Economy Chapter 9 (EXAM 2)

If real economic growth is 3%, the inflation rate is 5%, and the nominal interest rate is 7%, then the real rate of interest is: Multiple choice question. 10% 8% 2% 3.5%

2%

Select all that apply Frictional unemployment is inevitable and, in part, desirable because many workers who are voluntarily between jobs are moving to higher-paying, more productive positions that will result in which of the following? Multiple select question. A higher income for the workers A more even population distribution An increase in GDP A better allocation of labor resources

A higher income for the workers An increase in GDP A better allocation of labor resources Need help? Review these concept resources.Read About the Concept Feedback Next QuestionReading

What type of inflation allows people to plan ahead and avoid or lessen the redistribution effects of inflation? Multiple choice question. Limited inflation Anticipated inflation Unanticipated inflation Unlimited inflation

Anticipated inflation

Which of the following are excluded from core inflation so that it better reflects the general trend in overall prices? Multiple select question. Real estate Energy products Food items Electronics

Energy products Food items

True or false: The unemployment rate for African Americans and Hispanics is lower than that for whites. True false question.TrueFalse

False

Select all that apply According to some economists, which of the following are positive effects of mild inflation? Multiple select question. Firms can more easily adjust real wages downward when the demand for their products rises. People have increased purchasing power as a result of falling prices. Firms will have a strong demand for labor. Firms have an incentive to expand their plants and equipment.

Firms will have a strong demand for labor. Firms have an incentive to expand their plants and equipment.

Remy worked as a sales associate at a large retailer through the holiday season, but that position has since ended. As a result, Remy is without work while he looks for a new job. What term would economists use to refer to Remy's situation? Multiple choice question. Discouraged unemployment Structural unemployment Part-time unemployment Frictional unemployment

Frictional unemployment

The difference between actual and potential GDP is called a ______ gap. Multiple choice question. demand GDP real natural

GDP

Which of the following describe why unemployment rates are higher for African Americans and Hispanics than for whites? Multiple select question. Greater concentration in lower-skilled occupations Higher rates of geographic mobility Lower rates of educational attainment Greater concentration in higher-skilled occupations

Greater concentration in lower-skilled occupations Lower rates of educational attainment

Which of the following are reasons why teenagers have a much higher unemployment rate than adults? Multiple select question. Have lower skill levels Have less geographic mobility Quit more frequently "Fired" more frequently Demand higher wages than adults

Have lower skill levels Have less geographic mobility Quit more frequently "Fired" more frequently

Select all that apply Which statements describe how even low levels of inflation may negatively affect real output? Multiple select question. Businesses see even mild inflation as a threat and slow or stop production. People hold more cash and have to spend less time going to the bank or online to transfer money. Households and businesses spend time and effort distinguishing between real and nominal wages and interest rates. Businesses incur the costs of changing prices to reflect inflation.

Households and businesses spend time and effort distinguishing between real and nominal wages and interest rates. Businesses incur the costs of changing prices to reflect inflation.

Which of the following are consequences of the widespread joblessness of cyclical unemployment? Multiple select question. Increased poverty Greater ethnic tensions Increased mental health Lower morale

Increased poverty Greater ethnic tensions Lower morale

Which statement best describes U.S. inflation since 2000? Multiple choice question. It has been consistently high, often climbing into the double digits. It has been neither very high nor very low. It has been widely variable, swinging from zero to over 10%. It has been virtually nonexistent.

It has been neither very high nor very low.

Which statements about the CPI are true? Multiple select question. It is only rarely updated to reflect the emergence of new industries. It is updated every 10 years in conjunction with the national census. It is updated every few years to reflect recent consumer purchasing patterns. It is periodically updated by the BLS to reflect current inflation rates.

It is updated every few years to reflect recent consumer purchasing patterns. It is periodically updated by the BLS to reflect current inflation rates.

How is cost-push inflation unique? Multiple choice question. It reduces the overall quantity of real output. It results in an overall reduction in prices. It negatively impacts companies, not consumers. It redistributes income and output.

It reduces the overall quantity of real output.

