question
The employment population ratio measures the
A. -- portion of the total population that is employed
B. -- percentage of the working age population that is in the labor force
C. -- percentage of the working age population that is not employed
D. -- percentage of the working age population that is employed
A. -- portion of the total population that is employed
B. -- percentage of the working age population that is in the labor force
C. -- percentage of the working age population that is not employed
D. -- percentage of the working age population that is employed
answer
D
question
When an unemployed person drops out of the labor force, the unemployment rate
A. -- Understates the true degree of joblessness in the economy
B. -- overstates the true degree of joblessness in the economy
C. -- is not affected by the existence of such workers
D. -- becomes more reliable as all the potential erroneous data are removed
A. -- Understates the true degree of joblessness in the economy
B. -- overstates the true degree of joblessness in the economy
C. -- is not affected by the existence of such workers
D. -- becomes more reliable as all the potential erroneous data are removed
answer
A
question
When an unemployed person drops out of the labor force, it
A. -- Does not affect the unemployment rate
B. -- does not affect the employment population ratio
C. -- does not affect the labor force participation rate
D. -- affects employment population ratio
A. -- Does not affect the unemployment rate
B. -- does not affect the employment population ratio
C. -- does not affect the labor force participation rate
D. -- affects employment population ratio
answer
B
question
How to get employment percentage
answer
100-Unemployment rate=
question
Formula used to calculate size of the labor force
answer
Number of employed/(Employment percentage/100)=
question
Formula used to get the unemployment rate
answer
Number of unemployed/Labor force X 100=
question
The labor force participation rate is the...
answer
Percentage of the working age population in the labor force
question
Formula used to get the labor force participation rate
answer
Labor force/working age population X 100=
question
People are considered unemployed...
answer
If they did not work in the previous week but were available for work and had actively looked for work at some time during the previous four weeks
question
The labor force is the ...
answer
Sum of the employed and unemployed
question
The unemployment rate is the...
answer
Percentage of the labor force that is unemployed
question
Discouraged workers are...
answer
People who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them
question
What would happen to the unemployment rate and the labor force participation rate if homemakers were included in the employment and labor force totals
A -- both the unemployment rate and the labor force participation rate would increase
B. -- Both the unemployment rate and the labor force participation rate would decrease
C. -- the unemployment rate would increase and the labor force participation rate would decrease
D. -- the unemployment rate would decrease and the labor force participation rate would increase
A -- both the unemployment rate and the labor force participation rate would increase
B. -- Both the unemployment rate and the labor force participation rate would decrease
C. -- the unemployment rate would increase and the labor force participation rate would decrease
D. -- the unemployment rate would decrease and the labor force participation rate would increase
answer
D
question
How would it affect the unemployment rate if the BLS counted as unemployed both discouraged workers and people who work part time but would prefer to work full-time
A -- the unemployment rate would remain the same because those people are already counted as unemployed
B. -- The unemployment rate would increase
C. -- the annual unemployment rate would have been close to 50% in the last decade
D. -- the unemployment rate would decrease
A -- the unemployment rate would remain the same because those people are already counted as unemployed
B. -- The unemployment rate would increase
C. -- the annual unemployment rate would have been close to 50% in the last decade
D. -- the unemployment rate would decrease
answer
B
question
The natural rate of unemployment is
a -- the sum of structural unemployment and frictional unemployment
B. -- the sum of cyclical unemployment and frictional unemployment
C. -- the sum of structural unemployment and cyclical employment
a -- the sum of structural unemployment and frictional unemployment
B. -- the sum of cyclical unemployment and frictional unemployment
C. -- the sum of structural unemployment and cyclical employment
answer
A
question
When the economy is at full employment, unemployment is equal to
A -- zero
B. -- the natural rate of unemployment
C. -- normal rate of unemployment
A -- zero
B. -- the natural rate of unemployment
C. -- normal rate of unemployment
answer
B
question
During a recession, a person would prefer to work in an industry that produces
A. -- an inferior good because the demand for inferior goods should increase with decreases in income during a recession
B. -- a normal good because the demand for normal goods should increase with decreases in income during a recession
C. -- an inferior good because the demand for inferior goods should decrease with increases in income during a recession
A. -- an inferior good because the demand for inferior goods should increase with decreases in income during a recession
B. -- a normal good because the demand for normal goods should increase with decreases in income during a recession
C. -- an inferior good because the demand for inferior goods should decrease with increases in income during a recession
answer
A
question
Structural unemployment is...
