Macro chap 24 quiz

Keynesians tend to agree that during a depression: decreasing government spending is likely to improve economic conditions. increasing taxes is likely to improve economic conditions increasing government spending is likely to improve economic conditions governments should not do anything because anything they do will likely make the situation worse.

During a depression, economic conditions are so poor that most economists agree that macroeconomic policy should be used to improve the situation. This is not the case in many recessions. increasing government spending is likely to improve economic conditions

Laissez-faire economists favor government intervention in the market process. True False

F Laissez-faire economists believe that government intervention in the economy will make things worse and do not favor government intervention for this reason.

If the economy is in a structural stagnation, it can be expected to return to its historical trend soon. True False

F With a structural stagnation, there are long-term structural problems that will keep the economy from returning to his historical trend until the government addresses these problems.

The difference between the long-run and short-run frameworks is that the long-run framework focuses on demand while the short-run framework focuses on supply. True False

False Just the reverse is true.

Unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one is called: structural unemployment. frictional unemployment. cyclical unemployment. are not counted in the unemployment rate.

Frictional unemployment is unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one.

Active demand management policies are based on the work of John Maynard Keynes. True False

T Keynesian economics is based on the work of John Maynard Keynes.

In September 2010, the NBER's Business Cycle Dating Committee decided that the recession that began in December of 2007 had ended and that the lowest point of production was July of 2009. The NBER does not use a popular definition of recession-two quarters of falling GDP-but looks at a variety of monthly statistics to date business cycles.What is the NBER? National Bureau of Economic Research, a nonprofit, private organization National Board of Economic Recovery, part of the Department of Commerce National Business Education Roundtable, part of the Federal Reserve National Budget Estimation Review, part of the Congressional Budget Office

The National Bureau of Economic Research, the NBER, dates business cycles. Despite its name, it is not part of the government.

The historical trend growth rate of the production of goods and services (and so income) in the United States is approximately: 1 to 1.5 percent per year, or simply 1.25% 2.5 to 3.5 percent per year, or simply 3% 5 to 5.5 percent per year, or simply 5.25% 7 to 8 percent a year, or simply 7.5%

The secular trend is the long-term growth trend. The U.S. Department of Commerce traced U.S. economic growth in output since about 1890 and discovered that, on average, output of goods and services grew about 3.5 percent per year.

The total labor force is 100,000 out of a possible working age population of 160,000. The total number of unemployed is 8,000. What is the unemployment rate? 5 percent. 6 percent. 7 percent. 8 percent.

The unemployment rate is the number of unemployed divided by the labor force times 100, in this case 8%. (8,000/100,000 ×100). Dividing by the non-institutional population is wrong. 8 percent.

Suppose there are 81.0 million people not in the labor force, 154.0 million in the civilian labor force, and 140.9 million employed. Based on these numbers, what is the unemployment rate? 13.1 9.3 8.5 5.5

The unemployment rate is the unemployed divided by the labor force, or 13.1/154 = 8.5%. 8.5

The short-run business cycle framework focuses primarily on factors: affecting demand. affecting supply. affecting both supply and demand. other than supply and demand.

affecting demand. Demand is the dominant factor in the short run.

The unemployment rate is the number of people without a job: divided by the population. and looking divided by the population. divided by the labor force. and looking for work divided by the labor force.

A person has to be looking for a job, not just be without a job, to be counted as unemployed. and looking for work divided by the labor force.

Which of the following people would be considered unemployed? A 55-year-old steel worker who was laid off 18 months ago and has given up trying to find a job A woman who has quit college to move to New York where she is looking for a modeling job A young man who has recently received his Doctorate (Ph.D), but who is driving a taxi because he can't find a teaching job at a University. A current Full Time student who plans to look for a job after graduation

An individual is considered unemployed if they do not have a job and are currently seeking one. Only the woman who aspires to be a model is actively seeking a job, so only she would be considered unemployed. A woman who has quit college to move to New York where she is looking for a modeling job

What is one reason the government collects data about discouraged workers? Some people argue that the unemployment rate underestimates true unemployment because it does not include discouraged workers. Some people argue that the unemployment rate overestimates true unemployment because it includes discouraged workers. The number of discouraged workers is a better indicator of unemployment. To include them in the standard measure of unemployment because they can't find jobs.

Any attempt to put people into categories has weaknesses-there are always fuzzy borderline cases. The discouraged workers are a borderline case-many of them consider themselves as unemployeD) However, the Department of Labor had to draw a line somewhere, and they decided that if a person who was not working did not actively search for work in the past four weeks, they would not be counted as unemployeD) The existence of discouraged workers suggests that the unemployment rates are biased to the low side. (There also are other factors biasing the numbers lower or higher.) Some people argue that the unemployment rate underestimates true unemployment because it does not include discouraged workers.

The Classical economists argued that: a market economy will not experience unemployment in the short run. if unemployment occurs, it will cure itself because wages will fall. aggregate expenditures may be too low. if inflation occurs it will cure itself because prices, wages, and interest rates will rise.

Classical economists believe that in the short-run, a market economy can experience unemployment, but only until wages adjust.

Classical economists contend that official measures of unemployment: understate the problem due to the existence of discouraged workers. understate the problem due to involuntary part-time employment. overstate the problem because most unemployment is voluntary. overstate the problem because most unemployment is cyclical.

