Deck 3: Business Cycle Measurement

Question 1

If the correlation between GDP and y is -0.75,we say y is

A) procyclical.
B) acyclical.
C) countercyclical.
D) tricyclical.

Answer 1

countercyclical.

Question 2

Macroeconomic forecasting is made easier due to the fact that

A) real GDP is variable about trend.
B) the business cycle has a regular frequency.
C) deviations from trend in real GDP are persistent.
D) turning points are easy to predict.

Answer 2

deviations from trend in real GDP are persistent.

Question 3

The official dating of the most recent recession places its timing as

A) 2007.
B) 2007-2009.
C) 2008.
D) 2008-2009.

Answer 3

2008-2009.

Question 4

Positive correlation between x and y implies that

A) when x is high, y is high.
B) when x is high, y is low.
C) when x is zero, y is positive.
D) x and y are positively unrelated.

Question 5

A business cycle trough is a

A) small positive deviation from trend in real GDP.
B) relatively large positive deviation from trend in real GDP.
C) small negative deviation from trend in real GDP.
D) relatively large negative deviation from trend in real GDP.

Question 6

Business cycle persistence refers to the property that

A) real GDP is rarely exactly at trend.
B) booms and recessions last a long time.
C) when real GDP is above trend, it tends to stay above trend, and when it is below trend, it tends to stay below trend.
D) business cycles are persistently hard to predict.

Question 7

When a macroeconomic aggregate is procyclical

A) it grows faster than GDP.
B) its deviations from trend generally change before the deviations from trend in GDP do.
C) its deviations from trend generally change more that the deviations from trend in GDP.
D) its deviations from trend are more often of the same sign as the deviations from trend in GDP.

Question 8

The property that macroeconomic variables fluctuate together in patterns that exhibit strong regularities is called

A) coincidence.
B) co-movement.
C) correlation.
D) coexistence.

Question 9

If x is useful for predicting future GDP then

A) x is coincident.
B) x is a lagging variable.
C) x is countercyclical.
D) x is a leading variable.

Question 10

Macroeconomic forecasting is made more difficult due to the fact that

A) deviations from trend in real GDP are persistent.
B) turning points are hard to predict.
C) there is no regularity in comovements.
D) consumption is smooth.

Question 11

A turning point is

A) a change in policy.
B) a peak or a trough.
C) a boom or a recession.
D) a zero deviation from trend.

Question 12

If the correlation between GDP and y is 0.55,we say y is

A) procyclical.
B) acyclical.
C) countercyclical.
D) tricyclical.

Question 13

Which of the following is NOT a feature of recent U.S. business cycles?

A) The time series of deviations from trend in real GDP is quite choppy.
B) The time series of deviations from trend in real GDP is quite smooth.
C) There is no regularity to the amplitude of fluctuations in real GDP above trend.
D) There is no regularity to the frequency of fluctuations in real GDP above trend.

Question 14

Predicting business cycles is difficult because

A) they are very persistent.
B) the weather changes unpredictably.
C) statistics lie.
D) their frequency is irregular.

Question 15

Before 2000,the three most recent U.S. recessions occurred in

A) 1969-1973, 1979-1982, and 1994-1995.
B) 1973-1975, 1982-1985, and 1990-1991.
C) 1973-1975, 1981-1982, and 1990-1991.
D) 1981-1982, 1990-1991, and 1998-1999.

Question 16

The defining feature of business cycles is that they

A) are inherently bad.
B) represent the underlying trend of real GDP in the economy.
C) are fluctuations about trend in real GDP.
D) measure prospects for future growth in the economy.

Question 17

A business cycle peak is a

A) small positive deviation from trend in real GDP.
B) relatively large positive deviation from trend in real GDP.
C) small negative deviation from trend in real GDP.
D) relatively large negative deviation from trend in real GDP.

Question 18

Robert Lucas has popularized the notion that with respect to

A) severity, business cycles are all alike.
B) causation, business cycles are all alike.
C) quantitative behavior of co-movements among series, business cycles are all alike.
D) qualitative behavior of co-movements among series, business cycles are all alike.

