Economics for Today International Edition 8th Edition by Irvin B. Tucker - Test Bank

Economics for Today International Edition 8th Edition by Irvin B. Tucker – Test Bank

 

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Sample Questions Are Posted Below

 

Chapter 6—Business Cycles and Unemployment

 

MULTIPLE CHOICE

 

1. Economists use the phrase “business cycle” when referring to fluctuations in:

a.	real GDP.	c.	the consumer price index.
b.	the chain price index.	d.	the general level of prices.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

2. The period of declining growth in real GDP between the peak of the business cycle and the trough is called a(n):

a.	recessionary phase.	c.	expansionary phase.
b.	recovery.	d.	stationary phase.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

3. The period of growth in real GDP between the trough of the business cycle and the next peak is called the:

a.	recessionary phase.	c.	contractionary phase.
b.	recovery phase.	d.	cyclical phase.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

4. Which of the following will most likely occur during the recessionary 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.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

5. Which of the following will most likely occur during the recovery 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.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

6. 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.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

7. 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.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

8. A business cycle is the:

a.	period of time in which expansion and contraction of economic activity are equal.
b.	period of time in which there are three phases: peak, depression, and recovery.
c.	recurring growth and decline in real GDP.
d.	period of time in which a business is established and ceases operations.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

9. The point at which real output reaches a maximum during a business cycle is called the:

a.	peak.	c.	recovery.
b.	recession.	d.	trough.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

10. The period during which real output falls during a business cycle is called:

a.	peak.	c.	recovery.
b.	recession.	d.	trough.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

11. The phase of the business cycle that follows a recession is known as the:

a.	peak.	c.	recovery.
b.	recession.	d.	trough.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

12. As a general rule, a recession is a decline in real GDP lasting at least:

a.	one year.	c.	three months.
b.	six months.	d.	one month.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

13. As a general rule, a recession occurs when there is a six consecutive month fall in:

a.	nominal GDP.	c.	the price level.
b.	real GDP.	d.	the trade balance.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

14. Since World War II, the average length of recessions in the United States has been:

a.	2 months.	c.	2 years.
b.	11 months.	d.	3 1/2 years.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

15. A business cycle is the period of time in which:

a.	a business is established and ceases operations.
b.	there are four phases: peak, recession, trough and recovery.
c.	the price level varies with real GDP.
d.	expansion and contraction of economic activity are equal.
e.	none of these are true.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

16. What stage of the business cycle immediately follows the trough?

a.	Peak.	c.	Recession.
b.	Recovery.	d.	Depression.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

17. The ____ phase of the business cycle follows a recession.

a.	recovery	c.	peak
b.	recession	d.	trough

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

18. A phase in the business cycle in which the economy’s real GDP declines is known as:

a.	a depression.
b.	a recession.
c.	a downtick.
d.	disequilibrium.
e.	limited demand.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

19. A long and deep recession in the business cycle is:

a.	unemployment.
b.	a trough.
c.	a recession.
d.	a depression
e.	unavoidable.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

20. The business cycle consists of four phases. At the top we have:

a.	recovery, followed by peak, and then recession followed by a recession.
b.	recovery, followed by a recession, and then peak followed by recession.
c.	peak, then an upturn followed by a recession, and then recession.
d.	peak, then a recession followed by recovery, and then recession.
e.	peak, then a recession followed by recession, and finally, recovery.

 

 

ANS:  E                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

Exhibit 6-1 Business cycle

 

 

21. In Exhibit 6-1, the recovery phase of the business cycle can be represented by points:

 

a.	CHOICE BLANK
b.	C.
c.	E.
d.	C to E.
e.	E to G.

 

 

ANS:  E                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

22. In Exhibit 6-1, point E represents:

a.	recession and a trough.	c.	recession and a peak.
b.	peak and a trough.	d.	recovery and a peak.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

23. In Exhibit 6-1, the recession phase of the business cycle can be represented by point(s):

a.	CDE.	c.	EFG.
b.	BCD.	d.	A and E.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

24. The phase in the business cycle in which real GDP declines is called a:

a.	trendline.
b.	peak.
c.	recession.
d.	recovery.
e.	trough.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

25. If you look for a job for eighteen months after graduation, but fail to generate an offer, even after lowering your expectations, the economy is probably in the business cycle phase called a:

a.	recession.
b.	peak.
c.	boom.
d.	recovery.
e.	trough.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

26. If real GDP declines for at least one-half year, the economy is experiencing a:

a.	depression.
b.	decline.
c.	recession.
d.	growth recession.
e.	deflation.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

27. A general rule is that economy is experiencing a recession when:

a.	real GDP declines for at least three months.
b.	real GDP declines for at least nine months.
c.	nominal GDP declines for at least nine months.
d.	real GDP declines for at least six months.
e.	nominal GDP declines for at least six months.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

28. Since 1929, real GDP in the United States has grown at an average annual rate of about:

a.	0.5 percent.	c.	3 percent.
b.	1 percent.	d.	7.5 percent.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

29. Economic growth is measured by the annual percentage increase in a nation’s level of:

a.	nominal GDP.	c.	real GDP deflator.
b.	real GDP.	d.	economic indicators.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

30. The government’s chief forecasting gauge for business cycles is the:

a.	unemployment rate.	c.	personal income index.
b.	real GDP.	d.	index of leading indicators.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

31. Which of the following is not a variable in the index of leading indicators?

a.	Average work week.	c.	Employment claims.
b.	Duration of unemployment.	d.	New businesses.

