ECON CHAPTER 17

Which of the following will probably rise when the economy is in a recession? Initial unemployment claims Real retail sales Employment Real GDP growth

Initial unemployment claims

#4

expansion

#1

peak

#3

recession

What kind of data adjustment removes the effect of sales spikes due to the holiday season? real data nominal data annual data seasonally adjusted data

seasonally adjusted data

Refer to the following table. What was the approximate output gap in 1998? -5.5% 3% -1.2% 1.2%

-1.2%

Refer to the following table. What was the approximate output gap in 1974? 3.3% 2.1% 6.1% -6.5%

-6.5%

Refer to the following table. What was the approximate output gap in 1999? -3.6% 1.9% 1.2% 3%

1.9%

Which of the following will fall when the economy is expanding? Consumer confidence Applications for unemployment benefits Nonfarm payrolls Business confidence

Applications for unemployment benefits

Refer to the data dashboard shown. Which indicator is a cross-check on GDP? Business confidence Stock prices: S&P 500 Real GDI Employment cost index

Business confidence

If an economy has a positive output gap of 1.5%, this means: unemployment is 1.5% above the natural rate of unemployment. GDP is 1.5% above potential GDP. inflation is 1.5% above the long-run rate of inflation. GDP is 1.5% below potential GDP.

GDP is 1.5% above potential GDP.

Which economic indicator tells you about the future expected profits of businesses? Initial unemployment claims Nonfarm payrolls Consumer price index S&P 500

S&P 500

Use this for the 2 next questions:

Suppose that Georgiania was a thriving empire in its golden age. Business was booming and it was the center of international trade under the leadership of Emperor Raphael III. His empire's pride and joy was the trading of green and black tea, and he decreed that their entire economy should be built around it. However, in the mid 1800s, Georgiania experienced a severe economic downturn when the other nations of the world created an embargo on tea from Georgiania, which led to civil strife due to thousands of workers being laid off.

A downward fluctuation in the economy like this is known as economic growth. market failure. the invisible hand. a recession.

a recession.

Which of the statements is the best description of a business cycle? the relationship between the returns on Treasury securities and the time to maturity a calendar year divided into four quarters, each containing three months the time it takes a firm to convert raw materials into a final good or service alternating periods of increasing and decreasing economic output

alternating periods of increasing and decreasing economic output

The Great Moderation refers to the: stable level of inflation in the United States. increase in globalization. decreased volatility of the U.S. economy. longstanding effect of the Great Recession.

decreased volatility of the U.S. economy.

True/False: Business cycles are common in emerging economies but not in developed economies.

false

True/False: Business cycles last for approximately nine months

false

True/False: When a business cycle reaches the trough, the economy is usually operating at its capacity

false

The four stages of the business cycle are: full employment, potential GDP, recessionary gap, and inflationary gap. consumption, investment, government expenditure, and net exports. expansion, growth, contraction, and depression. peak, recession, trough, and expansion.

peak, recession, trough, and expansion.

#5

recession

Please determine which economic feature is described by the statements below. FILL IN THE BLANK A _________ occurs as the result of a significant decline in national output. If such a decline goes on for an especially long time, the period will be considered a ___________ A _________ is the highest point before output decline, while the lowest point during the decline is known as a business or economic ___________

recession, depression, peak, through

Suppose that an economy is in a recession. You would expect to see the unemployment rate: rise above the equilibrium unemployment rate. be zero. be equal to the equilibrium unemployment rate. fall below the equilibrium unemployment rate.

rise above the equilibrium unemployment rate.

#2

through

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will: rise by 3%. rise by 1.5%. fall by 1.5%. fall by 2%.

rise by 1.5%.

True/False: Business cycles can be described as fluctuations from the economy's long‑term growth trend.

true

True/False: The four phases of business cycles are peaks, troughs, expansions, and recessions.

true

True/False: The peak of a business cycle is followed by a downturn or recession

true

Which of the following correctly describes the business cycle? It refers to excess unemployment during recessionary periods. It refers to ups and downs in business revenue during expansions and recessions. It is the fluctuations of GDP around the potential output. It is the constant rise in GDP over time.

It is the fluctuations of GDP around the potential output.

An economy's potential output level is: the output that is possible when all resources are fully employed. the output when unemployment is zero. equivalent of the GDP at current market value. the level at which no resources are available in the economy.

the output that is possible when all resources are fully employed.

Which of the following is a narrow indicator? Real GDI Non-farm payrolls The consumer price index The stock price for JPMorgan Chase & Co.

The stock price for JPMorgan Chase & Co.