Question 1

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

Accepted Answer

Recessions have been known to reduce inflation rates as they lead to a decrease in demand for goods and services, causing prices to fall. This decrease in demand is often accompanied by a decrease in the money supply, which also lowers inflation rates. Wars typically lead to an increase in government spending, which can lead to inflation. Large federal budget deficits and rapid growth in the money supply can also contribute to inflation.

Question 2

The longest expansion since records have been kept began in

Accepted Answer

The National Bureau of Economic Research (NBER) defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. Therefore, the longest expansion since records have been kept is the period from March 1991 to March 2001, as this was the longest sustained economic expansion in U.S. history.

Question 3

Troughs occur

Accepted Answer

Troughs refer to the low points in business cycles, so they occur at the bottom of each cycle. They are not tied to a specific frequency, so choices A, B, and D are incorrect.

Question 4

In general _____ by unanticipated inflation.

Accepted Answer

Unanticipated inflation generally hurts creditors because the money they are repaid has less purchasing power than expected. Debtors benefit because they repay their loans with money that is worth less than when they borrowed it.

Question 5

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

Accepted Answer

The answer of Among the following cases,which one would be...

Question 6

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

Accepted Answer

If the number of unemployed stays the same and the number of people in the labor force declines, the labor force participation rate decreases. This means that there are fewer people actively looking for work, which can result in a decrease in the number of employed individuals as well. With no change in the number of unemployed, the unemployment rate will increase due to the decrease in the labor force.

Question 7

The recovery phase of the business cycle ends when

Accepted Answer

The recovery phase of the business cycle is when the economy is transitioning from a recession to expansion. It ends when we reattain the level of the previous peak, which marks the start of the expansion phase. Therefore, choice A is the correct answer. B, C, and D are incorrect because they do not accurately describe the end of the recovery phase.

Question 8

The most severe recession since WWII was in

Accepted Answer

The 2007-2008 recession, also known as the Great Recession, was the most severe recession since WWII. It was characterized by widespread unemployment, a severe contraction in credit, and a sharp downturn in global trade. The other options listed were also significant recessions, but not as severe as the Great Recession.

Question 9

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.

Accepted Answer

Frictional unemployment refers to temporary unemployment that occurs while a person is searching for a new job or transitioning between jobs. In this scenario, Mr. Pearlmutter is unemployed because his previous company went out of business, but he is actively searching for a new position. Therefore, his unemployment is best categorized as frictional. Option B) Structurally refers to unemployment caused by shifts in the economy, such as changes in technology, and is not applicable in this scenario. Option C) Cyclical unemployment is caused by economic downturns and fluctuations in the business cycle, which also does not apply here. Option D) Psychological unemployment is not a recognized type of unemployment.

Question 10

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

Accepted Answer

A person who has not worked in six months and has given up looking for work is classified as "discouraged," which means they are not actively seeking employment and are therefore not counted in the labor force as unemployed or employed.

Question 11

We have had some degree of inflation since

Accepted Answer

The answer of We have had some degree of inflation...

Question 12

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

Accepted Answer

During the early 1980s, the U.S. experienced disinflation with high unemployment, suggesting that reducing inflation often requires a significant increase in unemployment, consistent with the short-term trade-off described by the Phillips curve.

Question 13

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

Accepted Answer

The cyclical unemployment rate is the difference between the actual unemployment rate and the natural rate of unemployment. If the overall unemployment rate falls by 2%, it implies that cyclical unemployment has also decreased by 2%, assuming the natural rate remains constant.

Question 14

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.

Accepted Answer

Mr. Ozark's lack of job experience and qualifications for the job he is seeking suggest that he is structurally unemployed. This type of unemployment occurs when an individual's skills or experience do not align with job openings available in the economy.

Question 15

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

Accepted Answer

The increase in the unemployment rate from 6 percent to 7 percent suggests that cyclical unemployment, which is related to the economic cycle, increased by 1 percent.

Question 16

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

Accepted Answer

The process of disinflation, which involves reducing the rate of inflation, often leads to higher unemployment rates. This is because as policies are implemented to reduce inflation, such as higher interest rates to curb spending, economic activity can slow down, leading to job losses.

Question 17

The real rate of interest

Accepted Answer

The real rate of interest can be negative, as it is the nominal interest rate minus the inflation rate. If the inflation rate is higher than the nominal interest rate, then the real rate of interest will be negative.

Question 18

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

Accepted Answer

Deflation is indicated by a Consumer Price Index (CPI) value less than 100 since the base year, meaning prices have generally fallen. A CPI of 90 suggests a decrease in the general price level compared to the base year.

Question 19

Which statement is true?

Accepted Answer

All provided statements are incorrect. A) People collecting unemployment benefits are indeed counted as unemployed if they meet the criteria for unemployment. B) The Bureau of Labor Statistics (BLS) compiles the unemployment rate based on household surveys, not data from unemployment insurance officers. C) The unemployment rate is calculated by dividing the number of unemployed individuals by the labor force, not the number of employed.

Question 20

Demand-pull inflation is often summed up as

Accepted Answer

Demand-pull inflation occurs when there is an increase in demand for goods and services in the economy that outstrips the supply of goods and services. This leads to an increase in prices as buyers have to compete for the limited number of goods available, resulting in a situation where there are too many dollars chasing too few goods.

Quiz 10: Economic Fluctuations, unemployment, and Inflation