chapter 6 test prep economics

Which among the following is the principal effect of the unemployment insurance on the U.S. economy? a. It reduces federal debt. b. It reduces unemployment. c. It spreads the costs of unemployment. d. It boosts aggregate supply.

c. It spreads the costs of unemployment.

Historically, U.S. potential GDP has increased, but actual GDP tends to fluctuate around potential GDP. Potential GDP and actual GDP tend to have the largest separation when this economic event occurs. a. A growth period b. A trade deficit c. A recession d. An inflationary period

c. a recession

______________ is the difference between the sale price of a financial asset and the purchase price of the asset. a. interest b. dividend c. capital gain d. profit

c. capital gain

Unemployment rate among _____ was the highest according to a study in the year 2013 in the United States. a. unmarried women b. married men c. college graduates d. black teenagers

d. black teenagers

_____ often gain during periods of unanticipated inflation. a. Consumers b. Pensioners c. Lenders d. Borrowers

d. borrowers

Most macroeconomists refer to full employment as the level of employment in an economy with minimized _____ unemployment. a. seasonal b. structural c. frictional d. cyclical

d. cyclical

Which of the following is true of an inflationary period? a. The purchasing power of money falls during the period. b. The real value of money remains constant during the period. c. Household savings increase during the period. d. Investment spending increases during the period.

a. the purchasing power of money falls during the period

which of the following is not an effect of unexpected inflation? a. the rich benefit at the expense of the poor b. borrowers gain from inflation c. consumers will spend more time searching for the best prices of goods and services d. those who lend money are victimized by inflation.

a. the rich benefit at the expense of the poor

_____ is the difference between the sale price of a financial asset and the purchase price of the asset. a. Dividend b. Capital gain c. Profit d. Interest

b. capital gain

Which of the following best defines labor productivity? a. The amount of output an average worker turns out in an hour of labor b. The amount of output the most efficient worker produces in a day c. The ratio of the wages paid to workers to total profits d. The ratio of the total number of workers hired to total output

a. The amount of output an average worker turns out in an hour of labor

What is a potential impact of hyperinflation? a. The loanable funds market may cease to exist. b. The government raises taxes. c. Consumers spend more time shopping at one store. d. The amount of savings increases.

a. The loanable funds market may cease to exist.

The U.S. Bureau of Labor Statistics classifies an individual who gives up looking for work as a. a discouraged worker. b. an underemployed worker. c. seasonally unemployed. d. temporarily unemployed.

a. a discouraged worker.

ted loans money to his friend at a nominal interest rate of 10 percent. ted's expected inflation rate is 9 percent. his purchasing power a. increases by 1 percent b. increases by 9 percent c. decreases by 10 percent d. decreases by 5 percent

a. increases by 1 percent 10-9 = 1

An increase in capital stock will result in a(n) _____ the production function. a. outward shift of b. upward movement along c. downward movement along d. rightward shift of

a. outward shift of

The principal cause for the hyperinflation in Zimbabwe was a. printing of large amounts of money by its government. b. the continuous increase of taxes by the government. c. the presence of highly mobile international capital in the economy. d. the rapid growth of multinational corporations in the economy.

a. printing of large amounts of money by its government.

The main purpose of unemployment insurance is to a. reduce the impact of the social cost of unemployment. b. provide job training for individuals who have just become unemployed. c. incentivize an unemployed person to look for work. d. prevent unemployment.

a. reduce the impact of the social cost of unemployment.

Workers who work part time but want to work full time are considered a. underemployed. b. prisoners who have jobs. c. not fully employable. d. discouraged.

a. underemployed

if prices increase by 2 percent and wages increase by 10 percent in a year, the real wages increase by _______ percent. a. 10 b. 8 c. 2 d. 9

b. 8 10-2=8

Which is not a reason that economists use in favor of rapid economic growth? a. Mandatory controls may discourage production. b. Financing capital projects will allow a country to industrialize and compete against China. c. Slower growth makes it difficult to finance anti-poverty programs. d. Individuals are only willing to pay for certain programs to improve the quality of life, such as environmental regulation, until an income level is met.

b. Financing capital projects will allow a country to industrialize and compete against China.

Which of the following is considered a cost of volatile inflation? a. Producers will be forced to spend more time hiring new inputs. b. Shoppers will be forced to spend more time comparing prices. c. More business investors get involved in long-term contracts. d. Short-term contracts become more risky.

b. Shoppers will be forced to spend more time comparing prices.

John earned $8 an hour for working at a bookstore last year and $9 an hour in the current year. Suppose a hamburger cost $1.00 last year and it costs $1.10 in the current year. Assuming that John purchases only hamburgers with his income, John is a. better off because the opportunity cost of working at the bookstore decreased substantially. b. better off because the purchasing power of his income has increased this year. c. worse off because the hamburgers are relatively expensive this year. d. worse off because the price of hamburgers increased substantially

b. better off because the purchasing power of his income has increased this year.

Mary loses her job of a software developer due to an economic downturn. This is an example of a. frictional unemployment. b. cyclical unemployment. c. structural unemployment. d. seasonal unemployment.

b. cyclical unemployment

Growth rate of potential GDP equals a. growth rate of labor input multiplied by growth rate of labor productivity. b. growth rate of labor input plus growth rate of labor productivity. c. growth rate of output produced plus growth rate of population. d. growth rate of output produced multiplied by growth rate of population.

b. growth rate of labor input plus growth rate of labor productivity.

Nelson owned and operated a Blockbuster video rental company for over 10 years. A few years after consumers started renting en masse from Netflix, an online video subscription service, Nelson had to close down his store. He became unemployed and decided to go back to school to become a computer programmer. In the period he was unemployed, Nelson experienced a. frictional unemployment. b. structural unemployment. c. cyclical unemployment. d. temporary unemployment.

b. structural unemployment.

