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Exam 9: Business Cycles, Unemployment, and Inflation

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Question 1

True/False

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Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed.

A) True
B) False

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Question 2

Multiple Choice

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Which of the following statements is correct?

A) For a given real interest rate, the nominal interest must decrease if expected inflation increases
B) For a given nominal interest rate, the real interest will decrease if inflation decreases
C) For a given expected inflation rate, the nominal interest must increase if real interest decreases
D) For a given real interest rate, the nominal interest must increase if expected inflation increases

E) B) and C)
F) All of the above

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Question 3

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Which of the following is the correct way to calculate the unemployment rate?

A recession is a decline in:

In the 1920s, Germany after the First World War experienced an economic condition which can be best described as:

The amount by which actual GDP falls short of potential GDP is one measure of the:

If the total population is 175 million, the labor force is 100 million, and 89 million workers are employed, then the unemployment rate is 11 percent.

What has been the range of the decline in real output during recessions in the U.S. between 1950 and 2009?

Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:

In Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price level was 125 and the average nominal level of income was $32,000. What happened to real income from Year 1 to Year 2?

A cumulative wage-price spiral which produces very rapid inflation is called:

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2) George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3) Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4) Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information. Which individual would be classified as a discouraged worker?

During the Great Depression of the 1930s, U.S. real GDP fell by about ____ percent, in comparison to the ______ percent decline during the Great Recession of 2007-09.

For a person to keep his real income steady at a certain level from one year to the next, his nominal income must:

The CPI compiled by the Bureau of Labor Statistics is used in the computations for:

What has been the range for the duration in months of U.S. recessions between 1950 and 2009?

Demand-pull inflation is usually accompanied by low unemployment and higher real output.

The diagram above illustrates the pattern of:

If the natural rate of unemployment was 6 percent, the current unemployment rate was 10 percent, and the potential GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed:

If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income: