AP Macroeconomics Chapter 8: Introduction to Economic Growth and Instability
Inflation affects: A) both the level and the distribution of income. B) neither the level nor the distribution of income. C) the distribution, but not the level, of income. D) the level, but not the distribution, of income.
A
If the rate of inflation is 12 percent per year, the price level will double in about: A) 4 years. B) 6 years. C) 10 years. D) 12 years.
B
In the United States, the rate of unemployment is highest for: A) white teenagers. B) black teenagers. C) married women. D) unmarried women.
B
(Consider This) The feudal practice of clipping coins illustrates the idea of: A) taxation through inflation. B) good money driving out bad money. C) the derived demand for resources. D) cost-push inflation.
A
(Last Word) Changes in stock market prices: A) do not greatly impact the macroeconomy and used alone are not reliable predictors of the future health of the economy. B) greatly impact the macroeconomy but used alone are not reliable predictors of the future health of the economy. C) greatly impact the macroeconomy and used alone are reliable predictors of the future health of the economy. D) do not greatly impact the macroeconomy but used alone are reliable predictors of the future health of the economy.
A
Cost-push inflation: A) reduces real output. B) increases real output. C) reduces the unemployment rate. D) raises the natural rate of unemployment.
A
Demand-pull inflation: A) occurs when total spending in the economy is excessive. B) is measured differently than cost-push inflation. C) can be present even during an economic depression. D) is also called "hyperinflation."
A
If Ernie's annual real income rises by 8 percent each year, his annual real income will double in about: A) 8-9 years. B) 10-11 years. C) 5-6 years. D) 19-20 years.
A
If both the real interest rate and the nominal interest rate are 3 percent, then the: A) inflation premium is zero. B) real GDP must exceed the nominal GDP. C) nominal GDP must exceed real GDP. D) inflation premium also is 3 percent.
A
Inflation is undesirable because it: A) arbitrarily redistributes real income and wealth. B) invariably leads to hyperinflation. C) usually is accompanied by declining real GDP. D) reduces everyone's standard of living.
A
Unanticipated inflation: A) reduces the real burden of the public debt to the Federal government. B) hurts borrowers and helps lenders. C) hurts people whose sole source of income is from Social Security benefits. D) helps savers.
A
Unlike demand-pull inflation, cost-push inflation: A) is self-limiting. B) drives up the price level. C) increases nominal income. D) increases real income.
A
Which of the following statements is correct? Unanticipated inflation: A) arbitrarily "taxes" fixed-income groups. B) increases the real value of savings. C) increases the purchasing power of the dollar. D) benefits creditors at the expense of debtors.
A
"Too much money chasing too few goods" best describes: A) the GDP gap. B) demand-pull inflation. C) the inflation premium. D) cost-push inflation.
B
As applied to the price level, the "rule of 70" indicates that the number of years required for the price to double can be found by: A) dividing "70" into the annual rate of inflation. B) dividing the annual rate of inflation into "70." C) subtracting the annual change in nominal incomes from "70." D) multiplying the annual rate of inflation by "70."
B
Demand-pull inflation: A) occurs when prices of resources rise, pushing up costs and the price level. B) occurs when total spending exceeds the economy's ability to provide output at the existing price level. C) occurs only when the economy has reached its absolute production capacity. D) is also called cost-push inflation.
B
During a period of hyperinflation: A) creditors gain because their loans are repaid with dollars of higher value. B) people tend to hold goods rather than money. C) income is redistributed away from borrowers. D) the real value of the national currency rises.
B
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? A) Yes, because when you have a large nominal income your standard of living automatically increases. B) No, because real income may fall if price increases are more proportionately than the increase in nominal income. C) No, because real income may fall if price increases are less proportionately than the increases in nominal income. D) Yes, because real income may fall if price increases are less proportionately than the increases in nominal income.
B
Which of the following formulas is correct? Percentage change in: A) price level approximates percentage change in real income minus percentage change in nominal income. B) real income approximates percentage change in nominal income minus percentage change in price level. C) nominal income approximates percentage change in price level minus percentage change in real income. D) real income approximates percentage change in price level minus percentage change in nominal income.
