Deck 8: Economic Fluctuations, unemployment, and Inflation

Question 1

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.

Answer 1

B

Question 2

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.

Answer 2

D

Question 3

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.

Answer 3

A

Question 4

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 5

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 6

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.

Question 7

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.

Question 8

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 9

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 10

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 11

During this 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 12

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.

Question 13

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 14

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 15

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 16

Which of the following individuals would be considered unemployed by the official government definition?

A)George,a mathematician,who returned to graduate school after failing to find a job the last four months
B)Gwen,a medical student,who is still in college and is not working
C)Morgan,who is employed part-time but desires a full-time job
D)Ralph,an auto worker vacationing in Florida during a layoff at a General Motors plant

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

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 19

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 20

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 21

Tom 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 22

Consider an economy made up of 100 people,60 of whom hold jobs,10 of whom are looking for work,and 15 of whom are retired.The number counted as unemployed is

A)10.
B)15.
C)40.
D)30.
E)90.

Question 23

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 24

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 25

Tara just graduated from college.In order to devote all her efforts to college,she didn't hold a job.She is going to cruise around the country on her motorcycle for awhile before she starts looking for work.As a result,the unemployment rate

A)increases,and the labor-force participation rate increases.
B)is unaffected,and the labor-force participation rate is unaffected.
C)increases,and the labor-force participation rate decreases.
D)increases,and the labor-force participation rate is unaffected.

Question 26

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 27

Consider an economy made up of 100 people,50 of whom hold jobs,10 of whom are looking for work,and 15 of whom are retired.The unemployment rate is approximately

A)10 percent.
B)12 percent.
C)17 percent.
D)20 percent.
E)25 percent.

Question 28

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 29

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 30

Mallory Trammell is a homemaker.Last week,she was busy with her normal household chores.She is

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 31

Which of the following is not a way to become officially unemployed?

A)quit your job to look for a better job in another part of the country
B)be fired from your job
C)look for a job after being out of the labor force for five years
D)retire
E)look for a job only for the period in the summer that you are out of school

Question 32

Matt 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 33

Sally is on a temporary layoff from her factory job.If Sally 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 34

Which of the following 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 35

Brian Vargo,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 36

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 37

Anna 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 38

Consider an economy made up of 100 people,60 of whom hold jobs,10 of whom are looking for work,and 15 of whom are retired.The number of people in the civilian labor force is

A)30.
B)60.
C)85.
D)90.
E)70.

Question 39

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 40

Economists usually use the term "recession" to refer to

A)any slowdown in the growth of real GDP.
B)zero real GDP growth.
C)two or more consecutive quarters of declining real GDP.
D)a reduction in nominal GDP lasting more than six months.

Question 41

Suppose there are 100 working-age people,80 of whom are in the labor force.Of these,70 are employed and 10 are unemployed.

A)The unemployment rate is 10 percent.
B)The employment/population ratio is 80 percent.
C)The labor force participation rate is 80 percent.
D)The unemployment rate is 14.3 percent.

Question 42

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 43

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 44

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 45

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 46

If a country's population (age 16 and over)is 50 million,with 2 million unemployed and 28 million currently holding jobs,the unemployment rate is

A)4 percent,and the labor force participation rate is 60 percent.
B)4 percent,and the labor force participation rate is 58 percent.
C)6.7 percent,and the labor force participation rate is 60 percent.
D)7.1 percent,and the labor force participation rate 56 percent.

Question 47

Use the data below to answer the following question(s).
Table 8-2

Refer to Table 8-2.What is the unemployment rate of the economy?

A)4 percent
B)5 percent
C)5.3 percent
D)7.1 percent

Question 48

The population (age 16 and over)of Econoland is 100 million;5 million are unemployed,and 70 million hold jobs.The labor force participation rate in Econoland is

A)5 percent.
B)65 percent.
C)70 percent.
D)75 percent.

Question 49

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 50

The population (age 16 and over)of Lebos is 400 million;20 million are unemployed,and 230 million hold jobs.What are the rates of unemployment and labor force participation of Lebos?

