Quiz 8: Economic Fluctuations, Unemployment, and Inflation

Over the past century, the growth rate of real GDP in the United States has averaged approximately A)1 percent. B)3 percent. C)6 percent. D)10 percent.

Economists use the term "business cycle" to refer to A)the growth of small businesses into major corporations. B)changes in products that occur from improved technology. C)fluctuations in the level of real output and employment. D)periods of increases and decreases in the rate of inflation.

The labor force participation rate of women in the United States has been A)increasing for several decades. B)decreasing for the past several decades after increasing dramatically in the early 1900s. C)approximately constant during the last three decades. D)decreasing since the early 1900s.

Suppose there was a country with an adult (age 16 and over) population of 1,000, of which 100 were unemployed and 700 were employed. Which of the following is true? A)The employment population ratio is 87.5 percent. B)The labor force participation rate is 70 percent. C)The unemployment rate is 12.5 percent. D)There are 700 individuals in this country's labor force.

The type of unemployment caused by changes in the business cycle is A)cyclical unemployment. B)natural unemployment. C)frictional unemployment. D)structural unemployment.

Frictional unemployment is the result of A)not enough jobs for everyone to be employed. B)unemployed workers' skills not matching those needed for the available jobs. C)a decline in the demand for labor, such as during a recession. D)imperfect information and temporary periods of unemployment while workers are changing jobs.

Suppose an economy is operating at its maximum sustainable output rate. Neither recession nor economic boom are present. Which of the following would be true? A)The economy would be considered at full employment. B)Actual GDP would exceed potential GDP. C)Actual unemployment will be less than the natural rate of unemployment. D)One hundred percent of the labor force is employed.

Which of the following individuals would be considered unemployed by the official government definition? A)Alexander, a mathematician, who returned to graduate school after failing to find a job the last four months. B)Abigail, a medical student, who is still in college and is not working. C)Elizabeth, who is employed part-time but desires a full-time job. D)Darius, an auto worker vacationing in Florida during a layoff at a General Motors plant.

Suppose that the consumer price index at year-end 2008 was 140 and by year-end 2009 had risen to 150. What was the inflation rate during 2009? A)7.1 percent B)10 percent C)14.2 percent D)50 percent

Which of the following is true? A)Anticipated inflation is an increase in the price level that comes as a surprise, at least to most individuals. B)Unanticipated inflation is a change in the price level that is widely expected. C)Decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy. D)Inflation will increase the prices of goods and services that households purchase but not the wage rates of workers.

The distinguishing characteristics of business cycles are A)periods of inflation followed by periods of deflation. B)high rates of economic growth coupled with high rates of unemployment. C)a constant rate of economic growth coupled with ups and downs in the general level of prices. D)periods of growth in real output followed by periods of decline.

Economists use the phrase "business cycle" when referring to fluctuations in A)the rate of real output and employment. B)interest rates. C)the consumer price index. D)the general level of prices.

The period of declining growth in real GDP between the peak of the business cycle and the trough is called the A)contractionary phase. B)boom. C)expansionary phase. D)stationary phase.

The period of growth in real GDP between the trough of the business cycle and the next peak is called the A)recessionary phase. B)expansionary phase. C)contractionary phase. D)cyclical phase.

Which of the following will most likely occur during the contractionary phase of a business cycle? A)Real GDP rises, and the unemployment rate falls. B)Real GDP declines, and the rate of inflation rises. C)The sales of most businesses decline, and the unemployment rate rises. D)Inflation rises, and employment/population ratio falls.

Which of the following will most likely occur during the expansionary phase of a business cycle? A)Real GDP rises, and unemployment falls. B)Real GDP declines, and inflation rises. C)Interest rates rise, and the number of business failures rise. D)Inflation rises, and employment falls.

The recessionary phase of the business cycle is characterized by A)decreasing real output and increasing unemployment. B)decreasing real output and declining unemployment. C)increasing real output and increasing unemployment. D)increasing real output and declining unemployment.

The expansionary phase of the business cycle is characterized by A)decreasing real output and increasing unemployment. B)decreasing real output and declining unemployment. C)increasing real output and increasing unemployment. D)increasing real output and declining unemployment.

During a sustained economic expansion, A)the rate of unemployment will generally fall and the employment/population ratio will generally rise. B)the rate of unemployment will generally rise and the employment/population ratio will generally fall. C)both the rate of unemployment and the employment/population ratio will generally decline. D)both the rate of unemployment and the employment/population ratio will generally rise.

During a period of rapid growth in output, A)employment generally increases and unemployment decreases. B)employment generally decreases and unemployment increases. C)both employment and unemployment generally increase. D)both employment and unemployment generally decrease.

Which of the following is most indicative of a recession? A)a decline in unemployment B)a rise in inflation C)a decline in real GDP D)an increase in the interest rate

Which of the following is true of the business cycle record of the United States? A)Recessions have been lengthier during the last two decades than was true prior to 1980. B)Real GDP contracted throughout most of the 1950s. C)Real GDP in 2000 was approximately the same as 1950. D)Since 1950, the fluctuations in GDP have been less severe than before 1950.

Which of the following about business cycles is true? A)A "depression" is a recession that is mild and relatively brief. B)The expansions and contractions of real world business cycles last varying lengths of time. C)The timing of business fluctuations is regular and, therefore, easily predictable. D)During the recessionary phase of the business cycle, the rate of unemployment is generally quite low.

