STUDY: Unit II. Chapter 6 and Chapter 9 Concepts.

Which of the following is most likely to indicate higher unemployment? an increase in real GDP a decrease in nominal GDP a decrease in real GDP an increase in nominal GDP

a decrease in real GDP

Inflation is defined as a general increase in the price level. the growth phase of the business cycle. the rate of growth in nominal GDP. a situation where all prices in the economy rise simultaneously.

a general increase in the price level.

A large negative GDP gap implies a low rate of unemployment. a high rate of unemployment. an excess of imports over exports. a sharply rising price level.

a high rate of unemployment.

Demand-pull inflation occurs when prices of resources rise, pushing up costs and the price level. occurs only when the economy has reached its absolute production capacity. occurs when total spending exceeds the economy's ability to provide output at the existing price level. is also called cost-push inflation.

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

Demand-pull inflation is measured differently than cost-push inflation. can be present even during an economic depression. is also called "hyperinflation." occurs when total spending in the economy is excessive.

occurs when total spending in the economy is excessive.

The three statistics that are the main focus for those measuring macroeconomic health are nominal GDP, unemployment, and inflation. real GDP, inflation, and unemployment. real GDP, nominal GDP, and inflation. real GDP, nominal GDP, and unemployment.

real GDP, inflation, and unemployment.

A recession is defined as a period in which demand-pull inflation is present. nominal domestic output falls. real domestic output falls. cost-push inflation is present.

real domestic output falls.

The table contains information about the hypothetical economy of Scoob. All figures are in millions. The unemployment rate in Scoob is 6.9 percent. 5.0 percent. 2.5 percent. 3.2 percent.

6.9 percent.

Cost-push inflation reduces the unemployment rate. increases real output. raises the natural rate of unemployment. reduces real output.

reduces real output.

Core inflation measures changes in key input prices. underlying changes in the CPI, after accounting for the price volatility of high-tech goods. changes in the prices of the most commonly used goods, including food and energy. underlying increases in the CPI after removing volatile food and energy prices.

underlying increases in the CPI after removing volatile food and energy prices.

Real GDP measures the total dollar value of all goods and services produced within the borders of a country using current prices. total dollar value of all goods and services consumed within the borders of a country, corrected for price changes. value of final goods and services produced within the borders of a country, adjusted for price changes. value of all goods and services produced in the world, using current prices.

value of final goods and services produced within the borders of a country, adjusted for price changes.

Real gross domestic product will increase if the level of output increases. will increase if the price level increases. can change from one year to the next even if there is no change in output. is a measure of inflation.

will increase if the level of output increases.

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 2 percent. 8 percent. 6 percent. 3 percent.

3 percent.

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is $990 billion. $510 billion. $490 billion. $10 billion.

$510 billion.

The consumer price index was 177.1 last year and 179.9 this year. Therefore, the current rate of inflation is about 4.1 percent. 1.6 percent. 2.8 percent. 3.4 percent.

1.6 percent.

The table contains information about the hypothetical economy of Scoob. All figures are in millions. The labor force in Scoob is 102 million. 145 million. 95 million. 105 million.

102 million.

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is 33 percent. 91 percent. 10 percent. 11 percent.

11 percent.

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is 6 percent. 3 percent. 53 percent. 7 percent.

6 percent.

Refer to the figures. Which figure(s) represent(s) a situation where prices are flexible? A only B only neither A nor B both A and B

A only

Refer to the figures. Which figure(s) represent(s) a situation where negative demand shocks can result in a recession? neither A nor B A only B only both A and B

B only

Refer to the figures. Which figure(s) represent(s) a situation where prices are sticky? both A and B neither A nor B A only B only

B only

Which of the following would an economist consider to be investment? Boeing builds a new factory Oprah buys a $10 million home from a fellow celebrity a stockbroker buys 10,000 shares of Starbucks stock All of these choices are correct.

Boeing builds a new factory

Which of the following is an example of a demand shock? The federal government unexpectedly requires automobile producers to raise fuel efficiency standards. Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico. Floods in the Midwest destroy crops. Consumers become worried about job loss and buy fewer goods and services than expected.

Consumers become worried about job loss and buy fewer goods and services than expected.

Which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices? Firms respond to shorter-term demand shocks by adjusting production levels; more persistent changes in demand result in changes in inventories. Firms are reluctant to adjust inventory levels because the costs are higher than changing the quantity of output produced. Firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels. Firms are quick to let go of workers when negative demand shocks occur.

Firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels.

Which of the following is used to compare the average standard of living across countries? GDP per person purchasing power parity real GDP nominal GDP

GDP per person

In which of the following cases would real income rise? Nominal income rises by 8 percent, and the price level rises by 10 percent. Nominal income rises by 2 percent, and the price level remains unchanged. Nominal income falls by 4 percent, and the price level falls by 2 percent. Real income will rise in all of these cases.

Nominal income rises by 2 percent, and the price level remains unchanged.

