Econ Exam 2

A statement that is often used to describe demand-pull inflation is "There is no such thing as a free lunch." "Money is easily earned, but not easily saved." "too much money chasing too few goods." "A rising tide lifts all boats."

"too much money chasing too few goods."

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation was approximately 5.5 percent. 5.9 percent. 6.3 percent. 7.2 percent.

5.9 percent.

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate? 6 percent 9 percent 4 percent 27 percent

6 percent

The unemployment rate in an economy is 6 percent. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is 12 million. 6 million. 9 million. 24 million

9 million.

Which of the following statements about deflation is true? Economists fear deflation because it could lead to a wave of bankruptcies and a downward spiral. Consumers will increase their spending if they expect deflation to continue. Deflation would reduce unemployment, but it could encourage business investment. Economists generally agree that deflation is good for consumers and the economy as a whole.

Economists fear deflation because it could lead to a wave of bankruptcies and a downward spiral.

Which of the following statements about deflation is true? Economists fear deflation because it could lead to a wave of bankruptcies and a downward spiral. Economists generally agree that deflation is good for consumers and the economy as a whole. Consumers will increase their spending if they expect deflation to continue. Deflation would reduce unemployment, but it could encourage business investment.

Economists fear deflation because it could lead to a wave of bankruptcies and a downward spiral.

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is cyclically unemployed? Jeanette Ricardo Mollie George

Jeanette

The accompanying list describes the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is frictionally unemployed? Mollie George Jeanette Ricardo

Mollie

Which of the following is the correct way to calculate the unemployment rate? [(labor force)/(unemployed)] × 100 [(labor force)/(population)] × 100 [(unemployed)/(labor force)] × 100 [(unemployed)/(population)] × 100

[(unemployed)/(labor force)] × 100

Which of the following is the correct way to calculate the unemployment rate? [(unemployed)/(labor force)] × 100 [(unemployed)/(population)] × 100 [(labor force)/(population)] × 100 [(labor force)/(unemployed)] × 100

[(unemployed)/(labor force)] × 100

The GDP gap measures the difference between NI and PI. nominal GDP and real GDP. NDP and GDP. actual GDP and potential GDP.

actual GDP and potential GDP.`

In calculating the unemployment rate, part-time workers are treated the same as "discouraged" workers who are not actively seeking employment. counted as unemployed because they are not working full time. used to determine the size of the labor force but not the unemployment rate. counted as employed because they are receiving payment for work.

counted as employed because they are receiving payment for work.

Which of the following would most likely occur during the expansionary phase of the business cycle? cost-push inflation demand-pull inflation frictional inflation structural inflation

demand-pull inflation

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 multiplying the annual rate of inflation by 70. subtracting the annual change in nominal incomes from 70. dividing the annual rate of inflation into 70. dividing 70 into the annual rate of inflation.

dividing the annual rate of inflation into 70.

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 subtracting the annual change in nominal incomes from 70. multiplying the annual rate of inflation by 70. dividing the annual rate of inflation into 70. dividing 70 into the annual rate of inflation.

dividing the annual rate of inflation into 70.

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 employed. structurally unemployed. frictionally unemployed. not in the labor force.

employed

A trough in the business cycle occurs when employment and output reach their lowest levels. the inflation rate is at its lowest level. the natural rate of unemployment is at a minimum point. cyclical unemployment is at a minimum point.

employment and output reach their lowest levels.

Okun's law indicates that for every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 5 percent GDP gap is generated. a 2 percent GDP gap, a 2 percent increase in the actual unemployment rate is generated. every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated. a 5 percent GDP gap, a 1 percent increase in the natural unemployment rate is generated.

every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated.

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are included as part of the unemployed. treated the same as part-time workers. used to determine the size of the labor force. excluded from the labor force.

excluded from the labor force.

The natural rate of unemployment is the unemployment rate experienced by the least-skilled workers in the economy. unemployment rate experienced at the depth of a depression. unemployment rate experienced by the most-skilled workers in the economy. full-employment unemployment rate.

full-employment unemployment rate.

The best example of a "frictionally unemployed" worker is one who reduces productivity by causing friction in a business. is in the process of voluntarily switching jobs. is laid off during a recessionary period in the economy. is discouraged and not actively seeking work.

is in the process of voluntarily switching jobs.

The unemployment rate is interpreted as the percentage of the labor force that are not employed. adult population who are unemployed. workforce that have been laid off. able-bodied population who are not working.

labor force that are not employed.

"Full employment" refers to the situation when there is no cyclical unemployment. 100 percent employment of the labor force. no frictional or structural unemployment. 0 percent unemployment rate.

no cyclical unemployment.

In the accompanying diagram, the phases of the business cycle from points A to D are peak, recession, trough, expansion, respectively. peak, recession, expansion, trough, respectively. trough, recovery, expansion, peak, respectively. expansion, recession, trough, peak, respectively.

peak, recession, trough, expansion, respectively.

Unanticipated inflation tends to penalize businesses which borrow money from financial institutions. people who save money in financial institutions. individuals who borrow money from financial institutions. governments that have a progressive personal income tax.

people who save money in financial institutions.

The GDP gap measures the amount by which actual GDP exceeds national income. potential GDP exceeds actual GDP. actual GDP exceeds equilibrium GDP. nominal GDP exceeds real GDP.

potential GDP exceeds actual GDP.

A recession is a decline in real GDP that lasts six months or longer. the unemployment rate that lasts six months or longer. potential GDP that lasts six months or longer. the inflation rate that lasts six months or longer.

real GDP that lasts six months or longer.

The inflation rate measures the percentage growth rate of the CPI from one year to the next. real GDP from one year to the next. the CPI from the base period 1982-84 to a given year. real GDP from the base period 1982-84 to a given year.

the CPI from one year to the next.

During a severe recession, we would expect output to fall the most in the construction industry. agriculture. the clothing industry. the health care industry.

the construction industry.