If the labor force grows at a faster rate than the number employed, the A)unemployment rate will fall. B)unemployment rate will rise. C)labor force participation rate will fall. D)employment rate will rise.

Isabella is on a temporary layoff from her factory job. If Isabella participates in the BLS survey, she will be classified as A)unemployed and in the labor force. B)unemployed and out of the labor force. C)employed and in the labor force. D)employed and out of the labor force.

Terrance loses his job and immediately begins looking for another. Other things the same, the unemployment rate A)increases, and the labor-force participation rate decreases. B)increases, and the labor-force participation rate is unaffected. C)is unaffected, and the labor-force participation rate increases. D)decreases, and the labor-force participation rate is unaffected.

Maurice loses his job and decides to sit on the beach rather than looking for work the next few months. Other things the same, the unemployment rate A)increases, and the labor-force participation rate is unaffected. B)increases, and the labor-force participation rate decreases. C)decreases, and the labor-force participation rate increases. D)decreases, and the labor-force participation rate decreases.

Nicole has just finished high school and started looking for her first job, but has not yet found one. As a result, the unemployment rate A)increases, and the labor-force participation rate is unaffected. B)increases, and the labor-force participation rate increases. C)is unaffected, and the labor-force participation rate increases. D)increases, and the labor-force participation rate decreases.

Suppose the labor-force participation rate of men is greater in Troy than in Sparta. This could be because the men of Troy A)spend more time in school and have earlier and longer retirements than men in Sparta. B)spend more time in school and have later and shorter retirements than men in Sparta. C)spend less time in school and have earlier and longer retirements than men in Sparta. D)spend less time in school and have later and shorter retirements than men in Sparta.

Suppose the official unemployment rate is 10 percent. We can conclude without question that A)the same 10 percent of the people in the economy were out of work for the entire year B)one of every ten people in the labor force is currently unemployed C)the same 10 percent of the people in the labor force were out of work for the entire year D)every person in the labor force was out of work for 10 percent of the year E)10 percent of the people in the economy were each out of work for 10 percent of the year

Camila is a homemaker. Last week, she was busy with her normal household activities. How would the Bureau of Labor Statistics classify her? A)A member of the civilian labor force who is employed. B)A member of the civilian labor force who is unemployed. C)A member of the civilian labor force who is underemployed. D)A discouraged worker who is not a member of the labor force. E)Not a member of the labor force.

The unemployment rate will increase whenever there is A)an increase in the number of persons classified as unemployed. B)an increase in the number of unemployed persons relative to the size of the labor force. C)an increase in the size of the U.S.population and there is no change in the number of persons classified as employed. D)a reduction in the size of the labor force while the number of unemployed decreases.

The unemployment rate will decrease whenever there is A)an increase in the number of persons classified as unemployed. B)a decrease in the number of unemployed relative to the size of the labor force. C)a decrease in the size of the population and there is no change in the number of persons classified as employed. D)a reduction in the size of the labor force. E)a decrease in the number of unemployed and the population does not change.

Terrell, an auto repair mechanic who remains unemployed because he refuses to work for less than $1,000 an hour, is A)counted as part of the labor force. B)considered frictionally unemployed. C)an underemployed worker. D)not counted as part of the labor force. E)considered as productively active.

Use the data below to answer the following question. What is the unemployment rate of the economy? A)3.3 percent B)4 percent C)5 percent D)5.3 percent

The civilian labor force includes those individuals who are A)unemployed and looking for work. B)staying home to care for other family members. C)attending school and not working at a job. D)retired.

A person is considered unemployed if she is A)working at a part-time job. B)taking a vacation from a job. C)working at a full-time job in a foreign country. D)not working but is actively looking for work.

How would the Bureau of Labor Statistics classify a person who is not working and refuses an offer of employment in order to keep looking for a better job? A)not in the labor force B)unemployed C)employed D)a discouraged worker

Which of the following would be officially classified as unemployed? A)a school administrator who has been working as a substitute teacher one day per week while looking for a full-time job in administration B)a mathematician who returned to graduate school after failing to find a job the last four months C)a 60-year-old former steel worker who would like to work but has given up actively seeking employment D)a laid-off construction worker waiting to return to a previous job

Which of the following would be classified as unemployed? A)mothers who choose to stay at home with their preschool-age children B)retirees who are no longer working at a job C)students attending school full time D)a 20-year old looking for her first job

Which one of the following persons would be considered unemployed? A)a person not working who has given up searching for a job B)a part-time worker looking for a full-time job C)a construction worker who was laid off due to cold weather D)a full-time college student who is not a member of the labor force

The labor force participation rate is defined as the number of A)unemployed individuals plus employed individuals divided by the number of individuals in the working-age population. B)employed individuals divided by the number of individuals in the working-age population. C)unemployed individuals plus employed individuals divided by the number of employed individuals. D)employed individuals divided by the number of individuals employed plus the number of unemployed individuals.

When people speak of the labor force participation rate, they are actually talking about the percentage of A)people not working but actively seeking work. B)people who are working. C)new entrants into the labor force. D)working-age people who are either working or seeking work.

Suppose the population (age 16 and over) of Vietnam is 100 million; 5 million are unemployed, and 40 million hold jobs. The labor force participation rate in Vietnam is A)10 percent. B)45 percent. C)50 percent. D)90 percent.

Suppose the population (age 16 and over) of Angola is 100 million; 5 million are unemployed, and 70 million hold jobs. The labor force participation rate in Angola is A)5 percent. B)65 percent. C)70 percent. D)75 percent.

