Deck 6: Business Cycles and Unemployment

Question 1

Economists use the phrase "business cycle" when referring to fluctuations in:

A)real GDP.
B)the chain price index.
C)the consumer price index.
D)the general level of prices.

Answer 1

real GDP.

Question 2

As a general rule, a recession is a decline in real GDP lasting at least :

A)one year.
B)six months.
C)three months.
D)one month.

Answer 2

six months.

Question 3

Which of the following will most likely occur during the recessionary phase of a business cycle?

A)Real GDP rises, and the unemployment rate falls.
B)Real GDP declines, and the rate of inflation rises.
C)The sales of most businesses decline, and the unemployment rate rises.
D)Inflation rises, and employment\population ratio falls.

Answer 3

The sales of most businesses decline, and the unemployment rate rises.

Question 4

A long and deep recession in the business cycle is:

A)unemployment.
B)a trough.
C)a recession.
D)a depression
E)unavoidable.

Question 5

The point at which real output reaches a maximum during a business cycle is called the:

A)peak.
B)recession.
C)recovery.
D)trough.

Question 6

Economists usually use the term "recession" to refer to:

A)any slowdown in the growth of real GDP.
B)zero real GDP growth.
C)two or more consecutive quarters of declining real GDP.
D)a reduction in nominal GDP lasting more than six months.

Question 7

Which of the following is true of the business cycle record of the United States?

A)Recessions have been lengthier during the last two decades than was true prior to 1980.
B)Real GDP contracted throughout most of the 1950s.
C)Real GDP in 2000 was approximately the same as 1950.
D)Since 1950, the fluctuations in GDP have been less severe than before 1950.

Question 8

The period during which real output falls during a business cycle is called:

A)peak.
B)recession.
C)recovery.
D)trough.

Question 9

The phase of the business cycle that follows a recession is known as the:

A)peak.
B)recession.
C)recovery.
D)trough.

Question 10

How do we measure economic growth?

A)Increases in the price level, as indicated by the GDP chain price index.
B)Increases in nominal GDP.
C)Increases in real GDP.
D)Increases in the labor force.

Question 11

A phase in the business cycle in which the economy's real GDP declines is known as:

A)a depression.
B)a recession.
C)a downtick.
D)disequilibrium.
E)limited demand.

Question 12

Which of the following will most likely occur during the recovery phase of a business cycle?

A)Real GDP rises, and unemployment falls.
B)Real GDP declines, and inflation rises.
C)Interest rates rise, and the number of business failures rise.
D)Inflation rises, and employment falls.

Question 13

The ____ phase of the business cycle follows a recession.

A)recovery
B)recession
C)peak
D)trough

Question 14

The period of declining growth in real GDP between the peak of the business cycle and the trough is called a(n):

A)recessionary phase.
B)recovery.
C)expansionary phase.
D)stationary phase.

Question 15

What stage of the business cycle immediately follows the trough?

A)Peak.
B)Recovery.
C)Recession.
D)Depression.

Question 16

As a general rule, a recession occurs when there is a six consecutive month fall in:

A)nominal GDP.
B)real GDP.
C)the price level.
D)the trade balance.

Question 17

The period of growth in real GDP between the trough of the business cycle and the next peak is called the:

A)recessionary phase.
B)recovery phase.
C)contractionary phase.
D)cyclical phase.

Question 18

A business cycle is the:

A)period of time in which expansion and contraction of economic activity are equal.
B)period of time in which there are three phases: peak, depression, and recovery.
C)recurring growth and decline in real GDP.
D)period of time in which a business is established and ceases operations.

Question 19

Since World War II, the average length of recessions in the United States has been:

A)2 months.
B)11 months.
C)2 years.
D)3 1\2 years.

Question 20

A business cycle is the period of time in which:

A)a business is established and ceases operations.
B)there are four phases: peak, recession, trough and recovery.
C)the price level varies with real GDP.
D)expansion and contraction of economic activity are equal.
E)none of these are true.

Question 21

Suppose the index of leading economic indicators begins to decline for several months. Which of the following economic events will likely follow?

A)A recession.
B)Severe inflation.
C)Greater employment.
D)Higher investment.

Question 22

If real GDP declines for at least one-half year, the economy is experiencing a:

A)depression.
B)decline.
C)recession.
D)growth recession.
E)deflation.

Question 23

Which of the following is not a variable in the index of leading indicators?

A)Average work week.
B)Duration of unemployment.
C)Employment claims.
D)New businesses.

Question 24

Economic growth is measured by the annual percentage increase in a nation's level of:

A)nominal GDP.
B)real GDP.
C)real GDP deflator.
D)economic indicators.

Question 25

Exhibit 6-1 Business cycle In Exhibit 6-1, the recession phase of the business cycle can be represented by point(s):

A)CDE.
B)BCD.
C)EFG.
D)A and E.

