Problem 1
Place the phases of the business cycle in order. Recession, Trough, Peak, Expansion.
Problem 2
Most economists agree that the immediate cause of the large majority of cyclical changes in the levels of real output and employment is unexpected changes in ______. a. The level of total spending. b. The level of the stock market. c. The level of the trade deficit. d. The level of unemployment.
Problem 3
Suppose that an economy has 9 million people working full-time. It also has 1 million people who are actively seeking work but currently unemployed as well as 2 million discouraged workers who have given up looking for work and are currently unemployed. What is this economy's unemployment rate? b. 15 percent. c. 20 percent. d. 25 percent.
Problem 4
Label each of the following scenarios as either frictional unemployment, structural unemployment, or cyclical unemployment. a. Tim just graduated and is looking for a job. b. A recession causes a local factory to lay off 30 workers. c. Thousands of bus and truck drivers permanently lose their jobs when driverless, computer-driven vehicles make human drivers redundant. d. Hundreds of New York legal jobs permanently disappear when a lot of legal work gets outsourced to lawyers in India.
Problem 5
The unemployment rate that is consistent with full employment is known as _____. a. The natural rate of unemployment. b. The unnatural rate of unemployment. c. The status quo rate of unemployment. d. Cyclical unemployment. e. Okun's rate of unemployment.
Problem 7
Cost-push inflation occurs when there is _____. a. Excess inventory. b. A trade deficit. c. Rising per-unit production costs. d. Excess demand for goods and services.
Problem 8
Jimmer's nominal income will go up by 10 percent next year. Inflation is expected to be -2 percent next year. By approximately how much will Jimmer's real income change next year? a. -2 percent. b. 8 percent. c. 10 percent. d. 12 percent.
Problem 9
Kaitlin has \(\$ 10,000\) of savings that she may deposit with her local bank. Kaitlin wants to earn a real rate of return of at least 4 percent and she is expecting inflation to be exactly 3 percent. What is the lowest nominal interest rate that Kaitlin would be willing to accept from her local bank? a. 4 percent. b. 5 percent. c. 6 percent. d. 7 percent.
Problem 10
True or False: Lenders are helped by unanticipated inflation.
Problem 11
Economists agree that _____ inflation reduces real output. a. Cost-push. b. Demand-pull. c. Push-pull.
