downturn in the business cycle

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1 Which of the following is characteristic of a downturn in the business cycle?

Which of the following is characteristic of a downturn in the business cycle?

downturn in the business cycle 1

Higher prices

downturn in the business cycle 1

Higher unemployment rates

 

downturn in the business cycle 1

Growth in real output

downturn in the business cycle 1

Increased population

 

 

2 The price of one good compared to the price of other goods refers to:

The price of one good compared to the price of other goods refers to:

downturn in the business cycle 1

Relative price.

downturn in the business cycle 1

The income effect.

 

downturn in the business cycle 1

Deflation.

downturn in the business cycle 1

Inflation.

 

 

3 Based on the HEADLINE article titled “Inflation and the Weimar Republic,” which of the following is the best illustration of a change in relative prices due to hyperinflation?

Based on the HEADLINE article titled “Inflation and the Weimar Republic,” which of the following is the best illustration of a change in relative prices due to hyperinflation?

downturn in the business cycle 1

“… businessmen traveling around the country found themselves borrowing funds from their customers each stage of the way. The cash they’d allocated for the entire trip barely sufficed to pay the way to the next stop.”

downturn in the business cycle 1

“Workers were often paid daily and sometimes two or three times a day, so that they could buy goods in the morning before the inevitable afternoon price increase.”

 

downturn in the business cycle 1

“Wholesale prices rose fortyfold . . . while retail prices rose even more rapidly.”

downturn in the business cycle 1

“Those thrifty Germans who had placed their savings in corporate or government bonds saw their lifetime efforts come to naught.”

 

 

4 Which of the following is an example of the price effect during a period of inflation?

Which of the following is an example of the price effect during a period of inflation?

downturn in the business cycle 1

You buy a lot of gasoline, and the price of gasoline rises more rapidly than the price level does.

downturn in the business cycle 1

Your income increases, but not as rapidly as the price level does.

 

downturn in the business cycle 1

You own municipal bonds that pay a low interest rate while the price level is rising.

downturn in the business cycle 1

You own a house, and its value rises more rapidly than the price level does.

 

 

5 Nominal income must have fallen if real income:

Nominal income must have fallen if real income:

downturn in the business cycle 1

Falls and there is inflation.

downturn in the business cycle 1

Rises and there is inflation.

 

downturn in the business cycle 1

Falls and there is deflation.

downturn in the business cycle 1

Rises and there is deflation.

 

 

6 Which of the following is likely if an economy is in a recession or headed for one?

Which of the following is likely if an economy is in a recession or headed for one?

downturn in the business cycle 1

An increase in unemployment

downturn in the business cycle 1

An increase in consumer confidence

 

downturn in the business cycle 1

An increase in the rate of output

downturn in the business cycle 1

An increase in the rate of inflation

 

 

7 Throughout the business cycle, unemployment and production typically move in opposite directions.

Throughout the business cycle, unemployment and production typically move in opposite directions.

downturn in the business cycle 1

TRUE

downturn in the business cycle 1

FALSE

 

 

8 Samantha quit her job in the city to look for a job in the country. While she is looking, Samantha experiences _______ unemployment.

Samantha quit her job in the city to look for a job in the country. While she is looking, Samantha experiences _______ unemployment.

downturn in the business cycle 1

Seasonal

downturn in the business cycle 1

Frictional

 

downturn in the business cycle 1

Structural

downturn in the business cycle 1

Cyclical

 

 

9 Suppose a recent college graduate has an annual nominal income of $42,000 for the first year she works. If the annual inflation rate is 5 percent, what salary would she need in the second year to maintain the same real income?

Suppose a recent college graduate has an annual nominal income of $42,000 for the first year she works. If the annual inflation rate is 5 percent, what salary would she need in the second year to maintain the same real income?

downturn in the business cycle 1

$42,500

downturn in the business cycle 1

$44,100

 

downturn in the business cycle 1

$39,900

downturn in the business cycle 1

$42,000

 

 

10 If a market basket of goods cost $100 in the base year and $125 in a later year, then average prices have increased by:

If a market basket of goods cost $100 in the base year and $125 in a later year, then average prices have increased by:

downturn in the business cycle 1

125 percent.

downturn in the business cycle 1

25 percent.

 

downturn in the business cycle 1

80 percent.

downturn in the business cycle 1

225 percent.

 

 

11 If a person who has the required job skills quits one job and takes two months to find another job, he is considered to be structurally unemployed.

 

downturn in the business cycle 1

TRUE

downturn in the business cycle 1

FALSE

 

 

12 The Great Depression in the United States:

The Great Depression in the United States:

downturn in the business cycle 1

Was ended by World War I.

downturn in the business cycle 1

Caused real GDP to fall dramatically between 1929 and 1933.