Suppose the population (age 16 and over) of Panama is 50 million; 4 million are unemployed, and 36 million hold jobs. What are the rates of unemployment and labor force participation of Panama? A)Unemployment is 10 percent, and labor force participation is 80 percent. B)Unemployment is 10 percent, and labor force participation is 75 percent. C)Unemployment is 11 percent, and labor force participation is 80 percent. D)Unemployment is 11 percent, and labor force participation is 90 percent.

Suppose the population (age 16 and over) of Peru is 400 million; 20 million are unemployed, and 230 million hold jobs. What are the rates of unemployment and labor force participation of Peru? A)Unemployment is 8 percent, and labor force participation is 62.5 percent. B)Unemployment is 8.7 percent, and labor force participation is 92 percent. C)Unemployment is 8.7 percent, and labor force participation is 62.5 percent. D)Unemployment is 5 percent, and labor force participation is 57.5 percent.

The unemployment rate is defined as the number of A)unemployed individuals divided by the number of employed individuals. B)employed individuals divided by the number of individuals in the working-age population. C)unemployed individuals divided by the number of individuals in the working-age population. D)unemployed individuals divided by the number of individuals employed plus the number of unemployed.

The unemployment rate equals the number of persons A)unemployed divided by the number employed. B)unemployed divided by the number in the labor force. C)unemployed divided by the population age 16 and over. D)not working divided by the population age 16 and over.

Each month, the Bureau of Labor Statistics calculates unemployment by A)surveying all workers in the economy. B)surveying a random sample of households. C)making projections based on census data. D)surveying large business and government employers.

Which of the following would be most likely to reduce the rate of unemployment? A)a business recession B)an Internet job listing system that makes it easier to get information about job openings and available employees C)an increase in unemployment compensation benefits D)a rise in the minimum wage

Suppose the population (age 16 and over) of Madagascar is 200 million; 9 million are unemployed, and 111 million hold jobs. Indicate the rate of unemployment and the employment/population ratio of Madagascar. A)The unemployment rate is 4.5 percent, and the employment/population ratio is 55.5 percent. B)The unemployment rate is 7.5 percent, and the employment/population ratio is 60 percent. C)The unemployment rate is 7.5 percent, and the employment/population ratio is 55.5 percent. D)The unemployment rate is 8.1 percent, and the employment/population ratio is 60 percent.

Suppose the population (age 16 and over) of New Zealand is 48 million; 4 million are unemployed, and 40 million hold jobs. Indicate the rate of unemployment and the employment/population ratio of New Zealand. A)The unemployment rate is 10 percent, and the employment/population ratio is 75 percent. B)The unemployment rate is 9.1 percent, and the employment/population ratio is 91.7 percent. C)The unemployment rate is 10 percent, and the employment/population ratio is 83.3 percent. D)The unemployment rate is 9.1 percent, and the employment/population ratio is 83.3 percent.

Andrea would be considered unemployed if she is A)working at a part-time job but is looking for a full-time job. B)absent from her regular job as the result of illness. C)working at a full-time job but is looking for a part-time job. D)not working and is looking for a part-time job.

Which of the following would be classified as employed? A)a full-time college student B)a construction worker on layoff due to cold weather C)a parent who works 50 to 60 hours per week caring for family members D)a worker who is in the midst of a two-week vacation from his regular job

Which one of the following would be classified as employed? A)a parent who works 50 to 60 hours per week caring for family members B)an construction worker vacationing in Florida who is on layoff due to bad weather conditions in his home state C)a 21-year-old full-time college student D)a 17-year-old high school student who works a newspaper route six hours per week

Darryl would like to work as an accountant full time. A full-time position is not available, however, so he must accept a part-time job working 15 hours per week. The Bureau of Labor Statistics would categorize Darryl as A)employed. B)unemployed. C)both employed and unemployed. D)not in the labor force.

Xavier is on layoff from his assembly-line job in Detroit, and he expects to return in about four weeks. During this time, he is vacationing in Florida. The Bureau of Labor Statistics would classify Xavier as A)employed. B)unemployed. C)not part of the labor force. D)a temporary retiree.

How would the Bureau of Labor Statistics classify a college graduate who is not currently working but recently turned down an offer for employment at $10 an hour in order to keep looking for a better job? A)not in the labor force B)employed C)unemployed D)on temporary absence from school

The employment/population ratio identifies the proportion of the population age 16 and over that is A)either looking for work or on layoff waiting to be rehired. B)employed. C)in the labor force. D)unemployed.

The employment/population ratio is the number of persons employed divided by the number of persons A)in the labor force. B)unemployed. C)employed plus the number unemployed. D)in the civilian population age 16 and over.

Suppose the population (age 16 and over) of Cameroon is 250 million; 10 million are unemployed, and 125 million hold jobs. The employment/population ratio in Cameroon is A)8 percent. B)50 percent. C)54 percent. D)92 percent.

Suppose the population (age 16 and over) of Guatemala is 100 million; 5 million are unemployed, and 70 million hold jobs. The employment/population ratio of Guatemala is A)5 percent. B)65 percent. C)70 percent. D)85 percent.

The employment/population ratio _____ between 1980 and 2000, but this ratio has _______ since 2000. (fill in the blanks) A)fell; risen B)was virtually constant; risen C)rose; been virtually constant D)rose; fallen

As the economy recovered from the 2008-2009 recession during 2010-2013 the employment/population ratio A)rose sharply during the expansion. B)remained well below the rates achieved prior to the recession. C)remained well above the rates achieved prior to the recession. D)rose even though the labor force participation rate was declining.