answer
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs
question
Frictional unemployment is...
answer
short-term unemployment that arises from the process of matching workers with jobs
question
Cyclical Unemployment is...
answer
workers who lose their jobs because of a recession
question
Efficiency wage is...
answer
an above market wage that a firm pays to motivate workers to be more productive
question
Consumer price index is...
answer
An average of the prices of the goods and services purchased by the typical urban family of four
question
Inflation rate is...
answer
the percentage increase in the price level from one year to the next
question
formula to find CPI
answer
Expenditures(year x)/expenditures(base year) X 100
question
Formula to find percentage change in price index
answer
Price Index (year x) - price index (year y)/Price index (year y) X 100
question
Which of the following makes changes in the CPI overstate the true inflation rate?
A. -- increase in quality bias
B. -- substitution bias
C. -- new product bias
D. -- all of the above
A. -- increase in quality bias
B. -- substitution bias
C. -- new product bias
D. -- all of the above
answer
D
question
The difference between a nominal variable and a real variable is that
A.-- real variables are divided by the price index and multiply by 100 to obtain nominal variables
B. -- nominal variables are calculated in current year prices and the real variables are measured in dollars of the base year for that price index to correct the effects of inflation
C. -- nominal variables are economic variables that are adjusted for inflation, whereas real variables are valued in today's dollars
A.-- real variables are divided by the price index and multiply by 100 to obtain nominal variables
B. -- nominal variables are calculated in current year prices and the real variables are measured in dollars of the base year for that price index to correct the effects of inflation
C. -- nominal variables are economic variables that are adjusted for inflation, whereas real variables are valued in today's dollars
answer
B
question
Formula to find the real average hourly wage
answer
Nominal average hourly wage/CPI X 100=
question
If inflation is expected to increase,
A -- the nominal interest rate will decrease
B. -- the real interest rate will decrease
C. -- the nominal interest rate will remain the same
D. -- the nominal interest rate will increase
A -- the nominal interest rate will decrease
B. -- the real interest rate will decrease
C. -- the nominal interest rate will remain the same
D. -- the nominal interest rate will increase
answer
D
question
If income rises more slowly than the rate of inflation, purchasing power will rise.
True or false?
True or false?
answer
False
question
Formula to get real interest rate
answer
Real interest rate = nominal interest rate - inflation rate
question
What is the rule of 70? The rule of 70
A. -- is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double
B. -- is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to increase by 200%
C. -- is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to quadruple
A. -- is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double
B. -- is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to increase by 200%
C. -- is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to quadruple
answer
A
question
The two key factors that cause labor productivity to increase over time are
A. -- the quantity of labor per hour worked and the level of technology
B. -- the decline in unionization and slacking of labor laws
C. -- the quantity of capital per hour worked on the level of technology
A. -- the quantity of labor per hour worked and the level of technology
B. -- the decline in unionization and slacking of labor laws
C. -- the quantity of capital per hour worked on the level of technology
answer
C
question
Which of the following does not lead to long-run economic growth?
