Chapter 8

1. Which is one of the four phases of an idealized business cycle?
A.inflation
B.recession
C.unemployment
D.seasonal variation


2. Most economists believe that the immediate determinant of the levels of domestic output and employment is
A.the price level
B.the size of the civilian labor force
C.the nation's stock of capital goods
D.the level of total spending


3. Total output in December of this year was greater than total output in December of 1928. This is no doubt due to the effect of
A.seasonal variations
B.secular trend
C.the business cycle
D.business fluctuations


4. If employment in the agricultural sector of the U.S. economy during August and September is typically 112% of what it normally is in the other months of the year, this is probably a consequence of
A.seasonal variations
B.secular trend
C.the business cycle
D.both seasonal variations and the business cycle


5. Production and employment in which of the following industries would be least affected by a depression?
A.nondurable consumer goods
B.durable consumer goods
C.capital goods
D.iron and steel


6. A worker who loses a job at a petroleum refinery because consumers and business firms switch from the use of oil to the burning of coal is an example of
A.frictional unemployment
B.structural unemployment
C.cyclical unemployment
D.disguised unemployment


7. A worker who has quit one job and is taking 2 weeks off before reporting to a new job is an example of
A.frictional unemployment
B.structural unemployment
C.cyclical unemployment
D.disguised unemployment


8. Insufficient total spending in the economy results in
A.frictional unemployment
B.structural unemployment
C.cyclical unemployment
D.disguised unemployment


9. The full-employment unemployment rate in the economy has been achieved when
A.frictional unemployment is zero
B.structural unemployment is zero
C.cyclical unemployment is zero
D.the natural rate of unemployment is zero


10. Which has decreased the natural rate of unemployment in the United States in recent years?
A.the increased size of unemployment benefits
B.more workers covered by unemployment programs
C.fewer young workers in the labor force
D.less competition in product and labor markets


11. The labor force includes those who are
A.less than 16 years of age
B.in mental institutions
C.not seeking work
D.employed


12. The unemployment rate in an economy is 8%. The total population of the economy is 250 million, and the size of the civilian labor force is 150 million. The number of employed workers in this economy is
A.12 million
B.20 million
C.138 million
D.140 million


13. The price has doubled in about 14 years. The approximate annual percentage rate of increase in the price level over thisperiod has been
A.2%
B.3%
C.4%
D.5%


14. The unemployment data collected by the Bureau of Labor Statistics have been criticized because
A.part-time workers are not counted in the number of workers employed
B.discouraged workers are not considered a part of the labor force
C.it covers frictional unemployment, but not cyclical unemployment, which inflates unemployment figures.
D.the underground economy may understate unemployment


15. Okun's law predicts that when the actual unemployment rate exceeds the natural rate of unemployment by two percentage
points, the GDP gap will equal
A.2% of the potential GDP
B.3% of the potential GDP
C.4% of the potential GDP
D.5% of the potential GDP


16. If the GDP gap were equal to 6% of the potential GDP, the actual unemployment rate would exceed the natural rate of unemployment by
A.two percentage points
B.three percentage points
C.four percentage points
D.five percentage points


17. The burden of unemployment is least felt by
A.white-collar workers
B.teenagers
C.blacks
D.males


18. If the consumer price index was 110 in one year and 117 in the next year, then the rate of inflation from one year to the next was
A.3.5%
B.4.7%
C.6.4%
D.7.1%


19.
R-1 8a

In which range does the price level begin to rise as the economy either approaches or surpasses the full employment level of output?
A.range 1
B.range 2
C.range 3
D.range 4



20. Only two resources, capital and labor, are used in an economy to produce an output of 300 million units. If the total cost ofcapital resources is $150 million and the total cost of labor resources is $50 million, then the per unit production costs in this economy are
A.$0.67 million
B.$1.50 million
C.$2.00 million
D.$3.00 million


21. If the economy can supply no more resources to production, an increase in aggregate spending will cause
A.output and employment to increase
B.output and prices to increase
C.nominal income and prices to increase
D.employment and nominal income to increase


22. If the economy is experiencing a depression with substantial unemployment, an increase in total spending will cause
A.a decrease in the real income of the economy
B.little or no increase in the level of prices
C.an increase in the real income and a decrease in the nominal income of the economy
D.proportionate increases in the price level, output, and income in the economy


23. If a person's nominal income increases by 8% while the price level increases by 10%, the person's real income
A.increases by 2%
B.increases by 18%
C.decreases by 18%
D.decreases by 2%


24. If the average level of nominal income is $21,000 and the price level index is 154, the average real income would be about
A.$12,546
B.$13,636
C.$15,299
D.$17,823


25. With no inflation, a bank would be willing to lend a business firm $10 million at an annual interest rate of 8%. But, if the rate of inflation was anticipated to be 6%, the bank would
charge the firm an annual interest rate of
A.2%
B.6%
C.8%
D.14%


26. Who would be hurt by unanticipated inflation?
A.those living on incomes with cost-of-living adjustments
B.those who find prices rising less rapidly than their nominal incomes
C.those who lent money at a fixed interest rate
D.those who became debtors when prices were lower


27. Some economists argue that mild demand-pull inflation at less than full employment results in
A.rising real output and employment
B.falling real output and employment
C.a rising price level and falling employment
D.a falling price level and rising employment


28. Which contributes to cost-push inflation?
A.an increase in employment and output
B.an increase in per unit production costs
C.a decrease in resource prices
D.an increase in unemployment


29. Which is not associated with hyperinflation?
A.war or its aftermath
B.rising output in the economy
C.the hoarding of goods and speculation
D.a halt to the use of money as both a medium of exchange and a standard of value


30. If an economy has experienced an inflation rate of over 3000% per year, this economic condition would best be described as
A.a wage-price inflationary spiral
B.a cost-of-living adjustment
C.cost-push inflation
D.hyperinflation



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