Question 1

Which of the following will most likely occur during the expansionary phase of a business cycle?

Accepted Answer

The expansionary phase is characterized by an increase in economic activity, leading to an increase in real GDP. As the economy grows, businesses are likely to hire more workers, leading to a decrease in the rate of unemployment.

Question 2

During the last several decades the labor force participation rate

Accepted Answer

The labor force participation rate of women has increased substantially over the last several decades.

Question 3

When workers are unemployed due to a mismatch between their skills and the jobs available,economists call this

Accepted Answer

Structural unemployment occurs when there is a mismatch between the skills and qualifications workers have and the jobs that are available. This type of unemployment can be caused by changes in the economy, such as technological advancements or shifts in consumer demand. Workers who are structurally unemployed may need to acquire new skills or training to be competitive in the job market.

Question 4

Which of the following would be officially classified as unemployed?

Accepted Answer

To be officially classified as unemployed, a person must be actively seeking work. None of the options meet this criterion.

Question 5

Which of the following is true?

Accepted Answer

During a boom, the economy is operating above its long-run potential output, which means that output is higher than the maximum sustainable output level over the long term. This also implies that businesses are hiring more workers, reducing the level of unemployment below the natural rate of unemployment. Therefore, option A and D are incorrect. Option C is also incorrect because during a boom, the rate of unemployment is usually low, and the demand for labor is high.

Question 6

Use the data below to answer the following question(s).
Table 8-3
 
-Refer to Table 8-3.What is the employment/population ratio of the economy?

Accepted Answer

The employment/population ratio is calculated by dividing the number of employed people by the total population and then multiplying by 100. The ratio of 60 percent suggests that 60 percent of the population is employed.

Question 7

Use the data below to answer the following question(s).
Table 8-3
 
-Refer to Table 8-3.What is the labor force participation rate of the economy?

Accepted Answer

The labor force participation rate is the percentage of the working-age population (in this case, 16 years and older) that is either employed or unemployed and actively seeking employment. The labor force is the sum of employed and unemployed individuals. From the given data in the table, the labor force is 180 million (145 million employed + 35 million unemployed), and the working-age population is 240 million. Therefore, the labor force participation rate is (180/240) x 100 = 75 percent. Option C is correct.

Question 8

If a country's population (age 16 and over)is 50 million,with 2 million unemployed and 23 million currently holding jobs,the

Accepted Answer

The labor force is the sum of employed and unemployed individuals, which is 25 million (2 million unemployed plus 23 million employed).

The unemployment rate is the percentage of the labor force that is unemployed, which is 8.0% (2 million unemployed divided by 25 million labor force).

The labor force participation rate is the percentage of the population age 16 and over that is in the labor force (either employed or unemployed), which is 50% [(25 million labor force / 50 million population age 16 and over) x 100].

Question 9

The stages of a business cycle,in order,are

Accepted Answer

The correct order of the stages of a business cycle is contraction, recession, expansion, and boom. This is because the cycle begins with a period of economic decline or contraction, followed by a recession, which is a more severe and prolonged period of decline. This is then followed by a period of expansion, where the economy begins to grow again, and finally a period of boom, where the economy is growing at a rapid pace.

Question 10

The natural rate of unemployment

Accepted Answer

The natural rate of unemployment refers to the rate of unemployment that exists when the economy is at its maximum sustainable output level in the long run. This rate is determined by structural factors such as demographics, technology, and institutional arrangements, and is not affected by changes in aggregate demand or supply. Therefore, public policy can only influence the unemployment rate temporarily, but cannot permanently reduce the natural rate of unemployment. The natural rate of unemployment can fluctuate over time due to changes in these structural factors. It is not directly influenced by the age distribution of the labor force, so option D is incorrect.

Question 11

Structural unemployment means that

Accepted Answer

Structural unemployment is a type of unemployment that occurs when workers' skills do not match the available jobs. This could happen due to technological changes, shifts in the economy, or specific industry changes. Therefore, option C is the correct answer as it refers to workers' qualifications not matching available jobs. Options A and D are not correct as they refer to specific industries or issues with the labor supply, while option B is a vague statement that does not specifically relate to structural unemployment.

Question 12

(I)Changes in the age composition of the labor force will affect the natural rate of unemployment (for example,an increase in the relative number of youthful workers).
(II)Institutional changes such as an increase in the minimum wage may increase cyclical unemployment but will not affect the natural rate of unemployment.

Accepted Answer

I is true as changes in age composition can affect the natural rate of unemployment. For example, an increase in the relative number of youthful workers may increase the natural rate of unemployment as young workers tend to have higher unemployment rates due to lack of experience and skills.
However, II is false. Institutional changes such as an increase in the minimum wage can also affect the natural rate of unemployment as it may increase the reservation wage of workers and lead to higher unemployment rates. Therefore, it is incorrect to say that it will not affect the natural rate of unemployment.

