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Econ Ch 7 questions

The recurrent ups and downs in the level of economic activity extending over several years are referred to as:
A. Economic phases
B. Business startups
C. Business cycles
D. Noncyclical fluctuations
C
Which phase of the business cycle would be most closely associated with an economic contraction?
A. Peak
B. Recession
C. Trough
D. Recovery
B
A peak in the business cycle:
A. Occurs when the unemployment rate is its greatest
B. Occurs when the inflation rate is its lowest
C. Is a temporary maximum point
D. Is a temporary minimum point
C
A trough in the business cycle occurs when:
A. Cyclical unemployment is at a minimum point
B. Employment and output reach their lowest levels
C. The natural rate of unemployment is at a minimum point
D. The inflation rate is at its lowest level
B
In the expansion phase of a business cycle:
A. The inflation rate decreases, but productive capacity increases
B. The inflation rate and productive capacity decrease
C. Employment increases, but output decreases
D. Employment and output increase
D
A recession is a decline in:
A. The inflation rate that lasts six months or longer
B. The unemployment rate that lasts six months or longer
C. Real GDP that lasts six months or longer
D. Potential GDP that lasts six months or longer
C
Which of the following groups declares the start and end of recessions in the U.S.?
A. The Business Cycle Monitoring Committee of the Federal Reserve System
B. The Business Cycle Tracking Agency of the Department of Commerce
C. The Business Cycle Dating Committee of the National Bureau of Economic Research
D. The Committee on Business Cycles of the Council of Economic Advisers
C
General sources of shocks that can cause business cycles include the following, except:
A. Irregular occurrence of innovations and productivity changes
B. Monetary factors and financial instability
C. Unemployment jumps and production drops
D. Political events, either domestic or global
C
Most economists agree that the immediate cause of the majority of cyclical changes in the level of real output is unexpected changes in the:
A. Level of total spending
B. Rate of unemployment
C. Rate of inflation
D. Stock market price indexes
A
The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?
A. Gold market and stock market
B. International trade and foreign exchange markets
C. Real estate and financial markets
D. Consumer and government spending
C
In which industry or sector of the economy is output least likely to be affected by the business cycle?
A. Housing construction
B. Automobile production
C. Agricultural commodities
D. Capital goods production
D
The unemployment rate is interpreted as the percentage of the:
A. Adult population who are unemployed
B. Labor force that are not employed
C. Able-bodied population who are not working
D. Work force that have been laid off
B
Full-time homemakers and retirees are classified in the BLS data as:
A. Employed
B. Unemployed
C. Part of the labor force
D. Not in the labor force
D
The unemployed are those people who:
A. Do not have jobs
B. Are not employed but are seeking work
C. Are not working
D. Are not in the workforce
B
Which of the following is the correct way to calculate the unemployment rate?
A. [(unemployed)/(population)] × 100
B. [(unemployed)/(labor force)] × 100
C. [(labor force)/(population)] × 100
D. [(labor force)/(unemployed)] × 100
B
In calculating the unemployment rate, “discouraged” workers who are not actively seeking employment are:
A. Excluded from the labor force
B. Included as part of the unemployed
C. Treated the same as part-time workers
D. Used to determine the size of the labor force
A
In calculating the unemployment rate, part-time workers are:
A. Counted as unemployed because they are not working full-time
B. Counted as employed because they are receiving payment for work
C. Used to determine the size of the labor force, but not the unemployment rate
D. Treated the same as “discouraged” workers who are not actively seeking employment
B
Official unemployment rate statistics may:
A. Overstate the amount of unemployment by including part-time workers in the calculations
B. Understate the amount of unemployment by excluding part-time workers in the calculations
C. Overstate the amount of unemployment because of the presence of “discouraged” workers who are not actively seeking employment
D. Understate the amount of unemployment because of the presence of “discouraged” workers who are not actively seeking employment
D
The best example of a “frictionally unemployed” worker is one who:
A. Reduces productivity by causing friction in a business
B. Is laid off during a recessionary period in the economy
C. Is in the process of voluntarily switching jobs
D. Is discouraged and not actively seeking work
C
A worker who loses a job at a call center because the company moved the call center operations to another country is an example of:
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Disguised unemployment
B
Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
A. Cyclical
B. Frictional
C. Structural
D. Natural
C
New college graduates still looking for their first jobs would be classified in the BLS data as:
A. Frictionally unemployed
B. Not yet in the labor force
C. Cyclically unemployed
D. Part of structural unemployment
B
A headline states: “Real GDP falls again as the economy slumps.” This condition is most likely to produce what type of unemployment?
A. Structural
B. Cyclical
C. Frictional
D. Natural
B
Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:
A. Frictional unemployment
B. Cyclical unemployment
C. Structural unemployment
D. Natural unemployment
C
A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment?
A. Wait
B. Cyclical
C. Frictional
D. Structural
D
“Full employment” refers to the situation when there is:
A. 100% employment of the labor force
B. 0% unemployment rate
C. No frictional or structural unemployment
D. No cyclical unemployment
D
The full-employment rate of unemployment is also called the:
A. Potential rate of unemployment
B. Cyclical rate of unemployment
C. Frictional rate of unemployment
D. Natural rate of unemployment
D
The natural rate of unemployment:
A. Means that the economy will always operate at that rate
B. Means that the economy will always realize its potential output
C. Is equal to the total of frictional and structural unemployment
D. Is a fixed unemployment rate that does not change over time
B
The rate of unemployment when the economy is at its potential output is called the:
A. Full-employment rate of unemployment
B. Natural rate of unemployment
C. Structural rate of unemployment
D. Frictional rate of unemployment
B
The downward-stickiness of wages serves like a _____ in the labor market.