Select all that apply Which of the following are characteristics of lower-skilled workers? Multiple select question. Longer spells of structural unemployment Less likely to be self-employed Less likely to bear the brunt of recessions. Shorter spells of cyclical unemployment

Longer spells of structural unemployment Less likely to be self-employed

Which of the following could be considered a cost of cyclical unemployment? Multiple select question. Severe psychological costs to the job loser A higher rate of inflation Higher crime, suicide, and divorce rates Political upheaval

Severe psychological costs to the job loser Higher crime, suicide, and divorce rates Political upheaval

Which type of unemployment occurs as a direct result of a mismatch between skills and jobs? Multiple choice question. Partial Frictional Cyclical Structural

Structural

What is the unemployment rate? Multiple choice question. The number of unemployed people in the United States The percentage of the labor force that is unemployed The number of people currently looking for work The percentage of the population that is unemployed

The percentage of the labor force that is unemployed

What does the Consumer Price Index (CPI) measure? Multiple choice question. The annual prices of durable goods The prices of a fixed "market basket" of goods and services The purchasing power of consumers in a given year The cost of capital resources over time

The prices of a fixed "market basket" of goods and services

What are the effects of unanticipated deflation? Multiple select question. The purchasing power of savings will increase. Creditors will benefit at the expense of debtors. The real value of fixed-monetary assets will decline. The real incomes of people with fixed nominal incomes will increase.

The purchasing power of savings will increase. Creditors will benefit at the expense of debtors. The real incomes of people with fixed nominal incomes will increase.

True or false: Hyperinflation is extraordinarily rapid inflation. True false question.TrueFalse

True

True or false: In the United States, inflation reached double-digit rates in the 1970s and early 1980s but has since declined and recently, has been relatively mild. True false question.TrueFalse

True

What are the results of unanticipated inflation? Multiple select question. Wealth and real income are redistributed. Some people are harmed and others are helped. Most people are able anticipate the redistribution effects of inflation.

Wealth and real income are redistributed. Some people are harmed and others are helped.

Which of the following statements best summarizes how inflation may redistribute real income? Multiple choice question. When a change in the price level is equal to the change in a person's real income When a change in the price level is equal to the change in a person's nominal income When a change in the price level differs from a change in a person's real income When a change in the price level differs from a change in a person's nominal income

When a change in the price level differs from a change in a person's nominal income

The formula for a GDP gap is: Multiple choice question. real GDP plus nominal GDP real GDP minus nominal GDP actual GDP plus potential GDP actual GDP minus potential GDP

actual GDP minus potential GDP

Business cycles are ______. Multiple choice question. the transfer of executives between firms increases and decreases in stock prices alternating increases and decreases in economic activity the time it takes to bring a new product to market

alternating increases and decreases in economic activity

A business cycle consists of ______. Multiple choice question. a period in which output and employment are falling alternating rises and declines in the level of economic activity a period in which output and employment are rising a very deep and prolonged economic downturn

alternating rises and declines in the level of economic activity

A business cycle consists of ______. Multiple choice question. a very deep and prolonged economic downturn a period in which output and employment are falling a period in which output and employment are rising alternating rises and declines in the level of economic activity

alternating rises and declines in the level of economic activity

The official unemployment rate may be understated because part-time workers ______. Multiple choice question. are counted as unemployed and discouraged workers are counted as employed and discouraged workers are counted as employed and discouraged workers are counted as unemployed are counted as employed but discouraged workers are not counted

are counted as employed but discouraged workers are not counted

Cost-of-living adjustments are ______. Multiple choice question. automatic wage changes that happen when the CPI rises averages of neighboring years base prices used in constructing the CPI changes in the basket of goods used in calculating the CPI quality measurements included in the calculation of the CPI

automatic wage changes that happen when the CPI rises

A key issue in macroeconomics is why the economy sees ______. Multiple choice question. low, smooth business cycle growth rather than fluctuations business cycle fluctuations rather than slow, smooth growth modest fluctuations rather than volatile fluctuations extensive periods of fast growth

business cycle fluctuations rather than slow, smooth growth

Firms and industries producing capital goods are affected most by the business cycle and the negative effects of a recession because purchases of capital goods Blank______. Multiple choice question. can be postponed are typically unexpected cannot be postponed are made frequently

can be postponed

The index most widely used by the government and the private sector to measure changes in the cost of living is the: Multiple choice question. producer price index the chain-type price index the GDP deflator consumer price index

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: Multiple choice question. the GDP deflator the chain-type price index consumer price index producer price index

consumer price index

The composition of the market basket for the CPI is based on spending patterns of urban _______ in a given period. Multiple choice question. commuters producers consumers

consumers

Social security payments automatically increase when the CPI goes up because of the ______. Multiple choice question. cost of living adjustments marital status years receiving social security age of the recipient

cost of living adjustments

The rocketing prices of imported oil in 1973-1974 and again in 1979-1980 are good illustrations of ______. Multiple choice question. hyperinflation shock inflation demand-pull inflation cost-push inflation

cost-push inflation

Inflation caused by an increase in the per-unit production costs at each level of total spending is called: Multiple choice question. demand-push inflation. demand-pull inflation. cost-push inflation. cost-pull inflation.

cost-push inflation.