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Analysis

 

32. Suppose the index of leading economic indicators begins to decline for several months. Which of the following economic events will likely follow?

a.	A recession.	c.	Greater employment.
b.	Severe inflation.	d.	Higher investment.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

33. Economic indicators, like unemployment claims and the average workweek, which change before real GDP changes, are called:

a.	leading.	c.	coincident.
b.	lagging.	d.	structural.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

34. Variables that change before real GDP changes are measured by the:

a.	personal income index.	c.	forecasting gauge.
b.	real GDP index.	d.	index of leading indicators.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

35. Which of the following is not a coincident indicator?

a.	Personal income.	c.	Manufacturing and trade sales.
b.	Industrial production.	d.	All of these.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

36. Which of the following is a lagging indicator?

a.	Outstanding commercial loans.	c.	Prime rate.
b.	Duration of unemployment.	d.	All of these.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

37. Which of the following is not a lagging indicator?

a.	Duration of unemployment.
b.	Stock prices.
c.	Outstanding commercial and industrial loans.
d.	Prime rate.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Knowledge

 

38. 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.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Analysis

 

39. Which of the following groups of people are members of the labor force?

a.	People in prison.
b.	Full-time students.
c.	People over 16 years of age who are employed.
d.	Anyone not actively looking for work during the past 30 days.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

40. The civilian labor force consists of:

a.	all civilians over the age of 16.
b.	the employed plus the unemployed who are not in the military.
c.	only individuals who are actually at work during a given week.
d.	civilians who are not in prisons or mental hospitals.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

41. Retired persons are officially classified as:

a.	unemployed.	c.	underemployed.
b.	self-employed.	d.	not in the labor force.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

42. Find the size of the civilian labor force from the following data: frictional unemployment = 150, structural unemployment = 200, cyclical unemployment = 225, discouraged workers = 25, underemployed workers = 75, fully employed workers = 850, total population = 2,000.

a.	1,425
b.	1,450
c.	1,500
d.	1,525
e.	2,000

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Application

 

43. Stephen Moreno reported to the government interviewer that he worked 40 hours last week as a stocker at a Target department store. He 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.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

44. Martin Shore lost his job when General Motors closed down its local plant. He has been visiting the personnel offices of the other factories in the area, looking for a new job. He 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.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

45. 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.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

46. Ryan Black does not work and has not looked for work because of a disability. He 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.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

47. Which one of the following people is not a member of the labor force?

a.	A full-time student who devotes all her time to her classes.
b.	A person who works 30 hours a week at Burger King and goes to school at night.
c.	The man who was fired last week and is searching for a new job.
d.	The President of the United States.
e.	A professional athlete.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

48. Which one of the following people would not be considered a part of the labor force?

a.	A steel worker who was laid off last week and is seeking work.
b.	A steel worker who was laid off last year and is no longer seeking work.
c.	A student who also works part-time.
d.	A member of the U.S. Navy.
e.	A retired college professor paid to teach a summer course.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

49. The civilian labor force consists of all the:

a.	people in the economy who are not retired.
b.	people in the economy over 16 years of age.
c.	adults in the economy between 18 and 65 years old who are able to work.
d.	noninstitutionalized adults in the economy who hold jobs or are looking for them.
e.	citizens in the economy who are graduates of high school.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

50. Which of the following people is counted in the labor force?

a.	Jerry, who lost his job and last looked for work three months ago.
b.	Bob, who holds an MBA in management but can only find part-time employment at a fast-food restaurant.
c.	Phil, who would like to work as a stockbroker but is now a househusband.
d.	Mickey, who thinks he could easily become a millionaire, despite the opinion of the psychiatrist at the state hospital where he is a patient.
e.	Donna Jean, age 90, who is enjoying her retirement in Montana.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

51. People who are not currently employed, but say they want a job, are counted as unemployed only if they:

a.	have previously held a job.
b.	are actively seeking employment.
c.	are willing to accept a reasonable offer.
d.	are between 16 and 65 years of age.
e.	are willing to accept any offer of employment.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

52. 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.

