Multiple Choice Answers

Question 1
While the limit for collecting unemployment benefits in the United States is 26 weeks, German unemployed workers can collect for at least:
A. one year.
B. five years.
C. nine months.
D. two years

Question 2
__________ is NOT an endogenous business cycle theory.
A. Psychological theory
B. Demographic theory
C. Monetary theory
D. Innovation theory

Question 3
Demand-pull inflation is often summed up as:
A. too many dollars chasing too few goods.
B. the wage-price spiral.
C. profit-push inflation.
D. supply-side cost shock inflation.

Question 4
The unemployment that occurs as jobs are eliminated because of changing technology is known as:
A. frictional.
B. voluntary.
C. structural.
D. fundamental.

Question 5
During the early 1980s the changes that occurred in inflation and unemployment rates:
A. suggest that disinflation can occur only if unemployment increases significantly.
B. support the notion of a stable Phillips curve.
C. suggest that both inflation and unemployment can be consistently reduced by dramatically increasing interest rates.
D. All of the above

Question 6
During business cycles:
A. troughs are followed by recessions.
B. troughs are followed by peaks.
C. peaks are followed by troughs.
D. peaks are followed by recessions.

Question 7
Inflation generally occurs:
A. in wartime.
B. before wars.
C. during recessions.
D. in peacetime.

Question 8
Kimberly quit her job as a computer programmer, spent two weeks in Hawaii, and is now looking for (and expects to soon find) another job. She is __________ unemployed.
A. psychologically
B. structurally
C. frictionally
D. cyclically

Question 9
In 1973 the OPEC countries:
A. lowered the price of oil by 50%.
B. raised the price of oil by 50%.
C. doubled the price of oil.
D. quadrupled the price of oil.

Question 10
The term recession refers to a:
A. period of decline in real GDP for two business quarters.
B. fall in the general level of real wages.
C. fall in the CPI.
D. fall in the rate of increase of real per capita GDP.

Question 11
The unemployment rate is a fraction whose numerator is the:
A. total population.
B. number of employed.
C. number of unemployed.
D. difference between the total population and the number of employed.

Question 12
A lender need NOT be penalized by inflation if the:
A. long-term rate of inflation is less than the short-term rate of inflation.
B. short-term rate of inflation is less than the long-term rate of inflation.
C. lender correctly anticipates inflation and increases the nominal interest rate accordingly.
D. inflation is unanticipated by both borrower and lender.

Question 13
What does NOT occur in a fully employed economy?
A. Cyclical unemployment
B. Discouraged workers
C. Frictional unemployment
D. Structural unemployment

Question 14
The Consumer Price Index measures changes in:
A. the money supply.
B. all prices.
C. the cost of living.
D. the cost of consumer credit.

Question 15
Discouraged workers are officially:
A. unemployed.
B. employed.
C. not in the labor force.
D. in the labor force.

Question 16
Business cycles:
A. have been a recurring source of debate to economic theory throughout history.
B. represent a fairly recent problem confronting economic systems.
C. show very regular and smooth patterns of ups-and-downs in economic systems.
D. cannot occur in market-based economic systems.

Question 17
Which can be negative?
A. Only the nominal rate of interest
B. Only the real rate of interest
C. Both the nominal and real rates of interest
D. Neither the nominal nor the real rate of interest

Question 18
For purposes of calculating the unemployment rate, a person who is between jobs is:
A. counted as being structurally unemployed.
B. not included in the labor force.
C. not included in the population.
D. counted as being frictionally unemployed.

Question 19
The U.S. Department of Labor calculates the unemployment rate by:
A. totaling the number of households receiving unemployment compensation.
B. analyzing federal income tax returns.
C. surveying households.
D. surveying businesses to determine patterns of hiring and layoffs.

Question 20
The recovery phase of the business cycle ends when we:
A. re-attain the level of the previous peak.
B. re-attain the level of the previous trough.
C. go into the next recession.
D. are back at full employment.