Deck 10: Economic Fluctuations, unemployment, and Inflation

Question 1

If the unemployment rate rose from 6 percent to 7 percent,

A)Cyclical unemployment went up by more than 1 percent.
B)Cyclical unemployment went up by 1 percent.
C)Cyclical unemployment went up by less than 1 percent.
D)Cyclical unemployment stayed the same.
E)Cyclical unemployment went down.

Answer 1

B

Question 2

A person who has not worked in six months and has given up looking for work is officially classified as

A)employed.
B)unemployed.
C)discouraged.
D)in the labor force.

Answer 2

C

Question 3

If the unemployment rate fell from 8 percent to 6 percent,the cyclical unemployment rate

A)Went up.
B)Stayed the same.
C)Fell by less than 2%.
D)Fell by 2%.
E)Fell by more than 2%.

Answer 3

D

Question 4

During the early 1980s the changes that occurred in inflation and unemployment rates

A)suggest that disinflation can occur only if unemployment increases significantly.
B)support the notion of a stable Phillips curve.
C)suggest that both inflation and unemployment can be consistently reduced by dramatically increasing interest rates.

Question 5

In general _____ by unanticipated inflation.

A)creditors and debtors are both helped
B)creditors and debtors are both hurt
C)creditors are helped and debtors are hurt
D)creditors are hurt and debtors are helped

Question 6

The longest expansion since records have been kept began in

A)March 1991.
B)November 1982.
C)July 1980.
D)March 1975.

Question 7

The real rate of interest

A)is always negative.
B)can be negative.
C)can never be negative.
D)is always zero.

Question 8

One thing that has reduced our rate of inflation since 1945 has been

A)recessions.
B)wars.
C)large federal budget deficits.
D)rapid growth in the money supply.

Question 9

Which statement is true?

A)People collecting unemployment benefits are not counted as unemployed.
B)The Bureau of Labor Statistics compiles the unemployment rate from the data they collect from the unemployment insurance officers.
C)The unemployment rate is calculated by dividing the number of unemployed by the number of employed.
D)None of the statements are true.

Question 10

H.Ross Pearlmutter is a crackerjack salesperson.He could probably sell anything to anyone.The company he works for goes out of business.Until he finds a new position,Mr.Pearlmutter is _____ unemployed.

A)frictionally
B)structurally
C)cyclically
D)psychologically

Question 11

The experience of the 1970s and 1980s suggests that the cost of engaging in the process of disinflation is that

A)exports must increase.
B)deflation must occur.
C)nominal interest rates will be expected to increase.
D)unemployment will most likely increase.

Question 12

Junior Ozark dresses for job interviews in bib overalls,a red lumberjack shirt,and torn basketball sneakers.He has been looking for a job as an investment banker ever since he dropped out of high school.He is now 46 years old and has never held a job.Mr.Ozark is _____ unemployed.

A)frictionally
B)structurally
C)cyclically
D)psychologically

Question 13

An example of deflation since the base year would be a CPI in the current year of

A)90.
B)100.
C)110.
D)200.

Question 14

If the number of unemployed stays the same and the number of people in the labor force declines

A)The unemployment rate will rise.
B)the unemployment rate will fall.
C)the unemployment rate will stay the same.
D)There is not enough information to determine what will happen to the unemployment rate.

Question 15

Demand-pull inflation is often summed up as

A)too many dollars chasing too few goods.
B)the wage-price spiral.
C)profit-push inflation.
D)supply-side cost shock inflation.

Question 16

Among the following cases,which one would be considered to be unemployed? Someone who

A)worked three days in the last month but is now out of work.
B)is ready,willing,and able to work,but gave up looking for work three months ago.
C)reported to the state employment office last week but is not very enthusiastic about finding a job.

Question 17

Troughs occur

A)two or three times a year.
B)two or three times in every business cycle.
C)at the bottom of business cycles.
D)about once every 25 years.

Question 18

The recovery phase of the business cycle ends when

A)we reattain the level of the previous peak.
B)we reattain the level of the previous trough.
C)we go into the next recession.
D)we are back at full employment.

Question 19

We have had some degree of inflation since

A)1900.
B)1920.
C)1940.
D)1960.
E)1980.

Question 20

The most severe recession since WWII was in

A)1973-1975.
B)1981-1982.
C)2007-2008.
D)1991-2001.

Question 21

A housewife returning to the labor force after 20 years would be _____ unemployed until she finds work.

A)frictionally
B)structurally
C)cyclically

Question 22

Statement I: If the overall unemployment rate is over 10%,the cyclical unemployment rate is larger than the sum of the frictional and structural unemployment rates.
Statement II: If the cyclical unemployment rate is 3 percent,the overall unemployment rate is 8 percent.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 23

Kimberly quit her job as a computer programmer,spent two weeks in Hawaii,and is now looking for (and expects to soon find)another job.She is _____ unemployed.

A)psychologically
B)structurally
C)frictionally
D)cyclically

Question 24

In 1973 the OPEC countries

A)lowered the price of oil by 50%.
B)raised the price of oil by 50%.
C)doubled the price of oil.
D)quadrupled the price of oil.

