Deck 24: Economic Growth, Business Cycles, and Unemployment

Question 1

If the economy is in a structural stagnation, it can be expected to return to its historical trend soon.

Answer 1

False

Question 2

Active demand management policies are based on the work of John Maynard Keynes.

Answer 2

True

Question 3

The four phases of the business cycle are, in order, upturn, peak, recession, and trough.

Answer 3

True

Question 4

"Classical economist" is often used interchangeably with which term?

A)Laissez-faire economist
B)Keynesian economist
C)Activist economist
D)Marxian economist

Question 5

Before the Great Depression the popular view of government was:

A)laissez-faire; and after the Great Depression, the popular view of government was activist.
B)activist; and after the Great Depression, the popular view of government was laissez-faire.
C)activist; and after the Great Depression, the popular view of government was still activist.
D)laissez-faire; and after the Great Depression, the popular view of government was still laissez-faire.

Question 6

Laissez-faire economists favor government intervention in the market process.

Question 7

In the post-war era, the average business expansion has lasted about 59 months.

Question 8

Keynesian economists believe:

A)government policies do not affect economic activity.
B)government can implement policy proposals that can positively impact the economy.
C)most government policies would probably make things worse.
D)the economy ought to be left to market forces.

Question 9

If the economy were producing at its potential output, then the unemployment rate would be less than the target rate of unemployment.

Question 10

Laissez-faire economists believe:

A)government policies mostly do not affect economic activity.
B)government can implement policy proposals that have mostly positively impacts on the economy.
C)most government policies would probably make things worse.
D)government intervention in the market is necessary for a smoothly operating economy.

Question 11

The unemployment rate is the percentage of people in the labor force who are both able to and looking for work but who cannot find jobs.

Question 12

Cyclical unemployment is caused by fluctuations in economic activity.

Question 13

The terms business cycle and structural stagnation can be used interchangeably.

Question 14

Between 2007 and 2009, the U.S.unemployment rate rose from under 5 percent to over 8 percent.A Keynesian economist would most likely blame this increase in unemployment on:

A)an increase in the minimum wage.
B)an increase in the bargaining power of labor unions.
C)a decline in the level of aggregate demand.
D)a decline in aggregate supply.

Question 15

The difference between the long-run and short-run frameworks is that the long-run framework focuses on demand while the short-run framework focuses on supply.

Question 16

Which of the following explains why Keynesian economics lost influence in the 1970s?

A)A change in the how the Federal Reserve was constructed
B)A crash in the stock market
C)The damaging effects of inflation
D)An increase in the marginal tax rate

Question 17

Policy issues of business cycles are considered in a long-run framework

Question 18

Keynesian economists tend to focus their analysis on:

A)the long run.
B)the short run.
C)aggregate supply.
D)economic growth.

Question 19

Which of the following statements would a Classical economist of the 1930s most likely disagree with?

A)The market, left to its own devices, is self-adjusting.
B)Wages and prices will adjust to eliminate unemployment.
C)In the short-run the economy might experience some problems.
D)Unions do not impede wage and price adjustment.

Question 20

The sum of the number of employed persons and the number of unemployed persons equals the civilian non-institutional population.

Question 21

Which of the following was not a solution to the Great Depression favored by Classical economists?

A)Break up labor unions
B)Hire unemployed workers for public works programs
C)Let market forces operate
D)Stop government measures that held up wages and prices

Question 22

Which of the following statements best depicts laypeople's explanation of the Great Depression at that time?

A)Government policies kept prices too high.
B)An oversupply of goods had glutted the market.
C)Unions were keeping the good jobs for themselves.
D)An oversupply of goods is impossible.

Question 23

The short-run business cycle framework focuses primarily on factors:

A)affecting demand.
B)affecting supply.
C)affecting both supply and demand.
D)other than supply and demand.

Question 24

The highest amount of output an economy can sustainably produce and sell using existing production processes and resources is called:

A)nominal output.
B)actual output.
C)potential output.
D)utilized output.