B
Who is least likely to be hurt by unanticipated inflation? A) a disabled laborer who is living off accumulated savings B) an owner of a small business C) a secretary D) a pensioned steelworker
B
(Consider This) The main point of the Consider This box on clipping coins is that: A) decreases in the money supply cause deflation. B) decreases in tax rates often increase tax revenues. C) inflation imposes a "hidden tax" on those who hold money. D) demand creates its own supply.
C
(Last Word) Which of the following statements is false? A) Stock prices are one clue as to the future direction of the economy. B) Research has shown that changes in stock prices have a relatively modest impact on the economy. C) Black Monday (1987) was followed immediately by a severe recession. D) A rise in stock prices increases consumer wealth and therefore slightly boosts consumption spending.
C
A lender need not be penalized by inflation if the: A) long-term rate of inflation is less than the short-term rate of inflation. B) short-term rate of inflation is less than the long-term rate of inflation. C) lender correctly anticipates inflation and increases the nominal interest rate accordingly. D) inflation is unanticipated by both borrower and lender
C
Between 1980 and 2000 the price level approximately doubled. The average annual rate of inflation over this 20-year period was about: A) 5.5 percent. B) 4.7 percent. C) 3.5 percent. D) 2.8 percent.
C
Cost-push inflation may be caused by: A) a decline in per unit production costs. B) a decrease in wage rates. C) a negative supply shock. D) an increase in resource availability.
C
Cost-push inflation: A) is caused by excessive total spending. B) shifts the nation's production possibilities curve leftward. C) moves the economy inward from its production possibilities curve. D) is a mixed blessing because it has positive effects on real output and employment.
C
If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is: A) 8 percent. B) 5 percent. C) 3 percent. D) 2 percent.
C
In 2002 Ortega's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. We can conclude that Ortega's real income: A) may have either increased or decreased. B) rose by 6.2 percent. C) rose by 3 percent. D) fell by 13 percent.
C
Inflation initiated by increases in wages or other resource prices is labeled: A) demand-pull inflation. B) demand-push inflation. C) cost-push inflation. D) cost-pull inflation.
C
Mild demand-pull inflation: A) raises the natural rate of unemployment. B) usually leads to hyperinflation.. C) has an uncertain effect on real output. D) decreases the natural rate of unemployment
C
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: A) fall by about 20 percent. B) fall by about 2 percent. C) rise by about 15 percent. D) rise by about 25 percent
C
(Last Word) Declines in stock prices measured by the Dow Jones average: A) are a major cause of recessions. B) usually reduce saving and increase consumption spending. C) usually increase investment and reduce net exports. D) sometimes precede recessions; sometimes do not.
D
Cost-of-living adjustment clauses (COLAs): A) invalidate the "rule of 70." B) apply only to demand-pull inflation. C) increase the gap between nominal and real income. D) tie wage increases to changes in the price level.
D
Given the annual rate of inflation, the "rule of 70" allows one to: A) determine whether the inflation is demand-pull or cost-push. B) calculate the accompanying rate of unemployment. C) determine when the value of a real asset will approach zero. D) calculate the number of years required for the price level to double.
D
Real income can be determined by: A) dividing the price level by nominal income. B) inflating nominal income for inflation. C) dividing the annual rate of inflation into the number "70." D) deflating nominal income for inflation.
D
Real income is found by: A) dividing nominal income by 70. B) multiplying nominal income by 1.03. C) dividing the price index (in hundredths) by nominal income. D) dividing nominal income by the price index (in hundredths).
D
Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will: A) fall by about 1 percent. B) remain constant. C) rise by about 4 percent. D) rise by about 1 percent.
D
Suppose the nominal annual interest rate on a two year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years. The annual real rate of interest is: A) 6 percent. B) 8 percent. C) 2 percent. D) 3 percent.
D
Which of the following is correct? A) Real and nominal incomes always move in the same direction. B) Inflation increases the purchasing power of the dollar and necessarily reduces one's nominal income. C) Inflation reduces the purchasing power of the dollar and necessarily reduces one's real income. D) Inflation reduces the purchasing power of the dollar, but does not necessarily reduce one's real income.
