Chapter 9: Business Cycles, Unemployment, and Inflation

The unemployment rate equals:

(Labor force - employed)/ Labor force

Which of the following describes how to calculate the unemployment rate?

(Unemployed/labor force)X100

A business cycle is:

A short-run alternation between economic upturns and downturns

The formula for the ______ _____ _____ is the price of the most recent market basket in a particular year divided by the price estimate of the market basket in 1982-1984 multiplied by 100.

Consumer Price Index

The index most widely used by the government and the private sector to measure changes in the cost of living is the:

Consumer Price Index

Economists say that the economy is at "full employment" when the:

Cyclical unemployment rate is zero

Too much spending chasing too few goods is the essence of _____-_____ inflation.

Demand-pull

A worker who, after unsuccessfully seeking employment for some time, becomes frustrated and drops out of the labor force is defined as a _____ worker.

Discouraged

the official unemployment rate is understated because it does not count which of the following as unemployed?

Discouraged workers

Automobiles, and refrigerators are examples of ____ goods while food and clothes are examples of _____ goods.

Durable; nondurable

The labor force is the sum of the _____ and ____.

Employed; unemployed

Wen prices are sticky in the short-run, the economy is forced to respond by changes in:

Employment Output

When inflation occurs, each dollar of income will buy ____ goods and services than before.

Fewer

Identify all of the consequences of unexpected lower total spending in the short-run when prices are sticky.

Firms cut back on production GDP declines Unemployment rises Firms sell fewer units of output Fewer items are purchased

____ unemployed workers live in areas where jobs exist and they have marketable skills, while ____ employed workers do not.

Frictionally; Structurally

The formula for a GDP gap is:

GDP gap = actual GDP - potential GDP

The difference between actual and potential GDP is called a GDP ______.

Gap

Which of the following describe why unemployment rates are higher for African Americans and Hispanics than for whites?

Greater concentration in lower-skilled occupations Discrimination in the labor market Lower rates of educational attainment

Workers in lower skilled occupations have ____ unemployment rates than workers in higher-skilled occupations.

Higher

Identify all of the results of unexpected higher total spending in the short-run when prices are sticky.

Increased output, employment, and incomes GDP rises More goods and services are purchased

____ reduces the purchasing power of money.

Inflation

According to McConnell, which of the following are reasons why teenagers have a much higher unemployment rate than adults?

Less geographic mobility Quit more frequently More frequently "fired" Lower skill levels

The number of persons unemployed for long periods as a percentage of the labor fore is ______ the overall unemployment.

Lower than

Why the economy sees business cycle fluctuations rather than slow, smooth growth is a central issue of:

Macroeconomics

The phase of the business cycle at which the economy is at full employment is known as a

Peak

Inflation exists when there is an increase in _____ over a sustained period of time.

Prices

In the trough of a _____, output and employment "bottom out" at their lowest levels.

Recession

Which of the following could be considered a cost of unemployment?

Severe psychological costs to the job loser Higher crime, suicide and divorce rates Wasted resources because a worker is not being utilized

Unexpected events that drive economic cycles and fluctuations are called economic _____.

Shocks

An auto worker in Michigan who loses his job because the company relocated the plant to another country is an example of:

Structural unemployment

An expansion is a period in which:

The price level may rise Output rises

On average, less-educated workers have higher ____ rates than workers with more education.

Unemployment

Several possible sources of shocks that can cause business cycles include:

Unexpected political events Productivity changes Monetary factors Irregular innovation

Those who are working are defined as ____ and those who are not working but actively seeking work are defined as ____.

employed; unemployed