Macro 2 Pt 2
6) One difference between stocks and bonds is that
D) stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a
16) What are the three main kinds of unemployment?
D) structural, frictional, and cyclical
19) Refer to Figure 10-6. The loanable funds market is in equilibrium, as shown in the figure
D) supply; fall; increasing; decreasing
3) A student who just graduated from college but has not found a job would most likely be
A) frictionally unemployed.
11) Purchases of which of the following goods would be dramatically reduced during a
D) refrigerators
11) Refer to Scenario 10-1. Based on the information above, what is the level of private saving in
A) $3 trillion
10) If the growth rate of real GDP rises from 3% to 4% per year, then the number of years
A) 23.3 years to 17.5 years.
8) If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate
A) 4.7%
1) Which of the following explains the cause of the change in the unemployment rate at the end
A) Firms are hesitant to rehire laid off workers, as they continue to operate below capacity.
14) There is a government budget surplus if
A) T - TR > G.
17) Refer to Figure 10-3. Which of the following is consistent with the graph depicted above?
A) Taxes are changed so that real interest income is taxed rather than nominal interest income.
8) In a closed economy, which of the following equations reflects investment? (Y = GDP, C =
A) Y - C - G
5) Structural unemployment is the result of
A) a persistent mismatch between the skills and characteristics of workers and the requirements
10) The natural rate of unemployment is the amount of unemployment
A) associated with the business cycle.
15) Which of the following goods would see the largest decline in demand during a recession?
A) automobiles
5) Financial securities that represent promises to repay a fixed amount of funds are known as
A) bonds.
6) The period of expansion ends with a ________ and the period of recession ends with a
A) business cycle peak; business cycle trough
1) Due to slowing growth in China and other developing countries, Caterpillar ________ the
A) decreased; increased
4) The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily
A) employed
5) From 1991 until 2001, the United States was in a period of
A) expansion.
2) The advice to "keep searching, there are plenty of jobs around here for which you are
A) frictional unemployment
12) Establishing a state employment agency that speeds up the process of matching unemployed
A) frictional unemployment.
14) The short-term unemployment arising from the process of matching workers with jobs is
A) frictional unemployment.
4) Since 1900, real GDP per capita has ________ and this measure ________ the actual growth in
A) increased; understates
10) The U.S. unemployment insurance program
A) increases the amount of time the unemployed spend searching for a job.
13) In a closed economy, public saving plus private saving is equal to
A) investment.
13) An efficiency wage
A) is higher than the market wage and tends to increase productivity.
2) A firm can fund an expansion of its operations by
A) issuing bonds.
7) The United States has ________ social insurance programs, and generally has a ________
A) less generous; lower
5) Since 1900, real GDP in the United States has grown
A) more rapidly than the population.
3) A good measure of the standard of living is
A) real GDP per capita.
13) As the economy nears the end of an expansion, interest rates usually ________ and wages
A) rise; rapidly
6) In 2013, Caterpillar laid off employees who produced mining machinery at its South
A) structurally unemployed.
8) If cyclical unemployment is eliminated in the economy, then
A) the economy is considered to be at full employment.
1) The average price of goods and services in the economy is also known as
A) the price level.
21) Refer to Figure 10-6. The market is in equilibrium. If the government budget deficit rises,
B) The quantity of loanable funds demanded by firms will fall below $120 million.
8) Refer to Table 9-1. The unemployment rate for this simple economy equals
B) (100/1,100) × 100.
16) Refer to Table 10-2. Using the table above, what is the approximate growth rate of real GDP
B) -1%
7) Refer to Table 9-2. Assume the market basket for the consumer price index has two products
B) 116.
3) Which of the following is true about the consumer price index?
B) It assumes that consumers purchase the same amount of each product in the market basket
16) Refer to Figure 10-1. Which of the following is consistent with the graph depicted above?
B) Technological change increases the profitability of new investment.
14) Refer to Figure 9-1. Based on the graph of the labor market above, if a minimum wage of $8
B) The quantity of labor demanded by firms will fall.
20) Refer to Figure 10-6. The loanable funds market is given in the figure above. If the current real
B) There is a surplus of loanable funds in the market.
4) Which of the following policies would reduce structural unemployment?
B) a job retraining program
18) An increase in cyclical unemployment will result in
B) an increase in the unemployment rate.
10) The demand for durable goods
B) declines by a greater percentage than does GDP during a recession.
12) During a recession, spending on ________ tends to fall more dramatically than spending on
B) durable goods; nondurable goods
7) Suppose that homemakers are included as employed in the labor force statistics, rather than
B) increase the measured labor force participation rate.
1) An increase in unemployment insurance payments would, in effect, ________ the amount of
B) increase; frictional
2) Technological advances generally result in
B) increased life expectancy.
9) As the economy nears the end of a recession, which of the following do we typically see?
B) increased spending on capital goods by firms
3) During the recession phase of the business cycle,
B) interest rates are usually falling.
15) When the government runs a budget deficit, we would expect to see that
B) investment will fall.
10) The unemployment rate equals the number of unemployed divided by the ________, all times
B) labor force
1) Which of the following statements describes the experiences of the Whirlpool Corporation
B) long-run growth interrupted by periods of business cycle recession
4) The period between a business cycle peak and a business cycle trough is called
B) recession.
11) By offering training to workers whose firms laid them off because of competition from foreign
B) structural unemployment.
3) The unemployment rate is an important economic statistic that can tell us about the health of
B) that stock prices are more likely to fall.
3) Liquidity refers to
B) the ease with which a financial security can be traded for cash.
