Chapter 9 test bank
*Wait* unemployment and *search* unemployment are both types of A. cyclical unemployment. B. hidden unemployment. C. frictional unemployment. D. structural unemployment.
C
*Cost-push* inflation A. *reduces* real *output.* B. *increases* real output. C. *reduces* the *unemployment* rate. D. *raises* the natural rate of unemployment.
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
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 the real GDP. D. inflation premium also is 3 percent.
A
If the *real interest rate and the nominal interest rate* are both *negative and equal* to each other, then the A. inflation premium is zero. B. inflation premium is also negative. C. inflation premium is positive. D. economy must be in a recession.
A
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
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
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
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
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
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
*Governments imposing* negative nominal interest rates are attempting to A. discourage the use of banks. B. compete with private banks in the lending market. C. discourage consumption and encourage saving. D. encourage consumption by discouraging saving.
D
*Suppose that lenders* want to receive a real rate of interest of *5* percent and that they expect inflation to remain steady at *2* percent in the coming years. Based on this, *lenders should charge a nominal interest rate of* A. 2 percent. B. 3 percent. C. 5 percent. D. 7 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
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
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
If *Fred's* annual real income rises by *8* percent each year, his annual real income will double in about A. 8 to 9 years. B. 10 to 11 years. C. 5 to 6 years. D. 19 to 20 years.
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
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 underside.
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 true amount of unemployment. D. *may* cause the official unemployment rate to *overstate* the true 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
*Cyclical* unemployment results from A. *a deficiency of spending* on goods and services. 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, with workers voluntarily changing jobs. D. *technological change.*
A
According to the *Bureau of Labor Statistics,* to be *officially unemployed* a person must A. be in the labor force. B. be 21 years of age or older. C. have lost a job. D. be waiting to be called back from a layoff.
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
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
In which *phase* of the business cycle will the economy most likely experience *rising real output and falling unemployment rates?* A. expansion B. recession C. peak D. trough
A
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, all else equal, *the official unemployment rate would* A. decline. B. increase. C. increase in the short run but eventually decline. D. be unchanged.
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 government agency responsible for collecting and reporting unemployment data is the A. Bureau of Labor Statistics. B. Bureau of Unemployment. C. Bureau of Economic Analysis. D. Bureau of Economic Research.
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
Under which of the following *circumstances* would we observe the *greatest increase in real income?* A. Nominal income falls by *2 percent, and the price level falls by 10* percent. B. Nominal income rises by *8 percent, and the price level rises by 4* percent. C. Nominal income rises by *15 percent, and the price level rises by 12* percent. D. Nominal income falls by *4 percent, and the price level rises by 6* percent.
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 is correct? A. During the Great Recession, unemployment rates for men rose above those of women. B. Unemployment rates for African-American 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
Which of the following would most likely *concern policymakers?* A. *high core* inflation and low CPI inflation B. *high CPI* inflation and low core inflation C. *core inflation* and CPI inflation that moved consistently over time D. *stable core* inflation and volatile CPI inflation
A
Which of the following would most likely occur during the *expansionary phase of the business cycle?* A. demand-pull inflation B. cost-push inflation C. structural inflation D. frictional inflation
A
an *increase in GDP* A. if prices are *sticky.* B. if prices are *fully flexible.* C. *regardless* of whether prices are sticky or fully flexible. D. *only* if prices are stuck in the long term.
A
*As applied to the price level, the "rule of 70"* indicates that the number of years required for the price level 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
*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 given information about a hypothetical economy. *The unemployment rate is* A. 18.8 percent. B. 12.5 percent. C. 16.7 percent. D. 25 percent.
B
*Innovations such as the microchip* and the Internet lead to business cycle variations because A. they cause *prices to be sticky.* B. *significant innovations occur* irregularly and unexpectedly. C. *the central bank* will often *change* the money supply in response. D. they cause *prices to be flexible.*
B
*Most economists* agree that the immediate cause of most *business cycle variation* is A. *an unexpected change in the productivity* of workers. B. *an unexpected change in the level* of total spending. C. *the invention* of new products. D. *the growth and subsequent* bursting of financial bubbles.