Question 19

Negative correlation between x and y implies that

A) when x is high, y is high.
B) when x is high, y is low.
C) xy < 0.
D) x/y < 0.

Question 20

A time series is

A) the length of a business cycle.
B) a macroeconomic aggregate that does not lead or lag the business cycle.
C) data that is subject to revision.
D) a sequence of dated measurements.

Question 21

A positive relationship between the rate of change in money prices and real GDP is

A) a leading relationship
B) a lagging relationship.
C) an example of countercyclicality.
D) a Phillips curve.

Question 22

If deviations from trend in a macroeconomic variable are positively correlated with deviations from trend in real GDP,that variable is said to be

A) useful in predicting future movements in real GDP.
B) procyclical.
C) countercyclical.
D) acyclical.

Question 23

For the period 1947-2012 in the United States,the price level was

A) acyclical.
B) bicyclical.
C) procyclical.
D) countercyclical.

Question 24

A reverse Phillips Curve would consist of a

A) positive relationship between deviations from trend in real and nominal interest rates.
B) negative relationship between deviations from trend in real and nominal interest rates.
C) positive relationship between deviations from trend in the level of prices and the level of aggregate economic activity.
D) negative relationship between deviations from trend in the level of prices and the level of aggregate economic activity.

Question 25

Average labor productivity is computed as the

A) ratio of industrial production to the employment rate.
B) ratio of real output in manufacturing to the level of real GDP.
C) ratio of real GDP to the unemployment rate.
D) ratio of real GDP to the level of employment.

Question 26

If deviations from trend in a macroeconomic variable are negatively correlated with deviations from trend in real GDP,that variable is said to be

A) useless in predicting future movements in real GDP.
B) procyclical.
C) countercyclical.
D) acyclical.

Question 27

A scatterplot is

A) a graph highlighting leads and lags.
B) a graph with one series on each axis.
C) a graph of one series against time.
D) a graph of two series against time.

Question 28

If real GDP helps to predict the path of a particular macroeconomic variable,it is said to be a

A) conventional variable.
B) coincident variable.
C) leading variable.
D) lagging variable.

Question 29

Real investment tends to be

A) procyclical and less variable than real GDP.
B) procyclical and more variable than real GDP.
C) countercyclical and less variable than real GDP.
D) countercyclical and more variable than real GDP.

Question 30

A lagging variable can be recognized by the fact that

A) its persistence is smaller than that of GDP.
B) its turning points happen before the turning points of GDP.
C) the turning points of GDP happen before its turning points.
D) its persistence is larger than that of GDP.

Question 31

Real consumption tends to be

A) procyclical and less variable than real GDP.
B) procyclical and more variable than real GDP.
C) countercyclical and less variable than real GDP.
D) countercyclical and more variable than real GDP.

Question 32

If the correlation between GDP and y is 0,we say y is

A) procyclical.
B) acyclical.
C) countercyclical.
D) tricyclical.

Question 33

Forecasting the future path of real GDP by exploiting past statistical relationships

A) is never very reliable.
B) can be accomplished by the construction and use of an index of leading variables.
C) can be accomplished by the construction and use of an index of lagging variables.
D) can be accomplished by the construction and use of an index of coincident variables.

Question 34

One example of a Phillips Curve would be a

A) positive relationship between deviations from trend in real and nominal interest rates.
B) negative relationship between deviations from trend in real and nominal interest rates.
C) positive relationship between deviations from trend in the level of prices and the level of aggregate economic activity.
D) negative relationship between deviations from trend in the level of prices and the level of aggregate economic activity.

Question 35

Employment tends to

A) lead the cycle.
B) be coincident with the cycle.
C) lag the cycle.
D) sometimes lead, sometimes lag the cycle.

Question 36

If a macroeconomic variable tends to aid in predicting the future path of real GDP,it is said to be a

A) convenient variable.
B) coincident variable.
C) leading variable.
D) lagging variable.