Which of the following best explains why the rate of unemployment is highest among individuals aged 16 through 19? A)Teenagers do not have the skills necessary to find jobs. B)Teenagers change jobs more frequently than do older individuals. C)Teenagers have a higher labor force participation rate than other age groups. D)Most teenagers are in school and, for this reason, are not holding jobs.

The reduction of structural unemployment in the United States' economy may require A)an increase in the minimum wage. B)a reduction in government spending. C)an decrease in interest rates. D)increased spending on worker retraining.

Gabriela, a brilliant new Ph.D. in economics, has turned down many job offers because she hopes eventually to teach at one of the top ten universities in her field. The type of unemployment she is experiencing is A)frictional B)structural C)seasonal D)cyclical E)underemployment

Which type of unemployment is most likely to help the economy become more efficient? A)cyclical B)structural C)seasonal D)frictional E)underemployment

If the official unemployment rate increases in March from its February level because of sluggish sales in the auto industry, we can conclude that ____ unemployment is responsible for the increase. A)seasonal B)cyclical C)structural D)frictional E)any one of the causes of

If Trevon voluntarily quits one job, possesses marketable skills, and expects to find a new job in a few weeks, then Trevon is considered A)frictionally unemployed. B)cyclically unemployed. C)seasonally unemployed. D)structurally unemployed. E)unwise to quit his job without already having another one.

Unemployment caused by people voluntarily quitting work in order to seek more attractive employment is called A)the natural rate of unemployment. B)full employment. C)cyclical unemployment. D)frictional unemployment. E)structural unemployment.

Ashley was being treated unfairly by her boss, so she stormed off the job and two days later found another position. For two days, Ashley experienced A)cyclical unemployment. B)structural unemployment. C)seasonal unemployment. D)frictional unemployment. E)being out of the labor force.

A decrease in aggregate demand and the subsequent cutbacks in production lead to A)frictional unemployment. B)cyclical unemployment. C)cost-push unemployment. D)structural unemployment. E)transitory unemployment.

In a dynamic economy under ideal conditions, A)the unemployment rate should be near zero. B)some unemployment would be present due to workers temporarily being out of work while changing jobs. C)unemployment would tend to move upward slightly as prices increased. D)unemployment would tend to move slightly downward as unemployment compensation benefits increased.

Which of the following about unemployment is true? A)When a dynamic labor market is operating efficiently, mostly cyclical unemployment will be present. B)Some unemployment will be present even when a dynamic labor market is operating efficiently. C)When full employment is present, the rate of unemployment will be zero. D)When full employment is present, there will not be any frictional unemployment. E)When full employment is present, it will be impossible to sustain the current rate of output in the future.

Frictional unemployment A)would be eliminated if the economy were more stable. B)would be eliminated if the minimum wage were raised. C)is the result of workers' skills not matching the jobs available. D)is present even when labor markets are working well.

The type of unemployment resulting from the fact that labor market information is less than perfect is called A)frictional unemployment. B)natural unemployment. C)cyclical unemployment. D)structural unemployment.

An individual should continue to spend time searching for a job as long as A)all salary offers are below what the person expected. B)the marginal benefit expected from additional search exceeds the marginal cost. C)job openings are available in the individual's field. D)information is available that the individual has not yet collected.

When information about potential jobs is costly to acquire and individuals must spend time searching for jobs, which type of unemployment will result? A)frictional B)seasonal C)structural D)cyclical

The primary cause of frictional unemployment is A)discouraged workers who give up looking for work. B)fluctuations in aggregate demand. C)the lack of training and marketable qualifications in job seekers. D)inaccurate and costly information about job opportunities.

The primary cause of frictional unemployment is A)the low level of the current minimum wages. B)the lack of and cost of acquiring information about available job opportunities. C)a mismatch of the skills of unemployed workers with the skills needed for job openings. D)discouraged workers who quit looking for a job after extended periods of unsuccessful job search.

Which of the following is a positive effect of job search and the unemployment that often accompanies it? A)It keeps wages and income levels low. B)It permits individuals to better match their skills and preferences with the requirements of a job. C)It reduces the wage gap between high skill workers and those with few skills. D)It creates political pressure for an increase in the minimum wage, which will reduce the rate of unemployment in the long run.

How will increased usage of the Internet by employers and employees influence the job search process? A)It will make job-related information more costly and, therefore, tend to increase the rate of unemployment. B)It will make job-related information less costly and, therefore, tend to increase the rate of unemployment. C)It will make job-related information more costly and, therefore, tend to reduce the rate of unemployment. D)It will make job-related information less costly and, therefore, tend to reduce the rate of unemployment.

Higher unemployment insurance benefits tend to increase unemployment because they A)reduce the opportunity cost of job search and, hence, increase the search time. B)increase the opportunity cost of job search and, hence, increase the search time. C)reduce the opportunity cost of job search and, hence, decrease the search time. D)increase the opportunity cost of job search and, hence, decrease the search time.

Structural unemployment is a result of A)difficulties in matching qualified workers with available jobs. B)inaccurate or costly information about job opportunities. C)slow or negative economic growth, as during a recession. D)not enough workers to fill available jobs.

