quoted in the market minus the inflation rate

question

The BLS's unemployment rate is understated because:

answer

it counts part-time workers as fully employed

question

Real income equals nominal income divided by the ____________.

answer

price index

question

answer

Severe psychological costs to the job loser

Higher crime, suicide and divorce rates

Wasted resources because a worker is not being utilized

question

Too much spending chasing too few goods is the essence of ___________ inflation.

answer

demand-pull

question

In the trough of a ____________,(one word) output and employment "bottom out" at their lowest levels.

answer

recession

question

True or false: In the United States, inflation reached double-digit rates in the 1970s and early 1980s but declined and recently, has been relatively mild.

answer

True

question

When prices are sticky in the short-run, the economy is forced to respond by changes in:

answer

Employment
Output

question

The major source of cost-push inflation has been so called _________ shocks.

answer

supply

question

The phase of the business cycle at which the economy is at full employment is known as a(n) _______.

answer

peak

question

Cost-push inflation is caused by:

answer

the increase in the per-unit production costs at each level of spending

question

What does the Consumer Price Index (CPI) measure?

answer

The cost of living over time

question

Unexpected events that drive economic cycles and fluctuations are called economic _________.

answer

shock

question

When the expected rate of inflation is added to the real interest rate, the result is called the ___________.

answer

nominal interest rate

question

A GDP gap equals actual GDP minus __________ GDP.

answer

potential

question

The difference between actual and potential GDP is called a GDP ______.

answer

gap

question

Fictional unemployment is defined as:

answer

unemployment for workers who are searching for jobs or waiting to take jobs in the future

question

If Sally's nominal income increases by 10% and the price level increases by 6%, Sally's real income will:

answer

rise by 4%

question

Which of the following are categories by which unemployment rates are broken down?

Duration

Gender

Occupation

Education

Race and ethnicity

Age

Socioeconomic status

answer

Duration

Gender

Occupation

Education

Race and ethnicity

Age

question

_________ unemployed workers live in areas where jobs exist and they have marketable skills while _________ unemployed workers do not.

answer

Frictionally; Structurally

question

True or false: The unemployment rate for African Americans and Hispanics is lower than that for whites.

answer

False

question

The natural rate of employment is generally thought of as the:

answer

sum of the frictional unemployment and structural unemployment rates

question

Sticky prices prevent the economy from adjusting to a shock because priced cannot quickly equalize the demand and ______ of goods.

answer

supply

question

answer

demand; supply

question

By not counting discouraged workers as unemployed, the BLS official unemployment rate is ___________.

answer

understated

question

answer

consumer price index

question

Real income will remain the same when nominal income rises at the same percentage rate as does the ________.

answer

price index

question

Foregone output is a basic economic cost of ________.

answer

unemployment

question

answer

Less likely to be self-employed

Longer spells of structural unemployment

question

The number of persons unemployed for long periods as a percentage of the labor force is _________ the overall unemployment rate.

answer

lower than

question

True or false: The Bureau of Labor Statistics list all part-time workers as fully employed.

answer

True

question

Full employment is _________ 100 percent employment of the labor force.

answer

less than

question

If the 3 percent annual rate of inflation persists, the price level will double in _______ years while a persistent 5 percent annual rate of inflation will double the price level in ___ years.

answer

23.3; 14

question

Changes in unemployment that occur as the economy expands and contracts is called:

answer

cyclical unemployment

question

The unemployment rate is calculated by dividing the number of _________ by the ________ times 100.

answer

unemployed; labor force

question

Suppose that the expected inflation is 5% and the actual inflation is 7%. Then borrowers:

answer

are better off and lenders are worse off

question

__________ consumer goods are affected more by the business cycle than ________ consumer goods.

answer

Durable, nondurable

question

Which of the following is inevitable and, at least in part, desirable?

Seasonal unemployment

Cyclical unemployment

Frictional unemployment

Structural unemployment

answer

Frictional unemployment

question

Economists say that the economy is at "full employment" when the:

answer

cyclical unemployment rate is zeo

question

answer

Greater concentration in lower-skilled occupations

Lower rates of educational attainment

Discrimination in he labor market

question

Cost-push inflation will reduce supply and lower real output and employment which will eventually generate an economic __________.

answer

recession

question

Which of the following are normally very similar between men and women?

Structural unemployment rates

Salary levels

Frictional unemployment rates

Unemployment rates

answer

Unemployment rates

question

Cost-of-living adjustments are

answer

automatic wage changes based on the CPI which are included in some union contracts

question

The rule of 70 says that the number of years it will tale for some metric to double, given its annual percentage increase, can be found by

answer

dividing 70 by the annual percentage increase

question

If the CPI was 208.5 in 2009, up from 200.5 in 2008, what is the rate of inflation?

answer

3.99%

question

Why the economy sees business cycle fluctuation rather than slow, smooth growth is a central issue of:

answer

macroeconomics

question

Okun's law indicates that for every percentage point by which the __________ unemployment rate exceeds the ______ rate, a negative GDP gap of about 2% occurs.

answer

actual; natural

question

Borrowers benefit form unanticipated inflation because they pay back loans with dollars that have _______ purchasing power than the dollars that were originally borrowed.

