Question 1

Many economists argue that the unemployment rate tends to understate the actual amount of unemployment. Why?&#10;A) The unemployment rate excludes persons who work in the service sector.&#10;B) The unemployment rate excludes persons who are unable to find work.&#10;C) The unemployment rate excludes persons who want to work but have given up looking for a job.&#10;D) The unemployment rate excludes workers who are also students.

Accepted Answer

The unemployment rate only considers individuals who are actively seeking work and are available to work. It does not include people who have given up looking for a job. This is known as the "discouraged worker effect" and means that the unemployment rate does not capture the full extent of unemployment in the economy.

Question 2

Progressive economists such as Wesley Mitchell&#10;A) showed that capitalist economies often do not produce equilibrium but do produce a business cycle with booms and busts.&#10;B) claimed that the internal workings of market capitalism produce an economy without booms or busts or price inflation that the market could not correct quickly.&#10;C) claimed that unemployment and inflation are caused by factors external to the economy and are not due to how the economy itself operates.&#10;D) argued that aggregate demand must always equal aggregate supply at any level of supply.

Accepted Answer

Wesley Mitchell and other progressive economists argued that capitalist economies tend to experience business cycles characterized by booms and busts, rather than stable equilibrium. They believed that these fluctuations were inherent to the way the economy functioned and could not be easily corrected by market forces alone.

Question 3

Wesley Mitchell made a study of business cycles and found that booms and busts&#10;A) occur in all types of economies.&#10;B) only occur under capitalism.&#10;C) were more severe in the feudal period.&#10;D) occur more often in a barter system.

Accepted Answer

B

Question 4

Wesley Mitchell coined the concept of a cycle relative. What is a cycle relative?&#10;A) The cycle relative is defined as the average of an economic series for one whole cycle.&#10;B) The cycle relative is defined as the original data in a stage divided by the number of stages.&#10;C) The cycle relative is defined as the original data in a stage divided by the cycle base.&#10;D) The cycle relative is defined as the relative number of stages in a cycle.

Accepted Answer

According to the question, Wesley Mitchell coined the term "cycle relative." The cycle relative is defined as the original data in a stage divided by the cycle base. Therefore, option C is the most appropriate choice.

Question 5

Wesley Mitchell divided the business cycle into 9 stages. Mitchell called the lowest stages of the cycle&#10;A) the initial peak and the initial contraction.&#10;B) the initial trough and the final trough.&#10;C) the cycle relative and the cycle base.&#10;D) the amplitude and the capacity.

Accepted Answer

Wesley Mitchell divided the business cycle into 9 stages, and identified the lowest points as the initial trough and the final trough. Therefore, option B is the correct choice. Option A is incorrect because Mitchell did not refer to the initial peak or initial contraction as the lowest stages of the cycle. Option C is not correct because Mitchell did not use the terms "cycle relative" and "cycle base" to describe the business cycle stages. Option D is not correct because the terms "amplitude" and "capacity" do not accurately describe the stages of the business cycle.

Question 6

What is meant by the cycle base?&#10;A) The original data in a stage divided by the cycle relative.&#10;B) The capacity utilization during the initial trough.&#10;C) The average of an economic series for one whole cycle.&#10;D) The lowest point of the cycle.

Accepted Answer

The cycle base refers to the average of an economic series for one whole cycle, which includes the peak and trough. Therefore, option C is the correct choice. Options A, B, and D do not accurately reflect the concept of cycle base.

Question 7

Table 41a&#10;  &#10;-Table 41a gives quarterly GDP data for a complete business cycle. Using Mitchell's terminology, what is the value for Stage 1?&#10;A) $3,759.8 billion&#10;B) $4,237.6 billion&#10;C) $4,373.3 billion&#10;D) $4,147.5 billion

Accepted Answer

According to Mitchell's terminology, Stage 1 is the period of expansion from the trough to the previous peak. The value for Stage 1 is the difference between the quarterly GDP at the trough and the previous peak. In this table, the trough is in Q1 2009 and the previous peak is in Q4 2007. The GDP at the trough is $14,090.7 billion and the GDP at the previous peak is $17,850.5 billion. Therefore, the value for Stage 1 is $3,759.8 billion, which is option A.

Question 8

Table 41a&#10;  &#10;-Table 41a gives quarterly GDP data for a complete business cycle. Using Mitchell's terminology, what is the value for the cycle base?&#10;A) $3,759.8 billion&#10;B) $4,237.6 billion&#10;C) $4,373.3 billion&#10;D) $4,147.5 billion

Accepted Answer

The answer of Table 41a&#10;  &#10;-Table 41a gives quarterly...

Question 9

Table 41a&#10;  &#10;-Table 41a gives quarterly GDP data for a complete business cycle. Using Mitchell's terminology, what is the value for Stage 5?&#10;A) $3,759.8 billion&#10;B) $4,237.6 billion&#10;C) $4,373.3 billion&#10;D) $4,147.5 billion

Accepted Answer

According to Mitchell's terminology, Stage 5 is the peak of the business cycle where the economy reaches its highest point before entering a contraction. Looking at Table 41a, the highest GDP value is $4,373.3 billion, so the answer is C.

Question 10

Table 41a&#10;  &#10;-Table 41a gives quarterly GDP data for a complete business cycle. Using Mitchell's terminology, what is the value for Stage 9?&#10;A) $3,759.8 billion&#10;B) $4,237.6 billion&#10;C) $4,373.3 billion&#10;D) $4,147.5 billion

Accepted Answer

The answer of Table 41a&#10;  &#10;-Table 41a gives quarterly...

Question 11

Table 41a&#10;  &#10;-Table 41a gives quarterly GDP data for a complete business cycle. Using Mitchell's terminology, what is the value for the cycle relative for Stage 1?&#10;A) 105.4&#10;B) 90.6&#10;C) 86.2&#10;D) 55.1

Accepted Answer

The answer of Table 41a&#10;  &#10;-Table 41a gives quarterly...

Deck 7: Introduction to Business Cycles