A general mismatch between the skills of unemployed workers and the skills needed by employers with job openings results in A)frictional unemployment. B)structural unemployment. C)cyclical unemployment. D)a higher labor force participation rate.

When individuals are unemployed because they lack the qualifications to fill available jobs, this is called A)frictional unemployment. B)natural unemployment. C)cyclical unemployment. D)structural unemployment.

During the early 1990s, many workers in military-related industries lost their jobs as the defense budget was reduced. Unemployment of this type is called A)cyclical unemployment. B)the natural rate of unemployment. C)frictional unemployment. D)structural unemployment.

When people become unemployed because of a higher minimum wage, this type of unemployment is called A)frictional. B)structural. C)cyclical. D)abnormal.

The type of unemployment that occurs because of a recession is called A)frictional unemployment. B)seasonal unemployment. C)natural unemployment. D)cyclical unemployment.

Cyclical unemployment is primarily caused by A)a large proportion of youthful workers in the labor force. B)fluctuations in aggregate demand. C)a lack of training on the part of job seekers. D)the failure of job seekers to search adequately for the available jobs.

The natural rate of unemployment occurs if there is no A)unemployment. B)frictional unemployment. C)structural unemployment. D)cyclical unemployment.

Full employment is the situation in which the economy operates at an unemployment rate equal to the sum of A)structural and frictional unemployment. B)cyclical and frictional unemployment. C)structural and cyclical unemployment. D)structural, frictional, and cyclical unemployment.

When the rate of cyclical unemployment is zero, the A)natural rate of unemployment must also be zero. B)rate of frictional unemployment must be negative. C)economy must have entered a recessionary stage. D)economy is considered to be at full employment.

The economy is considered to be at full employment when A)the actual rate of unemployment is less than the natural rate. B)the leading economic indicators are unchanged for two consecutive quarters. C)structural unemployment is zero. D)frictional plus structural unemployment is less than the natural rate. E)the rate of cyclical unemployment is zero.

Economists define full employment as the level of employment that results when A)the economy is in an economic boom. B)the rate of unemployment is zero. C)the rate of unemployment has fallen to its historical low of approximately two percent. D)the rate of unemployment is normal, considering both frictional and structural factors.

In a modern dynamic economy such as the United States, full employment generally means A)cyclical unemployment is present. B)everyone (excluding teenagers) that would like to work is employed. C)approximately 95 percent of the labor force is employed. D)100 percent of the labor force is either working or seeking work.

If unemployment in the United States was approximately 5 percent, most economists would believe that the economy was A)experiencing abnormally high unemployment. B)at or near full employment. C)experiencing an abnormally high labor force participation rate. D)in the midst of a strong economic boom.

Full employment means which of the following is zero? A)structural unemployment B)cyclical unemployment C)frictional unemployment D)aggregate unemployment

Which of the following is true? A)The natural rate of unemployment is present when the economy is operating at full employment. B)The natural rate of unemployment is equal to the number of persons unemployed divided by the number of persons in the labor force. C)The natural rate of unemployment is primarily the result of the ups and downs of the business cycle. D)Public policy cannot influence the natural rate of unemployment.

The natural rate of unemployment A)is a temporary low rate that cannot be maintained. B)is fixed; it cannot be altered by public policy. C)is equal to the number of persons unemployed divided by the number in the labor force. D)is the unemployment rate accompanying the economy's maximum sustainable rate of output.

The natural rate of unemployment A)increases sharply during a recession but declines significantly during a business expansion. B)is the unemployment rate accompanying the economy's maximum sustainable output. C)is generally less than the unemployment rate associated with the economy's full-employment rate of output. D)is present when the economy operates at approximately 94 percent of its potential GDP.

The natural rate of unemployment A)is due to cyclical business conditions. B)results from normal dynamic changes given the institutional arrangements of the economy. C)results from both frictional and cyclical economic conditions. D)is present when the economy is at the peak of an economic boom.

The natural rate of unemployment is not zero because A)some workers will always have few skills. B)unemployment will always rise during the recessionary phase of the business cycle. C)the economy is characterized by dynamic change and imperfect information. D)not every member of society is capable of participating in the labor force.

Teenage unemployment is substantially higher than unemployment among prime-age workers because teenagers A)are more likely to switch jobs and move into and out of the labor force. B)are less likely to be in the labor force than are older workers since many teenagers are still in school. C)are more likely to be in the armed forces, therefore, they're counted as unemployed. D)generally think they can find jobs that are available only to experienced, highly skilled workers if they just search diligently enough.

Which of the following will most likely reduce the natural rate of unemployment? A)an increase in the minimum wage B)an increase in unemployment benefits C)an increase in the proportion of prime-age workers (35-54) as a share of the labor force D)an increase in the labor force participation rate of teenagers

Which of the following will most likely cause a decrease the natural rate of unemployment? A)an increase in the minimum wage B)an increase in unemployment benefits C)an increase in experienced workers aged 25 and over as proportion of the labor force D)an increase in the labor force participation rate of teenagers

Which of the following will most likely increase the natural rate of unemployment? A)a decrease in the minimum wage B)an increase in unemployment benefits C)an increase in the number of people who stop looking for a job D)an increase in the proportion of prime-age workers as a share of the labor force

The current U.S. unemployment insurance program A)tends to significantly lower the unemployment rate. B)tends to modestly lower the unemployment rate. C)has no effect on the unemployment rate. D)tends to raise the unemployment rate.