 

 

ANS:  E                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Application

 

53. Consider an economy made up of 100 people, 60 of whom old 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.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Application

 

54. 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 civilian 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.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

55. 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.

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

56. In a dynamic economy under ideal conditions:

a.	the unemployment rate should be near zero.
b.	some unemployment would be present due to workers temporarily being out of work while changing jobs.
c.	unemployment would tend to move upward slightly as prices increased.
d.	unemployment would tend to move slightly downward as unemployment compensation benefits increased.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

57. An individual who is employed part time, but is looking for a full-time job, is classified as:

a.	frictionally unemployed.	c.	structurally unemployed.
b.	cyclically unemployed.	d.	employed.

 

 

ANS:  D                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

58. Which of the following groups of people are counted as employed?

a.	People who work at least one hour a week.
b.	People who work at least 15 hours a week as unpaid employees of a family business.
c.	People who are out of work due to bad weather.
d.	All of these are counted as employed.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

59. The unemployment rate measures the percentage of:

a.	people in the civilian labor force who are without jobs and actively seeking jobs.
b.	the U.S. population that is out of work and actively seeking a job.
c.	the civilian noninstitutionalized population that is out of work and actively seeking a job.
d.	people over age 21 who are without jobs and actively seeking jobs.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

60. One problem with the unemployment rate is that:

a.	discouraged workers are included in the calculation.
b.	the data includes part-time workers as fully employed.
c.	underemployment is measured in the calculation.
d.	all of these are problems.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

61. Which of the following people would be officially counted as unemployed?

a.	A person who works only 5 hours per week for pay.
b.	A full-time college student who chooses not to have a paying job.
c.	A family member who works 20 hours per week without pay.
d.	A jobless high-school graduate who is actively looking for work.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

62. If a sizable number of workers were switched from full-time to half-time employment, then the official unemployment rate would:

a.	rise.	c.	remain unchanged.
b.	fall.	d.	react unpredictably.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

63. A criticism of the unemployment rate is that:

a.	underemployment is measured in the calculation.
b.	the data includes part-time workers as fully employed.
c.	discouraged workers are included in the calculation.
d.	all of these are problems.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

64. Which of the following statements would come from someone classified as unemployed?

a.	I’m not working because I’m going to Jamaica with my buddy.
b.	I haven’t had a job in a year, and I stopped looking for a job nine months ago.
c.	I’m a full-time student at the University of Illinois who doesn’t have time to work.
d.	I can’t stand my current job as a telemarketer. I used to be a nuclear engineer.
e.	I’m not working. I had three interviews this week, and I’m trying to find a job.

 

 

ANS:  E                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Analysis

 

65. The unemployment rate is the percentage of the:

a.	civilian labor force that is unemployed or working part-time.
b.	civilian labor force that is unemployed.
c.	civilian labor force that is unemployed less the number of government workers.
d.	adult population that is unemployed.
e.	adult population that is unemployed or looking for a better job.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

Exhibit 6-2 Unemployment categories

 

Category	# of Individuals
Frictional unemployment	20
Structural unemployment	35
Cyclical unemployment	60
Discouraged workers	5
Underemployed workers	10
Fully employed workers	410
Population	900

 

 

66. The unemployment rate for the economy in Exhibit 6-2 is:

a.	28 percent.
b.	30.5 percent.
c.	31.7 percent.
d.	12.8 percent.
e.	21.5 percent.

 

 

ANS:  E                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

67. Find the BLS’s rate of unemployment from the following data: frictional unemployment = 150, structural unemployment = 200, cyclical unemployment = 225, discouraged workers = 25, underemployed workers = 75, fully employed workers = 850, total population = 2,000.

a.	17.5 percent
b.	23.3 percent
c.	24.6 percent
d.	28.8 percent
e.	38.3 percent

 

 

ANS:  E                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

68. 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.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

69. The unemployment rate will increase whenever there is a(n):

a.	increase in the number of persons classified as unemployed.
b.	increase in the number of unemployed persons relative to the size of the labor force.
c.	increase in the size of the U.S. population and there is no change in the number of persons classified as employed.
d.	reduction in the size of the labor force.
e.	reduction in the size of the civilian labor force while the number of unemployed decreases.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

70. Suppose u = those adults who are unemployed and seeking work; e = those adults who are employed; and NLF = those adults not in the labor force. Which expression would equal the BLS definition of the unemployment rate?

a.	u / (e + NLF)
b.	u / e
c.	u / (u + e)
d.	u / (e + NLF)
e.	u / (u + e – NLF)

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Application

 

71. 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 ear.
b.	one of every 10 people in the civilian labor force is currently unemployed.
c.	the same 10 percent of the people in the civilian labor force were out of work for the entire year.
d.	every person in the civilian labor force was out of work for 10 percent of the year.
e.	10 percent of the people in the economy were out of work for 10 percent of the year.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

