Question 1

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

Accepted Answer

The rise in overall unemployment rate indicates an increase in cyclical unemployment, which is caused by changes in the business cycle. Since the overall unemployment rate increased by 1 percent, it is reasonable to assume that the increase in cyclical unemployment is also 1 percent.

Question 2

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, as they are no longer actively seeking employment and thus not counted as unemployed.

Question 3

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

Accepted Answer

The cyclical unemployment rate refers to the portion of unemployment that is due to fluctuations in the business cycle. If the overall unemployment rate fell from 8 percent to 6 percent, it means that there are fewer unemployed individuals in the economy. Therefore, the cyclical unemployment rate would also have to decrease by a proportional amount, which would be 2%. Therefore, the correct answer is D, fell by 2%.

Question 4

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

Accepted Answer

During the early 1980s, the U.S. experienced a period of high unemployment and high inflation, known as "stagflation." Eventually, the Federal Reserve increased interest rates to combat inflation, which led to a significant increase in unemployment. This suggests that disinflation (reducing inflation) can occur only if there is a significant increase in unemployment, supporting answer choice A. The unstable relationship between inflation and unemployment during this period also suggests that the Phillips curve, which suggests that there is an inverse relationship between inflation and unemployment, may not be as stable as initially thought (eliminating answer choice B). The idea that both inflation and unemployment can be consistently reduced by dramatically increasing interest rates is debatable and not necessarily supported by the events of the early 1980s, eliminating answer choice C.

Question 5

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 6

The longest expansion since records have been kept began in

Accepted Answer

The longest expansion since records have been kept began in March 1991 and lasted until March 2001, for a total of 120 months.

Question 7

The real rate of interest

Accepted Answer

The real rate of interest can be negative if inflation is higher than the nominal interest rate. The real rate of interest is calculated by subtracting the inflation rate from the nominal interest rate. If the inflation rate is higher than the nominal interest rate, the real rate of interest will be negative.

Question 8

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

Accepted Answer

Recessions typically result in lower levels of spending and decreased demand for goods and services, leading to a decrease in prices and a reduction in inflation. Additionally, during recessions, the Federal Reserve may implement contractionary monetary policies (such as raising interest rates) to further dampen inflationary pressures.

Question 9

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 10

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 the temporary unemployment that occurs while someone is in between jobs or searching for a new one. In this scenario, Mr. Pearlmutter is temporarily unemployed and actively seeking a new position, making him an example of someone experiencing frictional unemployment.

Question 11

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 12

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

Junior Ozark's lack of job experience and education suggests structural unemployment, which is caused by a mismatch between the skills and qualifications of workers and the needs of employers. Frictional unemployment refers to a temporary period of unemployment as individuals search for new jobs, cyclic unemployment is caused by business downturns or economic recessions, and psychological unemployment is not a recognized category of unemployment.

Question 13

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

Accepted Answer

Deflation occurs when the overall price level decreases from the base year. Therefore, a CPI lower than 100 in the current year would indicate deflation since the base year. Choice A is the only option that meets this criteria.

Question 14

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 but the number of people in the labor force declines, then the proportion of unemployed individuals in the labor force will increase, resulting in a higher unemployment rate.

Question 15

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, leading to an increase in prices. This is often caused by an increase in the money supply, which leads to too many dollars chasing too few goods. As a result, prices tend to rise.

Question 16

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 17

Troughs occur

Accepted Answer

Troughs occur at the bottom of business cycles, which typically last several years. They represent a low point in economic activity, with high unemployment and low levels of production and spending. The exact timing and frequency of troughs can vary, but they generally occur at the end of a recession or period of contraction in the economy.

Question 18

The recovery phase of the business cycle ends when

Accepted Answer

The recovery phase of the business cycle is the period between the trough and the peak, during which economic activity gradually increases until it reaches the level of the previous peak. Therefore, the recovery phase ends when we reattain the level of the previous peak.

Question 19

We have had some degree of inflation since

Accepted Answer

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

Question 20

The most severe recession since WWII was in

Accepted Answer

The most severe recession since WWII occurred in 2007-2008, also known as the Great Recession. This recession was sparked by the collapse of the housing market and the subprime mortgage crisis, and it led to high unemployment rates and a sharp decrease in economic activity. The other options listed were significant recessions, but not as severe as the Great Recession.

Quiz 10: Economic Fluctuations, unemployment, and Inflation