D
If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, it real GDP per capita will: A) remain constant. B) fall by 6 percent. C) rise by 6 percent. D) fall by 12 percent.
A
If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is: A) $510 billion. B) $490 billion. C) $10 billion. D) $990 billion.
A
In the United States, business cycles have occurred against a backdrop of a long-run trend of: A) declining unemployment. B) stagnant productivity growth. C) rising real GDP. D) rising inflation.
C
In the depth of the Great Depression, the unemployment rate in the United States was about: A) 15 percent. B) 33 percent. C) 25 percent. D) 40 percent.
C
Inflation means that: A) all prices are rising, but at different rates. B) all prices are rising and at the same rate. C) prices in the aggregate are rising, although some particular prices may be falling. D) real incomes are rising.
C
The phase of the business cycle in which real GDP is at a minimum is called: A) the peak. B) a recession. C) the trough. D) the pits.
C
The presence of discouraged workers: A) increases the size of the labor force, but does not affect the unemployment rate. B) reduces the size of the labor force, but does not affect the unemployment rate. C) may cause the official unemployment rate to understate the amount of unemployment. D) may cause the official unemployment rate to overstate the amount of unemployment.
C
The type of unemployment associated with recessions is called: A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.
C
At an annual growth rate of 4 percent, real GDP will double in about: A) 17 ½ years. B) 20 years. C) 13 ½ years. D) 15 years.
A
At the economy's natural rate of unemployment: A) the economy achieves its potential output. B) there is only a relatively small amount of cyclical unemployment. C) only frictional unemployment exists. D) only structural unemployment exists.
A
Cyclical unemployment results from: A) a deficiency of aggregate spending. B) the decreasing relative importance of goods and the increasing relative importance of services in the U.S. economy. C) the everyday dynamics of a free labor market. D) technological change.
A
Economic growth is best defined as an increase in: A) Either real GDP or real GDP per capita B) Nominal GDP C) Total Consumption Expenditures D) Wealth in the economy
A
If the Consumer Price index rises from 300 to 333 in a particular year, the rate of inflation in that year is: A) 11 percent. B) 33 percent. C) 91 percent. D) 10 percent.
A
Market economies have been characterized by: A) occasional instability of employment and price levels. B) uninterrupted economic growth. C) persistent full employment. D) declining populations.
A
Search unemployment and wait unemployment are types of: A) frictional unemployment. B) structural unemployment. C) deficient-demand unemployment. D) cyclical unemployment.
A
The labor force includes: A) employed workers and persons who are officially unemployed. B) employed workers, but excludes persons who are officially unemployed. C) full-time workers, but excludes part-time workers. D) permanent employees, but excludes temporary employees.
A
The main cause of the 2001 recession in the United States was a large decline in: A) investment spending. B) government spending. C) net exports. D) interest rates.
A
The relationship between the size of the negative GDP gap and the unemployment rate is: A) direct. B) inverse. C) undefined. D) direct during recession, but inverse during expansion.
A
To be officially unemployed a person must: A) be in the labor force. B) be 21 years of age or older. C) have just lost a job. D) be waiting to be called back from a layoff.
A
Which of the following is correct? A) The unemployment rates of men and women workers are roughly the same. B) Unemployment rates for black and white workers are approximately the same. C) Teenagers experience approximately the same unemployment rates as do adults. D) Laborers are less vulnerable to unemployment than are professional workers.
A
Year > Alta (Real GDP) > Zorn (Real GDP) > Alta (population) > Zorn (population) 1 > $2,000 > $150,000 > 200 > 500 2> $2,100 > $152,000 > 202 > 505 3 > $2,200 > $154,000 > 210 > 208 ------------------------------------- Refer to the above table. Between years 2 and 3: A) Alta's real GDP grew more rapidly than Zorn's real GDP. B) real GDP fell in Zorn. C) population growth reduced Alta's real GDP growth to zero. D) population fell in Alta's.