72. The unemployment rate will decrease whenever there is a(n):

a.	increase in the number of persons classified as unemployed.
b.	decrease in the number of unemployed relative to the size of the labor force.
c.	decrease in the size of the population and there is no change in the number of persons classified as employed.
d.	reduction in the size of the labor force.
e.	decrease in the number of unemployed and the population does not change.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

Exhibit 6-3 Unemployment categories

 

Category	Workers
Frictional unemployment	250
Structural unemployment	350
Cyclical unemployment	600
Discouraged workers	400
Underemployment	450

 

 

73. According to data in Exhibit 6-3 and assuming the total number of workers is 8,400, the civilian labor force is:

a.	7,550.
b.	8,000.
c.	8,400.
d.	8,800.
e.	9,250.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Application

 

74. According to data in Exhibit 6-3 and assuming the total number of workers is 8,400, the unemployment rate is:

a.	14 percent.
b.	15 percent.
c.	16 percent.
d.	19 percent.
e.	24 percent.

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Application

 

75. A person who has given up searching for work is called:

a.	frictionally unemployed.	c.	a discouraged worker.
b.	structurally unemployed.	d.	unemployed.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

76. The number of people officially unemployed is not the same as the number of people who can’t find a job because:

a.	the armed forces is included.
b.	some people have jobs but continue to look for a better one.
c.	some people who can’t find a job become discouraged and quit looking.
d.	none of these.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

77. The number of people officially unemployed is not the same as the number of people who can’t find a job because:

a.	people who have jobs continue to look for better ones.
b.	the armed forces is included.
c.	discouraged workers are not counted.
d.	none of the above.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Analysis

 

78. 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.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

79. John Steinbeck’s Cannery Row describes a character who takes his own life because of poor job prospects. If he was an unemployed person who gave up looking for work, he would be considered:

a.	chronically unemployed.	c.	a member of the labor force.
b.	a discouraged worker.	d.	frictionally unemployed.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

80. Elisa Kilhafer, a housewife in St. Louis, Missouri, who claims on a Bureau of Labor Statistics (BLS) survey that she is neither gainfully employed nor looking for work, is, according to the BLS,

a.	considered retired.
b.	counted as unemployed.
c.	considered reemployable.
d.	counted as a member of the labor force.
e.	not counted as a member of the labor force.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

81. Andrea Burris lost her job in a company layoff 5 months ago. She would take a job if one was offered, but she has given up looking for work until the economy improves. 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.	now structurally unemployable.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

82. The presence of discouraged workers may cause:

a.	the employment rate to be overstated.
b.	the employment rate to be understated.
c.	the unemployment rate to be overstated.
d.	the unemployment rate to be understated.
e.	GDP to be too large.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

83. A discouraged worker is one who:

a.	is underqualified for the current job.
b.	dislikes the current job but is afraid to quit.
c.	drops out of the civilian labor force because he/she cannot find a job.
d.	quits his/her job because the possibility of advancement was very low.
e.	is overqualified for the current job.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

84. Whom does the Bureau of Labor Statistics include in the discouraged workers group?

a.	All those between 16 and 65 who are neither disabled nor in an institution and are also neither employed nor seeking employment.
b.	Civilian labor force members who have chosen early retirement because they dislike their work or think the pay is too low.
c.	Members of the noninstitutional population who say they want to be employed but aren’t searching for a job.
d.	Members of the civilian labor force who are looking for a job but cannot find one.
e.	Anyone in the population who is not working.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

85. Exclusion of which of the following tends to understate the true level of unemployment in the economy?

a.	Children.
b.	Retired persons.
c.	Students.
d.	People who do not want to work.
e.	Discouraged workers.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

86. Whom does the Bureau of Labor Statistics include in the “discouraged workers” group?

a.	All those between 16 and 65 who are neither disabled nor in an institution and are also neither employed nor seeking employment.
b.	Civilian labor force members who have chosen early retirement because they dislike their work or think the pay is too low.
c.	Members of the noninstitutional population who say they want to be employed but aren’t searching for a job.
d.	Members of the civilian labor force who are looking for a job but cannot find one.
e.	Anyone in the population who is not working.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

87. The primary cause of frictional unemployment is:

a.	discouraged workers who give up looking for work.
b.	fluctuations in aggregate demand.
c.	the lack of training and marketable qualifications in job seekers.
d.	inaccurate information about job opportunities.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

88. Unemployment that is of a short duration to allow time to find a new job is:

a.	structural unemployment.	c.	frictional unemployment.
b.	cyclical unemployment.	d.	durational unemployment.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Knowledge

 

89. A person who voluntarily quits his/her job in New York and expects to get a similar job in Los Angeles is an example of:

a.	structural unemployment.	c.	durational unemployment.
b.	cyclical unemployment.	d.	frictional unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Knowledge