A -- improved labor productivity
B. -- increase in average wages
C. -- increase in the capital stock
D. -- technological change
A -- improved labor productivity
B. -- increase in average wages
C. -- increase in the capital stock
D. -- technological change
answer
B
question
Potential GDP
A. -- measures the maximum that a firm is capable of producing
B. -- increases over time as the labor force grows
C. -- increases over time as technological change occurs
D. -- all of the above
E. -- B. and C. only
A. -- measures the maximum that a firm is capable of producing
B. -- increases over time as the labor force grows
C. -- increases over time as technological change occurs
D. -- all of the above
E. -- B. and C. only
answer
E
question
Which of the following is the best measure of the standard of living of the typical person in the country?
A -- the inflation rate
B. -- real GDP per person
C. -- the unemployment rate
D. -- real GDP
A -- the inflation rate
B. -- real GDP per person
C. -- the unemployment rate
D. -- real GDP
answer
B
question
Potential GDP is
A -- always greater than actual real GDP
B. -- sometimes greater, sometimes less, and sometimes equal to actual real GDP
C. -- The level of GDP that would be produced when firms are operating at maximum capacity
D. -- always less than actual real GDP
A -- always greater than actual real GDP
B. -- sometimes greater, sometimes less, and sometimes equal to actual real GDP
C. -- The level of GDP that would be produced when firms are operating at maximum capacity
D. -- always less than actual real GDP
answer
B
question
The high point of economic activity is called a...
answer
peak
question
The low point of economic activity is called a...
answer
trough
question
The period between the high point of economic activity and the following low point is called a...
answer
recession
question
The period between the low point of economic activity and the following High Point is called an...
answer
expansion
question
What is the general relationship between the business cycle and unemployment and inflation?
A -- during a recession, unemployment and inflation increase
B. -- during an expansion, unemployment and inflation increase
C. -- during a recession, unemployment and inflation decrease
D. -- during an expansion, unemployment falls and inflation increases
A -- during a recession, unemployment and inflation increase
B. -- during an expansion, unemployment and inflation increase
C. -- during a recession, unemployment and inflation decrease
D. -- during an expansion, unemployment falls and inflation increases
answer
D
question
The agency that identifies a recession is the
A. -- BEA Bureau of economic analysis
B. -- BLS Bureau of labor statistics
C. -- NBER national Bureau of economic research
A. -- BEA Bureau of economic analysis
B. -- BLS Bureau of labor statistics
C. -- NBER national Bureau of economic research
answer
C
question
Which of the following contributes to shorter recessions, longer expansions, and less severe fluctuations in real GDP?
A -- fiscal policy
B. -- Social Security benefits
C. -- a service-based economy
D. -- all of the above
A -- fiscal policy
B. -- Social Security benefits
C. -- a service-based economy
D. -- all of the above
answer
D
question
Marginal propensity to consume (MPC) is...
answer
The slope of the consumption function: the amount by which consumption spending changes when disposable income changes
question
Marginal propensity to save (MPS) is...
answer
The change in saving divided by the change in disposable income
question
Formula to find MPC
answer
change in consumption/change in disposable income = MPC
question
if the government raises the amount of taxes, holding everything else constant, then
A. -- disposable income will increase
B. -- government purchases will have to decrease
C. -- disposable income will remain unchanged
D. -- disposable income will decrease
A. -- disposable income will increase
B. -- government purchases will have to decrease
C. -- disposable income will remain unchanged
D. -- disposable income will decrease
answer
D
question
The relationship between the MPC and the MPS can best be described as
A. -- MPC = 1 - MPS
B. -- MPC + MPS = 1
C. -- MPS = 1 - MPC
D. -- all of the above
A. -- MPC = 1 - MPS
B. -- MPC + MPS = 1
C. -- MPS = 1 - MPC
D. -- all of the above
answer
D
question
Which of the following equalities is correct?
A -- disposable income is equal to national income plus government transfer payments plus taxes
B. -- government transfer payments minus taxes equals net taxes
C. -- disposable income is equal to national income minus net taxes
D. -- disposable income equals national income
A -- disposable income is equal to national income plus government transfer payments plus taxes
B. -- government transfer payments minus taxes equals net taxes
C. -- disposable income is equal to national income minus net taxes
D. -- disposable income equals national income
answer
C
question
Would a larger multiplier lead to more severe recessions or less severe recessions?