Unemployment describes the condition where equipment and machinery are going unused. any resource sits idle. a person does not have a job, regardless of whether or not he or she wants one. a person cannot get a job but is willing to work and is actively seeking work.

a person cannot get a job but is willing to work and is actively seeking work.

The phase of the business cycle in which real GDP declines is called a recession. the peak. the trough. an expansion.

a recession.

Refer to the figures. Which of the following events would most likely result in higher unemployment? a shift from D2 to D1 in Figure B a shift from D2 to D3 in Figure A a shift from D2 to D3 in Figure B a shift from D2 to D1 in Figure A

a shift from D2 to D1 in Figure B

Refer to the figures. Which of the following events would most likely result in inflation? a shift from D2 to D1 in Figure A a shift from D2 to D3 in Figure A a shift from D2 to D1 in Figure B a shift from D2 to D3 in Figure B

a shift from D2 to D3 in Figure A

Most economists agree that the immediate cause of most business cycle variation is the growth and subsequent bursting of financial bubbles. the invention of new products. an unexpected change in the productivity of workers. an unexpected change in the level of total spending.

an unexpected change in the level of total spending.

Recurring upswings and downswings in an economy's real GDP over time are called business cycles. recessions. output yo-yos. total product oscillations.

business cycles.

Rising per-unit production costs are most directly associated with structural unemployment. cost-push inflation. demand-pull inflation. frictional unemployment.

cost-push inflation.

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced deflation of 4 percent. inflation of 3.33 percent. deflation of 3.33 percent. inflation of 4 percent.

deflation of 3.33 percent.

The phrase "too much money chasing too few goods" best describes demand-pull inflation. the inflation premium. cost-push inflation. the GDP gap.

demand-pull inflation.

Real income is found by dividing nominal income by the price index (in hundredths). multiplying nominal income by 1.03. dividing nominal income by 70. dividing the price index (in hundredths) by nominal income.

dividing nominal income by the price index (in hundredths).

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? trough expansion peak recession

expansion

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 frictionally unemployed. not a member of the labor force. structurally unemployed. cyclically unemployed.

frictionally unemployed.

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

full-employment unemployment rate.

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information, we can conclude that Harry's production of large pepperoni pizzas this year left nominal GDP unchanged but increased real GDP by $20,000. increased nominal GDP by $120,000 but left real GDP unchanged. increased nominal GDP by $20,000 but left real GDP unchanged. increased nominal GDP by $120,000 and increased real GDP by $100,000.

increased nominal GDP by $20,000 but left real GDP unchanged.

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information, we can conclude that Harry's production of large pepperoni pizzas did not change either nominal or real GDP from last year. increased both nominal and real GDP from last year. increased nominal GDP from last year, but real GDP was unaffected. increased real GDP from last year, but nominal GDP was unaffected.

increased nominal GDP from last year, but real GDP was unaffected.

Cost-push inflation is caused by excessive total spending. is a mixed blessing because it has positive effects on real output and employment. moves the economy inward from its production possibilities curve. shifts the nation's production possibilities curve leftward.

moves the economy inward from its production possibilities curve.

Suppose a small economy produces only smart TVs. In year one, 100,000 TVs are produced and sold at a price of $1,200 each. In year two, 100,000 TVs are produced and sold at a price of $1,000 each. As a result, nominal GDP stays constant, while real GDP decreases. nominal GDP and real GDP both decrease. nominal GDP decreases, and real GDP decreases even more. nominal GDP decreases, while real GDP stays constant.

nominal GDP decreases, while real GDP stays constant.

Real GDP is preferred to nominal GDP as a measure of economic performance because nominal GDP only includes goods and excludes services. nominal GDP is not adjusted for population changes. nominal GDP uses current prices and thus may over or understate true changes in output. real GDP accounts for changes in the quality of goods and services produced.

nominal GDP uses current prices and thus may over or understate true changes in output.

The unemployment rate is the ratio of unemployed to employed workers. percentage of the total population that is unemployed. percentage of the labor force that is unemployed. number of employed workers minus the number of workers who are not in the labor force.

percentage of the labor force that is unemployed.

Full-employment output is also called zero-savings output. potential output. zero-unemployment output. equilibrium output.

potential output.

Which of the following formulas is correct? Percentage change in price level approximates percentage change in real income minus percentage change in nominal income. real income approximates percentage change in price level minus percentage change in nominal income. real income approximates percentage change in nominal income minus percentage change in price level. nominal income approximates percentage change in price level minus percentage change in real income.

real income approximates percentage change in nominal income minus percentage change in price level.

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 rise by about 1 percent. fall by about 1 percent. rise by about 4 percent. remain constant.

rise by about 1 percent.

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment? frictional, structural, and cyclical unemployment frictional and cyclical unemployment cyclical and structural unemployment structural and frictional unemployment

structural and frictional unemployment

The natural rate of unemployment is lower than the full-employment rate of unemployment. found by dividing total unemployment by the size of the labor force. higher than the full-employment rate of unemployment. that rate of unemployment occurring when the economy is at its potential output.

that rate of unemployment occurring when the economy is at its potential output.