Multiple Choice Questions

The labor force includes:
  • dividing nominal income by the price index (in hundredths).
  • fully employed and therefore the official unemployment rate may understate the level of unemployment.
  • employed workers and persons who are officially unemployed.
  • percentage of the labor force that is unemployed.
If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:
  • deflation of 3.33 percent.
  • a part of frictional unemployment.
  • 11 percent.
  • demand-pull inflation.
Part-time workers who want full-time work are counted as:
  • arbitrarily redistributes real income and wealth.
  • the economy achieves its potential output.
  • fully employed and therefore the official unemployment rate may understate the level of unemployment.
  • employed workers and persons who are officially unemployed.
Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is:
  • deflation of 3.33 percent.
  • frictionally unemployed.
  • Prices are sticky in the short run.
  • Cyclical unemployment.
Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.Refer to the given information. If the natural rate of unemployment in Scoob is 5 percent, then:
  • cyclical unemployment is about 2 percent.
  • structural unemployment.
  • 102 million.
  • Cyclical unemployment.
The unemployment rate is the:
  • tie wage increases to changes in the price level.
  • that rate of unemployment occurring when the economy is at its potential output.
  • deflating nominal income for inflation.
  • percentage of the labor force that is unemployed.
Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:
  • 11 percent.
  • 6 percent.
  • 6.9 percent.
  • 8 percent.
A large negative GDP gap implies:
  • arbitrarily redistributes real income and wealth.
  • a high rate of unemployment.
  • real domestic output falls.
  • actual GDP and potential GDP.
In the United States, business cycles have occurred against a backdrop of a long-run trend of:
  • 11 percent.
  • business cycles.
  • rising real GDP.
  • Capital goods.
If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is:
  • rising real GDP.
  • $360 billion.
  • $510 billion.
  • 11 percent.
Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.Refer to the given information. The unemployment rate in Scoob is:
  • 25 percent.
  • 102 million.
  • 6.9 percent.
  • 11 percent.
In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?
  • Capital goods.
  • capital goods and durable consumer goods.
  • Cyclical unemployment.
  • Expansion.
Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?
  • Structural and frictional unemployment.
  • cyclical unemployment is about 2 percent.
  • Capital goods.
  • Cyclical unemployment.
At the economy's natural rate of unemployment:
  • the economy achieves its potential output.
  • actual GDP and potential GDP.
  • real domestic output falls.
  • tie wage increases to changes in the price level.
During a period of hyperinflation:
  • people tend to hold goods rather than money.
  • Bureau of Labor Statistics.
  • employed workers and persons who are officially unemployed.
  • fully employed and therefore the official unemployment rate may understate the level of unemployment.
Inflation initiated by increases in wages or other resource prices is labeled:
  • potential output.
  • cost-push inflation.
  • structural unemployment.
  • cyclical unemployment.
Cost-of-living adjustment clauses (COLAs):
  • tie wage increases to changes in the price level.
  • the economy achieves its potential output.
  • deflating nominal income for inflation.
  • that rate of unemployment occurring when the economy is at its potential output.
If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is:
  • $360 billion.
  • $510 billion.
  • a recession.
  • 25 percent.
Inflation means that:
  • the long-term expansion or contraction of business activity that occurs over 50 or 100 years.
  • prices on average are rising, although some particular prices may be falling.
  • percentage of the labor force that is unemployed.
  • occurs when total spending exceeds the economy's ability to provide output at the existing price level.
Real income is found by:
  • tie wage increases to changes in the price level.
  • arbitrarily redistributes real income and wealth.
  • dividing nominal income by the price index (in hundredths).
  • prices on average are rising, although some particular prices may be falling.
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
  • 3 percent.
  • 6 percent.
  • 102 million.
  • Expansion.
If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:
  • 6 percent.
  • Expansion.
  • rising real GDP.
  • 11 percent.
Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?
  • Structural and frictional unemployment.
  • Prices are sticky in the short run.
  • structural unemployment.
  • Cyclical unemployment.
Full-employment output is also called:
  • rising real GDP.
  • potential output.
  • structural unemployment.
  • reduces real output.
Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 toThe person's real income will:
  • Prices are sticky in the short run.
  • the official unemployment rate will remain unchanged.
  • rise by about 15 percent.
  • frictionally unemployed.
Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is:
  • Cyclical unemployment.
  • cost-push inflation.
  • employed workers and persons who are officially unemployed.
  • not in the labor force.
What is the primary reason that changes in total spending lead to cyclical changes in output and employment?
  • Prices are sticky in the short run.
  • about 4-5 percent of the labor force is unemployed.
  • rise by about 15 percent.
  • a part of frictional unemployment.
The GDP gap measures the difference between:
  • actual GDP and potential GDP.
  • percentage of the labor force that is unemployed.
  • real domestic output falls.
  • the economy achieves its potential output.
Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with:
  • Structural and frictional unemployment.
  • structural unemployment.
  • frictionally unemployed.
  • rise by about 15 percent.
Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is:
  • 3 percent.
  • 8 percent.
  • 6 percent.
  • 25 percent.
In the depth of the Great Depression, the unemployment rate in the United States was about:
  • 11 percent.
  • 6 percent.
  • 3 percent.
  • 25 percent.
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:
  • decline.
  • 6 percent.
  • 6.9 percent.
  • 102 million.
The United States' economy is considered to be at full employment when:
  • actual GDP and potential GDP.
  • about 4-5 percent of the labor force is unemployed.
  • that rate of unemployment occurring when the economy is at its potential output.
  • percentage of the labor force that is unemployed.
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Multiple Choice Questions
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