Question 1

Cost-push inflation may be caused by:

Accepted Answer

A)   a decline in per-unit production costs.
B)   a decrease in wage rates.
C)   a negative supply shock.
D)   an increase in resource availability.E) A) and B)
F) B) and C)

Question 2

The natural rate of unemployment:

Accepted Answer

A)   is fixed over time.
B)   is found by adding the cyclical and structural unemployment rates.
C)   may change from one decade to another.
D)   cannot be changed through public policy.E) B) and D)
F) B) and C)

Question 3

Okun's law:

Accepted Answer

A)   measures the tradeoff between the rate of inflation and the rate of unemployment.
B)   indicates the number of years it will take for a constant rate of inflation to cause the price level to double.
C)   quantifies the relationship between nominal and real incomes.
D)   shows the relationship between the unemployment rate and the size of the GDP gap.E) None of the above
F) A) and C)

Question 4

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Accepted Answer

A)   military goods
B)   durable goods (machinery,equipment,etc. ) 
C)   textile products (clothing) 
D)   agricultural commodities (wheat,corn,etc. ) E) B) and C)
F) C) and D)

Question 5

In the expansion phase of a business cycle:

Accepted Answer

A)   the inflation rate decreases,but productive capacity increases.
B)   the inflation rate and productive capacity decrease.
C)   employment increases,but output decreases.
D)   employment and output increase.E) B) and D)
F) A) and C)

Question 6

The presence of discouraged workers:

Accepted Answer

A)   increases the size of the labour force,but does not affect the unemployment rate.
B)   reduces the size of the labour force,but does not affect the unemployment rate.
C)   may cause the official unemployment rate to understate the amount of unemployment.
D)   may cause the official unemployment rate to overstate the amount of unemployment.E) C) and D)
F) B) and D)

Question 7

Which of the following statements is correct? Unanticipated inflation:

Accepted Answer

A)   arbitrarily "taxes" fixed-income groups.
B)   increases the real value of savings.
C)   increases the purchasing power of the dollar.
D)   benefits creditors at the expense of debtors.E) B) and D)
F) None of the above

Question 8

Official unemployment statistics:

Accepted Answer

A)   understate unemployment because individuals receiving unemployment compensation are counted as employed.
B)   understate unemployment because "discouraged workers" are not counted as unemployed.
C)   include cyclical and structural unemployment,but not frictional unemployment.
D)   overstate unemployment because workers who are involuntarily working part time are counted as being employed.E) B) and D)
F) B) and C)

Question 9

If average nominal income was about $15,000 and the price level index was 118,then average real income would be about:

Accepted Answer

A)   $11,146
B)   $12,712
C)   $13,385
D)   $14,249E) C) and D)
F) All of the above

Question 10

Unanticipated inflation benefits debtors at the expense of creditors.

Accepted Answer

A) True 
 B)False

Question 11

A large negative GDP gap implies:

Accepted Answer

A)   an excess of imports over exports.
B)   a low rate of unemployment.
C)   a high rate of unemployment.
D)   a sharply rising price level.E) A) and B)
F) B) and C)

Question 12

The aggregate cost of unemployment can be measured by the:

Accepted Answer

A)   amount by which actual GDP exceeds potential GDP.
B)   amount by which potential GDP exceeds actual GDP.
C)   excess of real GDP over nominal GDP.
D)   excess of nominal GDP over real GDP.E) B) and C)
F) A) and B)

Question 13

Waiting for employment and "searching for employment" are both types of:

Accepted Answer

A)   cyclical unemployment.
B)   hidden unemployment.
C)   frictional unemployment.
D)   structural unemployment.E) A) and C)
F) A) and B)

Question 14

The following information is about a hypothetical economy:
Full-time employed = 80
Part-time employed = 25
Unemployed = 15
Discouraged workers = 5
Members of underground economy = 6
Consumer Price Index = 110
-Refer to the above information.The unemployment rate is:

Accepted Answer

A)   18.8 percent.
B)   12.5 percent.
C)   16.7 percent.
D)   25 percent.E) All of the above
F) C) and D)

Question 15

The natural rate of unemployment is:

Accepted Answer

A)   higher than the full-employment rate of unemployment.
B)   lower than the full-employment rate of unemployment.
C)   found by dividing total unemployment by the size of the labour force.
D)   that rate of unemployment occurring when the economy is at its potential output.E) B) and C)
F) All of the above

Question 16

In 2012 Ortega's nominal income rose by 8 percent and the price level rose by 5 percent.We can conclude that Ortega's real income:

Accepted Answer

A)   may have either increased or decreased.
B)   rose by 13 percent.
C)   rose by 3 percent.
D)   fell by 3 percent.E) None of the above
F) B) and C)

Question 17

Suppose that the consumer price index was 140.3 in 2012 and 144.5 in 2013.Therefore,the rate of inflation in 2013 was about:

Accepted Answer

A)   6.7 percent.
B)   3.0 percent.
C)   1.2 percent.
D)   13.6 percent.E) A) and B)
F) A) and C)

Question 18

The national unemployment rate in Canada:

Accepted Answer

A)   reveals the significant diversity in regional unemployment.
B)   does not reveal the significant diversity in regional unemployment.
C)   is a good indicator of unemployment rate in all regions in Canada.
D)   is always higher than the unemployment rate in each region in Canada.E) None of the above
F) All of the above

Question 19

If the price level doubles in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

Accepted Answer

A) True 
 B)False

Question 20

Core inflation is the underlying inflation that exists when volatile food and energy prices are omitted.

Accepted Answer

A) True 
 B)False

Exam 9: Business Cycles, Unemployment, and Inflation

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

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Which of the following statements is correct? Unanticipated inflation:

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Core inflation is the underlying inflation that exists when volatile food and energy prices are omitted.

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The presence of discouraged workers:

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In 2012 Ortega's nominal income rose by 8 percent and the price level rose by 5 percent.We can conclude that Ortega's real income:

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If the price level doubles in a 23-year period,we can conclude that the average annual rate of inflation over that period was about 3 percent.

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Waiting for employment and "searching for employment" are both types of:

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In the expansion phase of a business cycle:

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The natural rate of unemployment is:

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If average nominal income was about $15,000 and the price level index was 118,then average real income would be about:

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The following information is about a hypothetical economy: Full-time employed = 80 Part-time employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110 -Refer to the above information.The unemployment rate is:

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The aggregate cost of unemployment can be measured by the:

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Official unemployment statistics:

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Unanticipated inflation benefits debtors at the expense of creditors.

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A large negative GDP gap implies:

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The natural rate of unemployment:

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The national unemployment rate in Canada:

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Okun's law:

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Suppose that the consumer price index was 140.3 in 2012 and 144.5 in 2013.Therefore,the rate of inflation in 2013 was about:

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Cost-push inflation may be caused by:

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