Deck 10: The Business Cycle

Question 1

Alternating periods of growth and contraction in real GDP define:

A) The business cycle.
B) Capitalism.
C) Inflation.
D) Macro equilibrium.

Answer 1

A

Question 2

Which of the following is characteristic of a downturn in the business cycle?

A) Lower unemployment rates
B) An increase in population
C) A decrease in real output
D) A decrease in population

Answer 2

C

Question 3

A basic purpose of macroeconomic theory is to:

A) Explain the business cycle.
B) Stop economic contractions from occurring.
C) Control the business cycle.
D) Cause GDP to grow.

Answer 3

A

Question 4

Business cycles in the United States:

A) Are similar in length but vary greatly in magnitude.
B) Vary greatly in length,frequency,and magnitude.
C) Are similar in frequency and magnitude.
D) Are similar in length and magnitude.

Question 5

The alternative combinations of goods and services that can be produced in a given time period with available resources and technology is referred to as:

A) The business cycle.
B) Real GDP.
C) Nominal GDP.
D) The production possibilities.

Question 6

Which of the following is not a basic measure of macroeconomic performance?

A) Output growth
B) Unemployment
C) Public goods
D) Inflation

Question 7

A basic purpose of macroeconomics is to explain:

A) Why businesses pollute.
B) How businesses choose the profit-maximizing rate of output.
C) Why the economy expands or contracts.
D) How and why countries trade with each other.

Question 8

For a particular economy,the production possibilities curve shows the:

A) Maximum potential output.
B) Maximum level of pollution.
C) Change in the price level.
D) Level of market power.

Question 9

Which of the following is not one of the three basic measures of macroeconomic performance?

A) Inflation
B) Unemployment
C) Antitrust
D) GDP growth

Question 10

As the economy falls from the peak to the trough of the business cycle:

A) Inflationary pressures should increase as unemployment rises.
B) Cyclical unemployment should increase and real GDP should decline.
C) Frictional unemployment should fall because people find jobs more quickly.
D) Structural unemployment will be eliminateD.

Question 11

Over time,U.S.real GDP has increased:

A) By small,constant increments.
B) At a constant geometric rate.
C) At an average rate of 3 percent per year.
D) At an average rate of 7 percent per year.

Question 12

The production possibilities will definitely shift outward if:

A) Land and capital increase and,at the same time,the labor force decreases.
B) Available resources decrease and,at the same time,technology improves.
C) The labor force increases and,at the same time,technology improves.
D) The labor force decreases and,at the same time,land and capital decrease.

Question 13

The total value of goods and services produced within a nation's borders,measured in constant prices refers to:

A) Nominal GDP.
B) Real inflation.
C) Per capita GDP.
D) Real GDP.

Question 14

Nominal GDP is defined as the:

A) Value of output in current dollars.
B) Dollar value of services but not goods.
C) Output produced by domestically owned factors of production regardless of where the factors are located.
D) Value of output in constant prices.

Question 15

Which of the following is a basic measure of macroeconomic performance?

A) The U.S.stock market
B) Growth in output
C) The U.S.bond market
D) Population growth

Question 16

The study of aggregate economic behavior is referred to as:

A) Microeconomics.
B) Macroeconomics.
C) Government policy.
D) The business cycle.

Question 17

When calculating nominal GDP,the volume of output is measured using:

A) Weight.
B) The number of people employed.
C) The market value adjusted for inflation.
D) The market value.

Question 18

Which of the following is characteristic of a downturn in the business cycle?

A) Higher unemployment rates
B) Higher prices
C) Growth in real output
D) Increased population

Question 19

Which of the following is true during the expansionary phase of the business cycle?

A) The unemployment rate increases
B) The inflation rate decreases
C) Real GDP increases
D) Population falls

Question 20

Real GDP measures changes in:

A) Prices but not output.
B) Output but not prices.
C) Prices and output.
D) Inflation.

Question 21

Since World War II,the United States has experienced:

A) An increase in output every year.
B) Only one recession and it was minor.
C) Several recessions but none as severe as the Great Depression.
D) Several recessions and in each case a war was necessary to end it.