 

90. Frictional unemployment refers to:

a.	people who are out of work and have no job skills.
b.	short periods of unemployment needed to match jobs and job seekers.
c.	people who spend relatively long periods out of work.
d.	unemployment related to the ups and downs of the business cycle.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Knowledge

 

91. An example of frictional unemployment is a(n):

a.	textile worker permanently laid off due to jobs lost to imports.
b.	engineer permanently laid off due to advances in technology.
c.	fast-food restaurant worker who quits work and attends college.
d.	computer programmer who leaves one job and accepts a new job.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

92. Which of the following people would be classified as fictionally unemployed?

a.	Computer programmers who lost their jobs because of a recession.
b.	Construction workers who are on temporary layoff.
c.	Elementary school teachers who do not have summer jobs.
d.	Textile workers who lost their jobs because of new foreign competition.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

93. Frictional unemployment refers to:

a.	unemployment related to the ups and downs of the business cycle.
b.	workers who are between jobs.
c.	people who spend relatively long periods out of work.
d.	people who are out of work and have no job skills.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

94. If Sam Jackson voluntarily quits one job, possesses marketable skills, and expects to find a new job in a few weeks, then Mr. Jackson is considered:

a.	frictionally unemployed.
b.	cyclically unemployed.
c.	seasonally unemployed.
d.	structurally unemployed.
e.	unwise to quit his job without already having another one.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

95. Workers who may be between jobs are considered:

a.	frictionally unemployed.
b.	structurally unemployed.
c.	cyclically unemployed.
d.	unemployable.
e.	discouraged workers.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

96. Unemployment caused by people voluntarily quitting work in order to seek more attractive employment is called:

a.	the natural rate of unemployment.
b.	full employment.
c.	cyclical unemployment.
d.	frictional unemployment.
e.	structural unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Knowledge

 

97. Sharon was being treated unfairly by her boss, so she stormed off the job and two days later found another position. For two days, Sharon experienced:

a.	cyclical unemployment.
b.	structural unemployment.
c.	seasonal unemployment.
d.	frictional unemployment.
e.	being out of the labor force.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

98. Althea, a brilliant new Ph.D. in economics, has turned down many job offers because she hopes eventually to teach at one of the top 10 universities in her field. The type of unemployment she is experiencing is:

a.	frictional.
b.	structural.
c.	seasonal.
d.	cyclical.
e.	underemployment.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

99. A general mismatch between the skills of unemployed workers and the skills needed by employers with job openings results in:

a.	frictional unemployment.	c.	cyclical unemployment.
b.	structural unemployment.	d.	a higher labor force participation rate.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

100. When individuals are unemployed because they lack the qualifications to fill available jobs, this is called:

a.	frictional unemployment.	c.	cyclical unemployment.
b.	natural unemployment.	d.	structural unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

101. Bob is unemployed because his skills have become obsolete due to technological advances. This is ____ unemployment.

a.	frictional	c.	cyclical
b.	structural	d.	abnormal

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

102. When people become unemployed because of a higher minimum wage, this type of unemployment is called:

a.	frictional.	c.	cyclical.
b.	structural.	d.	abnormal.

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

103. Structural unemployment is unemployment caused by:

a.	temporary changes in jobs.
b.	discrimination.
c.	the time required to match employers and workers.
d.	a mismatch between worker skills and employer requirements.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

104. An example of structural unemployment is a(n):

a.	textile worker who quits one job and waits for the new job to begin.
b.	engineer permanently laid off due to advances in technology.
c.	computer programmer who becomes rich and leaves the labor force.
d.	All of these.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

105. Unemployment that is caused by a mismatch of the demand for workers with certain skills and the skills of unemployed workers is:

a.	frictional unemployment.	c.	cyclical unemployment.
b.	structural unemployment.	d.	mismatch unemployment.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

106. Sam is a musician who is out of work because electronic equipment replaced live musicians. This is an example of:

a.	frictional unemployment.	c.	structural unemployment.
b.	cyclical unemployment.	d.	involuntary unemployment.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

107. Louise is unemployed due to a decrease in the demand for workers with a knowledge of a certain word processing language. This is an example of:

a.	cyclical unemployment.	c.	involuntary unemployment.
b.	frictional unemployment.	d.	structural unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

108. Consider a broom factory that permanently closes because of foreign competition. If the broom factory’s workers cannot find new jobs because their skills are no longer marketable, then they are classified as:

a.	seasonally unemployed.	c.	structurally unemployed.
b.	frictionally unemployed.	d.	cyclically unemployed.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

109. A mismatch of the skills of unemployed workers and the skills required for existing jobs is defined as:

a.	involuntary unemployment.	c.	structural unemployment.
b.	cyclical unemployment.	d.	frictional unemployment.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

110. Unemployment that occurs from fundamental technological changes in the production, or from the substitution of new goods for customary ones, is known as:

a.	underemployment.
b.	seasonal unemployment.
c.	frictional unemployment.
d.	structural unemployment.
e.	cyclical unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

111. Unemployment that results from fundamental technological changes in production, or from the substitution of new goods for customary ones, is:

a.	the natural rate of unemployment.
b.	full employment.
c.	cyclical unemployment.
d.	frictional unemployment.
e.	structural unemployment.

