Macroeconomics Ch. 6

Real income can be determined by:

deflating nominal income for inflation

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

cyclical unemployment

Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:

demand-pull inflation

At the full-employment unemployment rate there is only:

frictional and structural unemployment

Search and wait unemployment is another way to describe:

frictional unemployment

If unemployment is above the natural rate of unemployment, then potential GDP is:

greater than actual GDP

A peak in the business cycle:

is a temporary maximum point

The natural rate of unemployment:

is equal to the total of frictional and structural unemployment

Unlike demand-pull inflation, cost-push inflation:

is self-limiting

What is the main problem with mild inflation according to some economists?

it diverts productive time towards activities to hedge against inflation

What are the primary effects of cost-push inflation?

it reduces real output and redistributes a decreased level of real income

A high unemployment rate most likely means that there is a:

large GDP gap in the economy

The view that labor unions may be a source of inflation would be best associated with the:

wage-push view of inflation

Unanticipated inflation arbitrarily:

"taxes" those who receive fixed money incomes

If the average level of nominal income in a nation is $45,000 and the price level index is 180, the average real income would be about:

$25,000

If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double?

14 years

The price level has doubled in 35 years. The approximate annual percentage rate of increase in the price level over this period has been:

2 percent

You are given the following information about the economy: (1) nominal interest = 8 percent; (2) real rate of interest = 6 percent. The inflation premium is:

2 percent

If the Consumer Price Index was 166.6 in one year and 172.2 in the next year, then the rate of inflation from one year to the next was:

3.4 percent

In an economy, 35 million workers are employed, the labor force is 50 million, and total population is 70 million. The unemployment rate is:

30 percent

If the Consumer Price Index was 115 in one year and 120 in the next year, then the rate of inflation from one year to the next was:

4.3 percent

The Consumer Price Index was 115 one year and 120 the next year. The rate of inflation from one year to the next was approximately:

4.3 percent

The unemployment rate in an economy is 12 percent. The civilian labor force is 50 million. The number of employed workers in the economy is:

44 million

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation from one year to the next was approximately:

5.9 percent

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, 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

If the Consumer Price Index was 165 in one year and 175 in the next year, then the rate of inflation from one year to the next was approximately:

6.1 percent

The total population of an economy is 175 million, the labor force is 125 million, and the number of unemployed is 8 million. The unemployment rate for this economy is:

6.4 percent

Official unemployment statistics:

understate unemployment because discouraged workers are not counted as unemployed

A recession is a decline in:

GDP that lasts six months or longer

What is the formula to calculate unemployment rate?

[(Unemployed)/(Labor Force)] x 100

Cost-push inflation may be caused by:

a negative supply shock

A college graduate using the summer following graduation to search for a job would best be classified as:

a part of frictional unemployment

If the GDP gap is positive, then:

actual GDP is greater than potential GDP

If the GDP gap is negative, then:

actual GDP is less than potential GDP

The recurrent ups and downs in the level of economic activity extending over several years are a description of a:

business cycle

What does structural unemployment result from?

changes in the structure of consumer demand or technology

Inflation caused by a rise in per-unit production costs is referred to as:

cost-push inflation

Inflation initiated by increases in wages or other resource prices is labeled:

cost-push inflation

The level of total spending is the immediate determinant of the:

level of real output and employment

The full-employment rate of unemployment is also called the:

natural rate of unemployment

The amount by which potential GDP exceeds actual GDP is one measure of the:

opportunity cost of cyclical unemployment

Which phase of the business cycle would be most closely associated with an economic contraction?

recession

A mismatch between the geographic location of workers and the location of job openings would result in what type of unemployment?

structural

A worker who loses a job at a call center because business firms switch the call center to another country is an example of:

structural unemployment

Inflation is a:

sustained rise in the general level of prices

Which measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

the consumer price index

Inflation is a rise in:

the general level of prices over time

What is true about inflation?

the redistributive effects of inflation are arbitrary with respect to people and groups in society