Question 26

Which of the following is not a lagging indicator?

A)Duration of unemployment.
B)Stock prices.
C)Outstanding commercial and industrial loans.
D)Prime rate.

Question 27

The phase in the business cycle in which real GDP declines is called a:

A)trendline.
B)peak.
C)recession.
D)recovery.
E)trough.

Question 28

The government's chief forecasting gauge for business cycles is the:

A)unemployment rate.
B)real GDP.
C)personal income index.
D)index of leading indicators.

Question 29

Variables that change before real GDP changes are measured by the:

A)personal income index.
B)real GDP index.
C)forecasting gauge.
D)index of leading indicators.

Question 30

Which of the following is a lagging indicator?

A)Outstanding commercial loans.
B)Duration of unemployment.
C)Prime rate.
D)All of these.

Question 31

Which of the following is not a coincident indicator?

A)Personal income.
B)Industrial production.
C)Manufacturing and trade sales.
D)All of these.

Question 32

A general rule is that economy is experiencing a recession when:

A)real GDP declines for at least three months.
B)real GDP declines for at least nine months.
C)nominal GDP declines for at least nine months.
D)real GDP declines for at least six months.
E)nominal GDP declines for at least six months.

Question 33

Since 1929, real GDP in the United States has grown at an average annual rate of about:

A)0.5 percent.
B)1 percent.
C)3 percent.
D)7.5 percent.

Question 34

Exhibit 6-1 Business cycle In Exhibit 6-1, the recovery phase of the business cycle can be represented by points:

A)A.
B)C.
C)E.
D)C to E.
E)E to G.

Question 35

If you look for a job for eighteen months after graduation, but fail to generate an offer, even after lowering your expectations, the economy is probably in the business cycle phase called a:

A)recession.
B)peak.
C)boom.
D)recovery.
E)trough.

Question 36

The business cycle consists of four phases. At the top we have:

A)recovery, followed by peak, and then recession followed by a recession.
B)recovery, followed by a recession, and then peak followed by recession.
C)peak, then an upturn followed by a recession, and then recession.
D)peak, then a recession followed by recovery, and then recession.
E)peak, then a recession followed by recession, and finally, recovery.

Question 37

Economic indicators, like unemployment claims and the average workweek, which change before real GDP changes, are called:

A)leading.
B)lagging.
C)coincident.
D)structural.

Question 38

Which of the following is a leading business cycle indicator?

A)The unemployment rate.
B)The volume of outstanding commercial loans.
C)New building permits.
D)Personal income.

Question 39

Exhibit 6-1 Business cycle In Exhibit 6-1, point E represents:

A)recession and a trough.
B)peak and a trough.
C)recession and a peak.
D)recovery and a peak.

Question 40

Which one of the following persons would be considered unemployed?

A)A person not working who has given up searching for a job.
B)A part-time worker looking for a full-time job.
C)A construction worker who was laid off due to cold weather.
D)A full-time college student who is not a member of the labor force.

Question 41

The civilian labor force consists of all the:

A)people in the economy who are not retired.
B)people in the economy over 16 years of age.
C)adults in the economy between 18 and 65 years old who are able to work.
D)noninstitutionalized adults in the economy who hold jobs or are looking for them.
E)citizens in the economy who are graduates of high school.

Question 42

Ryan Black does not work and has not looked for work because of a disability. He is:

A)a member of the civilian labor force who is employed.
B)a member of the civilian labor force who is unemployed.
C)a member of the civilian labor force who is underemployed.
D)a discouraged worker who is not a member of the labor force.
E)not a member of the labor force.

Question 43

Retired persons are officially classified as:

A)unemployed.
B)self-employed.
C)underemployed.
D)not in the labor force.

Question 44

Find the size of the civilian labor force from the following data: frictional unemployment = 150, structural unemployment = 200, cyclical unemployment = 225, discouraged workers = 25, underemployed workers = 75, fully employed workers = 850, total population = 2,000.

A)1,425
B)1,450
C)1,500
D)1,525
E)2,000

Question 45

Which one of the following people is not a member of the labor force?

A)A full-time student who devotes all her time to her classes.
B)A person who works 30 hours a week at Burger King and goes to school at night.
C)The man who was fired last week and is searching for a new job.
D)The President of the United States.
E)A professional athlete.

Question 46

Consider an economy made up of 100 people, 60 of whom old jobs, 10 of whom are looking for work, and 15 of whom are retired. The number counted as unemployed is:

A)10.
B)15.
C)40.
D)30.
E)90.

Question 47

Which of the following groups of people are members of the labor force?

A)People in prison.
B)Full-time students.
C)People over 16 years of age who are employed.
D)Anyone not actively looking for work during the past 30 days.