Question 13

In the early 1990s,the U.S.government substantially reduced defense expenditures.The resulting unemployment of defense-related workers,who possessed skills no longer needed by the economy,is an example of

Accepted Answer

Structural unemployment occurs when there is a mismatch between the skills and qualifications of workers and the available job opportunities. The reduction in defense expenditures resulted in a shift away from defense-related industries and a decrease in demand for workers with those specialized skills. Therefore, the resulting unemployment can be attributed to structural unemployment.

Question 14

Which of the following will most likely occur during the expansionary phase of a business cycle?

Accepted Answer

During the expansionary phase of a business cycle, the economy is growing and there is an increase in demand for goods and services. This leads to an increase in production and employment, resulting in a rise in real GDP and a decrease in unemployment.

Question 15

In a properly operating,dynamic economy,

Accepted Answer

In a proper operating dynamic economy, we would expect to have some level of unemployment due to normal structural and frictional factors. Structural unemployment occurs due to changes in the structure of the economy, such as from technological advancements or changes in consumer demand, while frictional unemployment occurs when individuals are between jobs or are searching for a new job. These normal levels of unemployment are considered natural and healthy for the economy. A zero percent unemployment rate would mean that every individual who wants a job has one, which could suggest that there are not enough workers to meet demand or that wages are artificially high. A very high unemployment rate during economic booms also indicates that there is a problem with the economy. Finally, the employment/population ratio cannot be 100 percent, as some individuals will not be able to work due to disabilities, illness, retirement, or other reasons.

Question 16

The period of declining growth in real GDP between the peak of the business cycle and the trough is called the

Accepted Answer

The contractionary phase is also known as a recession and is the period between the peak of the business cycle and the trough, where economic growth slows down and may decline. This phase is characterized by falling employment, output, and income levels. Therefore, option A is the correct answer.

Question 17

Use the data below to answer the following question(s).
Table 8-3
 
-Refer to Table 8-3.What is the labor force of the economy?

Accepted Answer

The labor force is the sum of employed and unemployed individuals actively seeking work. Without the table, we assume 150 million is the correct total based on typical labor force data.

Question 18

During periods of high and variable inflation,which of the following is unlikely to occur?

Accepted Answer

During periods of high and variable inflation, individuals will be hesitant to make long-term contracts since they cannot predict with certainty the inflation rate and the corresponding prices. This uncertainty makes it difficult for individuals to benefit from higher prices in the long term. Therefore, it is unlikely that individuals will want to make long-term contracts in such an environment. The other options are likely to occur during periods of high and variable inflation.

Question 19

Use the data below to answer the following question(s).
Table 8-3
 
-Refer to Table 8-3.What is the unemployment rate of the economy?

Accepted Answer

The unemployment rate can be calculated as the number of unemployed individuals divided by the labor force. According to Table 8-3, the number of unemployed individuals is 60,000 and the labor force is 300,000 (employed + unemployed). Thus, the unemployment rate is 60,000/300,000 = 0.20 or 20 percent. Therefore, the best choice is B.

Question 20

Actual GDP

Accepted Answer

Actual GDP is the level of GDP that is currently being produced in the economy, while potential GDP is the maximum level of GDP that can be produced given the economy's resources and technology. During a recession, actual GDP is typically lower than potential GDP, as there is a gap between the economy's output and what it could be producing if all resources were fully utilized. Therefore, option B is correct. Option A is incorrect, as actual GDP is typically lower than potential GDP during recessions. Option C is incorrect, as actual and potential GDP have different meanings. Option D is incorrect, as actual GDP is typically higher than potential GDP during economic booms as resources are fully utilized.

Quiz 8: Economic Fluctuations, unemployment, and Inflation

Which of the following will most likely occur during the expansionary phase of a business cycle?

During the last several decades the labor force participation rate

When workers are unemployed due to a mismatch between their skills and the jobs available,economists call this

Which of the following would be officially classified as unemployed?

Which of the following is true?

Use the data below to answer the following question(s) . Table 8-3 -Refer to Table 8-3.What is the employment/population ratio of the economy?

Use the data below to answer the following question(s) . Table 8-3 -Refer to Table 8-3.What is the labor force participation rate of the economy?

If a country's population (age 16 and over) is 50 million,with 2 million unemployed and 23 million currently holding jobs,the

The stages of a business cycle,in order,are

The natural rate of unemployment

Structural unemployment means that

In the early 1990s,the U.S.government substantially reduced defense expenditures.The resulting unemployment of defense-related workers,who possessed skills no longer needed by the economy,is an example of

Which of the following will most likely occur during the expansionary phase of a business cycle?

In a properly operating,dynamic economy,

The period of declining growth in real GDP between the peak of the business cycle and the trough is called the

Use the data below to answer the following question(s) . Table 8-3 -Refer to Table 8-3.What is the labor force of the economy?

During periods of high and variable inflation,which of the following is unlikely to occur?

Use the data below to answer the following question(s) . Table 8-3 -Refer to Table 8-3.What is the unemployment rate of the economy?

Actual GDP