Question 25

Which of the following is NOT one of a group of variables that make up the Index of Leading Indicators?

A)New building permits issued
B)The unemployment rate
C)Index of stock prices
D)The money supply
E)The average workweek of production workers in manufacturing

Question 26

If the CPI is currently 296.3 and the base year is 1967,how much was the CPI in 1967?

A)96.3
B)100
C)196.3
D)200
E)There isn't enough information to answer this question.

Question 27

Which ordering is correct?

A)Recession,recovery,prosperity.
B)Prosperity,recovery,recession.
C)Recession,prosperity,recovery.
D)Recovery,recession,prosperity.

Question 28

Which statement is true about the rate of inflation?

A)It was higher in the 1960s than in the 1970s.
B)It was higher in the 1970s than in the 1960s.
C)It was about the same in the 1960s as in the 1970s.

Question 29

If we compared the total of the structurally and frictionally unemployed to the cyclically unemployed,

A)Cyclical would always be higher.
B)Cyclical would usually be higher.
C)Cyclical would rarely be higher.
D)Cyclical would never be higher.

Question 30

Each of the following people would be hurt by unanticipated inflation except

A)long-term bondholders.
B)debtors.
C)landlords who have granted long-term leases.
D)retired people on fixed pensions.

Question 31

Over the last four decades,our unemployment rate has generally been between

A)2-6 percent.
B)4-8 percent.
C)6-10 percent.
D)10-14 percent.
E)14-18 percent.

Question 32

A person collecting unemployment insurance benefits is

A)officially unemployed.
B)not in the labor force.
C)classified as a discouraged worker.
D)is employeD.

Question 33

If cyclical unemployment is 4%,the overall unemployment rate

A)is 4%.
B)is more than 4%.
C)is 9%.
D)is more than 9%.
E)cannot be determined.

Question 34

Which statement is true?

A)We are currently experiencing hyperinflation.
B)Our economy was in a recession for most of the 1980s.
C)The 1980s was the most prosperous decade in our history.
D)None of the statements are true.

Question 35

If the number of unemployed is greater than the number of employed,the unemployment rate is

A)over 100%.
B)more than 50%.
C)less than 50%.
D)None of the choices are correct.

Question 36

Joseph Schumpeter is most closely associated with the

A)theory of innovations.
B)psychological theory.
C)inventory cycle theory.
D)monetary theory.

Question 37

A high school dropout with poor work habits,little experience,and no vocational training,who has been out of work for three years but is actively seeking employment,would be _____ unemployed.

A)frictionally
B)structurally
C)cyclically

Question 38

Which statement is true about the rate of inflation?

A)It was higher at the beginning of the 1980s than at the end of the 1980s.
B)It was lower at the beginning of the 1980s than at the end of the 1980s.
C)It was about the same at the beginning of the 1980s as at the end of the 1980s.

Question 39

Inflation is

A)a rise in the price of every good and service.
B)a rise of exactly a specified percentage in the price of every good or service.
C)a rise in the average price level.
D)a rise in average prices of at least 10 percent a year.

Question 40

From 1964 to the present,real GDP

A)stayed roughly the same.
B)more than doubled.
C)almost quadrupled.
D)fell until 1975 then increased fivefolD.

Question 41

The trough occurs

A)at the peak of the business cycle.
B)at the bottom of the business cycle.
C)during the prosperity phase of the cycle.
D)more than twice in the same cycle.
E)only during depressions.

Question 42

Statement I: The recovery phase of the cycle ends at the peak.
Statement II: The recession phase of the cycle ends the trough.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 43

The prosperity phase of the business cycle is _____ followed by the recession phase.

A)always
B)usually
C)sometimes
D)never

Question 44

Mikhail was president of a large country almost 20 years ago.He is still looking for a similar position.Mikhail is _____ unemployed.

A)seasonally
B)frictionally
C)cyclically
D)structurally

Question 45

Which statement is false?

A)The 1920s was a very prosperous decade.
B)One of the main features of the 1970s was stagflation.
C)There were no recessions in the 1950s.
D)None is false.

Question 46

Point Y is in the _____ phase of the business cycle.

A)prosperity
B)recovery
C)depression
D)recession
E)acceleration

Question 47

The last recession began in

A)the winter of 1989-90.
B)the spring of 1990.
C)the spring of 2001.
D)the winter of 2007.

Question 48

The recovery phase of the business cycle is _____ followed by the prosperity phase.

A)never
B)sometimes
C)usually
D)always

Question 49

Statement I: Endogenous business cycle turning points are generally caused by external shocks to the economy.
Statement II: Each business cycle has one peak and one trough.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 50

The recession phase of the business cycle is _____ followed by the recovery phase.

A)never
B)sometimes
C)usually
D)always

Question 51

The labor force includes only

A)people who are employed.
B)the employed and the unemployed.
C)the employed,the unemployed,and discouraged workers.
D)the unemployed and discouraged workers.
E)the employed and discouraged workers.

Question 52

Recovery sets in after point

A)V.
B)W.
C)X.
D)Y.
E)Z.

Question 53

A trough occurs at point

A)V.
B)W.
C)X.
D)Y.
E)Z.

