Question 1

Unlike demand-pull inflation, cost-push inflation

Accepted Answer

A)  is self-limiting.
B)  drives up the price level.
C)  increases nominal income.
D)  increases real income.E) B) and D)
F) A) and D)

Question 2

Assume that there is a fixed rate of interest on contracts for borrowers and lenders.If unanticipated inflation occurs in the economy, then

Accepted Answer

A)  both lenders and borrowers benefit.
B)  both lenders and borrowers are hurt.
C)  borrowers are hurt, but lenders benefit.
D)  lenders are hurt, but borrowers benefit.E) A) and B)
F) B) and C)

Question 3

Suppose there are 5 million unemployed workers seeking jobs.After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work.As a result of this, all else equal, the official unemployment rate would

Accepted Answer

A)  decline.
B)  increase.
C)  increase in the short run but eventually decline.
D)  be unchanged.E) A) and B)
F) A) and C)

Question 4

After the Great Recession of 2007-09 ended, real GDP increased

Accepted Answer

A)  rapidly, and so did employment.
B)  slowly and weakly, and so did employment.
C)  rapidly, and so did the general price level.
D)  slowly, but employment grew quite rapidly.E) None of the above
F) All of the above

Question 5

The relationship between the size of the negative GDP gap and the unemployment rate is

Accepted Answer

A)  direct.
B)  inverse.
C)  undefined.
D)  direct during recession but inverse during expansion.E) C) and D)
F) None of the above

Question 6

For a given amount of nominal income, the real income will

Accepted Answer

A)  fall if the price level rises.
B)  fall if the price level falls.
C)  be unaffected if the price level falls.
D)  rise as the price level rises.E) A) and B)
F) A) and C)

Question 7

Which of the following statements about employment growth soon after the Great Recession is not true?

Accepted Answer

A)  The recovery in overall employment was driven mostly by an increase in part-time, rather than full-time employment.
B)  The unemployment rate statistic did not accurately reflect the still-struggling jobs market even in 2016.
C)  Employment growth did not keep up with population growth.
D)  The recovery in overall employment went mostly to younger workers, not older ones.E) All of the above
F) None of the above

Question 8

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.Which individual is cyclically unemployed?

Accepted Answer

A)  Mollie
B)  George
C)  Jeanette
D)  RicardoE) B) and C)
F) None of the above

Question 9

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is

Accepted Answer

A)  8 percent.
B)  5 percent.
C)  3 percent.
D)  2 percent.E) All of the above
F) C) and D)

Question 10

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

Accepted Answer

A)  military goods
B)  capital goods
C)  textile products
D)  agricultural commoditiesE) B) and C)
F) None of the above

Question 11

As applied to the price level, the "rule of 70" indicates that the number of years required for the price level to double can be found by

Accepted Answer

A)  dividing 70 into the annual rate of inflation.
B)  dividing the annual rate of inflation into 70.
C)  subtracting the annual change in nominal incomes from 70.
D)  multiplying the annual rate of inflation by 70.E) All of the above
F) A) and B)

Question 12

An annual rate of inflation of 7 percent will double the price level in about 15 years.

Accepted Answer

A) True 
 B)False

Question 13

Economists who are willing to accept mild inflation consider it to be a necessary by-product of high and growing spending that produces high levels of output, full employment, and economic growth.

Accepted Answer

A) True 
 B)False

Question 14

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

Accepted Answer

A)  expansion
B)  recession
C)  peak
D)  troughE) A) and B)
F) C) and D)

Question 15

Inflation means that the prices of all items in the economy are increasing.Difficulty: 02 Medium
Learning Objective: 29-03 Explain how inflation is measured and distinguish between cost-push inflation and demand-pull inflation.Topic: Inflation

Accepted Answer

A) True 
 B)False

Question 16

The business cycle is so named because upswings and downswings in business activity are predictably equal in terms of duration and intensity.

Accepted Answer

A) True 
 B)False

Question 17

When the economy goes into a recession and firms require less labor, managers tend to

Accepted Answer

A)  reduce wages to reflect the lower demand for labor.
B)  avoid cutting wages, for fear of drops in worker productivity.
C)  lay off workers and keep wages of the remaining workers constant.
D)  keep all of their workers by spreading work more thinly.E) All of the above
F) C) and D)

Question 18

The rate of unemployment tends to be lowest for

Accepted Answer

A)  black teenagers.
B)  white teenagers.
C)  black adult males.
D)  white adult males.E) A) and D)
F) None of the above

Question 19

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is

Accepted Answer

A)  11 percent.
B)  33 percent.
C)  91 percent.
D)  10 percent.E) A) and B)
F) A) and C)

Question 20

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

Accepted Answer

A)  the GDP Price Index
B)  the Consumer Price Index
C)  the Retail Trade survey
D)  the Wholesale Price IndexE) B) and C)
F) A) and C)

Exam 29: Business Cycles, Unemployment, and Inflation

An annual rate of inflation of 7 percent will double the price level in about 15 years.

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Which of the following statements about employment growth soon after the Great Recession is not true?

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If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is

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In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

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Assume that there is a fixed rate of interest on contracts for borrowers and lenders.If unanticipated inflation occurs in the economy, then

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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.Which individual is cyclically unemployed?

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Economists who are willing to accept mild inflation consider it to be a necessary by-product of high and growing spending that produces high levels of output, full employment, and economic growth.

Correct AnswerverifiedShow Answer

The relationship between the size of the negative GDP gap and the unemployment rate is

Correct AnswerverifiedShow Answer

The rate of unemployment tends to be lowest for

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Unlike demand-pull inflation, cost-push inflation

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The business cycle is so named because upswings and downswings in business activity are predictably equal in terms of duration and intensity.

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For a given amount of nominal income, the real income will

Correct AnswerverifiedShow Answer

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

Correct AnswerverifiedShow Answer

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is

Correct AnswerverifiedShow Answer

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

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Suppose there are 5 million unemployed workers seeking jobs.After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work.As a result of this, all else equal, the official unemployment rate would

Correct AnswerverifiedShow Answer

As applied to the price level, the "rule of 70" indicates that the number of years required for the price level to double can be found by

Correct AnswerverifiedShow Answer

After the Great Recession of 2007-09 ended, real GDP increased

Correct AnswerverifiedShow Answer

Inflation means that the prices of all items in the economy are increasing.Difficulty: 02 Medium Learning Objective: 29-03 Explain how inflation is measured and distinguish between cost-push inflation and demand-pull inflation.Topic: Inflation

Correct AnswerverifiedShow Answer

When the economy goes into a recession and firms require less labor, managers tend to

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