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 receiving 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 prices increase *more* proportionately than the increase in nominal income. C. No, because *real income may fall* if prices increase *less* proportionately than the increases in nominal income. D. Yes, because *real income may* fall if prices increase less proportionately than the increases in nominal income.
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
*Unemployment* rates in *industrialized* nations A. *all* exceeded 10 percent at some point during the Great Recession. B. *vary* considerably from each other. C. *tend* to be about the same in each country and move together over time. D. *are* less subject to business cycle fluctuations than in nonindustrialized countries.
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 other major holidays.
B
Assume that *Kyle* is *temporarily unemployed* because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as A. cyclically unemployed. B. frictionally unemployed. C. structurally 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 percentage 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 employed, the *unemployment rate is* A. 3 percent. B. 6 percent. C. 7 percent. D. 53 percent.
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
If potential GDP is *$400 billion* and there is a *negative* GDP gap of *$15 billion,* actual GDP is A. $415 billion. B. $385 billion. C. $15 billion. D. $785 billion.
B
If the rate of inflation is *12* percent per year, the *price level will double* in about A. 4.1 years. B. 5.8 years. C. 10.2 years. D. 12.4 years.
B
In the United States, the rate of unemployment is highest for A. white teenagers. B. African-American teenagers. C. married women. D. unmarried women.
B
In which of the following *industries or sectors* of the economy will business cycle *fluctuations* likely have the *greatest effect on output?* A. military goods B. capital goods C. textile products D. agricultural commodities
B
In which of the following cases would *real income rise?* A. Nominal income rises by *8 percent, and the price level rises by 10* percent. B. Nominal income rises by *2 percent*, and the price level remains unchanged. C. Nominal income falls by *4 percent, and the price level falls by 2* percent. D. Real income will rise in all of these cases.
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
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 phrase *"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
The production of durable goods varies more than the production of nondurable goods because A. durable purchases of durables *are not* postponable. B. durable purchases of durables *are* postponable. C. the producers of nondurables have monopoly power. D. producers of durables are highly competitive.
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
Which of the following constitute the types of 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
*Alex works in his own home* as a homemaker and full-time caretaker of his children. Officially, he is A. unemployed. B. employed. C. not in the labor force. D. in the labor force.
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
*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 given information about a hypothetical economy. If members of the underground economy are currently counted as part of the unemployed when in fact they are employed, *the official unemployment rate is overstated by about* A. 0 percentage points. B. 2 percentage points. C. 5 percentage points. D. 6 percentage points.
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
*Inflation* means that A. *all prices are rising*, but at different rates. B. *all prices are rising* at *approximately* the same rate. C. *prices* on average are rising, although some particular prices may be falling. D. *real* incomes are rising.
C
*Kara 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. Kara presently is A. cyclically unemployed. B. structurally unemployed. C. frictionally unemployed. D. not a member of the labor force.
C
*Most economists* agree that 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
*Susie* has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with A. seasonal unemployment. B. cyclical unemployment. C. structural unemployment. D. frictional unemployment.
C
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
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
Core inflation measures A. *changes* in the prices of the most commonly used goods, including food and energy. B. *underlying changes* in the CPI, after accounting for the price volatility of high-tech goods. C. *underlying increases* in the CPI after removing volatile food and energy prices. D. *changes* in key input prices.
C
Full-employment output is also called A. zero-unemployment output. B. equilibrium output. C. potential output. D. zero-savings output.
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,* actual 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
In *2010, Tatum's* nominal income rose by *4.6* percent and the price level rose by *1.6* percent. We can conclude that *Tatum's real income* A. may have either increased or decreased. B. rose by approximately *6.2* percent. C. rose by approximately *3* percent. D. fell by approximately *13* percent.
C
Potential *Real GDP = $200 Billion* Natural Rate of *Unemployment = 6* Percent Actual Rate of *Unemployment = 12* Percent Refer to the accompanying data, which is for a specific year in a hypothetical economy for which *Okun's law* is applicable. If the *unemployment rate in the economy fell 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 very near the curve. D. *nominal GDP* would rise, but real GDP would fall.