Question 54

Which statement is true?

A)All people who are unemployed collect unemployment insurance benefits.
B)All people who collect unemployment insurance benefits are officially unemployed.
C)No one who is officially unemployed collects unemployment insurance benefits.
D)No one who collects unemployment insurance benefits is officially unemployeD.

Question 55

Statement I: The recovery phase of the cycle always follows the recessionary phase.
Statement II: The trough is the low point of the business cycle.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 56

When we are at full employment

A)the unemployment rate is 0.
B)the cyclical unemployment rate is 0.
C)the structural unemployment rate is 0.
D)the frictional unemployment rate is 0.

Question 57

Point X is in the _____ phase of the business cycle.

A)prosperity
B)recovery
C)recession
D)depression
E)acceleration

Question 58

The last recession ended in

A)summer of 1991.
B)summer 2009.
C)winter of 1991-1992.
D)spring of 2001.

Question 59

In the spring of 2002 we were in the _____ phase of the business cycle.

A)recovery
B)prosperity
C)depression
D)recession
E)acceleration

Question 60

The cyclical unemployment rate is 0 when the overall unemployment rate is

A)15.
B)10.
C)5.
D)3.
E)0.

Question 61

Statement I: Unemployment was higher in the 1970s than in the 1960s.
Statement II: Unemployment was higher in the 1980s than in the 1970s.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 62

Compared to the late 1970s and early 1980s,the rate of inflation in the 1990s would be

A)much higher.
B)a little higher.
C)about the same.
D)a little lower.
E)much lower.

Question 63

The traditional Phillips curve suggests a conflict or tradeoff between

A)price level stability and income equality.
B)the level of unemployment and price level stability.
C)unemployment and income equality.
D)economic growth and full employment.

Question 64

If the consumer price index were 233.8 last year,261.3 today,a level of _____ next year would represent disinflation.

A)261.3
B)661.3
C)283.1
D)260.0
E)301.3

Question 65

Which one of these groups is counted among the unemployed?

A)Discouraged workers
B)People collecting unemployment benefits
C)People working part time
D)People out of the labor force

Question 66

Which one of these periods had the highest rate of inflation?

A)1945-1948.
B)1957-1960.
C)1961-1964.
D)1969-1972.
E)1984-1986.

Question 67

If the unemployment rate for whites was 5%,then the unemployment rate for blacks would be around

A)3%.
B)5%.
C)7%.
D)10%.
E)15%.

Question 68

The Phillips curve tradeoff implies

A)that if the curve is stable,society must accept increases in inflation in exchange for decreases in unemployment.
B)that if the curve is unstable,society must accept increases in inflation in exchange for decreases in unemployment.
C)that if the curve is stable,society must accept increases in inflation in exchange for increases in unemployment.
D)that if the curve is unstable,society must accept falling unemployment when inflation falls.

Question 69

In the song "My Hometown" by Bruce Springsteen,the foreman at the textile mill by the railroad tracks says,"These jobs are leaving.....and they ain't comin' back." This is an example of

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

Question 70

The _____ the unemployment rate and the _____ the rate of inflation,the higher the misery index.

A)higher;higher
B)lower;lower
C)higher;lower
D)lower;higher

Question 71

Deflation is

A)hyperinflation.
B)a constant rate of inflation.
C)a slow-down in the rate of inflation.
D)zero inflation.
E)a decline in the average price level

Question 72

A person who is not in the labor force and not actively looking for a job is

A)employed.
B)unemployed.
C)underemployed.
D)discourageD.

Question 73

If the overall unemployment rate were 12 percent,what is the most accurate statement that can be made about the cyclical unemployment rate?

A)It is above 5%.
B)It is less than 7%.
C)It is 7%.
D)It is more than 7%.
E)It is less than 12%.

Question 74

During unanticipated inflation,

A)savers lose.
B)borrowers gain.
C)lenders lose.
D)uncertainty about the future rises.
E)All of the choices are correct.

Question 75

A computerized job bank would be most effective in reducing _____ unemployment.

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

Question 76

Which statement is true?

A)Only the poor are hurt by inflation.
B)During times of inflation the nominal interest rate is considerably higher than the real interest rate.
C)People living on fixed incomes are generally helped by inflation.
D)None of the statements are true.

Question 77

If the cyclical unemployment rate were 4%,what is the most accurate statement that could be made about the overall unemployment rate?

A)It is 9%.
B)It is over 4%.
C)It is less than 9%.
D)It is more than 9%.

Question 78

Each of these was a recession year except

A)1974.
B)1980.
C)1982.
D)1986.
E)1990.

Question 79

Which statement is true?

A)Virtually all of the unemployed are collecting unemployment insurance benefits.
B)During recessions cyclical unemployment falls.
C)Our unemployment rate rarely rises above 5%.
D)None of the statements are true.

Question 80

The supply-side shocks that affected the United States in 1973 and 1979 were the result of

A)government tax policies.
B)union wage demands.
C)OPEC policies regarding the availability and price of crude oil.
D)periods of stagflation in which the United States had achieved low or negative rates of growth in real GDP.
E)increases in aggregate supply.