 

 

ANS:  E                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

112. Juanita earned a B.S. in engineering and went to work for a large defense contractor in a small town in California. When the government cut spending, Juanita and 99 others were laid off. The only other business in the town is growing grapes to be made into raisins, but the growers refuse to hire laid-off engineers, knowing they will leave at the first opportunity. The unemployment Juanita is experiencing is:

a.	cyclical.
b.	structural.
c.	permanent.
d.	frictional.
e.	voluntary.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

113. Structural unemployment is frequently caused by:

a.	technological changes that make certain job skills obsolete.
b.	temporary layoffs in industries such as construction.
c.	the impact of recessions on employment.
d.	none of these.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

114. Susan Greenberg, who works in a typewriter factory, becomes unemployed because people start buying personal computers instead of typewriters. Susan can best be described as:

a.	frictionally unemployed.
b.	structurally unemployed.
c.	cyclically unemployed.
d.	not part of the labor force.
e.	a discouraged worker.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

115. Structural unemployment refers to unemployment resulting from:

a.	technological change.
b.	being in the wrong geographical location
c.	taking the time to find the best job.
d.	seasonal decreases in demand for labor.
e.	a recession in the economy.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

116. Jamal (now age 54) lost his job. He has very specialized skills that are no longer in demand. Jamal’s unemployment is best classified as:

a.	cyclical.
b.	structural.
c.	seasonal.
d.	frictional.
e.	voluntary.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

117. Which type of unemployment is most closely connected with the saying “you can’t teach an old dog new tricks”?

a.	Cyclical.
b.	Frictional.
c.	Structural.
d.	Voluntary.
e.	Seasonal.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

118. Which type of unemployment is experienced by a person who is laid off at an office because word processing equipment and software reduce the need for typists?

a.	Seasonal.
b.	Cyclical.
c.	Voluntary.
d.	Structural.
e.	Frictional.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

119. The type of unemployment that occurs because of a recession is called:

a.	frictional unemployment.	c.	natural unemployment.
b.	seasonal unemployment.	d.	cyclical unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

120. Cyclical unemployment is primarily caused by:

a.	a large proportion of youthful workers in the labor force.
b.	fluctuations in aggregate demand.
c.	a lack of training on the part of job seekers.
d.	the failure of job seekers to search adequately for the available jobs.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

121. Cyclical unemployment is caused by:

a.	shifts in the job skills required in the economy.
b.	seasonal layoffs.
c.	declines in real GDP.
d.	cyclical changes in the job skills among workers.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

122. Eric lost his job because a recession caused his employer’s sales to fall. This is an example of:

a.	involuntary unemployment.	c.	structural unemployment.
b.	frictional unemployment.	d.	cyclical unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

123. Sally lost her job when her company went out of business because of a recession. This is an example of:

a.	frictional unemployment.	c.	cyclical unemployment.
b.	structural unemployment.	d.	technological unemployment.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

124. Cyclical unemployment is caused by:

a.	shifts in the structure of the economy.
b.	seasonal layoffs.
c.	declines in actual output below its full-employment level.
d.	the absence of job skills among the unemployed.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

125. An example of cyclical unemployment is a(n):

a.	textile worker permanently laid off due to job lost to imports.
b.	autoworker who is temporarily laid off due to a decline in demand for cars.
c.	engineer permanently laid off due to advances in technology.
d.	computer programmer who leaves one job and accepts a new job.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

126. Unemployment caused by a recession is called:

a.	structural unemployment.	c.	involuntary unemployment.
b.	frictional unemployment.	d.	cyclical unemployment

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Knowledge

 

127. Cyclical unemployment:

a.	causes unemployment statistics to be understated.
b.	causes unemployment statistics to be overstated.
c.	occurs because of recessions.
d.	occurs because of technological innovations in production.
e.	only occurs with a zero inflation rate.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

128. It is difficult for cyclically unemployed individuals to find jobs because:

a.	they do not meet the qualifications required for the available jobs.
b.	the economy is in a recession.
c.	they quit their last job and employers view them with suspicion.
d.	they have not looked long enough to find a job.