Question 22

The labor force is smaller than the total population because the labor force does not include:

A) People who have jobs.
B) The very young and old.
C) People looking for a job.
D) Teachers.

Question 23

Immediately following the years 1929-1933,the U.S.economy:

A) Resumed growing at the long-term trend for real GDP of 6 percent.
B) Suffered sporadic decreases in the growth rate of GDP,which led to lower GDP per capita.
C) Grew dramatically and steadily over a 20-year period with a record long growth period.
D) Experienced World War II,which resulted in rapid growth and rapid deflation.

Question 24

If the population of a country is 1,000,000 people,its labor force consists of 500,000,and 40,000 people are unemployed,the unemployment rate is:

A) 50.0 percent.
B) 8.0 percent.
C) 7.4 percent.
D) 4.

Question 25

The unemployment rate is calculated by dividing:

A) The number of unemployed by the size of the population and multiplying by 100.
B) 1.0 by the percentage of the employed population and multiplying by 100.
C) The number of unemployed by the size of the labor force.
D) The number of employed by the labor force and multiplying by 100.

Question 26

Who among the following would be counted as unemployed?

A) Amy,who is on vacation but will soon return to the same job.
B) Bob,a college student looking for summer work.
C) Carol,who is on welfare and not actively looking for a job.
D) Dave,who is on strike.

Question 27

The impact of World War II on the U.S.economy was:

A) To raise the growth rate of real GDP to approximately 19 percent per year.
B) To lower the per capita GDP by 3 percent per year.
C) Deflation at the rate of 10 percent per year.
D) Higher cyclical unemployment up to nearly 25 percent for the economy.

Question 28

If the population of a country is 1,000,000 people,its labor force consists of 600,000,and 60,000 people are unemployed,the unemployment rate is:

A) 6.0 percent.
B) 6.6 percent.
C) 10.0 percent.
D) 60.

Question 29

Suppose that in a population of 100 million people,50 million are in the labor force and 47 million are employed.The unemployment rate is:

A) 6.0 percent.
B) 6.4 percent.
C) 53.0 percent.
D) 94.

Question 30

An extremely deep and long period of negative economic growth is most accurately called:

A) Inflation.
B) Deflation.
C) A recession.
D) A depression.

Question 31

To be officially counted as unemployed,one must be:

A) Fired from previous employment.
B) A participant in a state unemployment benefits program.
C) Available for only full-time employment.
D) Actively seeking employment and currently not working.

Question 32

The Great Depression in the United States:

A) Was marked by hyperinflation.
B) Was ended by World War I.
C) Ended with a higher real GDP per capita than when it began.
D) Caused real GDP to fall dramatically between 1929 and 1933.

Question 33

People are unemployed if they are over 16 and not working due to:

A) The inability to find a job even though they are looking.
B) A two-week summer vacation.
C) A strike.
D) The lack of motivation to look for work.

Question 34

A decline in an economy's level of output can lead to:

A) A lower standard of living.
B) A decrease in unemployment.
C) Higher opportunity costs.
D) Increased consumer confidence.

Question 35

If the population of a country is 220 million people,its labor force consists of 115 million,and 99 million people are employed,the unemployment rate is:

A) 1.1 percent.
B) 13.9 percent.
C) 45.0 percent.
D) 52.

Question 36

Table 10.1-Population and labor force data.
In Table 10.1,what is the unemployment rate in Year 1?

A) 50 percent
B) 41.7 percent
C) 16.7 percent
D) 8.

Question 37

Which of the following individuals is part of the labor force?

A) The CEO of General Motors
B) A retired schoolteacher
C) A stay-at-home mom
D) A woman serving seven years in the penitentiary for selling drugs

Question 38

Which of the following is likely if an economy is in a recession or headed for one?

A) An increase in consumer confidence
B) An increase in the rate of inflation
C) An increase in unemployment
D) An increase in the rate of output

Question 39

All persons over age 16 who are either working for pay or actively seeking paid employment refers to:

A) Per capita GDP.
B) The labor force.
C) The unemployment rate.
D) The CPI.

