Deck 8: Economic Fluctuations, Unemployment, and Inflation

Question 1

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.

Answer 1

imperfect information and temporary periods of unemployment while workers are changing jobs.

Question 2

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.

Answer 2

The unemployment rate is 12.5 percent.

Question 3

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.

Answer 3

Real GDP rises, and unemployment falls.

Question 4

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.

Question 5

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.

Question 6

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.

Question 7

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.

Question 8

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.

Question 9

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.

Question 10

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

Question 11

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.

Question 12

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.

Question 13

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.

Question 14

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.

Question 15

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.

Question 16

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.

Question 17

The type of unemployment caused by changes in the business cycle is

A)cyclical unemployment.
B)natural unemployment.
C)frictional unemployment.
D)structural unemployment.

Question 18

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.

Question 19

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.

Question 20

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.

Question 21

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.

Question 22

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.

Question 23

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.

Question 24

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.

Question 25

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

Question 26

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.

Question 27

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

Question 28

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

Question 29

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

Question 30

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.

Question 31

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.

Question 32

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.

Question 33

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.

Question 34

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.

Question 35

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

Question 36

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.

Question 37

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.

Question 38

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

Question 39

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.

Question 40

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.

Question 41

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

Question 42

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.

Question 43

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.

Question 44

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.

Question 45

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.

Question 46

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

Question 47

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.

Question 48

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

Question 49

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

Question 50

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.

Question 51

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.

Question 52

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.

Question 53

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.

Question 54

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.

Question 55

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

Question 56

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.

Question 57

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.

Question 58

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.

Question 59

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.

Question 60

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.

Question 61

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

Question 62

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.

Question 63

Which type of unemployment is most likely to help the economy become more efficient?

A)cyclical
B)structural
C)seasonal
D)frictional
E)underemployment

Question 64

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.

Question 65

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.

Question 66

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.

Question 67

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

Question 68

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.

Question 69

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.

Question 70

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.

Question 71

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.

Question 72

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

Question 73

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.

Question 74

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.

Question 75

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.

Question 76

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.

Question 77

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.

Question 78

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

Question 79

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.

Question 80

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.