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

129. A decrease in aggregate demand and the subsequent cutbacks in production lead to:

a.	frictional unemployment.
b.	cyclical unemployment.
c.	cost-push unemployment.
d.	structural unemployment.
e.	transitory unemployment.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

130. The increase in unemployment associated with a recession is called:

a.	structural unemployment.
b.	frictional unemployment.
c.	discouraged unemployment.
d.	cyclical unemployment.
e.	temporary unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

131. In an economic expansion, people used their charge cards to purchase many goods. Now the economy is in a recession and people must use much of their reduced incomes to pay back debts. If employees manufacturing the goods people used to buy are laid off, they will suffer from:

a.	cyclical unemployment.
b.	structural unemployment.
c.	permanent unemployment.
d.	frictional unemployment.
e.	underemployment.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

132. Cyclical unemployment refers to unemployment resulting from:

a.	a mismatch of skills.
b.	being in the wrong geographical location.
c.	the time and monetary cost of finding the best job.
d.	a recession.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

133. When full employment is present in the United States:

a.	the rate of unemployment will fall to zero.
b.	the actual rate of unemployment will be less than the natural rate of unemployment.
c.	approximately 95 percent of the adult population will be employed.
d.	approximately 95 percent of the labor force will be employed.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

134. Full employment is the rate of employment that results when:

a.	all the labor resources of the economy are employed full time.
b.	cyclical unemployment has reached its maximum.
c.	everybody who wants a job can find one.
d.	only frictional and structural unemployment are present.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

135. Full employment means which of the following is zero?

a.	structural unemployment	c.	frictional unemployment
b.	cyclical unemployment	d.	aggregate unemployment

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

136. When an economy is operating at its full employment rate of output:

a.	the rate of unemployment will be zero.
b.	output will exceed the economy’s maximum sustainable rate.
c.	the actual rate of unemployment will equal the natural rate.
d.	the economy’s potential rate of output will exceed actual GDP.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

137. The combination of frictional and structural unemployment is the:

a.	cyclical rate of unemployment.	c.	civilian rate of unemployment.
b.	transitional rate of unemployment.	d.	natural rate of unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

138. The natural rate of unemployment occurs if there is no:

a.	unemployment.	c.	structural unemployment.
b.	frictional unemployment.	d.	cyclical unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

139. Full employment is the situation in which the economy operates at an unemployment rate equal to the sum of:

a.	structural and frictional unemployment.
b.	cyclical and frictional unemployment.
c.	structural and cyclical unemployment.
d.	structural, frictional, and cyclical unemployment.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

140. The economy’s natural rate of unemployment consists of:

a.	structural plus frictional unemployment.
b.	cyclical plus frictional unemployment.
c.	structural plus cyclical unemployment.
d.	structural, frictional, and cyclical unemployment.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

141. Full employment occurs when the rate of unemployment consists of:

a.	structural plus frictional unemployment.
b.	cyclical plus frictional unemployment.
c.	structural, frictional, and cyclical unemployment.
d.	none of these.

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

142. The economy is fully employed when there is no:

a.	seasonal unemployment.	c.	structural unemployment.
b.	frictional unemployment.	d.	cyclical unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

143. Which of the following statements is true?

a.	The four phases of the business cycle, in order, are: peak, recovery, trough, recession.
b.	When unemployment is rising then real GDP is rising.
c.	The economic problem typically associated with a recovery is rising unemployment.
d.	Full employment exists in an economy when the unemployment rate equals the sum of frictional, and structural unemployment rates.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

144. When the rate of cyclical unemployment is zero, the:

a.	natural rate of unemployment must also be zero.
b.	rate of frictional unemployment must be negative.
c.	economy must have entered a recessionary stage.
d.	Keynesian aggregate supply curve must be horizontal.
e.	economy is considered to be at full employment.

 

 

ANS:  E                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Analysis

 

145. The economy is considered to be at full employment when:

a.	the actual rate of unemployment is less than the natural rate.
b.	the leading economic indicators are unchanged for two consecutive quarters.
c.	structural unemployment is zero.
d.	frictional plus structural unemployment is less than the natural rate.
e.	the rate of cyclical unemployment is zero.

 

 

ANS:  E                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Analysis

 

146. Actual GDP will be below potential GDP:

a.	when the economy is at full employment.	c.	when resources are fully utilized.
b.	during an economic boom.	d.	during a recession.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

147. Which of the following is true?

a.	Frictional unemployment implies a lack of available jobs.
b.	During a recession, cyclical unemployment will be low.
c.	When an economy is at full employment, actual unemployment will be less than the natural rate of unemployment.
d.	When actual GDP equals potential GDP, the actual unemployment rate will equal the economy’s natural rate of unemployment.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

148. The GDP gap is the difference between:

a.	frictional unemployment and actual real GDP.
b.	unemployment rate and real GDP deflator.
c.	actual real GDP and full-employment real GDP .
d.	full-employment real GDP and real GDP deflator.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

149. Which of the following is true?

a.	The GDP gap is the difference between actual real GDP and full-employment real GDP.
b.	We desire economic growth because it increases the nation’s standard of living.
c.	Economic growth is measured by the annual percentage increase in a nation’s real GDP.
d.	Discouraged workers are a reason critics say the unemployment rate is understated.
e.	All of these are true.