Economists say that the economy is at "full employment" when the ______ unemployment rate is zero. Multiple choice question. structural cyclical total frictional

cyclical

Unemployment that is caused by a decline in total spending and occurs in the recession phase of a business cycle is called ________________ unemployment.

cyclical

A worker that is unemployed because of an insufficient demand for goods and services is an example of: Multiple choice question. structural unemployment seasonal unemployment cyclical unemployment frictional unemployment

cyclical unemployment

A worker who, after unsuccessfully seeking employment for some time, becomes frustrated and stops actively seeking work is referred to as a(n) ______ worker. Multiple choice question. discouraged uninterested unemployed frictional

discouraged

The official unemployment rate is understated because it does not count _______ as unemployed. Multiple choice question. individuals who are in the military individuals who are seeking jobs discouraged workers part-time workers

discouraged workers

The business cycle affects output and employment in capital and durable goods industries more severely than in industries producing non-durable goods because, ______. Multiple choice question. during a recession, business and consumer spending on nondurable goods decline sharply during a recession, business investment in new capital goods and consumer spending on new durable goods rise sharply during a boom, business investment in new capital goods and consumer spending on new durable goods decline sharply during a recession, business investment in new capital goods and consumer spending on new durable goods can be postponed

during a recession, business investment in new capital goods and consumer spending on new durable goods can be postponed

Economic theories are founded on the idea that economic fluctuations are driven by ______. Multiple choice question. inflation economic shocks expected changes international competition

economic shocks

The labor force is the sum of the ______ and ______. Multiple choice question. employed; discouraged workers unemployed; discouraged workers employed; working age population employed; unemployed

employed; unemployed

Those who are working are defined as (one word) and those who are not working but actively seeking work are defined as (one word).

employed; unemployed

An economy is "fully employed" when the unemployment rate _____. Multiple choice question. equals 5% or higher equals the structural and frictional unemployment rate equals the frictional unemployment rate is equal to 0 equals the structural unemployment rate

equals the structural and frictional unemployment rate

The long-run trend of the U.S. economy is ______. Multiple choice question. contraction and decline stagnation and contraction expansion and growth stability and stagnation

expansion and growth

During hyperinflation, the value of money: Multiple choice question. does not change rises slowly falls rapidly rises rapidly falls slowly

falls rapidly

When inflation occurs each dollar of income will buy ______ goods and services than before. Multiple choice question. the same amount of fewer more

fewer

John quit his current job and has taken a new job for higher pay. The new job starts in two weeks. During the two weeks between jobs, John is ______ unemployed. Multiple choice question. structurally frictionally cyclically permanently

frictionally

Workers that are unemployed because they are "between jobs" are: Multiple choice question. frictionally unemployed cyclically unemployed not in the labor force structurally unemployed discouraged workers

frictionally unemployed

The economy attains _______ when the unemployment rate equals the natural rate of unemployment. Multiple choice question. frictional unemployment short-run equilibrium cyclical unemployment full employment

full employment

The difference between actual and potential GDP is called a GDP _________ . (Enter one word in the blank.)

gap

The long-run trend of the U.S. economy is expansion and economic ______________

growth

One reason teenagers have a higher unemployment rate than adults is because they: Multiple choice question. have higher skill levels have lower skill levels are more mobile have more motivation

have lower skill levels

Unanticipated inflation ______ fixed-income recipients, savers, and creditors. Multiple choice question. hurts does not affect helps may or may not help

hurts

Frictional unemployment is ______. Multiple choice question. inevitable and undesirable not inevitable and should be prevented not inevitable and in part desirable inevitable and, in part, desirable

inevitable and, in part, desirable

Real interest rates are the ______. Multiple choice question. interest rates quoted in the market minus the expected inflation rate nominal interest rate multiplied by the inflation rate interest rates quoted in the market plus the expected inflation rate interest rates quoted in the market

