Economics

An annual rate of inflation of 7 percent will double the price level in about 15 years.

false

If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent

false

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

prices are sticky in the short run

Suppose the CPI is currently 126, while its value one year previously it was 120. The rate of inflation over the past year was:

5%

If the rate of inflation is 12 percent per year, the price level will double in about:

6 years

Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:

7 percent

Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:

8 percent

(Last Word) Declines in stock prices measured by the Dow Jones average:

sometimes precede recessions; sometimes do not.

The type of unemployment associated with recessions is called:

cyclical unemployment.

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is:

$510 billion

Recently a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining. Is the critic correct?

No, because real income may fall if prices increase more proportionately than the increase in nominal income.

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

Structural and frictional unemployment.

The aggregate cost of unemployment can be measured by the:

amount by which potential GDP exceeds actual GDP.

The "full employment rate of unemployment" is:

around 4% - 5% because of frictional and structural unemployment.

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

capital goods

The phrase "too much money chasing too few goods" best describes:

demand-pull inflation.

Changes in stock market prices:

do not greatly impact the macroeconomy and used alone are not reliable predictors of the future health of the economy.

Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kara presently is:

frictionally unemployed.

(Consider This) The main point of the Consider This box on clipping coins is that:

inflation imposes a "hidden tax" on those who hold money.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

rise by about 15 percent

In the United States, business cycles have occurred against a backdrop of a long-run trend of:

rising real GDP

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:

structural unemployment.

The natural rate of unemployment in the United States is about 4 to 5 percent.

true