The current U.S. unemployment insurance program tends to A)increase the incentive to switch occupations. B)reduce the time workers stay unemployed. C)make it more costly for unemployed workers to turn down available jobs. D)raise the unemployment rate.

Which of the following about unemployment is true? A)The unemployment rates of the major European economies have been lower than the United States during the last decade. B)The natural rate of unemployment is unaffected by labor market regulations and other dimensions of public policy. C)High unemployment rates over lengthy time periods are indicative of structural factors that are adversely affecting the natural rate of unemployment. D)The unemployment rates of Spain and Italy were among the lowest in the world during the past two decades.

Which of the following about unemployment is true? A)The unemployment rates of the major European economies were substantially lower than in the United States during the last decade. B)High unemployment rates over lengthy time periods are indicative of structural and regulatory factors that are exerting an adverse impact on the natural rate of unemployment. C)The natural rate of unemployment is unaffected by changes in the age composition of the labor force (for example, an increase in the relative number of youthful workers). D)Institutional changes such as an increase in the minimum wage may increase cyclical unemployment but will not affect the natural rate of unemployment.

During an economic boom period, the actual rate of unemployment will be A)less than the natural rate of unemployment. B)greater than the natural rate of unemployment. C)equal to the natural rate of unemployment. D)unaffected by the economic expansion.

During a recession, the actual rate of unemployment will be A)less than the natural rate of unemployment. B)greater than the natural rate of unemployment. C)equal to the natural rate of unemployment. D)unaffected by the economic contraction.

Potential output is the A)maximum rate of output that can ever be achieved. B)highest rate of output that has ever been achieved in the past. C)maximum sustainable output level consistent with the economy's resource base and current institutions. D)the rate of output present when the general level of prices is unstable.

The economy's potential output is A)the maximum output that could be achieved temporarily during a time of economic boom. B)the minimum output that could be achieved during a recession. C)present when 100 percent of the labor force is employed. D)the maximum sustainable output of the economy given its resources.

Potential GDP A)is always less than actual GDP. B)is identical to actual GDP. C)measures inflation. D)is the output an economy could produce at full employment.

The difference between actual real GDP and potential GDP A)decreases as the unemployment rate rises. B)increases as the unemployment rate rises. C)increases as the employment rate rises. D)decreases as the labor force increases.

Full employment A)exists when everyone in the economy has a job B)exists when everyone who wants a job has one C)exists when the unemployment rate is zero D)exists when everyone in the labor force has a job E)will always include some unemployment

If the economy were at its potential output level, which of the following is not true? A)The actual unemployment rate would equal the natural rate. B)There would be some cyclical unemployment. C)There would be some frictional unemployment. D)There would be some structural unemployment.

If an economy is at its potential output level, which of the following is not true? A)The economy is at its full-employment output level. B)Unemployment is at the natural level. C)The price level is zero. D)The output level being produced can be sustained indefinitely given the economy's resources and technology. E)The only unemployment is frictional or structural.

Which of the following types of unemployment can exist in an economy that is at its potential output level? A)cyclical unemployment only B)structural unemployment only C)frictional, cyclical, and seasonal unemployment only D)frictional, seasonal, and structural unemployment only E)there will be no unemployment in an economy that is at the potential output level

During an economic boom, A)the actual rate of unemployment will exceed the natural rate of unemployment. B)the output of the economy will exceed its long-run potential output. C)widespread unemployment will cause inflation to increase. D)the actual rate of unemployment will equal the natural rate of unemployment.

Actual GDP will be below potential GDP A)when the economy is at full employment. B)during an economic boom. C)when resources are fully utilized. D)during a recession.

During a recession, which of the following will be true? A)The actual rate of unemployment will be lower than the natural rate. B)Actual GDP will be lower than potential GDP. C)The employment/population ratio will increase substantially. D)Actual inflation will be higher than was anticipated.

Which of the following about unemployment is true? A)Frictional unemployment implies a lack of available jobs. B)During a recession, cyclical unemployment will be low. C)When an economy is at full employment, actual unemployment will be less than the natural rate of unemployment. D)When actual GDP equals potential GDP, the actual unemployment rate will equal the economy's natural rate of unemployment.

When real GDP grows more slowly than potential GDP, A)nominal GDP rises. B)the unemployment rate falls. C)labor productivity falls. D)the unemployment rate rises.

Which of the following about potential GDP is true? A)During a recession, actual GDP will exceed potential GDP. B)Actual GDP cannot exceed potential GDP, even for short periods. C)Actual output may be either above or below potential output depending on how fully resources are utilized. D)The economy's potential output is the maximum output that could be achieved temporarily during a time of economic boom.

Older Americans living on a pension and therefore on a fixed income, tend to be made A)better off when prices rise. B)better off when the inflation rate rises. C)worse off when prices rise. D)worse off when prices fall.

If borrowers and lenders expect a higher rate of inflation, A)nominal interest rates will tend to fall. B)real interest rates will tend to fall. C)nominal interest rates will tend to rise. D)real interest rates will tend to rise.

After a particular loan has been paid off, neither the borrower nor the lender has lost purchasing power. Therefore, it must be true that actual inflation was A)greater than expected inflation. B)equal to expected inflation. C)less than expected inflation. D)greater than the nominal rate of interest.

