Chapters 9 & 10 Flashcards
The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
- Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer.
- George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve.
- Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills.
- Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work.
Refer to the above information. Which individual is cyclically unemployed?
a) Mollie
b) George
c) Jeanette
d) Ricardo
George
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) Rate of unemployment
b) Stock market price indexes
c) Rate of inflation
d) Level of total spending
Level of total spending
The higher the rate of unemployment:
a) The lower is the level of potential GDP
b) The larger is the GDP gap
c) The smaller is the GDP gap
d) The higher is the level of actual GDP
The larger is the GDP gap
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) Significantly exceeded that for women
c) Was much lower than that for women
d) Was slightly lower than that for women
Significantly exceeded that for women
If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation is approximately:
a) 5.5 percent
b) 6.3 percent
c) 7.2 percent
d) 5.9 percent
5.9 percent
Inflation caused by an increase in aggregate spending is referred to as:
a) Hyperinflation
b) Cost-push inflation
c) Demand-pull inflation
d) Anticipated inflation
Demand-pull inflation
Potential GDP is the output that would be produced if the economy was experiencing:
a) No unemployment
b) Free markets and international trade
c) No inflation
d) Full employment
Full employment
A recession is a decline in:
a) Potential GDP 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) The inflation rate that lasts six months or longer
Real GDP that lasts six months or longer
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 Retail Trade survey
b) The Consumer Price Index
c) The Wholesale Price Index
d) The GDP Price Index
The Consumer Price Index
If the natural rate of unemployment was 6 percent, the current unemployment rate was 10 percent, and the potential GDP was $4,000 billion, then according to Okun’s law the economy would have sacrificed:
a) $320 billion in output not produced
b) $160 billion in output not produced
c) $240 billion in output not produced
d) $480 billion in output not produced
$320 billion in output not produced
Inflation caused by a rise in the prices of inputs is referred to as:
a) Hyperinflation
b) Demand-pull inflation
c) Unanticipated inflation
d) Cost-push inflation
Cost-push inflation
The rate of unemployment when the economy is at its potential output is called the:
a) Natural rate of unemployment
b) Frictional rate of unemployment
c) Full-employment rate of unemployment
d) Structural rate of unemployment
Natural rate of unemployment
Which of the following countries experienced deflation for several years in the period 2002-2012?
a) Japan
b) France
c) Germany
d) Italy
Japan
The natural rate of unemployment:
a) Means that the economy will always realize its potential output
b) Means that the economy will always operate at that rate
c) Is equal to the total of frictional and structural unemployment
d) Is a fixed unemployment rate that does not change over time
Is equal to the total of frictional and structural unemployment
The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
- Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer.
- George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve.
- Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills.
- Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work.
Refer to the above information. Which individual is structurally unemployed?
a) Mollie
b) George
c) Jeanette
d) Ricardo
Jeanette
In the expansion phase of a business cycle:
a) The inflation rate decreases, but productive capacity increases
b) Employment and output increase
c) The inflation rate and productive capacity decrease
d) Employment increases, but output decreases
Employment and output increase
In a private closed economy, national income is $4.5 trillion and savings equals $6.4 billion. Based on this data, the marginal propensity to consume:
a) Is less than the average propensity to consume
b) Decreases as income increases
c) Is greater than the marginal propensity to save
d) Cannot be calculated from the data given
Cannot be calculated from the data given
As disposable income decreases, consumption:
a) And saving both increase
b) Increases and saving decreases
c) Decreases and saving increases
d) And saving both decrease
And saving both decrease
A change in interest rates would shift the consumption schedule and the saving schedule ________; a change in taxes would shift these two schedules ________.
a) In opposite directions; in the same direction
b) In the same direction; in opposite directions
c) In the same direction; also in the same direction
d) In opposite directions; also in opposite directions
In opposite directions; in the same direction
The fraction, or percentage, of total income which is consumed is called the:
a) Average propensity to consume
b) Consumption schedule
c) Marginal propensity to consume
d) Break-even income
Average propensity to consume
The amount of consumption in an economy correlates:
a) Inversely with the level of disposable income
b) Directly with the rate of interest
c) Directly with the level of disposable income
d) Directly with the level of saving
Directly with the level of disposable income
If the consumption schedule is a straight line, it can be concluded that the:
a) MPC is zero
b) APC is necessarily constant
c) MPC is constant at various levels of income
d) APC is equal to the MPC
MPC is constant at various levels of income
The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percent of adults who are not in the labor force is:
a) 25.3 percent
b) 20.6 percent
c) 30.3 percent
d) 13.9 percent
20.6 percent
If the GDP gap is positive, then:
a) The unemployment rate is rising
b) Actual GDP is greater than potential GDP
c) Potential GDP is greater than actual GDP
d) The inflation rate is falling
Actual GDP is greater than potential GDP
When the economy goes into a recession and firms require less labor, managers tend to:
a) Reduce wages, to reflect the lower demand for labor
b) Avoid cutting wages, for fear of drops in worker-productivity
c) Keep all of their workers, by spreading work more thinly
d) Lay off workers, and keep wages of remaining workers constant
Lay off workers, and keep wages of remaining workers constant
Which of the following factors would decrease investment demand?
a) An increase in the rate of technological change
b) An increase in the cost of acquiring capital goods
c) A decrease in the stock of capital goods on hand
d) A decrease in business taxes
An increase in the cost of acquiring capital goods