A
Year > Alta (Real GDP) > Zorn (Real GDP) > Alta (population) > Zorn (population) 1 > $2,000 > $150,000 > 200 > 500 2> $2,100 > $152,000 > 202 > 505 3 > $2,200 > $154,000 > 210 > 208 ------------------------------------- Refer to the above table. Between years 1 and 2, real GDP per capita grew by __________ percent in Alta: A) 3 B) 4 C) 5 D) 10
A
Answer the next question(s) on the basis of the following information about a hypothetical economy: Full-time employed = 80 Part-time employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110 ------------------------------------- Refer to the above information. The unemployment rate is: A) 18.8 percent. B) 12.5 percent. C) 16.7 percent. D) 25 percent.
B
Answer the next question(s) on the basis of the following information about the hypothetical economy of Bralone. All figures are in millions. Not in the labor force 45 Unemployed 7 Total population 145 Employed 95 Discouraged workers 3 ------------------------------------- Refer to the above information. The labor force in Bralone is: A) 95 million. B) 102 million. C) 105 million. D) 145 million.
B
Answer the next question(s) on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 billion Natural rate of unemployment = 6 percent Actual rate of unemployment = 12 percent ------------------------------------- The size of the negative GDP gap as a percent of potential GDP for the above economy is: A) 9 percent. B) 12 percent. C) 15 percent. D) 18 percent.
B
For a nation's real GDP per capita to rise during a year: A) consumption spending must increase. B) real GDP must increase more rapidly than population. C) population must increase more rapidly than real GDP. D) investment spending must increase.
B
As it relates to economic growth, the term long-run trend refers to: A) the long-run increase in the relative importance of durable goods in the U.S. economy. B) the long-term expansion or contraction of business activity that occurs over 50 or 100 years. C) fluctuations in business activity that average 40 months in duration. D) fluctuations in business activity that occur around Christmas, Easter, and so forth.
B
Assume that Hernandez is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. Hernandez will be considered as: A) cyclically unemployed. B) frictionally unemployed. C) secularly unemployed. D) employed.
B
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: A) 4 percent. B) 8 percent. C) 10 percent. D) 2 percent.
B
Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are unemployed, the unemployment rate is: A) 3 percent. B) 6 percent. C) 7 percent. D) 9 percent.
B
At an annual growth rate of 7 percent, real GDP will double in about: A) 11 ½ years. B) 10 years. C) 13 ½ years. D) 9 years.
B
Between 1950 and 2002, U.S. real GDP grew at an average annual rate of about: A) 1.3 percent. B) 3.4 percent. C) 5.1 percent. D) 8.6 percent.
B
For comparing changes in potential military strength and political preeminence, the most meaningful measure of economic growth would be: A) changes in total nominal output. B) changes in total real output. C) changes in per capita output. D) changes in per family output.
B
For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of: A) Taylor's rule. B) Okun's law. C) Say's law. D) the Coase theorem.
B
Growth is advantageous to a nation because it: A) promotes faster population growth. B) lessens the burden of scarcity. C) eliminates the economizing problem. D) slows the growth of wants.
B
If potential GDP is $400 billion and there is a negative GDP gap of $15 billion, real GDP is: A) $415 billion. B) $385 billion. C) $15 billion. D) $785 billion
B
If the U.S. unemployment rate is 9 percent, we can infer that: A) the economy is in the expansion phase of the business cycle. B) potential GDP is in excess of actual GDP. C) actual GDP is in excess of potential GDP. D) actual GDP is equal to potential GDP.
B
In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle? A) military goods B) capital goods C) textile products D) agricultural commodities
B
Official unemployment statistics: A) understate unemployment because individuals receiving unemployment compensation are counted as employed. B) understate unemployment because discouraged workers are not counted as unemployed. C) include cyclical and structural unemployment, but not frictional unemployment. D) overstate unemployment because workers who are involuntarily working part time are counted as being employed.
B
Recurring upswings and downswings in an economy's real GDP over time are called: A) recessions. B) business cycles. C) output yo-yos. D) total product oscillations.
B
The United States experienced a: A) higher economic growth rate than Japan between 1950 and 2002, but a lower rate between 1992 and 2002. B) lower economic growth rate than Japan between 1950 and 2002, but a higher rate between 1992 and 2002. C) higher rate of growth of real GDP than of real GDP per capita between 1950 and 2002. D) higher rate of growth of real GDP than of real GDP per capita between 1990 and 2002.