Classical economists believe that unemployment is voluntary for the most part because people could be employed at lower wages if they wanted to. overstate the problem because most unemployment is voluntary.

Which of the following statements best characterizes the Classical view of business cycles? Fluctuations in business activity occur in regular and predictable patterns. Fluctuations in business activity are to be expected and should be accepted Business cycles are symptoms of underlying problems and should be addressed by macroeconomic policy. The appropriate macroeconomic policy can eliminate fluctuations in business activity.

Classicals generally favor laissez-faire policies. Fluctuations in business activity are to be expected and should be accepted

Keynesian economists tend to focus their analysis on: the long run. the short run. aggregate supply. economic growth.

Keynesian economists are primarily concerned with short-run fluctuations in equilibrium output.

Which of the following statements best characterizes the Keynesian view of business cycles? Fluctuations in business activity occur in regular and predictable patterns that cannot be altered. Fluctuations in business activity are to be expected and should be accepted just as changes in the seasons are accepted. Business cycles of the business cycle are symptoms of underlying problems and should be dealt with through activist government policies. The appropriate macroeconomic policy can easily eliminate all fluctuations in business activity.

Keynesians generally favor activist government policies. Business cycles of the business cycle are symptoms of underlying problems and should be dealt with through activist government policies.

Classical economists are generally associated with: laissez-faire. their support of inflation. an activist policy. price controls.

Laissez-faire is the non-activist policy that Classical economists generally support.

When people stop looking for work, because they feel they didn't have a chance of finding on, they're called: unemployed. structural unemployment. underemployed. discouraged workers.

People who stop looking for work are no longer counted as unemployed. discouraged workers.

If a country of 300 million people has a total income of $12 trillion, its per capita income is: $36,000. $40,000. $360,000. $400,000.

Per capita income is calculated by dividing total income by total population. $40,000.

The highest amount of output an economy can sustainably produce and sell using existing production processes and resources is called: nominal output. actual output. potential output. utilized output.

Potential output is defined as the highest amount of output an economy can sustainably produce and sell using existing production processes and resources.

Another term for what the text calls the "target rate of unemployment" is: Keynesian unemployment. nominal unemployment. real unemployment. the natural rate of unemployment.

See the Added Dimension Box, "From Full Employment to the Target Rate of Unemployment". the natural rate of unemployment.

The business cycle is: the term used to describe fluctuations in output around its long-term trend. the length of time required by a firm to buy inputs and produce and sell output. the pattern of increases and decreases in the money supply. regular and predictable.

See the definition of business cycle in the textbook. the term used to describe fluctuations in output around its long-term trend.

Cyclical unemployment is defined as unemployment that results from: fluctuations in economic activity. structural changes in the economy. changes in technology. the aging of the population.

See the definition of cyclical unemployment in the textbook. fluctuations in economic activity.

Frictional unemployment: refers to unemployment caused by friction between labor and management. comes from people entering the labor force and changing jobs. refers mainly to unemployment resulting from fluctuations in output. is undesirable and should be eliminated at all costs.

See the definition of frictional unemployment in the textbook. comes from people entering the labor force and changing jobs.

A recession is often considered to be: an economic downturn that persists for more than two consecutive quarters of the year. an economic downturn that persists for more than four consecutive quarters of the year. any period of more than six months in which unemployment is rising. any period when the unemployment rate exceeds 6 percent.

See the definition of recession in the textbook. an economic downturn that persists for more than two consecutive quarters of the year.

Some economists talk about a non-accelerating inflation rate of unemployment (NAIRU). The term the text uses for this concept is: the natural rate of unemployment. cyclical unemployment. structural unemployment. the target rate of unemployment.

See the definition of the target rate of unemployment in the textbook. the target rate of unemployment.

In September 2010, the NBER's Business Cycle Dating Committee decided that the recession that began in December of 2007 had ended and that the lowest point of production was July of 2009. The NBER does not use a popular definition of recession-two quarters of falling GDP-but looks at a variety of monthly statistics to date business cycles. In business cycle terminology, what does July 2009 mark? The trough of the cycle The peak of the cycle. The depression of the cycle. The duration of the recession

See the discussion in the textbook under "The Phases of the Business Cycle." The trough of the cycle

Which of the following countries, or groups of countries, has grown at the fastest rate in the last ten years? Western Europe China The United States Eastern Europe

See the figure in the textbook "Growth Rates around the World." China

Workers at a car-manufacturing plant are replaced by automated machinery. What type of unemployment best describes the workers' situation? Cyclical unemployment Full unemployment Structural unemployment Frictional unemployment

Structural unemployment is unemployment caused by economic restructuring which makes some skills obsolete.

Which of the following contributes to structural unemployment? A general short-run downturn in the economy. People quitting a job just long enough to look for and find another one. People over 65 who don't really want to work. People losing a job when their skills become obsolete due to technological innovations. .

Structural unemployment is unemployment caused by economic restructuring, which makes some skills obsolete People losing a job when their skills become obsolete due to technological innovations.

The long-run growth framework focuses on factors affecting: incentives to spend, that is, affecting demand. incentives to produce, that is, affecting supply. both supply and demand. the business cycle.

Supply is the dominant factor in the long run and incentives to produce affect it.