B5

Question 1

Frictional unemployement refers to unemployment resulting from:

a. seasonal decreases in demand for labor
b. the skills of workers do not correspond to the skills demanded by employers
c. the time needed to match qualified job seekers with available jobs
d. a recession in the economy

Answer 1

c. the time needed to match qualified job seekers with available jobs

Question 2

If the federal reserve wanted to implement an expansionary monetary policy, which one of the following actions would they take?

a. raise the discount rate and sell us gov securities
b. reaise the reserve requirement and the discount rate
c. purchase additional US government securities and lower the discount rate
d. lower the discount rate and raise the reserve requirement

Answer 2

c.

Question 3

An increase in the money supply leads to:

a. an increase in interest rates, a decrease in investment and a decrease in aggregate demand
b. a decline in interest rates, an increase in investment and an increase in aggregate demand
c. a decline in interest rates, a decrease in investment and an increase in aggregate demand
c. a decline in interest rates, a decrease in investment and an increase in aggregate demand
d. an increase in the money supply has no effect on interest rates or investment

Answer 3

B!

Question 4

An increase in the discount rate would cause:

a. the money supply to increase and interest rates to rise
b. the money supply to increase and interest rates to fall
c. the money supply to decrease and interest rates to rise
d. the money supply to decrease and interest rates to fall

Answer 4

C!

Question 5

Which of the following is most likely to cause an increase in the amount of frictional unemployment?

a. an increase in the average age of the work force
b. an invention that renders an industry obsolete
c. a downturn in aggregate business activity
d. a reduction i the average age of the work force

Answer 5

D - younger workers tend to move between jobs more frequently

Question 6

Which of the following statements represents the best definition of stagflation?

a. high inflation rates
b. a combination of rising unemployment rates and rising real GDP
c. a combination of rising unemployment and a rising price level
d. high unemployment rates

Answer 6

c

Question 7

Which of the following actions is acknowledged as the best measure to combat a period of deflation?

a. decreasing interest rates
b. increasing interest rates
c. increasing the money supply
d. decreasing the money supply

Answer 7

c. increasing the money supply

Question 8

Which of the following Federal Reserve policies would increase money supply?

a. reduce the discount rate
b. change the multiplier effect
c. increase reserve requirements
d. sell more US treasury bonds

Answer 8

A - if the fed reserve wanted in increase the money supply, it would reduce the discount rate. a lower discount rate would reduce short-term interest rates, which would encourage more (short-term) borrwing at teh lower interest reate (lower cost means more demand) more borrowing means mroe lending and more money in the economy

Question 9

Which of the following types of unemployment typically results from technological advances?
structural, cyclical, frictional, short-term

Answer 9

Structural

Technological advances would likely result in structural unemployment. Structural unemployment is characterized by available jobs that do not match the skill sets of the workforce.

Question 10

Assume an economy is at the peak of the business cycle. Which of the following policy combinations is the most effective way to dampen the economy and prevent inflation?

a. reduce government spending, increase taxes, reduce money supply, and increase interest rates
b. increase government spending, reduce taxes, increase money supply, and reduce interest rates
c. reduce government spending, increase taxes, increase money supply, and increase interest rates
d. reduce government spending, reduce taxes, reduce money supply, and reduce interest rates

Answer 10

a