Question 25

A period of protracted slow growth and high unemployment is called:

A)deflation.
B)cyclical stagnation.
C)structural stagnation.
D)stagflation.

Question 26

If a country of 300 million people has a total income of $12 trillion, its per capita income is:

A)$36,000.
B)$40,000.
C)$360,000.
D)$400,000.

Question 27

Issues of growth are generally considered in:

A)the short-run framework.
B)the long-run framework.
C)both the short-run and the long-run frameworks.
D)neither the short-run nor the long-run frameworks.

Question 28

When Classical economists of the 1930s looked at the Great Depression, they:

A)lacked a good explanation of why it was happening.
B)suggested wages were too flexible.
C)blamed it on activist fiscal and monetary policies.
D)thought it was a result of prices adjusting too quickly.

Question 29

The Classical economists argued that:

A)a market economy will not experience unemployment in the short run.
B)if unemployment occurs, it will cure itself because wages will fall.
C)aggregate expenditures may be too low.
D)if inflation occurs it will cure itself because prices, wages, and interest rates will rise.

Question 30

According to Classical economists in the 1930s, a recession will end when:

A)government creates enough jobs for all of the unemployed.
B)wages rise enough to eliminate unemployment.
C)wages fall enough to eliminate unemployment.
D)taxes are cut enough to stimulate private spending.

Question 31

Potential output:

A)is purely a physical phenomenon.
B)is related to the long-term growth trend.
C)requires government expenditures.
D)requires the purchase of new equipment.

Question 32

Keynesians:

A)generally favor activist government policies.
B)generally favor laissez-faire policies.
C)believe that frictional unemployment does not exist.
D)believe that all unemployment is cyclical unemployment.

Question 33

Classical economists believe that in the short-run, in the real world:

A)prices and wages are flexible.
B)prices and wages aren't flexible enough to bring about equilibrium.
C)prices are flexible but wages were not flexible.
D)wages are flexible but prices were not flexible.

Question 34

Classicals:

A)generally favor activist government policies.
B)generally favor laissez-faire policies.
C)believe that frictional unemployment does not exist.
D)believe that all unemployment is cyclical unemployment.

Question 35

The two frameworks conventional economists generally use to analyze macroeconomic issues are:

A)the inflation and the unemployment frameworks.
B)the short-run and the long-run frameworks.
C)the business cycle and the growth cycle frameworks.
D)the stagnationist and the Post-Keynesian frameworks.

Question 36

The long-run growth framework focuses on factors affecting:

A)incentives to spend.
B)incentives to produce.
C)both supply and demand.
D)the business cycle.

Question 37

The Great Depression occurred in the early:

A)1900s.
B)1930s.
C)1950s.
D)1960s.

Question 38

Keynesian economics focuses on:

A)the long run.
B)the short run.
C)both the long run and the short run.
D)neither the long run nor the short run.

Question 39

Classical economists are generally associated with:

A)laissez-faire.
B)their support of inflation.
C)an activist policy.
D)price controls.

Question 40

The laissez-faire policy prescription to eliminate unemployment was to:

A)eliminate labor unions and government policies that hold real wages too high.
B)strengthen unions and government regulations protecting unions and workers.
C)increase real wages so that people are encouraged to work.
D)have government guarantee jobs for everyone.

Question 41

If U.S.real GDP increases by 3.3 percent, we can infer that the United States experiences:

A)a recession.
B)an upturn.
C)a depression.
D)a trough.

Question 42

During the business cycle, an economic upturn occurs:

A)at the peak of the business cycle.
B)at the trough of the business cycle.
C)in between the peak and trough of the business cycle
D)in between the trough and peak of the business cycle

Question 43

Which of the following countries, or groups of countries, has grown at the fastest rate in the last ten years?

A)Western Europe
B)China
C)The United States
D)Eastern Europe

Question 44

What turns a business cycle into a structural stagnation?

