Deck 21: Short-Term Economic Fluctuations

Question 1

The end of a recession is called the:

A)trough.
B)expansion.
C)peak.
D)boom.

Answer 1

A

Question 2

An informal definition of a recession is at least ______ consecutive quarters of declining real GDP.

A)2
B)4
C)6
D)8

Answer 2

A

Question 3

A depression is:

A)a particularly severe and protracted recession.
B)the high point of economic activity prior to a downturn.
C)the low point of economic activity prior to a recovery.
D)a particularly strong and protracted expansion.

Answer 3

A

Question 4

The following data give the dates of successive turning points in U.S.economic activity and the corresponding levels of real GDP at the time. $$\begin{array} { c c c } \text { Turning Point } & \text { Date } & \text { Real GDP } \\&&\text { (1996 } \$ \text { billions) }\\\text { (A) } & \text { July } 1953 & 1992.2 \\\text { (B) } & \text { May } 1954 & 1941.0 \\\text { (C) } & \text { Apr. } 1957 & 2182.7 \\\text { (D) } & \text { Apr. } 1958 & 2117.4 \\\text { (E) } & \text { Apr. } 1960 & 2391.0\end{array}$$
Which of the turning points are troughs?

A)(A),(B),and (C)
B)(C),(D),and (E)
C)(A),(C),and (E)
D)(B)and (D)

Question 5

The following data give the dates of successive turning points in U.S.economic activity and the corresponding levels of real GDP at the time. $$\begin{array} { c c c } \text { Turning Point } & \text { Date } & \text { Real GDP } \\&&\text { (1996 } \$ \text { billions) }\\\text { (A) } & \text { July } 1953 & 1992.2 \\\text { (B) } & \text { May } 1954 & 1941.0 \\\text { (C) } & \text { Apr. } 1957 & 2182.7 \\\text { (D) } & \text { Apr. } 1958 & 2117.4 \\\text { (E) } & \text { Apr. } 1960 & 2391.0\end{array}$$
Which of the following periods was an expansion?

A)July 1953 through May 1954
B)May 1954 through April 1957
C)July 1953 through April 1957
D)May 1954 through April 1958

Question 6

In reference to short-term economic fluctuations,the "trough" refers to:

A)a period in which the economy is growing at a rate significantly below normal.
B)the high point of economic activity prior to a downturn.
C)the low point of economic activity prior to a recovery.
D)a particularly strong and protracted expansion.

Question 7

The longest expansion of the United States economy since 1925 began in _____.

A)1991
B)1945
C)1961
D)1982

Question 8

The duration of a recession is from:

A)peak to trough.
B)trough to peak.
C)peak to peak.
D)trough to trough.

Question 9

An expansion is:

A)a period in which the economy is growing at a rate significantly below normal.
B)a period in which the economy is growing at a rate significantly above normal.
C)the high point of economic activity prior to a downturn.
D)the low point of economic activity prior to a recovery.

Question 10

The following data give the dates of successive turning points in U.S.economic activity and the corresponding levels of real GDP at the time. $$\begin{array} { c c c } \text { Turning Point } & \text { Date } & \text { Real GDP } \\&&\text { (1996 } \$ \text { billions) }\\\text { (A) } & \text { July } 1953 & 1992.2 \\\text { (B) } & \text { May } 1954 & 1941.0 \\\text { (C) } & \text { Apr. } 1957 & 2182.7 \\\text { (D) } & \text { Apr. } 1958 & 2117.4 \\\text { (E) } & \text { Apr. } 1960 & 2391.0\end{array}$$
Which of the following periods was a recession?

A)July 1953 through May 1954
B)May 1954 through April 1957
C)July 1953 through April 1957
D)May 1954 through April 1958

Question 11

In the United States since 1929 the duration of recessions on average has been:

A)longer than the duration of expansions.
B)shorter than the duration of expansions.
C)about the same duration as expansions.
D)shorter than the duration of expansions before World War II,but longer afterwards.

Question 12

The following data give the dates of successive turning points in U.S.economic activity and the corresponding levels of real GDP at the time. $$\begin{array} { c c c } \text { Turning Point } & \text { Date } & \text { Real GDP } \\&&\text { (1996 } \$ \text { billions) }\\\text { (A) } & \text { July } 1953 & 1992.2 \\\text { (B) } & \text { May } 1954 & 1941.0 \\\text { (C) } & \text { Apr. } 1957 & 2182.7 \\\text { (D) } & \text { Apr. } 1958 & 2117.4 \\\text { (E) } & \text { Apr. } 1960 & 2391.0\end{array}$$
Which of the turning points are peaks?

A)(A),(B),and (C)
B)(C),(D),and (E)
C)(A),(C),and (E)
D)(B)and (D)

Question 13

A period in which the economy is growing at a rate significantly below normal is called a(n):

A)expansion.
B)boom.
C)peak.
D)recession.