Question 40

A decline in real GDP for at least two consecutive quarters is referred to as:

A) A recession.
B) A depression.
C) Deflation.
D) Inflation.

Question 41

A plumber quits his job in Dallas and moves to San Francisco where additional plumbers are needed,but it takes a couple of months for him to find a job.He is said to be:

A) Frictionally unemployed
B) Structurally unemployed
C) Cyclical unemployed
D) Underemployed

Question 42

Table 10.1-Population and labor force data.
In Table 10.1,what is the unemployment rate in Year 10?

A) .05 percent
B) 10 percent
C) 45 percent
D) 50 percent

Question 43

Table 10.2-Labor force data
In Table 10.2,what is the unemployment rate in Year 10?

A) 84.2 percent
B) 57.6 percent
C) 48.5 percent
D) 15.

Question 44

Table 10.2-Labor force data
In Table 10.2,what is the number of unemployed in Year 1?

A) 20 million
B) 30 million
C) 140 million
D) 170 million

Question 45

Table 10.2-Labor force data
In Table 10.2,what is the unemployment rate in Year 1?

A) 20.0 percent
B) 41.4 percent
C) 51.7 percent
D) 80.

Question 46

Which of the following types of unemployment would best characterize a swimming instructor's unemployment during the winter months?

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

Question 47

Table 10.1-Population and labor force data.
In Table 10.1,what is the number of unemployed in Year 1?

A) 15 million.
B) 75 million.
C) 90 million.
D) 105 million.

Question 48

Structural unemployment occurs:

A) Because of a mismatch between skills and jobs.
B) When firms fail because of a seasonal downturn.
C) When an industry experiences a cyclical downturn.
D) When there is inadequate demand for jobs.

Question 49

Automobile workers in Detroit are unemployed because robots are now being used on assembly lines but,at the same time,job vacancies exist for computer programmers.In this case,the automobile workers are an example of:

A) Cyclical unemployment.
B) Structural unemployment.
C) Frictional unemployment.
D) Seasonal unemployment.

Question 50

Samantha quit her job in the city to look for a job in the country.While she is looking,Samantha experiences _______ unemployment.

A) Structural
B) Seasonal
C) Frictional
D) Cyclical

Question 51

Table 10.1-Population and labor force data.
In Table 10.1,what is the number of unemployed in Year 10?

A) 110 million
B) 100 million
C) 90 million
D) 10 million

Question 52

Which of the following types of unemployment would best characterize a tax accountant's unemployment after tax returns are due?

A) Seasonal unemployment
B) Frictional unemployment
C) Underemployment
D) Cyclical unemployment

Question 53

An office worker who loses her job because she does not have the necessary computer skills is,ceteris paribus:

A) Frictionally unemployed.
B) Seasonally unemployed.
C) Cyclically unemployed.
D) Structurally unemployeD.

Question 54

Frictional unemployment goes up when:

A) Students quit work to return to school at the end of the summer.
B) A corporation transfers a worker to another city.
C) A worker quits one job in order to search for another.
D) There is inadequate demand for labor.

Question 55

After quitting one job,some people with marketable skills find that it takes several months to find a new job.This is an example of which type of unemployment?

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

Question 56

Which of the following is likely to reduce the level of structural unemployment?

A) A lower GDP level for the economy
B) Longer periods of unemployment between jobs
C) Federally funded job-training programs
D) An increase in the number of youth and women in the labor force

Question 57

A teenager without a high school diploma is unable to find work because all of the available jobs require a certain minimum reading level.Which of the following best characterizes the teenager's circumstances?

A) Frictionally unemployed
B) Structurally unemployed
C) Cyclical unemployed
D) Seasonally unemployed

Question 58

When construction workers seek work because the ground is covered in snow and ice,the unemployment rate goes up.This situation is an example of:

A) Frictional unemployment.
B) Seasonal unemployment.
C) Structural unemployment.
D) Cyclical unemployment.

Question 59

Table 10.2-Labor force data
In Table 10.2,what is the number of unemployed in Year 10?