B
The aggregate cost of unemployment can be measured by the: A) amount by which actual GDP exceeds potential GDP. B) amount by which potential GDP exceeds actual GDP. C) excess of real GDP over nominal GDP. D) excess of nominal GDP over real GDP.
B
The natural rate of unemployment is the: A) unemployment rate experienced at the depth of a depression. B) full-employment unemployment rate. C) unemployment rate experienced by the least-skilled workers in the economy. D) unemployment rate experienced by the most-skilled workers in the economy.
B
The production of durable goods varies more than the production of nondurable goods because: A) durables purchases are nonpostponable. B) durables purchases are postponable. C) the producers of nondurables have monopoly power. D) producers of durables are highly competitive.
B
Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called: A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) compositional unemployment.
B
When the U.S. economy has achieved full employment, the unemployment rate is between: A) 5 and 6 percent. B) 4 and 5 percent. C) 3 and 4 percent. D) 2 and 3 percent.
B
Which of the following constitute the unemployment occurring at the natural rate of unemployment? A) frictional and cyclical unemployment B) structural and frictional unemployment C) cyclical and structural unemployment D) frictional, structural, and cyclical unemployment.
B
Year > Alta (Real GDP) > Zorn (Real GDP) > Alta (population) > Zorn (population) 1 > $2,000 > $150,000 > 200 > 500 2> $2,100 > $152,000 > 202 > 505 3 > $2,200 > $154,000 > 210 > 208 -------------------------------------Refer to the above table. Per capita GDP was about: A) $105 in year 3 in Alta. B) $303 in year 3 in Zorn. C) $200 in year 1 in Zorn. D) $5 in year 2 in Alta.
B
A large negative GDP gap implies: A) an excess of imports over exports. B) a low rate of unemployment. C) a high rate of unemployment. D) a sharply rising price level.
C
Anne Kasperson works in her own home as a full-time caretaker and homemaker. Officially, she is: A) unemployed. B) employed. C) not in the labor force. D) in the labor force.
C
Answer the next question(s) on the basis of the following information about a hypothetical economy: Full-time employed = 80 Part-time employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110 ------------------------------------- Refer to the above information. If the members of the underground economy are presently counted as part of the unemployed when in fact they are employed, the official unemployment rate is overstated by: A) 0 percentage points. B) 2 percentage points. C) 5 percentage points. D) 6 percentage points.
C
Answer the next question(s) on the basis of the following information about the hypothetical economy of Bralone. All figures are in millions. Not in the labor force 45 Unemployed 7 Total population 145 Employed 95 Discouraged workers 3 ------------------------------------- Refer to the above information. If the natural rate of unemployment in Bralone is 5 percent, then: A) structural unemployment is 3 percent. B) frictional unemployment is 2 percent. C) cyclical unemployment is 2 percent. D) hidden unemployment is 5 percent.
C
Answer the next question(s) on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 billion Natural rate of unemployment = 6 percent Actual rate of unemployment = 12 percent ------------------------------------- If the unemployment rate in the above economy declined to 6 percent, we could conclude that: A) only structural unemployment remained. B) the economy's production possibilities curve shifted outward. C) the economy had moved from a point inside its production possibilities curve to a point on or near the curve. D) nominal GDP would rise but real GDP would fall.
C
Eckstein has lost her job in a Massachusetts textile plant because of import competition. She intends to take a short course in electronics and move to California where she anticipates that a new job will be available. We can say that Eckstein is faced with: A) secular unemployment. B) cyclical unemployment. C) structural unemployment. D) frictional unemployment.
C
Full-employment output is also called: A) zero-unemployment output. B) equilibrium output. C) potential output. D) zero-savings output.
C
Given the annual rate of economic growth, the "rule of 70" allows one to: A) determine the accompanying rate of inflation. B) calculate the size of the GDP gap. C) calculate the number of years required for real GDP to double. D) determine the growth rate of per capita GDP.
C
The phase of the business cycle in which real GDP declines is called: A) the peak. B) a recovery. C) a recession. D) the trough.
C
If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately: A) 22 years. B) 20 years. C) 14 years. D) 8 years.