Question 14

The beginning of a recession is called the:

A)depression.
B)expansion.
C)peak.
D)trough.

Question 15

A boom is:

A)a period in which the economy is growing at a rate significantly below normal.
B)the high point of economic activity prior to a downturn.
C)a particularly severe and protracted recession.
D)a particularly strong and protracted expansion.

Question 16

The following data give the dates of successive turning points in U.S.economic activity and the corresponding levels of real GDP at the time: $$\begin{array} { c c c } \text { Turning Point } & \text { Date } & \begin{array} { c } \text { Real GDP } \\\text { (1996 \$ billions) }\end{array} \\\text { (A) } & \text { Feb. } 1961 & 2352.9 \\\text { (B) } & \text { Dec. } 1969 & 3571.4 \\\text { (C) } & \text { Nov. } 1970 & 3566.5 \\\text { (D) } & \text { Nov. } 1973 & 4151.1 \\\text { (E) } & \text { Mar. } 1975 & 4010.0\end{array}$$
Which of the following periods was an expansion?

A)February 1961 through December 1969
B)December 1969 through November 1970
C)November 1970 through March 1975
D)December 1969 through November 1973

Question 17

A period in which the economy is growing at a rate significantly above normal is called a(n):

A)depression.
B)expansion.
C)peak.
D)recession.

Question 18

During recessions,the change in real GDP is:

A)always positive.
B)always negative.
C)usually positive,but can be negative.
D)usually negative,but can be positive.

Question 19

In reference to short-term economic fluctuations,the "peak" refers to:

A)a period in which the economy is growing at a rate significantly above normal.
B)the high point of economic activity prior to a downturn.
C)the low point of economic activity prior to a recovery.
D)a particularly strong and protracted expansion.

Question 20

The longest and most severe recession in the United States since 1925 began in _____.

A)1929
B)1945
C)1957
D)1982

Question 21

Typically unemployment ______ during a recession and ______ during an expansion.

A)rises;rises even more
B)rises;falls
C)rises;does not change
D)falls;rises

Question 22

Among the most important indicators used by the NBER Business Cycle Dating Committee to determine the beginning of the 2007-2009 recession were each of the following indicators EXCEPT:

A)industrial production.
B)total sales in manufacturing,wholesale trade,and retail trade.
C)the consumer price index.
D)nonfarm employment.

Question 23

Economic activity moves from a period of expansion to a ______ and then moves into a period of ______ until it reaches a _____.

A)peak;expansion;trough
B)peak,recession;trough
C)trough;expansion;peak
D)trough;recession;peak

Question 24

Which of the following is most likely to occur in the labor market during a recession?

A)The growth rate of real wages declines.
B)Bonuses and promotions become more frequent.
C)New entrants to the labor market have an easier time finding jobs.
D)The supply of labor increases dramatically.

Question 25

The dates of the "official" peaks and troughs of business cycles in the United States are determined by the:

A)Federal Reserve.
B)Congressional Budget Office.
C)National Bureau of Economic Research.
D)Council of Economic Advisers.

Question 26

Industrial production,total sales,nonfarm employment,and after-tax household income are examples of ______ indicators of economic activity.

A)coincident
B)preceding
C)lagged
D)real

Question 27

The increase in unemployment during a recession is associated with which type of unemployment?

A)Frictional unemployment
B)Cyclical unemployment
C)Structural unemployment
D)Nominal unemployment

Question 28

Recession in the United States typically are:

A)limited to a few industries.
B)limited to specific regions of the country.
C)widely felt outside the United States.
D)confined to the domestic economy.

Question 29

Recessions begin at ______ and end at _____.

A)the highest unemployment rate;the lowest unemployment rate
B)the lowest unemployment rate;the highest unemployment rate
C)a peak;a trough
D)the highest inflation rate;the lowest inflation rate

Question 30

Indicators of economic activity that move at the same time as the overall movement of the economy are called ______ indicators.

A)short-term
B)long-term
C)real
D)coincident

Question 31

All of the following are characteristics of short-term economic fluctuations EXCEPT:

A)expansions and recessions are felt throughout the economy.
B)expansions and recessions are irregular in length and severity.
C)unemployment rises during recessions.
D)durable-goods industries are less sensitive to short-term fluctuations than service and non-durable industries.

Question 32

Short-term economic fluctuations are ______ in length and severity and ______ to predict.

A)regular;difficult
B)regular;easy
C)irregular;easy
D)irregular;difficult

Question 33

The duration of an expansion is from:

A)peak to trough.
B)trough to peak.
C)peak to peak.
D)trough to trough.

Question 34

Since 1925,the longest expansion in the United States lasted:

A)10 years.
B)24 months.
C)43 months.
D)5 years.