11) Suppose the government launches a successful advertising campaign that convinces workers
B) the labor force participation rate to decrease.
1) Frictional unemployment is the result of
B) the search process of matching workers with jobs.
8) If the minimum wage is set above the market wage,
B) unemployment will rise.
9) Refer to Table 9-1. The labor force participation rate for this simple economy equals
C) (1,100/15,000) × 100.
13) The labor force participation rate equals the
C) (labor force divided by working-age population) × 100.
12) Refer to Table 10-1. Using the table above, what is the approximate average annual growth
C) 2%
13) Refer to Table 9-6. Consider the following values of the consumer price index for 1996, 1997,
C) 2.5 percent.
11) Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP
C) 3%
11) Assume the average annual CPI values for 2012 and 2013 were 207.3 and 215.3, respectively.
C) 3.86
6) If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2013, we
C) 8
6) An unemployment insurance program has which of the following effects?
C) It increases the amount of time spent searching for a job.
2) The economy has gone into a recession. You have majored in computer science and, because
C) No, the recession will most likely be short-lived and I can get a job after it is over.
10) In a closed economy, public saving is equal to which of the following? (Y = GDP, C =
C) T - G - TR
18) Refer to Figure 10-6. The loanable funds market is in equilibrium, as shown in the figure
C) The real interest rate is 3 percent, and the quantity of loanable funds is $150 million.
2) Which of the following would increase the unemployment rate?
C) an increase in unemployment insurance payments
6) The consumer price index is the
C) average of the prices of the goods and services purchased by a typical urban family of four.
4) Which of the following price indices comes closest to measuring the cost of living of the typical
C) consumer price index
13) Most of the unemployment that occurred during the Great Depression was
C) cyclical unemployment.
15) Workers laid off as a result of a recession suffer
C) cyclical unemployment.
12) If you have trouble finding a job because of a slowdown in the overall economy, we would
C) cyclically unemployed.
2) If the price level rose in three consecutive years from 100 to 120 to 140, then the annual
C) decrease.
6) The labor force equals the number of people
C) employed plus unemployed.
11) During the Great Depression, cyclical unemployment increased as the recession continued.
C) had no effect on the natural rate of unemployment.
13) Which of the following increases labor productivity?
C) inventions of new machinery, equipment, or software
7) If real GDP in a small country in 2012 is $8 billion and real GDP in the same country in 2013 is
C) is 3.75%.
14) Which of the following labor market statistics best indicates the amount of labor that is
C) labor force participation rate
7) In a closed economy, which of the following components of GDP is not included?
C) net exports
12) Someone who is available for work but has not actively looked for work in the previous four
C) not in the labor force.
8) As the economy nears the end of an expansion, which of the following do we typically see?
C) rising interest rates
14) What two factors are the keys to determining labor productivity?
C) technology and the quantity of capital per hour worked
7) What is the name of the organization that defines business cycle peaks and troughs in the
C) the National Bureau of Economic Research
15) The consumer price index implicitly assumes that the demand curve for each good and
C) vertical.
9) Full employment is not considered to be zero unemployment, because
D) people do not find jobs instantaneously.
8) Refer to Table 9-3. Assume the market basket for the consumer price index has three products
D) 121.
9) Refer to Table 9-4. Assume the market basket for the consumer price index has two products
D) 141.
12) Refer to Table 9-5. Consider the following values of the consumer price index for 2012 and
D) 3.9 percent.
15) Refer to Table 10-2. Using the table above, what is the approximate growth rate of real GDP
D) 4%
17) Refer to Table 10-2. Using the table above, what is the approximate average annual growth
D) 4%
9) If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to
D) 8 years and 9 months
15) Refer to Figure 9-1. Based on the graph of the labor market above, if a minimum wage is set at
D) None of the above will occur.
9) In a closed economy, private saving is equal to which of the following? (Y = GDP, C =
D) Y + TR - C - T
4) Which of the following is most liquid?
D) a dollar bill
4) Cyclical unemployment is the result of
D) a slowdown in the economy.
2) During the expansion phase of the business cycle, which of the following eventually increases?
D) all of the above
5) Which of the following policies would reduce frictional unemployment?
D) building an online job database that helps workers find jobs
5) Which of the following would be the best measure of the cost of living?
D) consumer price index
14) A recession begins with a(n) ________ in spending by firms on capital goods and a(n)
D) decrease; decrease
1) Increasing the amount of consumption spending and reducing the amount of savings ________
D) decreases; decreases
9) Efficiency wages cause unemployment because
D) firms pay wages that are above the market wage, causing the quantity of labor demanded to
17) The natural rate of unemployment is made up of
D) frictional and structural unemployment.
3) Which of the following would decrease the unemployment rate?
D) government aid to retrain unemployed workers
10) The percent increase in the CPI from one year to the next is a measure of the
D) inflation rate.
12) Refer to Scenario 10-1. Based on the information above, what is the level of public saving?
D) negative $1 trillion (a deficit of $1 trillion)
14) The "new product bias" in the consumer price index refers to the idea that
D) new products' prices often decrease after their initial introduction, and the CPI is adjusted
5) The Bureau of Labor Statistics would categorize a retiree who is not working as
D) out of the labor force.
7) According to the text, economists consider full employment to occur when
D) the unemployment rate consists of only frictional and structural unemployment.
17) Refer to Table 9-9. Suppose that the data in the table above reflect the price levels in the
E) 13%
16) Refer to Table 9-8. Suppose that the data in the table above reflect the price levels in the
E) 20%
15) The labor force participation rate is defined as
E) the percentage of the working-age population in the labor force.