 

downturn in the business cycle 1

Was marked by hyperinflation.

downturn in the business cycle 1

Ended with a higher real GDP per capita than when it began.

 

 

13 Which of the following is an essential part of the market mechanism?

Which of the following is an essential part of the market mechanism?

downturn in the business cycle 1

Constant prices

downturn in the business cycle 1

Changing relative prices

 

downturn in the business cycle 1

Rising average prices

downturn in the business cycle 1

Falling average prices

 

 

14 To construct the Consumer Price Index, the Bureau of Labor Statistics must:

To construct the Consumer Price Index, the Bureau of Labor Statistics must:

downturn in the business cycle 1

Find out what people buy and then survey how the prices of these items change.

downturn in the business cycle 1

Interview people to determine their willingness and ability to work and their average income.

 

downturn in the business cycle 1

Convert nominal incomes into real GDP and then compute the percentage increase on an annual basis.

downturn in the business cycle 1

Construct an index of the growth rate of real income to measure the growth of the economy.

 

 

15 Inflation is an increase in the average level of prices.

Inflation is an increase in the average level of prices.

downturn in the business cycle 1

FALSE

downturn in the business cycle 1

TRUE

 

 

16 When the unemployment rate falls to the full-employment level:

When the unemployment rate falls to the full-employment level:

downturn in the business cycle 1

Many resources are idle.

downturn in the business cycle 1

The size of the labor force decreases.

 

downturn in the business cycle 1

There is increased concern about deflation.

downturn in the business cycle 1

There is increased concern about inflation.

 

 

17 Suppose that in a population of 100 million people, 50 million are in the labor force and 47 million are employed. The unemployment rate is:

Suppose that in a population of 100 million people, 50 million are in the labor force and 47 million are employed. The unemployment rate is:

downturn in the business cycle 1

53.0 percent.

downturn in the business cycle 1

6.0 percent.

 

downturn in the business cycle 1

6.4 percent.

downturn in the business cycle 1

94.0 percent.

 

 

18 Since World War II, the United States has experienced:

Since World War II, the United States has experienced:

downturn in the business cycle 1

Several recessions but none as severe as the Great Depression.

downturn in the business cycle 1

An increase in output every year.

 

downturn in the business cycle 1

Several recessions and in each case a war was necessary to end it.

downturn in the business cycle 1

Only one recession and it was minor.

 

 

19 If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is:

If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is:

downturn in the business cycle 1

Reflation.

downturn in the business cycle 1

Stagflation.

 

downturn in the business cycle 1

Deflation.

downturn in the business cycle 1

Inflation.

 

 

20 An important measure of macroeconomic performance is the growth of GDP.

An important measure of macroeconomic performance is the growth of GDP.

downturn in the business cycle 1

FALSE

downturn in the business cycle 1

TRUE

 

 

21 Frictional unemployment goes up when:

Frictional unemployment goes up when:

downturn in the business cycle 1

A corporation transfers a worker to another city.

downturn in the business cycle 1

There is inadequate demand for labor.

 

downturn in the business cycle 1

A worker quits one job in order to search for another.

downturn in the business cycle 1

Students quit work to return to school at the end of the summer.

 

 

22 If a market basket of goods cost $100 in the base year and $110 in a later year, then average prices have increased by:

If a market basket of goods cost $100 in the base year and $110 in a later year, then average prices have increased by:

downturn in the business cycle 1

110 percent.

downturn in the business cycle 1

100 percent.

 

downturn in the business cycle 1

90 percent.

downturn in the business cycle 1

10 percent.

 

 

23 If the Consumer Price Index (CPI) had a value of 128 in 2007, this means that during the period between the base year and 2007:

If the Consumer Price Index (CPI) had a value of 128 in 2007, this means that during the period between the base year and 2007:

downturn in the business cycle 1

Prices of goods and services that the typical consumer buys increased by an average of 128 percent.

downturn in the business cycle 1

All prices increased by an average of 1.28 percent.

 

downturn in the business cycle 1

Prices of goods and services that the typical consumer buys increased by an average of 28 percent.

downturn in the business cycle 1

All prices increased by 28 percent.

 

 

24 Inflation acts like a tax because:

Inflation acts like a tax because:

downturn in the business cycle 1

Inflation pushes everyone into higher tax brackets.

downturn in the business cycle 1

It takes income and wealth from some people and gives it to others.

 

downturn in the business cycle 1

The government tends to benefit during periods of inflation.

downturn in the business cycle 1

Everyone loses purchasing power during periods of inflation just like everyone must pay taxes.

 

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