Question 35

Since 1925,the longest recession in the United States lasted:

A)10 years.
B)24 months.
C)43 months.
D)5 years.

Question 36

In determining the beginning of recessions,the NBER Business Cycle Dating Committee looks for evidence of decline in:

A)specific sectors of the economy.
B)the rate of inflation.
C)the entire economy.
D)the stock market.

Question 37

All of the following are characteristics of short-term economic fluctuations EXCEPT:

A)expansions and recessions are felt in only a few sectors of the economy.
B)expansions and recessions are irregular in length and severity.
C)unemployment rises during recessions.
D)durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.

Question 38

Falling growth rates during the 2007-2009 recession occurred:

A)only in the high-tech sectors of the U.S.economy.
B)only in the United States.
C)in the United States,Canada,Germany,the United Kingdom and Japan.
D)in the United States and Canada,but not in Germany,the United Kingdom or Japan.

Question 39

Which of the following workers is most likely to lose his/her job during a recession?

A)construction worker
B)baker
C)farmer
D)barber

Question 40

Economic activity moves from a trough into a period of ______ until it reaches a ______ and then into a period of _______.

A)expansion;trough;recession
B)recession;trough;expansion
C)expansion;peak;recession
D)recession;peak;expansion

Question 41

A recession occurs when either ______ or _______,or both.

A)potential output grows slowly;actual output falls below potential output
B)potential output grows slowly;actual output rises above potential output
C)potential output grows rapidly;actual output equals potential output
D)potential output grows rapidly;actual output falls below potential output

Question 42

If potential output equals $8 billion and actual output equals $7 billion,then this economy has a(n):

A)budget deficit.
B)trade deficit.
C)expansionary gap.
D)recessionary gap.

Question 43

A country's actual output ______ potential output.

A)can never exceed
B)can never be below
C)can temporarily exceed
D)will always be approximately equal to

Question 44

An expansion occurs when either ______ or _______,or both.

A)potential output grows rapidly;actual output rises above potential output
B)potential output grows slowly;actual output rises above potential output
C)potential output grows rapidly;actual output equals potential output
D)potential output grows rapidly;actual output falls below potential output

Question 45

If potential output equals $8 billion and actual output equals $10 billion,then this economy has an output gap equal to:

A)$2 billion.
B)20 percent.
C)25 percent.
D)-25 percent.

Question 46

When actual output is greater than potential output there is a(n):

A)budget deficit.
B)budget surplus.
C)expansionary gap.
D)recessionary gap.

Question 47

Changes in the growth rate of potential output and deviations of actual output from potential output are two logical explanations for:

A)the decline in the natural rate of unemployment.
B)short-term economic fluctuations.
C)increasing wage inequality.
D)skill-biased technological change.

Question 48

For policymakers the problem with a recessionary gap is ______ and the problem with an expansionary gap is _____.

A)a tendency for inflation to develop;wasted resources
B)wasted resources;a tendency for inflation to develop
C)an increase in cyclical unemployment;an increase in structural unemployment
D)an increase in structural unemployment;an increase in cyclical unemployment

Question 49

Recessions tend to be ______ by ______ in the rate of inflation.

A)followed;an increase
B)followed;a decline
C)preceded;a decline
D)preceded immediately;a stabilization

Question 50

______ post-World War II ______ have been preceded by increases in inflation.

A)Many;expansions
B)Few;recessions
C)All;expansions
D)Many;recessions

Question 51

The difference between the economy's potential output and its actual output relative to its potential output at a point in time is called the:

A)budget deficit.
B)trade deficit.
C)output gap.
D)full-employment rate.

Question 52

Potential output is:

A)the same as actual output.
B)the same as the output gap.
C)the same as the natural rate of unemployment.
D)the maximum sustainable amount of output.

Question 53

If actual output equals potential output,but potential is growing unusually slowly,then an economy:

A)is in a recession.
B)is in an expansion.
C)has an output gap.
D)has a recessionary gap.

Question 54

Recessionary gaps are:

A)efficient.
B)inefficient.
C)periods when actual output exceeds potential output.
D)the result a decrease in the growth rate of potential output.

Question 55

If potential output equals $8 billion and actual output equals $7 billion,then this economy has an output gap equal to:

A)-$1 billion.
B)$1 billion.
C)12.5 percent.
D)-12.5 percent.

Question 56

When recessions are the result of slowing growth in potential output,the government's best response is a policy to:

A)increase aggregate demand.
B)decrease aggregate demand.
C)promote saving and investment.
D)reduce government spending.

Question 57

If potential output equals $8 billion and actual output equals $9 billion,then this economy has a(n):

A)budget deficit.
B)trade deficit.
C)expansionary gap.
D)recessionary gap.

Question 58

When actual output is less than potential output there is a(n):

A)budget deficit.
B)budget surplus.
C)trade deficit.
D)recessionary gap.