answer

less

question

answer

question

If nominal income rises by 10% from 100% to 110% and the price level index rises by 6% from 100 to 106 then, real income has increased to:

answer

$103.77

question

It is widely accepted that the immediate cause of large cyclical changes in the levels of ________ and ______ is the level of unexpected total spending.

answer

output; emloyment

question

answer

When a change in the price level differs from a change in a person's nominal income.

question

The composition of the market basket for the CPI is:

answer

based in spending patterns of urban consumers in the period

question

If there is a 3% annual rate, the price level will double in about _______ years.

answer

question

The business cycle affects output and employment in capital and durable goods industries more severely than in industries producing non-durable goods because:

answer

during a recession business investment in new capital goods and consumer spending on new durable goods decline sharply.

question

Services and nondurable consumer goods are somewhat insulated from severe effects of a recession because:

answer

purchases of services and nondurable goods cannot be postponed

question

The interest rates quoted in the market are known as:

answer

nominal interest rates

question

Cost-push inflation can contribute to a recession by:

answer

increasing prices which reduces output and leads to lower employment and lower real incomes.

question

answer

More goods and services are purchased

Employment rises

GDP rises

Output rises

Unemployment rises

question

answer

$374 billion

question

Inflation is a problem because when it occurs:

answer

the "purchasing power" of money is reduced

question

answer

True

question

Output moves up and down rather than staying on a smooth growth trend line because of:

answer

unexpected changes in the level of total spending

question

As the result of unanticipated inflation, workers are better off while firms are worse off if the actual inflation rate:

answer

is less than the expected inflation rate

question

The intensity and the duration of the decline in GDP during the Great Depression was ________________ the more recent U.S. recessions.

answer

more severe than

question

Savers can balance their losses due to inflation if:

answer

the interest rate earned on savings is equal to or greater than the unexpected inflation

question

Fixed-income recipients, savers and creditors are hurt by unanticipated inflation because:

answer

inflation redistributes real income away from them and toward others

question

Firms and industries producing capital goods are affected most by the business cycle and the negative effects of a recession because:

answer

purchases of capital goods can be postponed

question

Deflation when there is:

answer

a decreasing aggregate price level

question

Frictional unemployment is inevitable and in part, desirable because:

answer

many workers voluntarily moving between jobs leads to greater income for workers, better allocation of labor resources and a larger real GDP

question

__________ inflation will continue for a long time, while __________ inflation is self-limiting.

answer

Demand-pull; cost-push

question

The means by which the US Bureau of Labor Statistics determines who is employed and unemployed is a:

answer

random survey of households

question

answer

It is better to have strong spending, full employment, economic growth and inflation as this moves the economy forward

question

The formula for calculating per-unit production costs include _________ as the denominator.

answer

output

question

Flexible-income receivers and debtors are unaffected or helped by inflation because:

answer

inflation redistributes real income toward them and away from others

question

Suppose that in a particular year the natural rate of an employment is 5 percent and the actual rate of unemployment is 8 percent. Using Okun's law, the size of GDP gap in percentage point terms is:

answer

6 percent

question

A lender who charges an inflation premium to a borrower is altering the redistribution of income due to:

answer

anticipated inflation

question

When the actual inflation rate is higher than the expected rate of inflation:

answer

lenders may receive a negative real rate of return

question

The four phases of the business cycle can be illustrated by:

answer

a series of alternating rising and declining curves

question

answer

Part time workers are considered fully employed

Discouraged workers are classified as "not in the labor force"

question

If the number of people employed is 11,000, there are currently 2,500 people unemployed and 3,000 people who are not in the labor force, what is the unemployment rate?

answer

18.5%

question

answer

real value or purchasing power of the savings will decline

question

True or false: Core inflation excludes volatile prices of goods like food and energy.

answer

True

question

The biggest cost associated with unanticipated inflation is:

answer

the arbitrary redistribution of income and wealth

question

If the CPI was 202 in 2009 and 209 in 2010, the rate of inflation for 2010 is:

answer

3.5%

question

The official unemployment rate may be understated because:

answer

part-time workers are counted as employed but discouraged workers are not counted

question

Full employment is something less then 100 percent employment of the labor force because:

answer

economists say that the economy is "fully employed" when it is only experiencing frictional and structural unemployment

question

Household purchases are affected by business cycle and the negative effects of a recession because:

answer

purchases of durable goods can be postponed

question

The rocketing prices of imported oil in 1973-1974 and again in 1979-1980 are good illustrations of:

answer

cost-push inflation

question

A glass blower who is unemployed because his skills are no longer marketable due to automation is an example of __________.

answer

structural unemployment

question

A worker that is unemployed because of an insufficient demand for goods and services is an example of:

answer

cyclical unemployment

question

The economy needs some unemployment to operate efficiently because without it:

answer

firms will find find it difficult to recruit workers, leading in increased wages and prices

question

John quit his current job and has taken a new job for higher pay. The new job starts in two weeks. During the two weeks between jobs, John is __________ unemployed.

answer

frictionally

question

answer

(unemployed/labor force) x 100%

question

On average, less-educated workers have __________ unemployment rates than workers with more education.

answer

high

question

An expansion is a period level in which:

the price level falls

output rises

the price level may rise

output declines

answer

output rises

the price level may rise

question

Inflation is when there is

answer

a rising aggregate price level.

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