Question 48

Mallory Trammell is a homemaker. Last week, she was busy with her normal household chores. She is:

A)a member of the civilian labor force who is employed.
B)a member of the civilian labor force who is unemployed.
C)a member of the civilian labor force who is underemployed.
D)a discouraged worker who is not a member of the labor force.
E)not a member of the labor force.

Question 49

Stephen Moreno reported to the government interviewer that he worked 40 hours last week as a stocker at a Target department store. He is:

A)a member of the civilian labor force who is employed.
B)a member of the civilian labor force who is unemployed.
C)a member of the civilian labor force who is underemployed.
D)a discouraged worker who is not a member of the labor force.
E)not a member of the labor force.

Question 50

Which one of the following people would not be considered a part of the labor force?

A)A steel worker who was laid off last week and is seeking work.
B)A steel worker who was laid off last year and is no longer seeking work.
C)A student who also works part-time.
D)A member of the U.S. Navy.
E)A retired college professor paid to teach a summer course.

Question 51

Why might the official measure of civilian unemployment in the U.S. be an understatement of actual unemployment?

A)Because some workers become discouraged and no longer are actively seeking work. Thus they are not officially counted in the labor force, and consequently are not officially unemployed.
B)Because the official measure of civilian unemployment fails to account for very high levels of unemployment among active-duty military personnel.
C)Because the statistics count part-time employment as being no different from full-time employment, even though many part-time workers would prefer to be fully employed.
D)Both a. and c. above are correct.

Question 52

Which of the following people is counted in the labor force?

A)Jerry, who lost his job and last looked for work three months ago.
B)Bob, who holds an MBA in management but can only find part-time employment at a fast-food restaurant.
C)Phil, who would like to work as a stockbroker but is now a househusband.
D)Mickey, who thinks he could easily become a millionaire, despite the opinion of the psychiatrist at the state hospital where he is a patient.
E)Donna Jean, age 90, who is enjoying her retirement in Montana.

Question 53

Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The number of people in the civilian labor force is:

A)30.
B)60.
C)85.
D)90.
E)70.

Question 54

Martin Shore lost his job when General Motors closed down its local plant. He has been visiting the personnel offices of the other factories in the area, looking for a new job. He is:

A)a member of the civilian labor force who is employed.
B)a member of the civilian labor force who is unemployed.
C)a member of the civilian labor force who is underemployed.
D)a discouraged worker who is not a member of the labor force.
E)not a member of the labor force.

Question 55

The civilian labor force consists of:

A)all civilians over the age of 16.
B)the employed plus the unemployed who are not in the military.
C)only individuals who are actually at work during a given week.
D)civilians who are not in prisons or mental hospitals.

Question 56

Which of the following is not a way to become officially unemployed?

A)Quit your job to look for a better job in another part of the country.
B)Be fired from your job.
C)Look for a job after being out of the civilian labor force for five years.
D)Retire.
E)Look for a job only for the period in the summer that you are out of school.

Question 57

Which of the following is the correct formula for determining the civilian unemployment rate?

A)[(the number of unemployed, working-age civilian seeking work) \(the number of civilian in the labor force)] x 100.
B)C + I + G + (X-M).
C)The total number of unemployed, working-age civilians seeking work.
D)(The number of civilian in the labor force)x 100.

Question 58

The unemployment rate equals the number of persons:

A)unemployed divided by the number employed.
B)unemployed divided by the number in the labor force.
C)unemployed divided by the population age 16 and over.
D)not working divided by the population age 16 and over.

Question 59

People who are not currently employed, but say they want a job, are counted as unemployed only if they:

A)have previously held a job.
B)are actively seeking employment.
C)are willing to accept a reasonable offer.
D)are between 16 and 65 years of age.
E)are willing to accept any offer of employment.

Question 60

How do the Bureau of Labor Statistics and the Bureau of the Census estimate U.S. unemployment each month?

A)They contact each state's unemployment office and gather data on new claims for unemployment.
B)They randomly survey about 60,000 U.S. households to determine how many people are in the labor force, and what proportion of them is unemployed.
C)They track released prisoners. These agencies adjust released prisoner employment unemployment rate proxy (PURP).
D)None of the above are correct.

Question 61

Exhibit 6-3 Unemployment categories
According to data in Exhibit 6-3 and assuming the total number of workers is 8,400, the unemployment rate is:

A)14 percent.
B)15 percent.
C)16 percent.
D)19 percent.
E)24 percent.

Question 62

Which of the following people would be officially counted as unemployed?

A)A person who works only 5 hours per week for pay.
B)A full-time college student who chooses not to have a paying job.
C)A family member who works 20 hours per week without pay.
D)A jobless high-school graduate who is actively looking for work.

Question 63

The unemployment rate will decrease whenever there is a(n):

A)increase in the number of persons classified as unemployed.
B)decrease in the number of unemployed relative to the size of the labor force.
C)decrease in the size of the population and there is no change in the number of persons classified as employed.
D)reduction in the size of the labor force.
E)decrease in the number of unemployed and the population does not change.