A) 70 million
B) 40 million
C) 30 million
D) 20 million

Question 60

After graduating from college,it takes Kim several months to find a professional job.This is an example of which type of unemployment?

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

Question 61

Which of the following government policies or programs is most likely to reduce cyclical unemployment?

A) Those that stimulate economic growth
B) Increased job training
C) Additional job-placement services
D) Additional health services

Question 62

Inflation is defined as:

A) The level of prices at full-employment.
B) An increase in the price of expensive items,such as cars.
C) An increase in the average level of prices.
D) An increase in relative prices.

Question 63

According to macroeconomists,a goal for the economy is a:

A) Zero unemployment rate.
B) High unemployment rate.
C) Steadily increasing unemployment rate.
D) Low unemployment rate.

Question 64

If the price of computers falls during a period when the average price level remains constant,which of the following has occurred?

A) Inflation
B) A change in relative prices
C) Deflation
D) A recession

Question 65

One reason our full employment goal is not zero percent is because:

A) Frictional unemployment will always exist.
B) Cyclical unemployment will always exist.
C) Population growth makes such a goal impossible.
D) Discouraged workers make such a goal impossible.

Question 66

If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is:

A) Inflation.
B) Deflation.
C) Stagflation.
D) Reflation.

Question 67

Which of the following is an example of cyclical unemployment?

A) Qadir is employed in the summer as a lifeguard but cannot find a position in the winter
B) Quincy left his job in Dallas to search for a new job in Idaho
C) Quinlan worked as an engineer until he was laid off because of a decrease in aggregate demand
D) Quinn has few job-related skills so she is never hired even though she continues to apply

Question 68

Which of the following types of unemployment is most directly related to real GDP growth?

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

Question 69

When there is no deflation or inflation in an economy:

A) Prices of all goods change by the same percentage.
B) Relative prices remain unchanged.
C) Average prices remain unchanged.
D) Full employment is achieveD.

Question 70

Which of the following is an essential part of the market mechanism?

A) Changing relative prices
B) Constant prices
C) Falling average prices
D) Rising average prices

Question 71

Unemployment that occurs when there are not enough jobs for the number of people in the labor force is referred to as:

A) Frictional unemployment.
B) Structural unemployment.
C) Cyclical unemployment.
D) Seasonal unemployment.

Question 72

Deflation occurs when the:

A) Price of large ticket items,such as appliances,decreases.
B) Price decreases for some goods and services outweigh price increases on all other goods and services.
C) Economy reaches full employment.
D) Average price of goods and services does not change.

Question 73

If the inflation rate is zero,changes in relative prices signal a change in the _____ for the economy.

A) Production possibilities
B) Unemployment rate
C) Level of GDP
D) Desirable mix of output

Question 74

A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed.

A) Frictionally
B) Structurally
C) Cyclically
D) Chronically

Question 75

A decrease in the average level of prices of goods and services is known as:

A) Deflation.
B) The business cycle.
C) A recession.
D) Inflation.

Question 76

During a period of inflation:

A) Specific prices are rising,and relative prices are falling.
B) Both relative prices and average prices are rising.
C) Relative prices are rising,but it is not certain what is happening to average prices.
D) Average prices are rising,but it is not certain what is happening to relative prices.

Question 77

When the unemployment rate falls to the full-employment level:

A) There is increased concern about inflation.
B) Many resources are idle.
C) The size of the labor force decreases.
D) There is increased concern about deflation.

Question 78

Which of the following is an example of structural unemployment?

A) Shelly is looking for work but never finished high school so her skills are perceived as limited by employers.
B) Sean just graduated from college and is planning to apply for professional positions.
C) Shamille was laid off as an architect because the economy is in a recession.
D) Shani is a hair stylist who cannot find work because her own hair is purple.

Question 79

Which of the following will definitely cause a change in the relative prices of two goods?

A) An increase in the average price of the two goods
B) Nominal price changes for the two goods adjusted for inflation
C) Different rates of change in the prices of the two goods
D) A decrease in the average price of the two goods

Question 80

The price of one good compared to the price of other goods refers to:

A) Relative price.
B) Inflation.
C) Deflation.
D) The income effect.