Question 37

Average labor productivity tends to be

A) procyclical and less variable than real GDP.
B) procyclical and more variable than real GDP.
C) countercyclical and less variable than real GDP.
D) countercyclical and more variable than real GDP.

Question 38

An example of a leading variable in the US is

A) GDP.
B) investment is structures.
C) the consumer price index.
D) housing starts.

Question 39

Employment tends to be

A) procyclical and less variable than real GDP.
B) procyclical and more variable than real GDP.
C) countercyclical and less variable than real GDP.
D) countercyclical and more variable than real GDP.

Question 40

A scatterplot allows us

A) to mark peaks and troughs.
B) to determine whether a series leads or lags.
C) to see the comovement between two time series.
D) to determine how persistent a series is.

Question 41

Which of the following is not a correct characterization of the U.S. business cycle?

A) Investment fluctuates less than GDP.
B) Consumption fluctuates less than GDP.
C) Employment fluctuates less than GDP.
D) Average labor productivity fluctuates less than GDP.

Question 42

The observation that the money supply is procyclical and leading the level of aggregate economic theory is most closely associated with

A) Lucas and Friedman.
B) Friedman and Schwartz.
C) Kydland and Prescott.
D) David Runkle.

Question 43

Which of the following is not a correct characterization of the U.S. business cycle?

A) Employment lags GDP.
B) Consumption is coincident.
C) Money lags GDP.
D) Investment is coincident.

Question 44

Seasonal adjustment

A) should never be used.
B) is rarely used.
C) is a common characteristic of macroeconomic time series in wide use.
D) is not used by modern macroeconomists.

Question 45

Which of the following is not a correct characterization of the U.S. business cycle?

A) Employment is procyclical.
B) Consumption is procyclical.
C) Real wages are procyclical.
D) Prices are procyclical.

Question 46

The weight of empirical evidence suggests that in the United States,the real wage rate is

A) acyclical.
B) bicyclical.
C) procyclical.
D) countercyclical.

Question 47

For the period 1947-2012 in the United States,the money supply was

A) procyclical and leading.
B) procyclical and lagging.
C) countercyclical and leading.
D) countercyclical and lagging.

Question 48

Which of the following is not a correct characterization of the U.S. business cycle?

A) Investment is procyclical.
B) Consumption is procyclical.
C) Investment is highly variable.
D) Consumption is highly variable.

Question 49

After 1980,the following is true

A) money is a leading variable.
B) any lead/lag relationship between money and real GDP is difficult to detect.
C) money is a lagging variable.
D) money is coincident.

Question 50

Seasonal adjustment tends to

A) smooth a time series with an important seasonal component.
B) accentuate seasonal fluctuations.
C) take out the deviations from trend in a time series.
D) make a time series acyclical.

Question 51

For the period 1947-2012,the behavior of the U.S. money supply is best characterized as

A) nearly constant over time.
B) somewhat smoother than GDP.
C) somewhat more volatile than GDP.
D) extremely volatile and unstable.

Question 52

Which of the following is not a correct characterization of the U.S. business cycle?

A) Prices are procyclical.
B) Consumption fluctuates little.
C) Investment fluctuates a lot.
D) Average labor productivity is procyclical.

Question 53

Difficulties in determining the cyclical pattern in real wage rates from aggregate data are primarily caused by biases due to

A) substitution behavior.
B) substantial differences across different business cycles.
C) variations in the composition of the labor force over the business cycle.
D) changing policy responses to business cycles.

Question 54

Which of the following is not a correct characterization of the U.S. business cycle?

A) Money is countercyclical.
B) Employment is procyclical.
C) Labor productivity is procyclical.
D) Prices are countercyclical.

Question 55

For the period 1947-2012,employment in the United States was

A) procyclical and leading.
B) procyclical and lagging.
C) countercyclical and leading.
D) countercyclical and lagging.

Question 56

Which of the following is not a correct characterization of the U.S. business cycle?

A) Employment is procyclical.
B) Average labor productivity is countercyclical.
C) Wages are procyclical.
D) Money is procyclical.