A)A trough that is lower than the peak.
B)Multiple business cycles in a short period of time.
C)A slow upturn that keeps the economy below trend.
D)An upturn that exceeds potential.

Question 45

Per capita output would be certain to increase if:

A)both real output and population increase.
B)both real output and population decrease.
C)real output increases and population decreases.
D)real output decreases and population increases.

Question 46

Policies that affect aggregate expenditures are primarily relevant to the:

A)short-run business cycle framework.
B)long-run growth framework.
C)short-run growth framework.
D)long-run business cycle framework.

Question 47

The business cycle is:

A)the term used to describe fluctuations in output around its long-term trend.
B)the length of time required by a firm to buy inputs and produce and sell output.
C)the pattern of increases and decreases in the money supply.
D)regular and predictable.

Question 48

The secular trend growth rate is the:

A)rate of growth in any one year.
B)rate of growth in per capita output in any one year.
C)rate of growth of potential output.
D)difference between actual output and the average growth in the economy.

Question 49

The top of the business cycle is called:

A)a growth trend.
B)a recession.
C)an upturn.
D)a peak.

Question 50

The business cycle consists of several stages or phases.Which is the accurate sequence?

A)Recession, peak, upturn, trough
B)Recession, peak, trough, upturn
C)Recession, upturn, peak, trough
D)Recession, trough, upturn, peak

Question 51

The secular trend growth rate in the United States is approximately:

A)1 to 1.5 percent per year.
B)2.5 to 3.5 percent per year.
C)5 to 5.5 percent per year.
D)7 to 7.5 percent per year.

Question 52

Suppose a country's output is $440 billion and its population is 110 million.Now suppose that both its output and its population increase by 24 percent.As a result of these changes, its new level of per capita output will be:

A)00.
B)40.
C)$4,000.
D)$4,400.

Question 53

Fluctuations around the long-term growth rate are called:

A)recessions.
B)depressions.
C)expansions.
D)business cycles.

Question 54

The growth trend in the graph shown is depicted by:

A)A
B)B
C)C
D)D

Question 55

Which of the following statements best characterizes the Keynesian view of business cycles?

A)Fluctuations in business activity occur in regular and predictable patterns that cannot be altered.
B)Fluctuations in business activity are to be expected and should be accepted just as changes in the seasons are accepted.
C)Business cycles of the business cycle are symptoms of underlying problems and should be dealt with through activist government policies.
D)The appropriate macroeconomic policy can easily eliminate all fluctuations in business activity.

Question 56

Which of the following statements best characterizes the Classical view of business cycles?

A)Fluctuations in business activity occur in regular and predictable patterns.
B)Fluctuations in business activity are to be expected and should be accepted
C)Business cycles are symptoms of underlying problems and should be addressed by macroeconomic policy.
D)The appropriate macroeconomic policy can eliminate fluctuations in business activity.

Question 57

Business cycles are generally considered in:

A)the short-run framework.
B)the long-run framework.
C)both the short-run and long-run frameworks.
D)neither the short-run nor the long-run frameworks.

Question 58

In order of their occurrence, the phases of the business cycle are:

A)peak, downturn, upturn, trough.
B)peak, upturn, downturn, trough.
C)peak, downturn, trough, upturn.
D)peak, upturn, trough, downturn.

Question 59

If a country's output and population are, respectively, $500 billion and 200 million, then its per capita output is:

A)50.
B)$1,000.
C)$2,500.
D)$24,000.

Question 60

Over the last ten years which geographic area or country had the highest per capita growth rate?

A)China
B)Western Europe
C)North America
D)Latin America

Question 61

In contrast to a recession in industrialized nations, a recession in pre-industrial nations:

A)is more visible in its effects on the unemployment rate but it has a smaller effect on wage rates.
B)is less visible in its effects on the unemployment rate but it has a larger effect on wage rates.
C)has larger effects on both unemployment and wage rates.
D)has smaller effects on both unemployment and wage rates.