C
Potential Real GDP = $200 Billion Natural Rate of Unemployment = 6 Percent Actual Rate of Unemployment = 12 Percent Refer to the accompanying data, which is for a specific year in a hypothetical economy for which *Okun's law* is applicable. *The size of the negative GDP gap as a percentage of potential GDP for the economy is* A. 6 percent. B. 9 percent. C. 12 percent. D. 15 percent.
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
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
The *United States' economy* is considered to be at *full employment* when A. about *5 to 6 percent* of the *total* population is *unemployed.* B. *90* percent of the labor force is employed. C. about *5 to 6* percent of the *labor force* is unemployed. D. *100* percent of the labor force is employed.
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 *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 unemployed. D. *percentage of the total population* that is unemployed.
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 consumer price index was *177.1 in 2001 and 179.9 in 2002.* Therefore, the rate of inflation in *2002* was about A. 2.8 percent. B. 3.4 percent. C. 1.6 percent. D. 4.1 percent.
C
The phase of the business cycle in which real GDP *declines* is called A. the peak. B. an expansion. C. a recession. D. the trough.
C
What is the primary reason that changes in *total spending lead to cyclical changes in output and employment?* A. *Government* is unable to respond by changing the amount of money in circulation. B. *Changes* in total spending cause supply shocks that cause cyclical variation. C. Prices are *sticky* in the *short run.* D. Prices are *flexible* in the *long run*
C
Which of the following *types of unemployment* is directly *associated with insufficient* overall demand for goods and services? A. search unemployment B. wait unemployment C. *cyclical* unemployment D. *frictional* unemployment
C
Which of the following would most likely *move the economy into a recession* in the *short term?* A. *invention* of a new product that most consumers want to buy B. *innovations* in management that enhance worker productivity C. *the central bank* printing *less* money than was anticipated D. *Congress* passing a reduction in personal income tax rates
C
*Compared to other industrial nations*, inflation rates in the *United States* are A. significantly *higher.* B. significantly *lower.* C. significantly higher than those in *Europe* and significantly lower than those in *Japan.* D. *neither* significantly higher *nor* significantly lower.
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
*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 given information about a hypothetical economy. *The rate of inflation* A. is 110 percent. B. is 10 percent. C. is 0 percent. D. cannot be determined from the data.
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
*Rising per-unit production* costs are most *directly* associated with A. *frictional* unemployment. B. *structural* unemployment. C. *demand*-pull inflation. D. *cost*-push inflation.
D
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. structurally unemployed. C. cyclically unemployed. D. frictionally unemployed.
D
A recession is defined as 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
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
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
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
Inflation, as measured by percentage *changes in the CPI,* A. *concerns* policymakers more than the level of core inflation. B. *does not* include the most price-flexible goods in the economy. C. is generally *less* volatile than core inflation. D. is generally *more* volatile than core inflation.
D
Okun's law A. *measures* the trade-off 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 *who want full-time work* 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
Potential *Real GDP = $200* Billion Natural Rate of *Unemployment = 6* Percent Actual Rate of *Unemployment = 12* Percent Refer to the accompanying data, which is for a specific year in a hypothetical economy for which *Okun's law* is applicable. *The amount of output being forgone by the economy is* A. $12 billion. B. $15 billion. C. $18 billion. D. $24 billion.
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
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
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
The annual 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 industries or sectors of the economy in which business cycle fluctuations tend to affect output most 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
Which of the following is not seen by economists as an underlying cause of business cycle fluctuations? A. unexpected financial bubbles that eventually burst B. shocks to the money supply by the nation's central bank C. supply shocks caused by major innovations D. All of these are identified as causes of business cycle changes.
D
Which of the following statements is true about *causes of business cycle fluctuations?* A. Economists all agree that supply shocks are the cause of most business cycle fluctuations. B. Economists all agree that productivity shocks are the cause of most business cycle changes. C. Economists all agree that monetary changes are primarily responsible for business cycle fluctuations. D. There are a wide range of theories as to the underlying causes of business cycle movements.
D