A. Price floor
B. Price ceiling
C. Demand determinant
D. Supply determinant
A
The GDP gap measures the amount by which:
A. Nominal GDP exceeds real GDP
B. Actual GDP exceeds equilibrium GDP
C. Potential GDP exceeds actual GDP
D. Actual GDP exceeds national income
The amount by which actual GDP falls short of potential GDP is one measure of the:
A. Natural rate of unemployment
B. Macroeconomic cost of unemployment
C. Difference between real and nominal GDP
D. Potential to produce outside the nation’s PPC
A
If the GDP gap is positive, then:
A. The inflation rate is falling
B. The unemployment rate is rising
C. Potential GDP is greater than actual GDP
D. Actual GDP is greater than potential GDP
D
The higher the rate of unemployment:
A. The larger is the GDP gap
B. The smaller is the GDP gap
C. The higher is the level of actual GDP
D. The lower is the level of potential GDP
A
Unemployment rates for men and women normally are very similar. In the Great Recession of 2007-09, the unemployment rate for men:
A. Remained roughly similar to that for women
B. Was slightly lower than that for women
C. Was much lower than that for women
D. Significantly exceeded that for women
D
The rate of unemployment tends to be lowest for:
A. Black teenagers
B. White teenagers
C. Black adult males
D. White adult males
D
Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are:
A. Lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries
B. Higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry
C. Higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry
D. Lower, because skilled workers tend to be primarily employed by government at the local, state, and Federal levels
D
Inflation is a rise in:
A. The general level of prices over time
B. The standard of living over time
C. Unemployment over time
D. Real GDP over time
A
When inflation occurs:
A. All prices are rising
B. Each dollar of income will buy more output than before
C. The purchasing power of money increases
D. The purchasing power of money decreases
D
The CPI compiled by the Bureau of Labor Statistics is used in the computations for:
A. The unemployment rate
B. The inflation rate
C. The interest rate
D. The foreign exchange rate
B
The inflation rate measures the percentage growth rate of:
A. Real GDP from the base period 1982-84 to a given year
B. Real GDP from one year to the next
C. The CPI from the base period 1982-84 to a given year
D. The CPI from one year to the next
C
Which of the following measures the changes in the prices of a “market basket” of some 300 goods and services purchased by typical urban consumers?
A. The GDP Price Index
B. The Consumer Price Index
C. The Retail Trade survey
D. The Wholesale Price Index
B
Which measure of inflation would include consumer goods and capital goods?
A. The GDP Price Index
B. The Consumer Price Index
C. The Retail Trade Survey
D. The Employment Cost Index
A
Inflation caused by an increase in aggregate spending is referred to as:
A. Cost-push inflation
B. Anticipated inflation
C. Demand-pull inflation
D. Hyperinflation
C
Inflation caused by a rise in the prices of inputs is referred to as:
A. Cost-push inflation
B. Demand-pull inflation
C. Unanticipated inflation
D. Hyperinflation
A
When oil and energy prices rise, the economy tends to experience:
A. Natural inflation
B. Demand-pull inflation
C. Cost-push inflation
D. Unanticipated inflation
C
Cost-push inflation tends to be characterized by all of the following, except:
A. Rising general price level
B. Falling real output
C. Automatically self-limiting
D. Falling unemployment
C
Core inflation refers to the inflation picture after stripping away the:
A. Capital goods prices
B. Food and energy prices
C. Government-regulated prices
D. Service-sector prices
B
When the government prints money faster than output is expanding, the inflation that will occur is a form of:
A. Subsidy
B. Quota
C. Production
D. Taxation
D
For a given amount of nominal income, the real income will:
A. Fall if the price level rises
B. Fall if the price level falls
C. Be unaffected if the price level falls
D. Rise as the price level rises
D
Unanticipated inflation arbitrarily:
A. “Subsidizes” those who receive fixed money incomes
B. “Taxes” those who receive fixed money incomes
C. “Penalizes” those who borrow money
D. “Benefits” those who save money
B
Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:
A. Both lenders and borrowers benefit
B. Both lenders and borrowers are hurt
C. Borrowers are hurt, but lenders benefit
D. Lenders are hurt, but borrowers benefit
D
A worker would be hurt least by inflation when the:
A. Worker anticipates inflation and increases savings at the bank
B. Worker is protected by a cost-of-living adjustment clause in an employment contract
C. Worker is protected by fixed annual increases in wages and benefits in an employment contract
D. Government increases the level of social security retirement benefits to correct for the effects of anticipated inflation
With mild demand-pull inflation, the economy’s output level would tend to be:
A. Pulled up by the increase in total spending
B. Pulled down by the decrease in total spending
C. Pulled up by the rising unemployment
D. Pulled down by the rising unemployment
After the Great Recession of 2007-09 ended, real GDP increased:
A. And unemployment fell in pace with the rising GDP
B. But unemployment fell more rapidly than the increase in GDP
C. But unemployment fell much slower than the increase in GDP
D. But unemployment continued to rise for three more years
D
Possible reasons why the level of employment remained lower than before the Great Recession began, even three years after the recession ended, includes the following, except:
A. There was an extension of the period of eligibility for unemployment benefits
B. Structural adjustments that were needed were happening very slowly, if at all
C. Worries about rising labor costs were dampening the willingness of firms to increase hiring
D. The production of output continued to decline, so that firms had no real need to increase hiring
D

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