A. -- a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be more severe
B. -- a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be less severe
C. --a larger multiplier means that large changes in spending lead to small changes in GDP, and thus recessions would be more severe
A. -- a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be more severe
B. -- a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be less severe
C. --a larger multiplier means that large changes in spending lead to small changes in GDP, and thus recessions would be more severe
answer
A
question
The multiplier represents the
A -- total amount of additional increases in consumption spending induced by an initial change in aggregate expenditure
B. -- total amount of additional increases in investment expenditures from an increase in consumption
C. -- amount disposable income changes by when there is an increasing consumption
A -- total amount of additional increases in consumption spending induced by an initial change in aggregate expenditure
B. -- total amount of additional increases in investment expenditures from an increase in consumption
C. -- amount disposable income changes by when there is an increasing consumption
answer
A
question
Indicate which of the following is correct about the multiplier effect.
A -- a decrease in autonomous spending decreases real GDP by a multiple of the change
B. -- the multiplier ignores the effect on real GDP of imports, inflation, and interest rates
C. -- the larger the MPC, the more additional consumption that occurs
D. -- all of the above
A -- a decrease in autonomous spending decreases real GDP by a multiple of the change
B. -- the multiplier ignores the effect on real GDP of imports, inflation, and interest rates
C. -- the larger the MPC, the more additional consumption that occurs
D. -- all of the above
answer
D
question
When the value of the multiplier increases, all else equal, a change in expenditure will raise aggregate expenditure by a_______________ amount.
answer
larger
question
The value of the multiplier is larger when
A. -- the value of the MPC is larger
B. -- the value of the MPC is smaller
C. -- the value of the MPC is equal to the value of autonomous expenditure
D. -- the value of the MPC equal zero
A. -- the value of the MPC is larger
B. -- the value of the MPC is smaller
C. -- the value of the MPC is equal to the value of autonomous expenditure
D. -- the value of the MPC equal zero
answer
A
question
The aggregate demand curve shows the relationship between
A. -- the price level and the quantity of real GDP demand by households, burns, and the government
B. -- the price level and the quantity of real GDP demanded by the private sector: households and firms
C. -- the price level and the quantity of real GDP demanded by consumers
A. -- the price level and the quantity of real GDP demand by households, burns, and the government
B. -- the price level and the quantity of real GDP demanded by the private sector: households and firms
C. -- the price level and the quantity of real GDP demanded by consumers
answer
A
question
The short run aggregate supply curve shows the relationship in the short run between
A. -- the price level and the quantity of real GDP supplied by firms
B. -- a price level and the quantity of real GDP demanded by firms
C. -- the price level and the quantity of real GDP demanded by households, firms and the government
A. -- the price level and the quantity of real GDP supplied by firms
B. -- a price level and the quantity of real GDP demanded by firms
C. -- the price level and the quantity of real GDP demanded by households, firms and the government
answer
A
question
An increase in government purchases will cause the aggregate demand curve to shift...
answer
Right
question
An increase in state income taxes will cause the aggregate demand curve to shift...
answer
Left
question
An increase in interest rates will cause the aggregate demand curve to shift...
answer
Left
question
A faster income growth in other countries will cause the US aggregate demand curve to shift
answer
Right
question
A change in expectations of households will cause the aggregate demand curve to shift...
answer
Right
question
Aggregate demand (AD) is comprised of expenditure components that include:
a -- government spending, taxes, exports, and labor
B. -- government spending, consumption, investment, and net exports
C. -- consumption, government spending, exports, and labor
a -- government spending, taxes, exports, and labor
B. -- government spending, consumption, investment, and net exports
C. -- consumption, government spending, exports, and labor
answer
B
question
Which of the following will cause a decrease in aggregate demand?