Which of the following can help an economy to produce above its potential GDP for a short period of time? a. An increase in the price of final goods and services b. A decrease in the size of the labor force c. An increase in the number of work hours d. A decrease in the money supply

c. An increase in the number of work hours

What is the benefit of a tax on real capital gains? a. Legislators would bring in less tax revenue than if nominal capital gains were taxed. b. There is no benefit to a real capital gains tax. c. It encourages more saving and, therefore, more lending and investing. d. Individuals will place less of their money in financial assets than in savings accounts.

c. It encourages more saving and, therefore, more lending and investing.

From the following, identify a benefit of unemployment insurance in the United States. a. It reduces taxes. b. It balances the federal budget. c. It props up aggregate demand during recessions. d. It props up aggregate supply during recessions.

c. It props up aggregate demand during recessions.

which is not a reason that economists use in favor of rapid economic growth? a. individuals are only willing to pay for certain programs to improve the quality of life, such as environmental regulation, until an income level is met b. mandatory controls may discourage production c. financing capital projects will allow a country to industrialize and compete against China d. slower growth makes it difficult to finance anti-poverty programs

c. financing capital projects will allow a country to industrialize and compete against china

Individuals who are unemployed because they are changing occupations are called _____ unemployed. a. seasonally b. structurally c. frictionally d. naturally

c. frictionally

The difference between nominal interest rate and expected inflation rate equals a. expected interest rate. b. nominal inflation rate. c. real interest rate. d. real inflation rate.

c. real interest rate

The use of machinery to weave cloth has caused many skilled weavers to lose their jobs in the textile industry. This is an example of a. frictional unemployment. b. cyclical unemployment. c. structural unemployment. d. seasonal unemployment.

c. structural unemployment

Individuals whose skills are no longer needed due to technological changes are called _____ unemployed. a. frictionally b. cyclically c. structurally d. seasonally

c. structurally

One of the costs of a recession is a. the raises in the tax rates of goods and services. b. that the economy will be unable to reach full employment for two years. c. the potential goods and services that could have been produced and enjoyed by consumers cannot be recovered. d. the individuals who will remain and enjoy being unemployed.

c. the potential goods and services that could have been produced and enjoyed by consumers cannot be recovered.

Suppose that Elisa works as an analyst. She works at a company where for every year worked, her productivity increases by 3 percent. If inflation is expected to increase by 2 percent, by how much should her employer increase her real wage each year? a. 3 percent b. 2 percent c. 6 percent d. 5 percent

d. 5 percent

Which of the following is true of an inflationary period? a. The real value of money remains constant during the period. b. Household savings increase during the period. c. Investment spending increases during the period. d. The purchasing power of money falls during the period.

d. The purchasing power of money falls during the period.

Which of the following is not an effect of unexpected inflation? a. Borrowers gain from inflation. b. Consumers will spend more time searching for the best prices of goods and services. c. Those who lend money are victimized by inflation. d. The rich benefit at the expense of the poor.

d. The rich benefit at the expense of the poor.

Which of the following happens in an economy when its real GDP grows slower than its potential GDP? a. The price level in the economy rises. b. The labor productivity in the economy falls. c. The economy's nominal GDP rises. d. The unemployment rate in the economy rises.

d. The unemployment rate in the economy rises.

A decline in the rate of technological progress in an economy results in a(n) a. decline in unemployment in the economy. b. decrease in the rate of inflation in the economy. c. increase in the economy's capital stock. d. decline in the growth of the economy's potential GDP.

d. decline in the growth of the economy's potential GDP.

In the United States, there is a _____ relationship between industrial capacity utilization rate and _____. a. indirect; civilian unemployment rate b. direct; inflation rate c. indirect; inflation rate d. direct; civilian unemployment rate

d. direct; civilian unemployment rate

individuals who are unemployed because they are changing occupations are called ________ unemployed a. naturally b. seasonally c. structurally d. frictionally

d. frictionally

Labor productivity equals GDP divided by a. profits earned by producers. b. capital stock. c. population. d. hours of work.

d. hours of work

Ted loans money to his friend at a nominal interest rate of 10 percent. Ted's expected inflation rate is 9 percent. His purchasing power a. increases by 9 percent. b. decreases by 10 percent. c. decreases by 5 percent. d. increases by 1 percent.

d. increases by 1 percent

The real wage rate is the wage rate adjusted for a. total population. b. taxes. c. the size of labor force. d. inflation.

d. inflation

from the following , identify a benefit of unemployment insurance in the U.S. a. it props up aggregate supply during recessions b. it reduces taxes c. it balances the federal budget d. it props up aggregate demand during recessions

d. it props up aggregate demand during recessions

Which among the following is the principal effect of the unemployment insurance on the U.S. economy? a. It boosts aggregate supply. b. It reduces federal debt. c. It reduces unemployment. d. It spreads the costs of unemployment.

d. it spreads the cost of unemployment

Which of the following variables is measured along the horizontal axis to graph the production function of an economy? a. Capital stock b. Real GDP c. Technology d. Labor input

d. labor input

The U.S. Bureau of Labor Statistics classifies an individual who failed to look for a job and does not currently work as a. temporarily employed. b. underemployed worker. c. unemployed. d. out of the labor force.

d. out of the labor force.

real GDP equals a. nations capital stock multiplied by the output pre hour b. total hours of work multiplied by the labor force c. labor force multiplied by the output per hour d. total hours of work multiplied by the output per hour

d. total hours of work multiplied by the output per hour