interest rates quoted in the market minus the expected inflation rate

Why the economy sees business cycle fluctuations rather than slow, smooth growth is a central issue of ______. Multiple choice question. macroeconomics microeconomics long-run economic growth unemployment inflation

macroeconomics

Food and energy prices often complicate the measurement of inflation because supply and demand for these products ______. Multiple choice question. often change, creating temporary changes in prices are stable in the short run and unstable in the long run typically lag behind other goods and services are constant, so equilibrium prices rarely change

often change, creating temporary changes in prices

The basic economic cost of unemployment is forgone ______. Multiple choice question. supply inputs labor output

output

The phase of the business cycle at which the economy is at or near full employment is known as a(n

peak

The phase of the business cycle at which the economy is at or near full employment is known as a(n) __________.

peak

A GDP gap equals actual GDP minus (one word) GDP.

potential

Inflation redistributes: Multiple choice question. nominal income real income prices interest rates

real income

Cost-push inflation can contribute to a recession by increasing prices, which ______. Multiple choice question. reduces output while increasing employment reduces output and leads to lower employment increases output and causes real incomes to rise increases interest rates and reduces consumer debts

reduces output and leads to lower employment

Select all that apply Which of the following group of people are hurt by unanticipated inflation? Multiple select question. savers debtors fixed-income recipients flexible-income recipients creditors

savers fixed-income recipients creditors

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 ______ unemployment. Multiple choice question. structural seasonal frictional cyclical

structural

The labor force is the ______. Multiple choice question. total population minus the unemployed employed minus the unemployed total number of employed sum of the employed and unemployed

sum of the employed and unemployed

The natural rate of unemployment is generally thought of as the: Multiple choice question. sum of the frictional unemployment and cyclical unemployment rates sum of the structural unemployment and cyclical unemployment rates sum of the frictional unemployment and structural unemployment rates ratio of the frictional unemployment rate to the cyclical unemployment rate

sum of the frictional unemployment and structural unemployment rates

The natural rate of unemployment is generally thought of as the: Multiple choice question. sum of the structural unemployment and cyclical unemployment rates sum of the frictional unemployment and structural unemployment rates ratio of the frictional unemployment rate to the cyclical unemployment rate sum of the frictional unemployment and cyclical unemployment rates

sum of the frictional unemployment and structural unemployment rates

The major source of cost-push inflation is Multiple choice question. supply shocks excess total spending surplus of supply demand shocks excess demand

supply shocks

Inflation is a problem because when it occurs: Multiple choice question. all prices go down. all prices go up. the "purchasing power" of money is reduced. the "purchasing power" of money is increased.

the "purchasing power" of money is reduced.

The unemployment rate equals the percentage of ______. Multiple choice question. the population that is unemployed people between the ages of 18 and 65 who are not working the labor force that is unemployed the workforce that is either unemployed or underemployed

the labor force that is unemployed

Cost-push inflation is caused by an increase in ______. Multiple choice question. spending by the government on management programs saving by consumers and companies alike total spending beyond the economy's capacity to produce the per-unit production costs at each level of spending

the per-unit production costs at each level of spending

Deflation occurs when there is a decline in ______. Multiple choice question. investment wages the price level unemployment

the price level

Frictional unemployment is defined as a type of unemployment that is caused by workers who ______. Multiple choice question. have skills that have become obsolete or are no longer marketable have given up searching for new employment unemployed as they actively search for a new job. are out of work because of a decline in total spending in the economy

unemployed as they actively search for a new job.

A discouraged worker is a(n) _______. Multiple choice question. employed worker who is looking for a different type of work unemployed worker who drops out of the labor force and no longer seeks work actively unemployed worker actively seeking work part-time worker who actively looks for full-time work

unemployed worker who drops out of the labor force and no longer seeks work actively

The portion of the labor force that is not working but is willing and able to work and actively seeking work is defined as ______, and the portion of the labor force that is working part-time or full-time is defined as ______. Multiple choice question. discouraged workers; the labor force unemployed; employed the labor force; employed employed; unemployed

unemployed; employed

Forgone output is a basic economic cost of ______. Multiple choice question. hyperinflation surpluses inflation unemployment

unemployment

Workers in lower-skilled occupations have higher ______ rates than workers in higher-skilled occupations. Multiple choice question. unemployment interest capital wage

unemployment