Question 59

Workers in durable-goods industries are ______ workers in service industries to lose their jobs during a recession.

A)much less likely than
B)more likely than
C)less likely than
D)equally likely as

Question 60

Which of the following workers is least likely to lose his/her job during a recession?

A)carpenter
B)automobile assembly line worker
C)roofer
D)police officer

Question 61

If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent,then the natural rate of unemployment must equal:

A)-7 percent.
B)9 percent.
C)12.5 percent.
D)7 percent.

Question 62

The increasing availability of temporary job placement agencies and online job services has ______ the efficiency of matching workers and jobs and ______ the natural rate of unemployment in the United States.

A)increased;increased
B)increased;reduced
C)had no impact on;reduced
D)decreased;increased

Question 63

According to the Congressional Budget Office,over the past twenty years,the natural rate of unemployment in the United States has:

A)increased.
B)remained constant.
C)fallen.
D)fallen to zero,and is now becoming negative.

Question 64

If the output gap equals 1.8 percent,then

A)cyclical unemployment equals the sum of structural and frictional unemployment.
B)there is an expansionary gap.
C)there is no cyclical unemployment.
D)potential GDP is less than actual GDP.

Question 65

Okun's law expresses the relationship between:

A)unemployment and inflation.
B)frictional unemployment and structural unemployment.
C)money and velocity.
D)cyclical unemployment and the output gap.

Question 66

The changing age structure of the U.S.population and more efficient labor markets are both possible explanations for:

A)the decline in the natural rate of unemployment.
B)the increase in the cyclical rate of unemployment.
C)the 2001 recession.
D)the stagnation of real wages.

Question 67

Compared to older workers,younger workers change jobs more frequently,so they are more prone to ______ unemployment and have fewer skills,so they are more prone to ______ unemployment.

A)cyclical;frictional
B)frictional;structural
C)structural;frictional
D)frictional;cyclical

Question 68

The natural rate of unemployment is the unemployment rate when there is only:

A)structural unemployment.
B)frictional unemployment.
C)cyclical unemployment.
D)structural and frictional unemployment.

Question 69

If the natural rate of unemployment equals 5 percent and the actual rate of unemployment equals 6 percent,then cyclical unemployment equals:

A)11 percent
B)3 percent
C)1 percent
D)0.3 percent

Question 70

In an expansion,the cyclical rate of unemployment is most often:

A)positive.
B)zero.
C)negative.
D)equal to the natural rate of unemployment.

Question 71

If the frictional rate of unemployment equals 3 percent,the structural rate of unemployment equals 4 percent,and the cyclical rate of unemployment equals -2 percent,then the natural rate of unemployment equals:

A)1%.
B)5%.
C)6%.
D)7%.

Question 72

The cyclical unemployment rate is zero when:

A)there is not a recessionary gap.
B)there is not an expansionary gap.
C)actual GDP and potential GDP are equal.
D)frictional unemployment equals structural unemployment.

Question 73

The aging of the labor force in the U.S.is likely to ______ the natural rate of unemployment;an increase in the efficiency of the labor market is likely to ______ the natural rate of unemployment.

A)decrease;decrease
B)increase;increase
C)increase;decrease
D)decrease;increase

Question 74

In Macroland potential GDP equals $20 billion and real GDP equals $19.2 billion.Macroland has a(n)______ gap equal to ______ percent of potential GDP.

A)expansionary;8
B)expansionary;4
C)recessionary;-8
D)recessionary;-4

Question 75

If the frictional rate of unemployment equals 2 percent,the structural rate of unemployment equals 3 percent,and the cyclical rate of unemployment equals 1 percent,then the natural rate of unemployment equals:

A)6%.
B)1%.
C)3%.
D)5%.

Question 76

If the natural rate of unemployment equals 6 percent and the actual rate of unemployment equals 5 percent,then cyclical unemployment equals:

A)-1 percent.
B)1 percent.
C)3 percent.
D)11 percent.

Question 77

In a recession,the cyclical rate of unemployment:

A)is rising.
B)is constant.
C)is falling.
D)equals the natural rate of unemployment.

Question 78

Two possible explanations for the decline in the natural rate of unemployment in the United States over the past twenty years are:

A)the changing age structure of the population and more efficient labor markets.
B)advances in computer technology and globalization.
C)increasing wage inequality and skill-biased technological change.
D)greater quantities of human capital and increased average labor productivity.

Question 79

If the output gap equals -3.2 percent,then

A)cyclical unemployment equals the sum of structural and frictional unemployment.
B)there is a recessionary gap.
C)there is no cyclical unemployment.
D)potential GDP is greater than actual GDP.

Question 80

The unemployment rate for younger workers is usually ______ the unemployment rate for older workers.

A)less than
B)approximately equal to
C)greater than
D)more predictable than