Question 64

A person who has given up searching for work is called:

A)frictionally unemployed.
B)structurally unemployed.
C)a discouraged worker.
D)unemployed.

Question 65

One problem with the unemployment rate is that:

A)discouraged workers are included in the calculation.
B)the data includes part-time workers as fully employed.
C)underemployment is measured in the calculation.
D)all of these are problems.

Question 66

If a sizable number of workers were switched from full-time to half-time employment, then the official unemployment rate would:

A)rise.
B)fall.
C)remain unchanged.
D)react unpredictably.

Question 67

The unemployment rate is the percentage of the:

A)civilian labor force that is unemployed or working part-time.
B)civilian labor force that is unemployed.
C)civilian labor force that is unemployed less the number of government workers.
D)adult population that is unemployed.
E)adult population that is unemployed or looking for a better job.

Question 68

Which of the following statements would come from someone classified as unemployed?

A)I'm not working because I'm going to Jamaica with my buddy.
B)I haven't had a job in a year, and I stopped looking for a job nine months ago.
C)I'm a full-time student at the University of Illinois who doesn't have time to work.
D)I can't stand my current job as a telemarketer. I used to be a nuclear engineer.
E)I'm not working. I had three interviews this week, and I'm trying to find a job.

Question 69

The unemployment rate measures the percentage of:

A)people in the civilian labor force who are without jobs and actively seeking jobs.
B)the U.S. population that is out of work and actively seeking a job.
C)the civilian noninstitutionalized population that is out of work and actively seeking a job.
D)people over age 21 who are without jobs and actively seeking jobs.

Question 70

In a dynamic economy under ideal conditions:

A)the unemployment rate should be near zero.
B)some unemployment would be present due to workers temporarily being out of work while changing jobs.
C)unemployment would tend to move upward slightly as prices increased.
D)unemployment would tend to move slightly downward as unemployment compensation benefits increased.

Question 71

Exhibit 6-2 Unemployment categories Find the BLS's rate of unemployment from the following data: frictional unemployment = 150, structural unemployment = 200, cyclical unemployment = 225, discouraged workers = 25, underemployed workers = 75, fully employed workers = 850, total population = 2,000.

A)17.5 percent
B)23.3 percent
C)24.6 percent
D)28.8 percent
E)38.3 percent

Question 72

The unemployment rate will increase whenever there is a(n):

A)increase in the number of persons classified as unemployed.
B)increase in the number of unemployed persons relative to the size of the labor force.
C)increase in the size of the U.S. population and there is no change in the number of persons classified as employed.
D)reduction in the size of the labor force.
E)reduction in the size of the civilian labor force while the number of unemployed decreases.

Question 73

An individual who is employed part time, but is looking for a full-time job, is classified as:

A)frictionally unemployed.
B)cyclically unemployed.
C)structurally unemployed.
D)employed.

Question 74

Exhibit 6-2 Unemployment categories The unemployment rate for the economy in Exhibit 6-2 is:

A)28 percent.
B)30.5 percent.
C)31.7 percent.
D)12.8 percent.
E)21.5 percent.

Question 75

Suppose u = those adults who are unemployed and seeking work; e = those adults who are employed; and NLF = those adults not in the labor force. Which expression would equal the BLS definition of the unemployment rate?

A)u \ (e + NLF)
B)u \ e
C)u \ (u + e)
D)u \ (u + e - NLF)

Question 76

A criticism of the unemployment rate is that:

A)underemployment is measured in the calculation.
B)the data includes part-time workers as fully employed.
C)discouraged workers are included in the calculation.
D)all of these are problems.

Question 77

Exhibit 6-2 Unemployment categories Consider an economy made up of 100 people, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The unemployment rate is approximately:

A)10 percent.
B)12 percent.
C)17 percent.
D)20 percent.
E)25 percent.

Question 78

Which of the following groups of people are counted as employed?

A)People who work at least one hour a week.
B)People who work at least 15 hours a week as unpaid employees of a family business.
C)People who are out of work due to bad weather.
D)All of these are counted as employed.

Question 79

Exhibit 6-3 Unemployment categories According to data in Exhibit 6-3 and assuming the total number of workers is 8,400, the civilian labor force is:

A)7,550.
B)8,000.
C)8,400.
D)8,800.
E)9,250.

Question 80

Suppose the official unemployment rate is 10 percent. We can conclude without question that:

A)the same 10 percent of the people in the economy were out of work for the entire ear.
B)one of every 10 people in the civilian labor force is currently unemployed.
C)the same 10 percent of the people in the civilian labor force were out of work for the entire year.
D)every person in the civilian labor force was out of work for 10 percent of the year.
E)10 percent of the people in the economy were out of work for 10 percent of the year.