A. -- a decrease in interest rates through monetary policy
B. -- a depreciation in the US dollar relative to foreign currencies
C. -- a decrease in government spending
D. -- a decrease in taxes
E. -- all of the above
A. -- a decrease in interest rates through monetary policy
B. -- a depreciation in the US dollar relative to foreign currencies
C. -- a decrease in government spending
D. -- a decrease in taxes
E. -- all of the above
answer
C
question
Which of the following factors does not cause aggregate demand curve to shift
a -- a change in government monetary or fiscal policies
B. -- a change in foreign variables
C. -- a change in the price level
a -- a change in government monetary or fiscal policies
B. -- a change in foreign variables
C. -- a change in the price level
answer
C
question
How can government policies shift aggregate demand curve to the right?
A -- by increasing personal income taxes
B. -- by increasing government purchases
C. -- by increasing business taxes
A -- by increasing personal income taxes
B. -- by increasing government purchases
C. -- by increasing business taxes
answer
B
question
The long-run aggregate supply curve is vertical because in the long run,
A. -- changes in the size of the labor force, capital stock, and technology affect the price level but not the potential GDP
B. -- the price level does not change, a potential GDP changes its value
C. -- changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, Capital stock, and technology
A. -- changes in the size of the labor force, capital stock, and technology affect the price level but not the potential GDP
B. -- the price level does not change, a potential GDP changes its value
C. -- changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, Capital stock, and technology
answer
C
question
An increase in the working population will cause the long-run aggregate supply curve to shift to the...
answer
right
question
If the price level increases the LRAS curve will...
answer
Not change
question
If the labor force increases the LRAS will shift to the...
answer
Right
question
If there is an increase in the quantity of capital goods the LRAS will shift to the...
answer
Right
question
If Technological change occurs The LRAS will shift to the...
answer
Right
question
How does a decrease in the price level affect the quantity of real GDP supplied in the long run?
A -- in the long run, a decrease in the price level increases inflation, which will decrease real GDP
B. -- in the long run, a decrease in the price level decreases inflation, which will decrease real GDP
C. -- changes in the price level do not affect the level of GDP in the long run
D. -- in the long run, a decrease in the price level will increase real GDP
A -- in the long run, a decrease in the price level increases inflation, which will decrease real GDP
B. -- in the long run, a decrease in the price level decreases inflation, which will decrease real GDP
C. -- changes in the price level do not affect the level of GDP in the long run
D. -- in the long run, a decrease in the price level will increase real GDP
answer
C
question
The position of the long-run aggregate supply curve is determined by
a -- the price level, the available technology, and sticky prices
B. -- the price level and aggregate demand
C. -- consumption, investment, government purchases, and net exports
D. -- the number of workers, the amount of capital, and the available technology
a -- the price level, the available technology, and sticky prices
B. -- the price level and aggregate demand
C. -- consumption, investment, government purchases, and net exports
D. -- the number of workers, the amount of capital, and the available technology
answer
D
question
An increase in the labor force or capital stock shifts the short run aggregate supply to the...
answer
Right
question
An increase in the expected price of an Important Natural resource Shifts the short run aggregate supply to the...
answer
Left
question
An improvement in technology Shifts the short run aggregate supply to the...
answer
Right
question
An increase in expected future price level causes the short run aggregate supply to shift to the...
answer
Left
question
In the long run, changes in the price level do not affect the level of real GDP.
True or false?
True or false?
answer
True
question
Which of the following factors will cause the long-run aggregate supply curve to shift to the right?
A -- the accumulation of more machinery and equipment
B. -- technological change
C. -- an increase in the number of workers in the economy
D. -- all of the above
A -- the accumulation of more machinery and equipment
B. -- technological change
C. -- an increase in the number of workers in the economy
D. -- all of the above
answer
D
question
Which of the following would cause a decrease in real GDP and, if large enough, a recession?
