Macro Chapter 10

The longest expansion of the United States economy since 1925 began in:

1991

If there is 2 percent frictional unemployment, 3 percent structural unemployment, and 1 percent cyclical unemployment, then the natural rate of unemployment equals:

5%

The increase in the unemployment rate during a recession is associated with which type of unemployment?

Cyclical unemployment

Depression is:

a particularly severe and protracted recession.

A boom is:

a particularly strong and protracted expansion

Cyclical unemployment is equal to zero when:

actual GDP and potential GDP are equal.

Okun's law expresses the relationship between:

cyclical unemployment and the output gap.

According to Okun's law, each extra percentage point of ______ unemployment is associated with a ______ widening of a negative output gap, measured in relation to potential output.

cyclical; 2 percent

If firms maintain preset prices in the short run, then the primary cause of output gaps is changes in:

economy-wide spending.

If potential output equals $8 billion and actual output equals $9 billion, then this economy has a(n):

expansionary gap.

When actual output is greater than potential output there is a(n):

expansionary gap.

Recessions tend to be ______ by ______ the rate of inflation.

followed; a decrease in

In the long run, total spending only influences:

inflation.

In a recession, cyclical unemployment:

is rising

Varying the quantity of output produced and sold at preset prices is called:

meeting demand

Workers in durable-goods industries are ______ workers in service industries to lose their jobs during a recession.

more likely than

If all prices adjusted immediately to balance the quantities supplied and demanded for all goods and services:

output gaps would not exist.

The beginning of a recession is called the:

peak

An expansion occurs when ______, when _______, or when both of these occur.

potential output grows rapidly; actual output rises above potential output.

In the long run, total spending affects ______, and output is determined by _______.

prices; inputs and productivity

A period in which the economy is growing at a rate significantly below normal is called a(n):

recession

When actual output is less than potential output there is a(n):

recessionary gap.

Typically, the unemployment rate ______ during a recession and ______ during an expansion.

rises; falls

Changes in the growth rate of potential output and deviations of actual output from potential output are two logical explanations for:

short-term economic fluctuations.

If actual GDP equals potential GDP, then:

the actual unemployment rate equals the natural rate of unemployment.

If real GDP is less than potential GDP, then:

the actual unemployment rate is greater than the natural rate of unemployment.

If real GDP is greater than potential GDP, then:

the actual unemployment rate is lower than the natural rate of unemployment.

An expansion is a period in which:

the economy is growing at a rate significantly above normal.

Potential output is:

the maximum sustainable amount of output.

In the short run, ______ determines output, and in the long run ______ determines output.

total spending; potential output

The end of a recession is called the:

trough

For policymakers, the problem with a recessionary gap is ________ and the problem with an expansionary gap is ________.

wasted resources; a tendency for inflation to increase

Recessions in the United States typically are:

widely felt outside the United States.

According to Okun's law, when cyclical unemployment increases by one percentage point, the recessionary gap ______ by ______ percent of potential output.

widens; two