C
If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is: A) $360 billion. B) $660 billion. C) $320 billion. D) $20 billion.
C
If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is: A) $300 billion. B) $30 billion. C) $360 billion. D) $630 billion.
C
If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced: A) inflation of 4 percent. B) inflation of 3.33 percent. C) deflation of 3.33 percent. D) deflation of 4 percent.
C
If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the: A) frictional unemployment rate is 5 percent. B) cyclical unemployment rate and the frictional unemployment rate together are 5 percent. C) cyclical unemployment rate is 4 percent. D) natural rate of unemployment will eventually increase.
C
Kimberly 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. Kimberly presently is: A) cyclically unemployed. B) structurally unemployed. C) frictionally unemployed. D) not a member of the labor force.
C
Real GDP per capita is found by: A) adding real GDP and population. B) subtracting population from real GDP. C) dividing real GDP by population. D) dividing population by real GDP.
C
Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result: A) the official unemployment rate will fall. B) the official unemployment rate will rise. C) the official unemployment rate will remain unchanged. D) the size of the labor force will increase.
C
Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, the official unemployment rate would: A) increase in the short run but eventually decline. B) increase. C) decline. D) be unchanged.
C
The GDP gap measures the difference between: A) NDP and GDP. B) NI and PI. C) actual GDP and potential GDP. D) nominal GDP and real GDP.
C
The United States' economy is considered to be at full employment when: A) 90 percent of the total population is employed. B) 90 percent of the labor force is employed. C) about 4-5 percent of the labor force is unemployed. D) 100 percent of the labor force is employed.
C
The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about: A) 6.7 percent. B) 3.4 percent. C) 1.6 percent. D) 4.1 percent.
C
The full-employment unemployment rate means an unemployment rate of about: A) 15 percent. B) 10 percent. C) 4-5 percent. D) 2 percent.
C
The immediate determinant of the volume of output and employment is the: A) composition of consumer spending. B) ratio of public goods to private goods production. C) level of total spending. D) size of the labor force.
C
The natural rate of unemployment is: A) higher than the full-employment rate of unemployment. B) lower than the full-employment rate of unemployment. C) that rate of unemployment occurring when the economy is at its potential output. D) found by dividing total unemployment by the size of the labor force.
C
The natural rate of unemployment: A) is fixed over time. B) is found by adding the cyclical and structural unemployment rates. C) may change from one decade to another. D) cannot be changed through public policy
C
The number of years required for real GDP to double can be found by: A) dividing the annual growth rate by .07. B) multiplying the annual growth rate by 70. C) dividing 70 by the annual growth rate. D) adding 14 to annual growth rate.
C
The official unemployment rate: A) involves people over 16 years of age who are not currently seeking employment. B) is the ratio of unemployed to employed workers. C) is the percentage of the labor force that is unemployed. D) is the percentage of the total population that is not working.
C
The unemployment rate is the: A) ratio of unemployed to employed workers. B) number of employed workers minus the number of workers who are not in the labor force. C) percentage of the labor force that is out of work. D) percentage of the total population that is out of work.
C
Wait unemployment and search unemployment are both types of: A) cyclical unemployment. B) hidden unemployment. C) frictional unemployment. D) structural unemployment.
C
Which of the following best measures improvements in the standard of living of a nation? A) growth of nominal GDP B) growth of real GDP C) growth of real GDP per capita D) growth of national income
C
Year > Alta (Real GDP) > Zorn (Real GDP) > Alta (population) > Zorn (population) 1 > $2,000 > $150,000 > 200 > 500 2> $2,100 > $152,000 > 202 > 505 3 > $2,200 > $154,000 > 210 > 208 -------------------------------------Refer to the above table. Between years 1 and 2, real GDP grew by __________ percent in Alta: A) 3 percent. B) 4 percent. C) 5 percent. D) 10 percent.
C
A college graduate using the summer following graduation to search for a job would best be classified as: A) not officially a member of the labor force. B) a part of structural unemployment. C) a part of cyclical unemployment. D) a part of frictional unemployment.
D
A recession is a period in which: A) cost-push inflation is present. B) nominal domestic output falls. C) demand-pull inflation is present. D) real domestic output falls.