A -- An increase in interest rates that causes aggregate demand to fall
B. -- An increase in government purchases that causes aggregate demand to rise
C. -- a reduction in consumer confidence and causes short run aggregate supply the fall
A -- An increase in interest rates that causes aggregate demand to fall
B. -- An increase in government purchases that causes aggregate demand to rise
C. -- a reduction in consumer confidence and causes short run aggregate supply the fall
answer
A
question
Which of the following scenarios would lead to a reduction in real GDP and may even cause a recession?
A -- a recession in a foreign trading partners country causing aggregate supply to fall
B. -- a reduction in taxes causing aggregate demand to fall
C. -- a reduction in the growth rate in foreign countries compared to United States because aggregate demand to fall
A -- a recession in a foreign trading partners country causing aggregate supply to fall
B. -- a reduction in taxes causing aggregate demand to fall
C. -- a reduction in the growth rate in foreign countries compared to United States because aggregate demand to fall
answer
C
question
Which of the following would cause an increase in the price level (example, a short run and intimidation)
A -- An increase in the exchange rate of the dollar in relation to foreign currencies that decreases short run aggregate supply
B. -- an increase in government purchases that decreases sure on aggregate supply
C. -- an increase in government purchases that increases aggregate demand
A -- An increase in the exchange rate of the dollar in relation to foreign currencies that decreases short run aggregate supply
B. -- an increase in government purchases that decreases sure on aggregate supply
C. -- an increase in government purchases that increases aggregate demand
answer
C
question
Which of the following scenarios would lead to an increase in the price level?
A -- an increase in payroll taxes leading to an increase in aggregate demand
B. -- an increase in business optimism regarding future profitability that increases every demand
C. -- an increase in oil prices that leads to a reduction in aggregate demand
A -- an increase in payroll taxes leading to an increase in aggregate demand
B. -- an increase in business optimism regarding future profitability that increases every demand
C. -- an increase in oil prices that leads to a reduction in aggregate demand
answer
B
question
If the economy adjusts Through the automatic mechanism, then a decline in aggregate demand causes
A -- a recession in the short run and a decline in the price level in the long run
B. -- an expansion in the short run and an increase in the price level in the long run
C. -- an expansion in the short run and a decline in the price level in the long run
A -- a recession in the short run and a decline in the price level in the long run
B. -- an expansion in the short run and an increase in the price level in the long run
C. -- an expansion in the short run and a decline in the price level in the long run
answer
A
question
If the economy is initially at full employment equilibrium, then an increase in aggregate demand causes________ in real GDP in the short run and________ in the price level in the long run.
A -- a decrease, an increase
B. -- an increase, a decrease
C. -- an increase, an increase
A -- a decrease, an increase
B. -- an increase, a decrease
C. -- an increase, an increase
answer
C
question
Which of the following is usually the cause of stagflation?
A -- a reduction in government purchases
B. -- an increase in investment as a result of a reduction in interest rates
C. -- a supply shock as a result of an unexpected increase in the price of a natural resource
A -- a reduction in government purchases
B. -- an increase in investment as a result of a reduction in interest rates
C. -- a supply shock as a result of an unexpected increase in the price of a natural resource
answer
C
question
In the dynamic aggregate demand and aggregate supply model, if aggregate demand increases faster than potential real GDP, there will be...
answer
Inflation
question
In the dynamic aggregate demand and aggregate supply model, If aggregate demand increases slower than potential real GDP, there will be...
answer
Recession
question
To have growth without inflation, which of the following must be true?
A -- there must be no change in SRAS
B. -- AD must decrease to reduce inflationary pressure
C. -- there must be no change in AD
D. -- AD, SRAS, and LRAS must increase by the same amount
A -- there must be no change in SRAS
B. -- AD must decrease to reduce inflationary pressure
C. -- there must be no change in AD
D. -- AD, SRAS, and LRAS must increase by the same amount
answer
D
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