During periods when the inflation rate fluctuates widely, A)all relative prices increase at the same rate, leaving money prices constant B)economic efficiency increases because decision makers pay closer attention to changes in money prices C)uncertainty about changes in relative prices causes a decrease in economic efficiency D)all money prices increase at the same rate, leaving relative prices constant

The best definition of inflation is A)a temporary increase in prices. B)an increase in the price of one important commodity such as food. C)a persistent increase in the general level of prices as measured by a price index. D)an increase in the purchasing power of the dollar.

The value of money A)remains constant during periods of inflation. B)varies inversely with the general price level. C)varies directly with the general price level. D)varies indirectly with output.

Which of the following about inflation is true? A)High rates of inflation are usually associated with wide year-to-year changes in inflation. B)High rates of inflation are usually associated only with very large countries such as the United States. C)High rates of inflation are usually associated only with smaller countries such as Costa Rica. D)High rates of inflation will generally improve the economic efficiency of an economy.

When the inflation rate of a country is high over a lengthy time period, A)the year-to-year variability in the rate of inflation is generally small. B)the year-to-year variability in the rate of inflation is generally large. C)decision makers will be able to forecast future rates of inflation accurately. D)there is no reason to believe that the inflation will exert harmful side effects on real output and the prosperity of the country.

Which of the following about inflation is true? A)High and variable rates of inflation will be easy for decision makers to forecast accurately. B)Unanticipated inflation is an increase in the general level of prices that was not expected by most decision makers. C)In contrast with unanticipated inflation, anticipated inflation implies that the increase in the general level of prices was expected by borrowers but not lenders. D)Inflation will increase the prices of goods and services that households purchase but not the wage rates of workers.

In contrast with unanticipated inflation, anticipated inflation implies that A)the government was informed about inflation. B)most decision makers expected the general increase in the price level. C)the increase in the general level of prices was growth of GDP. D)the increase in the general level of prices was expected by borrowers but not lenders.

Which of the following about inflation is true? A)Anticipated inflation is an increase in the price level that comes as a surprise, at least to most individuals. B)Unanticipated inflation is a change in the price level that is widely expected. C)Decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy. D)Inflation will increase the prices of goods and services that households purchase but not the wage rates of workers.

At the beginning of a year, decision makers expect the general level of prices to increase at a 3 percent annual rate. The CPI increases from 150 to 154.5 during the year; this is an example of A)an inflation rate that is equal to 4.5 percent. B)an unanticipated increase in the general level of prices. C)an increase in the general level of prices that was accurately anticipated. D)an inflation rate that is less than what people anticipated.

At the beginning of a year, decision makers expect the general level of prices to increase at a 6 percent annual rate. The CPI increases from 150 to 154.5 during the year; this indicates that A)decision makers underestimated the rate of inflation during the year. B)decision makers overestimated the rate of inflation during the year. C)decision makers accurately forecast the rate of inflation during the year. D)the rate of inflation during the year was 4.5 percent.

Which of the following is true? A)Anticipated inflation is an increase in the price level that comes as a surprise, at least to most individuals. B)Unanticipated inflation is a change in the price level that is widely expected. C)When the inflation rate is high and variable, decision makers will generally be able to anticipate year-to-year changes in inflation quite accurately. D)Inflation will tend to increase the nominal values of both prices and wages.

A person who argues that inflation "robs us of the purchasing power of our paychecks" should also consider that inflation A)increases the value of the dollar, making paychecks worth more. B)will increase the size of paychecks as well as the prices of goods. C)does not affect the value of the dollar, either in paychecks or in prices. D)only affects the prices of things that we buy, not the prices of things that we sell.

Which of the following is a danger of inflation? A)Price changes can affect the people who sign long-term contracts. B)Rapid price changes reduce uncertainty. C)Anticipated inflation may be greater than unanticipated inflation. D)High rates of inflation will reduce interest rates.

Which of the following is true of high and variable rates of inflation? A)When such rates are present, it will be difficult for people to accurately forecast next year's rate of inflation. B)Inflation of this type will help promote economic growth and the efficient use of resources. C)People will respond to such rates by spending more time producing and less time trying to protect their wealth and income from the uncertainty created by the inflation. D)Inflation of this type will improve the information content delivered by market prices.

Which of the following is an example of someone with inflationary expectations taking a step designed to insulate themselves from the higher expected rates of inflation? A)a consumer deciding to delay the purchase of a new home or automobile B)a consumer who borrows money at a fixed interest rate in order to purchase a new home or automobile C)an investor who borrows funds at an adjustable money interest rate (one that automatically increases with higher inflation) D)a home buyer who borrows funds at a variable interest rate

High and variable rates of inflation will A)distort the information delivered by market prices. B)encourage people to spend more time producing and less time trying to protect their wealth. C)decrease the risks that accompany the undertaking of long-term investment projects. D)promote economic growth and the efficient use of resources.

The stages of a business cycle, in order, are A)expansion, contraction, recession, and boom. B)contraction, recession, expansion, and boom. C)boom, expansion, contraction, and recession. D)recession, contraction, expansion, and boom.

Which of the following will most likely occur during the expansionary phase of a business cycle? A)Real GDP declines, and the rate of unemployment increases. B)Real GDP declines, and the rate of inflation is unchanged. C)Real GDP increases, and rate of unemployment falls. D)Real GDP is unchanged, and the rate of inflation is unchanged.

During the last several decades the labor force participation rate A)of women has increased substantially. B)of men has increased substantially. C)of women has steadily declined. D)of both men and women has steadily declined.