Question 62

Unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one is called:

A)structural unemployment.
B)frictional unemployment.
C)cyclical unemployment.
D)are not counted in the unemployment rate.

Question 63

Prior to the Industrial Revolution, unemployment was not generally considered a social problem because:

A)there were no fluctuations in how much people spent so there was nothing similar to recessions.
B)a reduction in spending would cause wages and income to fall rather than unemployment to rise.
C)governments, influenced by religious values, provided jobs to anyone unfortunate to be unemployed.
D)employers before the Industrial Revolution generally offered workers lifetime contracts and rarely dismissed them.

Question 64

Technological change is most likely to affect:

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

Question 65

Unemployment caused by a recession, assuming the time it takes to find a job constant, is called:

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

Question 66

Refer to the graph shown. A movement from points A to B represents a(n):

A)trough.
B)peak.
C)upturn.

Question 67

The unemployment rate is the number of people without a job:

A)divided by the population.
B)and looking divided by the population.
C)divided by the labor force.
D)and looking for work divided by the labor force.

Question 68

Some economists talk about a non-accelerating inflation rate of unemployment (NAIRU).The term the text uses for this concept is:

A)the natural rate of unemployment.
B)cyclical unemployment.
C)structural unemployment.
D)the target rate of unemployment.

Question 69

In the standard unemployment rate, discouraged workers are counted as:

A)part of the population over16.
B)employed.
C)unemployed.
D)part of the labor force.

Question 70

Refer to the graph shown. A movement from points B to C represents a(n):

A)trough.
B)peak.
C)recession.
D)upturn.

Question 71

Another term for what the text calls the "target rate of unemployment" is:

A)Keynesian unemployment.
B)nominal unemployment.
C)real unemployment.
D)the natural rate of unemployment.

Question 72

After the Great Depression, until 2008, economic downturns:

A)disappeared.
B)became longer.
C)became shorter.
D)continued more or less as they had prior to the Depression.

Question 73

A structural stagnation is:

A)a business cycle with greater fluctuations around the trend.
B)a slow expansion that involves slower growth than the previous long run trend.
C)a business cycle in which unemployment rises during the downturn and rises during the expansion.
D)a business cycle with smaller fluctuations around the trend.

Question 74

The longest business-cycle expansion in U.S.history occurred during the ten years from:

A)1919 until1929.
B)1938 until1948.
C)1959 until1969.
D)1991 until2001.

Question 75

Keynesians tend to agree that during a depression:

A)decreasing government spending is likely to improve economic conditions.
B)increasing taxes is likely to improve economic conditions
C)increasing government spending is likely to improve economic conditions
D)governments should not do anything because anything they do will likely make the situation worse.

Question 76

What is one reason the government collects data about discouraged workers?

A)Some people argue that the unemployment rate underestimates true unemployment because it does not include discouraged workers.
B)Some people argue that the unemployment rate overestimates true unemployment because it includes discouraged workers.
C)The number of discouraged workers is a better indicator of unemployment.
D)To include them in the standard measure of unemployment because they can't find jobs.

Question 77

Cyclical unemployment is defined as unemployment that results from:

A)fluctuations in economic activity.
B)structural changes in the economy.
C)changes in technology.
D)the aging of the population.

Question 78

The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions is:

A)zero.
B)called the target rate of unemployment.
C)called the optimal rate of unemployment.
D)called cyclical unemployment.

Question 79

Which of the following contributes to structural unemployment?

A)A general short-run downturn in the economy.
B)People quitting a job just long enough to look for and find another one.
C)People over 65 who don't really want to work.
D)People losing a job when their skills become obsolete due to technological innovations.

Question 80

A recession is often considered to be:

A)an economic downturn that persists for more than two consecutive quarters of the year.
B)an economic downturn that persists for more than four consecutive quarters of the year.
C)any period of more than six months in which unemployment is rising.
D)any period when the unemployment rate exceeds 6 percent.