ECON Test 4

Looking at past data, one finds that when the unemployment rate has increased, the annual growth rate of real GDP has usually:

decreased.

A reduction in government transfers ___, therefore shifting the aggregate demand curve to the ___.

decreases disposable income and consumption; left

Last week Stephanie quit her job as a copywriter at an advertising agency. She has spent the past few days browsing the help wanted ads. Stephanie is best classified as:

frictionally unemployed

Shoe-leather costs refer to the:

increased cost of transactions due to inflation.

If the economy undergoes a decline in overall spending and thus a contraction, the government could counter this by:

increasing government spending.

Firms pay an efficiency wage because:

it reduces the risk of losing the best workers.

Government's efforts to stabilize the business cycle through fiscal policy can destabilize the economy because of:

lags in the process of drafting a budget appropriate to the circumstances.

When inflation rises quickly:

lenders will be hurt and borrowers will benefit.

The threat of future inflation:

makes people reluctant to lend money for long periods.

Structural unemployment consists of people who are unemployed because of:

more people seeking jobs in a labor market than there are jobs available at the current wage rate.

According to official statistics, discouraged workers are:

not included in the labor force.

Medicaid, Medicare, and Social Security are examples of:

transfer payments.

The costs that arise from the way inflation makes money a less reliable unit of measurement are known as:

unit-of-account costs.

If deflation occurs and your income is fixed, your real income:

will go up

If actual unemployment is 6.2% and the natural rate of unemployment is 4%, cyclical unemployment is:

2.2%

Suppose the government increases spending more than is necessary to close a recessionary gap. Which of the following is likely to result?

The economy will undergo inflation.

Where G is government purchases of goods and services, the basic equation of national income accounting is GDP = C + I + G + X − IM. When the government uses fiscal policy to make changes to taxes and transfers, this policy primarily affects:

C

Suppose that immigration laws are relaxed and many workers from other nations enter the U.S. labor force. How will this affect the U.S. labor market?

The supply of labor will increase.

Which of the following statements is true?

Those who are not working but who have looked for work in the past year are unemployed.

Which of the following statements is false?

Unemployment always falls during economic expansions.

Donna was laid off by her employer at the beginning of 2011. She looked for a job for three months but could not find anything suitable. She then decided to volunteer for a soup kitchen and stopped looking for a job. Donna is considered to be

a discouraged worker.

Which of the following lending agreements represents the highest rate of return for a bank?

a fixed interest rate of 11% with 5% inflation

Which of the following is not an example of government purchases of goods and services?

a surgeon's bill reimbursed under the Medicare program

A binding minimum wage in a labor market is set _____ the equilibrium wage and creates a ____ of labor

above; surplus

Which of the following is an expansionary fiscal policy?

an increase in unemployment benefits

Jim has a part-time job and would prefer to have full-time work but has been unable to find it. Jim is classified as:

an underemployed worker.

If the current level of real GDP lies above potential GDP, then an appropriate fiscal policy would be to ____, which will shift the aggregate demand curve to the ____

decrease government purchases; left.

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n):

decrease in frictional unemployment.

Suppose the economy is in a recessionary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:

decrease taxes.

A binding minimum wage does all of the following except:

decrease the total labor force.