Question 1

Potential Real GDP = $200 Billion Natural Rate of Unemployment = 6 Percent Actual Rate of Unemployment = 12 Percent Refer to the accompanying data, which is for a specific year in a hypothetical economy for which Okun's law is applicable.The amount of output being forgone by the economy is

Accepted Answer

The answer of Potential Real GDP = $200 Billion Natural...

Question 2

Inflation means that

Accepted Answer

Inflation refers to the general increase in prices across an economy, meaning that on average, prices are rising. However, this does not mean that all individual prices are increasing; some may remain stable or even decrease.

Question 3

Full-employment output is also called

Accepted Answer

Full-employment output refers to the level of output that the economy can produce when all available resources are utilized efficiently. This level of output is also known as potential output. The other options (A, B, and D) do not accurately describe full-employment output.

Question 4

The consumer price index was 177.1 in 2001 and 179.9 in 2002.Therefore, the rate of inflation in 2002 was about

Accepted Answer

The rate of inflation is calculated as ((179.9 - 177.1) / 177.1) * 100 = 1.58%, which rounds to 1.6 percent.

Question 5

Assume the natural rate of unemployment in the U.S.economy is 5 percent and the actual rate of unemployment is 9 percent.According to Okun's law, the negative GDP gap as a percentage of potential GDP is

Accepted Answer

Okun's law suggests that for every 1% increase in the unemployment rate above the natural rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. Here, the unemployment rate is 4% above the natural rate (9% - 5%), so the GDP gap is approximately 8% (4% * 2%).

Question 6

Given the annual rate of inflation, the "rule of 70" allows one to

Accepted Answer

The "rule of 70" is a way to estimate the number of years it will take for a quantity to double, given a constant annual growth rate. It is calculated by dividing 70 by the annual growth rate (in percentage terms).

Question 7

Potential Real GDP = $200 Billion Natural Rate of Unemployment = 6 Percent Actual Rate of Unemployment = 12 Percent Refer to the accompanying data, which is for a specific year in a hypothetical economy for which Okun's law is applicable.If the unemployment rate in the economy fell to 6 percent, we could conclude that

Accepted Answer

Okun's law suggests that when the actual unemployment rate equals the natural rate, the economy is operating at its potential GDP, meaning it has moved from inside the production possibilities curve to a point on or near the curve.

Question 8

Potential Real GDP = $200 Billion Natural Rate of Unemployment = 6 Percent Actual Rate of Unemployment = 12 Percent Refer to the accompanying data, which is for a specific year in a hypothetical economy for which Okun's law is applicable.The size of the negative GDP gap as a percentage of potential GDP for the economy is

Accepted Answer

The answer of Potential Real GDP = $200 Billion Natural...

Question 9

As applied to the price level, the "rule of 70" indicates that the number of years required for the price level to double can be found by

Accepted Answer

The "rule of 70" is a way to estimate the number of years it takes for a quantity to double, given a constant annual growth rate. It is calculated by dividing 70 by the annual growth rate (in this case, the annual rate of inflation).

Question 10

If Fred's annual real income rises by 8 percent each year, his annual real income will double in about

Accepted Answer

The answer of If Fred's annual real income rises by...

Question 11

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

Accepted Answer

Deflation occurs when the consumer price index (CPI) decreases. The percentage change is calculated as ((116 - 120) / 120) * 100 = -3.33%, indicating deflation of 3.33 percent.

Question 12

Unemployment rates in industrialized nations

Accepted Answer

Unemployment rates in industrialized nations vary considerably due to differences in economic structures, labor market policies, and other factors.

Question 13

The relationship between the size of the negative GDP gap and the unemployment rate is

Accepted Answer

The negative GDP gap is the difference between the actual GDP and the potential GDP. When the negative GDP gap is large, it means that the economy is producing significantly below its potential. This leads to high unemployment, as businesses are not able to hire as many workers as they would if the economy were operating at its potential.

Question 14

If actual GDP is less than potential GDP,

Accepted Answer

If actual GDP is less than potential GDP, it means that the economy is not operating at full capacity and there is a slack in the labor market. This will lead to higher unemployment as firms will not be utilizing all available labor resources. The natural rate of unemployment is the level of unemployment that the economy experiences when it is operating at potential GDP. Hence, actual unemployment rate will be higher than the natural unemployment rate.

Question 15

Okun's law

Accepted Answer

Okun's law describes the inverse relationship between unemployment and GDP, specifically how a rise in unemployment is associated with a larger negative GDP gap.

Question 16

Compared to other industrial nations, unemployment rates in the United States

Accepted Answer

The unemployment rates in the United States tend to fall somewhere in the middle when compared to other industrial nations, as they are generally lower than many European countries but higher than countries like Japan.

Question 17

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is

Accepted Answer

The rate of inflation is calculated as ((333 - 300) / 300) * 100 = 11 percent.

Question 18

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs.This is a statement of

Accepted Answer

This is a statement of Okun's law, which states that for every 1 percentage point that the actual unemployment rate deviates from the natural rate, there is a corresponding 2 percentage point deviation in the GDP gap. This means that when unemployment is higher than the natural rate, the economy is operating below its potential, resulting in a negative GDP gap.

Question 19

The annual rate of inflation can be found by subtracting

Accepted Answer

The annual rate of inflation is calculated by taking the difference between this year's price index and last year's price index, then dividing that difference by last year's price index. This gives the rate of change in prices over the year.

Question 20

Between 1980 and 2000, the price level approximately doubled.The average annual rate of inflation over this 20-year period was about

Accepted Answer

The answer of Between 1980 and 2000, the price level...

Quiz 29: Business Cycles, Unemployment, and Inflation