If a country's population (age 16 and over) is 50 million, with 2 million unemployed and 23 million currently holding jobs, the A)unemployment rate is 4 percent, and the labor force participation rate is 46 percent. B)unemployment rate is 8.0 percent, and the labor force participation rate is 50 percent. C)unemployment rate is 4 percent, and the labor force participation rate is 50 percent. D)unemployment rate is 8.7 percent, and the labor force participation rate 50 percent.

When workers are unemployed due to a mismatch between their skills and the jobs available, economists call this A)cyclical unemployment. B)frictional unemployment. C)structural unemployment. D)transitional unemployment.

Sophia is tending to her home garden while awaiting recall from her seasonal part-time job. The Bureau of Labor Statistics would classify Sophia as A)not in the labor force. B)employed. C)unemployed. D)employed as a household worker.

Which of the following is a true statement? A)The concept of potential output might be thought of as the maximum sustainable output of the economy under normal circumstances. B)Actual output cannot exceed potential output, even during a boom. C)When the actual rate of unemployment exceeds the natural rate, the actual output of the economy will rise above its potential. D)Potential output represents the absolute maximum level of production.

Which of the following is a true statement? A)Unanticipated inflation is a change in the general level of prices that catches most decision makers by surprise. B)High and variable rates of inflation are easy for decision makers to forecast accurately. C)High and variable rates of inflation can increase GDP by reducing investment. D)When decision-makers are able to anticipate slow, steady rates of inflation, prices become more unstable and there is a negative impact on the level of prosperity.

If the consumer price index (CPI) was 125 at year-end of 2008 and 132.5 at year-end 2009, inflation during 2009 was A)zero; prices were stable during 2009. B)6.0 percent. C)7.5 percent. D)12.5 percent.

Which of the following is a danger of high rates of inflation? A)Price changes encourage long-term contracts at the expense of short-term contracts. B)Rapid price changes reduce uncertainty. C)Inflation increases the real value of assets, such as stocks and bonds. D)Inflation will encourage people to spend less time producing and more time trying to protect the value of their assets.

The natural rate of unemployment A)is an artificially low rate that cannot be maintained. B)is a constant rate that is unaffected by changes in public policy. C)is the rate of unemployment present when the economy is operating at full employment. D)is equal to the number of persons unemployed divided by the number in the labor force.

Which of the following about unemployment is true? A)The unemployment rates of the major European economies have been lower than that of the United States during the last decade. B)Compared to the U.S., European labor markets are characterized by less extensive regulation and less generous unemployment benefits. C)High unemployment rates over lengthy time periods are indicative of structural factors that are adversely affecting the natural rate of unemployment. D)The natural rate of unemployment decreases when youthful workers expand as a proportion of the workforce.

Full employment is the rate of employment that results when A)all labor resources of an economy are employed. B)there is efficient use of the labor force, with allowance made for normal unemployment due to dynamic changes and the structural conditions of the economy. C)cyclical unemployment is between 4 and 5 percent of the labor force. D)everybody who wants a job can find one.

Cyclical unemployment A)is caused by changes in the business cycle. B)results from imperfect search activities in matching qualified employees with employers. C)results from institutional factors that make it difficult for some workers to find jobs. D)will probably go up as a result of improvements in online job searching.

Which scenario will most likely happen as employers and employees increase their usage of the Internet in the job search process? A)Job-related information will become more costly and cyclical unemployment will go up. B)Job-related information will become less costly and frictional unemployment will go up. C)Job-related information will become more costly and structural unemployment will go down. D)Job-related information will become less costly and frictional unemployment will go down.

Answer the following questions: a.What are the three types of unemployment, and which two compose the natural rate? b.Give an example of a person who would be counted in each type. c.Would an economy with 2 percent actual unemployment be in a recession? Why or why not?

What is the natural rate of unemployment, and how does it relate to the concept of potential (or full-employment) GDP?

Suppose there are 25,000 employed and 5,000 unemployed persons. a.What is the unemployment rate? b.If 2,000 of those unemployed became discouraged and quit actively seeking work, what would happen to the unemployment rate? Calculate the new unemployment rate.

Answer the following questions: a.What is meant by the term "business cycle"? b.What economic indicators would indicate where the economy is in the business cycle? Explain. c.Give the four phases of the business cycle in their order of occurrence. d.What criterion must be met for our economy to be officially in a recession?

Discuss the dangers of inflation; that is, why may it hurt an economy?

Dr. Smith on the Channel 6 news says, "The recent figures showing that the unemployment rate is lower this quarter than last quarter are a definite sign that our economy is coming out of the recession." Dr. Jones on the Channel 8 news says, "Recent figures showing that employment is lower this quarter than it was last quarter are a definite sign that our economy is still plunging deeper into the recession." a.Is it possible for both unemployment and employment to fall at the same time? What factor could account for the observed phenomenon? b.In light of your answer, what do you think about the health of the economy relative to last quarter?

Answer the following questions: a.Describe the three types of unemployment. b.Explain why economists believe some types of unemployment are efficient and some are not.Which ones are which?

Evaluate the economic validity of the following statement: "Unemployed resources would not exist if the economy were operating efficiently."

Describe two ways that public policy could reduce the natural rate of unemployment.

Virtually all economists and policy makers agree that, within limits, higher employment is better. If this is true, couldn't the government create more employment by hiring people to dig holes and fill them in again? Is this good economic policy?

Inflation isn't costly just because prices are going up. After all, inflation means salaries and wages are going up as well. If higher prices are not the problem, discuss two important aspects of inflation that are costly.