 

 

ANS:  E                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

150. The GDP gap is the difference between:

a.	full-employment real GDP and real GDP chain price index.
b.	unemployment rate and real GDP chain price index.
c.	actual real GDP and full-employment real GDP.
d.	frictional unemployment and actual real GDP.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

151. Of the four groups listed below, the highest unemployment rate is typically experienced by:

a.	females as a group.
b.	males as a group.
c.	teenagers.
d.	persons who completed 1-3 years of high school.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

TRUE/FALSE

 

1. The business cycle is the periodic but recurrent fluctuations in real GDP.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

2. A principal cause of the business cycle is the changes in total spending that occur in the overall economy.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

3. The four phases of a single business cycle are, in order, the trough, followed by a recovery, then a recession, ending with a peak.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

4. Recovery is the phase of the business cycle during which real GDP reaches its maximum.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

5. The government’s chief forecasting gauge for business cycles is the chained real GDP indicators.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

6. Business cycles vary greatly in duration and intensity.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

7. Business cycles are recurring periods of economic growth and decline in an economy’s real GDP.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

8. The term “recovery” refers to the maximum point of the business cycle.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

9. A principal cause of the business cycle is the changes in total spending that occur in the overall economy.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

10. The government’s main statistic for forecasting business cycles is the index of coincident indicators.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

11. The duration of unemployment is not a leading indicator.

 

ANS:  T                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

12. Industrial production is not a coincident indicator.

 

ANS:  T                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

13. The prime rate is a lagging indicator.

 

ANS:  T                    PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Comprehension

 

14. The civilian labor force includes only the employed.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

15. The civilian labor force excludes anyone not actively seeking a job.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

16. The unemployment rate is the percentage of the civilian labor force that is unemployed but actively seeking work.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

17. Any adult who does not have a job is counted as unemployed.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

18. In the United States, the unemployment rate for blacks is roughly the same as the unemployment rate for whites.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

19. Part-time workers who want full-time work are counted as only partially employed in the official unemployment statistic.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

20. In the United States, the unemployment rate for women is roughly the same as the unemployment rate for men.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Knowledge

 

21. The official unemployment rate can be criticized for both understating and overstating the true number of unemployed.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

22. To be counted as unemployed, a person must be looking for a job.

 

ANS:  T                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   Unemployment                               KEY:  Bloom’s: Comprehension

 

23. A person who has lost his or her job because it is now performed by a robot is structurally unemployed.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

24. Structural unemployment refers to short periods of unemployment needed to match jobs and job seekers.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

25. Structural unemployment is a special type of cyclical unemployment.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

26. When actual real GDP output is below full-employment real GDP, the GDP measures the cost of cyclical unemployment.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

27. Cyclical unemployment is the result of the business cycle.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Comprehension

 

28. The natural rate of unemployment exists when cyclical unemployment equals zero.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

29. Full employment, which is always expected to occur, consists of the frictionally and cyclically unemployed.

 

ANS:  F                    PTS:   1                    DIF:    Easy               NAT:  BUSPROG: Analytic

TOP:   The Goal of Full Employment          KEY:  Bloom’s: Comprehension

 

30. The economic cost of unemployment is the loss of potential output which can never be realized.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension

 

ESSAY

 

1. What generally causes the business cycle? What are the four phases of a single business cycle? What are the problems associated with the business cycle?

 

ANS:

Changes in total spending (aggregate demand) are what generally cause changes in the business cycle. The four phases of a single business cycle is a peak, recession, trough and an expansion. The problems associated with a recession are cyclical unemployment and slow growth. The problem with an expanding economy is (demand-pull) inflation.

 

PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The Business-Cycle Roller Coaster  KEY:  Bloom’s: Application

 

2. What is full employment? What are the different kinds of unemployment? What constitutes the natural (normal) rate of unemployment?

 

ANS:

Full employment exists when approximately 95 percent of the civilian labor force is employed. This implies a natural rate of unemployment of approximately 5 percent. The natural rate of unemployment consists of the frictionally and structurally unemployed. The only other type of unemployment is cyclical unemployment.

 

PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   Types of Unemployment                 KEY:  Bloom’s: Application

 

3. What does the GDP gap measure?

 

ANS:

The GDP gap = potential real GDP – actual real GDP. It measures the loss of potential output associated with unemployment which can never be realized (it measures the economic cost of unemployment).

 

PTS:   1                    DIF:    Challenging    NAT:  BUSPROG: Analytic

TOP:   The GDP Gap                                 KEY:  Bloom’s: Comprehension