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 51

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 52

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 53

The figures below (in millions)are for the United States during the year 2003.

The rate of labor force participation of the U.S.in 2003 was

A)6 percent.
B)62.3 percent.
C)66.2 percent.
D)137.7 percent.

Question 54

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 55

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 56

Use the data below to answer the following question.
Table 8-1

Refer to Table 8-1.The figures above (in millions)are for the United States in 2003.The U.S.rates of labor force participation and unemployment equaled what percentages?

A)the labor force participation rate = 62.3 percent;unemployment rate = 6 percent
B)the labor force participation rate = 62.3 percent;unemployment rate = 6.4 percent
C)the labor force participation rate = 66.2 percent;unemployment rate = 6 percent
D)the labor force participation rate = 66.2 percent;unemployment rate = 6.4 percent

Question 57

The population (age 16 and over)of Pageland is 50 million;4 million are unemployed,and 36 million hold jobs.What are the rates of unemployment and labor force participation of Pageland?

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 58

Use the data below to answer the following question(s).
Table 8-2

Refer to Table 8-2.What is the labor force participation rate of the economy?

A)70 percent
B)76 percent
C)80 percent
D)95 percent

Question 59

The population (age 16 and over)of Italia is 100 million;5 million are unemployed,and 40 million hold jobs.The labor force participation rate in Italia is

A)10 percent.
B)45 percent.
C)50 percent.
D)90 percent.

Question 60

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 61

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 62

In 2003,the number of persons employed in the U.S.was 137.7 million,while the number unemployed was 8.8 million.The U.S.unemployment rate during the year was

A)4.0 percent.
B)5.0 percent.
C)6.0 percent
D)6.4 percent.

Question 63

Which one of the following persons would be classified as unemployed by the Bureau of Labor Statistics?

A)Sean,who is in the midst of a two-week vacation from his regular job
B)Susan,who is unable to work her regular job this week because of illness
C)Joe,who is on layoff waiting for better weather so he can return to his construction job
D)Kim,who is working four hours each week at McDonald's while looking for a full-time job

Question 64

John 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 John as

A)employed.
B)unemployed.
C)not part of the labor force.
D)a temporary retiree.

Question 65

Todd stops looking for work because he believes his prospects are so poor that he is unlikely to find a job.The Bureau of Labor Statistics would classify Todd as

A)not in the labor force.
B)on layoff.
C)unemployed.
D)employed as a household worker.

Question 66

John begins looking for work after two years of not working because he believes his prospects of finding a job have greatly improved.The Bureau of Labor Statistics would classify John as

A)not in the labor force.
B)on layoff.
C)unemployed.
D)not in the labor force because he is on vacation.

Question 67

Which one of the following persons would be considered employed?

A)a retired construction worker
B)a part-time worker looking for a full-time job
C)a construction worker laid off due to cold weather
D)a full-time college student who is not a member of the labor force

Question 68

Sean 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 Sean as

A)employed.
B)unemployed.
C)both employed and unemployed.
D)not in the labor force.

Question 69

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 70

John has been without a job for 12 months and quit searching for work about three months ago.The Bureau of Labor Statistics would classify John as

A)employed.
B)unemployed.
C)not part of the labor force.
D)on layoff.

Question 71

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 72

The population (age 16 and over)of Yakutsk is 48 million;4 million are unemployed,and 40 million hold jobs.Indicate the rate of unemployment and the employment/population ratio of Yakutsk.

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 73

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 74

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 75

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 76

The population (age 16 and over)of Yakutsk is 200 million;9 million are unemployed,and 111 million hold jobs.Indicate the rate of unemployment and the employment/population ratio of Yakutsk.

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 77

Shawn is on a two-week layoff as the result of a model change at the auto plant where he works.According to employment statistics,Shawn is classified as

A)not in the labor force.
B)unemployed.
C)employed.
D)both employed and unemployed.

Question 78

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 79

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 80

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.