Question 1

What has been the range of the decline in real output for U.S. recessions since 1950?

Accepted Answer

Since 1950, U.S. recessions have typically seen declines in real output ranging from -0.1 percent to -4.9 percent, reflecting moderate contractions in economic activity.

Question 2

The level of total spending is the immediate determinant of the:

Accepted Answer

The level of total spending directly affects the level of real output and employment, as it determines the demand for goods and services, which in turn influences production and job creation.

Question 3

Which statement is correct?

Accepted Answer

The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle because nondurable goods are essential and purchased regularly, while durable goods purchases can be postponed during economic downturns.

Question 4

Which of the following is the best example of a supply shock?

Accepted Answer

A supply shock refers to an unexpected event that suddenly changes the supply of a product or commodity, leading to sudden changes in its price. The introduction of new innovations in production can lead to a positive supply shock by increasing productivity and supply.

Question 5

Which of the following is the best example of an event that would cause a demand shock?

Accepted Answer

An unexpected change in financial asset prices can lead to a demand shock as it affects consumer wealth and spending, altering the overall demand in the economy.

Question 6

Shocks to the economy:

Accepted Answer

Shocks to the economy are unexpected changes in aggregate demand or aggregate supply, affecting the overall economic equilibrium.

Question 7

Shocks to the economy often result in calls for government action to correct the imbalances these shocks create. Why don't markets tend to correct these imbalances quickly by themselves?

Accepted Answer

Product prices are often "sticky" or inflexible, meaning they do not adjust quickly to changes in supply and demand, preventing markets from correcting imbalances rapidly.

Question 8

Indy worked for a major automobile manufacturer before the company relocated its factory to Malaysia, putting Indy out of a job. Indy continues to seek new employment, but will likely have to retrain or relocate to find a job. Based on this description, Indy is best described as:

Accepted Answer

Indy is structurally unemployed because the job loss is due to changes in the industry structure, such as the relocation of the factory, which requires retraining or relocation for new employment.

Question 9

Balin recently lost his job as a dog trainer because of a recession. He is seeking a new job, but his prospects appear dim until the economy recovers. Based on this description, Balin is best described as:

Accepted Answer

Balin is cyclically unemployed because his job loss is due to a recession, which is a downturn in the economic cycle affecting employment levels.

Question 10

Alyssa lost her job six years ago because of a recession. She continues to seek new employment and many people have returned to that industry as the economy has recovered, but because of her extended bout of unemployment, her workplace skills have deteriorated and she is unable to secure a job or even get interviews. In her current situation, Alyssa is best described as:

Accepted Answer

Alyssa is structurally unemployed because her skills have become outdated or irrelevant due to her long-term unemployment, making it difficult for her to find a job even though the economy has recovered.

Question 11

Rosa recently completed her college degree and is looking for her first job. She has had a few interviews and prospects look good for her to land a new job in the next couple of weeks. Based on this description, Rosa is best described as:

Accepted Answer

Rosa is frictionally unemployed because she is in the process of transitioning from college to her first job, which is a normal part of the job search process.

Question 12

Parker recently quit his job to find one that pays better and better fits his skills. He has had multiple interviews and anticipates securing a new position soon. Based on this description, Parker is best described as:

Accepted Answer

Parker is frictionally unemployed because he is in the process of transitioning between jobs and is actively seeking employment. This type of unemployment occurs when individuals are temporarily out of work while searching for new positions that better match their skills and preferences.

Question 13

Tony left his job three months ago to go back to school full time. He will complete his degree in about three years and then seek a new job. Based on this description, Tony is best described as:

Accepted Answer

Tony is not currently seeking employment as he is attending school full time, so he is not considered part of the labor force.

Question 14

Which is a correct statement?

Accepted Answer

Structural unemployment occurs when there are changes in the economy that alter the demand for certain skills, often due to technological advancements or shifts in consumer preferences.

Question 15

A headline reads: "Economy Still in Recession." The type of unemployment most closely associated with this economic condition would be:

Accepted Answer

Cyclical unemployment is most closely associated with economic recession because it is caused by a decline in aggregate demand, which leads to a decrease in output and employment.

Question 16

The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
1) Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in several months when national economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work.
Refer to the above information. Which individual is frictionally unemployed?

Accepted Answer

Mollie is frictionally unemployed because she is actively looking for work and has had three job interviews in the past month.

Question 17

The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
1) Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in several months when national economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Refer to the above information. Which individual is structurally unemployed?

Accepted Answer

Jeanette is structurally unemployed because her aircraft design skills are no longer in demand due to the federal government's cuts in defense spending.

Question 18

The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
1) Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in several months when national economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work.
Refer to the above information. Which individual is cyclically unemployed?

Accepted Answer

George is cyclically unemployed because he was laid off due to economic conditions and expects to return to work when the economy improves.

Question 19

The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
1) Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in several months when national economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work.
Refer to the above information. Which individual is not in the labor force?

Accepted Answer

Ricardo is not in the labor force because he has quit looking for work.

Question 20

The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.
1) Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in several months when national economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work.
Refer to the above information. Which individual(s) would be included in the calculation of the full-employment unemployment rate?

Accepted Answer

Mollie and Jeanette are actively looking for work, which qualifies them as unemployed and included in the full-employment unemployment rate.

Quiz 11: Business Cycles, Unemployment, and Inflation