D
About ________ of U.S. economic growth comes from improved productivity (as opposed to added inputs). A) one-fourth. B) one-third. C) one-half. D) two-thirds.
D
Answer the next question(s) on the basis of the following information about a hypothetical economy: Full-time employed = 80 Part-time employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110 ------------------------------------- Refer to the above information. The rate of inflation: A) is 110 percent. B) is 10 percent. C) is 0 percent. D) cannot be determined from the data.
D
Answer the next question(s) on the basis of the following information about the hypothetical economy of Bralone. All figures are in millions. Not in the labor force 45 Unemployed 7 Total population 145 Employed 95 Discouraged workers 3 ------------------------------------- Refer to the above information. The unemployment rate in Bralone is: A) 2.5 percent. B) 3.2 percent. C) 5.0 percent. D) 6.9 percent.
D
Answer the next question(s) on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 billion Natural rate of unemployment = 6 percent Actual rate of unemployment = 12 percent ------------------------------------- The amount of output being forgone by the above economy is: A) $12 billion. B) $15 billion. C) $18 billion. D) $24 billion.
D
Between 1950 and 2002, U.S. real GDP per capita grew at an average annual rate of about: A) 5.5 percent. B) 4.2 percent. C) 3.5 percent. D) 2.1 percent.
D
Cyclical unemployment is also called: A) wait unemployment. B) search unemployment. C) seasonal unemployment .D) deficient-demand unemployment.
D
Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as: A) structurally unemployed. B) frictionally unemployed. C) not in the labor force. D) employed.
D
During a severe recession, we would expect output to fall the most in: A) the health-care industry. B) the clothing industry. C) agriculture. D) the construction industry.
D
During periods of full employment the: A) burden of unemployment is quite evenly distributed among males and females, blacks and whites, and young and old workers. B) unemployment rate for teenagers is below the rate for the labor force as a whole. C) unemployment rate for women is considerably lower than that for men. D) unemployment rate for blacks is about twice the rate for whites.
D
If actual GDP is less than potential GDP: A) potential GDP will fall. B) the price level will rise. C) investment spending will fall. D) the actual unemployment rate will be higher than the natural unemployment rate.
D
If the economy's real GDP doubles in 18 years, we can: A) not say anything about the average annual rate of growth. B) conclude that its average annual rate of growth is about 5.5 percent. C) conclude that its average annual rate of growth is about 2 percent. D) conclude that its average annual rate of growth is about 4 percent.
D
Okun's law: A) measures the tradeoff between the rate of inflation and the rate of unemployment. B) indicates the number of years it will take for a constant rate of inflation to double the price level. C) quantifies the relationship between nominal and real incomes. D) shows the relationship between the unemployment rate and the size of the negative GDP gap.
D
Part-time workers are counted as: A) unemployed and therefore the official unemployment rate may overstate the level of unemployment. B) unemployed and therefore the official unemployment rate may understate the level of unemployment. C) fully employed and therefore the official unemployment rate may overstate the level of unemployment. D) fully employed and therefore the official unemployment rate may understate the level of unemployment.
D
Real GDP per capita: A) cannot grow more rapidly than real GDP. B) cannot grow more slowly than real GDP. C) necessarily grows more rapidly than real GDP. D) can grow either more slowly or more rapidly than real GDP.
D
Structural unemployment: A) is also known as frictional unemployment. B) is the main component of cyclical unemployment. C) is said to occur when people are waiting to be called back to previous jobs. D) may involve a locational mismatch between unemployed workers and job openings.
D
The industries or sectors of the economy in which output is likely to be most strongly affected by the business cycle are: A) military goods and capital goods. B) services and nondurable consumer goods. C) clothing and education. D) capital goods and durable consumer goods.
D
The rate of inflation can be found by subtracting: A) the real income from the nominal income. B) last year's price index from this year's price index. C) this year's price index from last year's price index and dividing the difference by this year's price index. D) last year's price index from this year's price index and dividing the difference by last year's price index.
D
The unemployment rate of: A) women greatly exceeds that of men. B) whites is roughly equal to that of blacks. C) white-collar workers exceeds that of blue-collar workers. D) teenagers is much higher than that of adults.
D
