Question 1

One form of "cost-push inflation," economists refer to are

Accepted Answer

Cost-push inflation occurs when production costs, such as wages, increase and businesses pass on these higher costs to consumers in the form of higher prices. If labor attempts to raise wages, it can lead to increases in prices and result in cost-push inflation.

Question 2

After a business cycle trough a recovery follows

Accepted Answer

A recovery following a business cycle trough is a typical characteristic of the economic cycle. While there may be some exceptions, such as prolonged recessions or depressions, generally recoveries do follow troughs. Therefore, "all of the time" is the most accurate answer.

Question 3

Which of the following assets decreases the most in purchasing power during inflation?

Accepted Answer

Cash decreases the most in purchasing power during inflation because its value is directly tied to its purchasing power. As inflation rises, the prices of goods and services increase, which means that the purchasing power of cash decreases. This is why it is important to invest cash in assets that can keep up with inflation, such as stocks or real estate, instead of holding onto it in a savings account or as physical cash.

Question 4

If people cannot find work and drop out of the labor force,they are classified as

Accepted Answer

If people cannot find work and drop out of the labor force, they are classified as discouraged workers. Discouraged workers have stopped looking for work because they believe there are no available jobs for them. They are not classified as unemployed because they are not actively seeking work.

Question 5

After a business cycle peak a recession follows

Accepted Answer

The answer of After a business cycle peak a recession...

Question 6

The consumer price index is created by

Accepted Answer

The consumer price index (CPI) is created by calculating the cost of a "basket" of consumer goods typically bought by an American family in any year as a percentage of their cost in a base year. This allows for comparison of the cost of living over time.

Question 7

Statement I: We had a period of deflation immediately following World War II.
Statement II: We have not had a period of sustained deflation since the early 1930s.

Accepted Answer

Statement I is false - there was actually a period of inflation immediately following World War II due to pent-up demand and limited supply of goods.

Statement II is true - while there have been some brief episodes of deflation in certain sectors or regions, there has not been a sustained period of deflation for the whole economy since the 1930s.

Question 8

Hyperinflation is

Accepted Answer

Hyperinflation refers to an extremely rapid or out of control inflation, where the price level increases very quickly as a currency loses its value. None of the provided options accurately describe hyperinflation. Option A describes a situation that could lead to deflation or economic stagnation rather than hyperinflation. Option B describes deflation, which is the opposite of inflation. Option C equates hyperinflation with depression, which is incorrect as depression is characterized by a prolonged period of economic downturn, not specifically by rapid inflation.

Question 9

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

Accepted Answer

The correct sequence of the business cycle stages after a recession is: recession, trough (the lowest point, indicating the end of a recession), and then recovery (the period of economic improvement following a trough).

Question 10

When the value of the dollar has decreased,

Accepted Answer

When the value of the dollar decreases, it means that it can buy less than it could previously. This results in an increase in the cost of living as individuals need more dollars to purchase the same goods and services.

Question 11

In constructing the consumer price index for the current year

Accepted Answer

The correct method for constructing the Consumer Price Index (CPI) involves comparing the total cost of a fixed basket of goods and services in the current year with the cost of the same basket in a base year. This is done by dividing the cost of the basket in the current year by the cost in the base year and then multiplying by 100 to get an index value. Option D accurately describes this process.

Question 12

Frictional unemployment

Accepted Answer

Frictional unemployment is caused by individuals in the labor force who are either entering the workforce for the first time or transitioning between jobs. It stems from normal, voluntary job transitions and is generally considered to be a temporary and somewhat natural phenomenon in a healthy, growing economy.

Question 13

When the cost of living increases,as measured by the consumer price index,

Accepted Answer

The consumer price index measures the average change over time in the prices paid by urban consumers for a basket of goods and services. When the cost of living increases, it means that the prices of goods and services have gone up, therefore the value of the dollar has decreased. This means that you will need more dollars to buy the same amount of goods and services as before. Therefore, D is the correct answer.

Question 14

Our unemployment rate is compiled by the _________ and our consumer price index is compiled by the ________.

Accepted Answer

The Bureau of Labor Statistics is responsible for compiling both the unemployment rate and the consumer price index.

Question 15

Disinflation took place in all of these periods except

Accepted Answer

The answer of Disinflation took place in all of these...

Question 16

Structural unemployment is often caused by

Accepted Answer

Structural unemployment is caused by changes in economic organization and production which make some jobs and job skills obsolete. This can result in a mismatch between the skills possessed by workers seeking employment and the skills demanded by employers.

Question 17

Suppose it costs a family $20,000 to live in 1987 and costs $50,000 to live today.If 1987 was the base year,how much is the CPI today?

Accepted Answer

To calculate CPI, we use the formula: 
CPI = (Cost of basket in current year/cost of basket in base year) x 100 
In this case, the cost of basket in 1987 is $20,000 and the cost of basket in current year is $50,000. 
Therefore, CPI = ($50,000/$20,000) x 100 = 250. 
Hence the correct answer is option C, which is 250.

Question 18

In the 1950s,A W Phillips investigated the relationship between

Accepted Answer

A.W. Phillips is best known for investigating the relationship between the unemployment rate and the rate of change in wages (or prices), which is famously represented by the Phillips Curve. This curve illustrates an inverse relationship between the rate of unemployment and the rate of inflation in an economy.

Question 19

Statement I: Since the end of World War II our economic expansions have been much longer than our contractions.
Statement II: Our longest economic expansion since the end of World War II was for 10 years.

Accepted Answer

Statement I is true, as economic expansions have been longer than contractions since World War II. Statement II is also true, as the longest economic expansion lasted for 10 years from 1991 to 2001. Therefore, both statements are true.

Question 20

Extremely high rates of inflation such as that experienced by Nicaragua in the 1980s are described as

Accepted Answer

Extremely high rates of inflation are described as hyperinflation. This is characterized by a rapid and uncontrollable increase in prices, often exceeding 50% per month. Nicaragua experienced hyperinflation during the 1980s.

Quiz 10: Economic Fluctuations, unemployment, and Inflation