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68) At the peak of a business cycle, the
A) cyclical unemployment rate is positive.
B) unemployment rate is above the natural unemployment rate.
C) frictional unemployment rate is zero.
D) unemployment rate is below the natural unemployment rate.
E) natural unemployment rate is negative.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
69) The natural unemployment rate is
A) equal to the sum of frictional, cyclical, and seasonal unemployment.
B) not known with certainty.
C) equal to zero.
D) the same for all industrialized countries.
E) equal to the sum of frictional, structural, and cyclical unemployment.
Skill: Level 1: Deinition
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
70) Potential GDP is
A) the value of the maximum amount of output that can be produced at any given time.
B) the amount of real GDP that the economy would produce if it were at full employment of
all resources.
C) another name for real GDP.
D) the amount of real GDP that the economy would produce if the unemployment rate was
zero.
E) the amount of real GDP that the economy would produce if all unemployment was
cyclical unemployment.
Skill: Level 1: Deinition
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
81
71) Potential GDP is the level of output produced when the unemployment rate is
A) equal to the natural unemployment rate.
B) greater than the natural unemployment rate.
C) less than the natural unemployment rate.
D) zero.
E) made up of only cyclical unemployment.
Skill: Level 1: Deinition
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
72) Potential GDP is reached when
A) unemployment is zero.
B) there is no cyclical unemployment.
C) unemployment is above full employment.
D) unemployment is below full employment.
E) the natural unemployment rate equals zero.
Skill: Level 3: Using models
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
73) Which of the following is true?
A) Real GDP luctuates around potential GDP.
B) Potential GDP luctuates around real GDP.
C) Nominal GDP luctuates around real GDP.
D) Real GDP luctuates around nominal GDP.
E) When real GDP equals potential GDP, both equal nominal GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
82
74) During a recession,
A) real GDP is equal to potential GDP.
B) real GDP is less than potential GDP.
C) real GDP is greater than potential GDP.
D) the relationship between real GDP and potential GDP no longer exists.
E) the actual unemployment rate is less than the natural unemployment rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
75) When the unemployment rate is greater than the natural unemployment rate, real GDP
is
A) greater than potential GDP.
B) less than potential GDP.
C) unrelated to potential GDP.
D) equal to potential GDP.
E) greater than full employment GDP.
Skill: Level 1: Deinition
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
76) As the unemployment rate increases,
A) potential GDP decreases.
B) real GDP decreases.
C) both real GDP and potential GDP decrease.
D) potential GDP increases.
E) full employment GDP decreases.
Skill: Level 1: Deinition
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
83
77) When the unemployment rate is ________ the natural unemployment rate, real GDP is
________ potential GDP.
A) below; above
B) above; the same as
C) the same as; below
D) the same as; above
E) above; above
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
78) Tommy graduates from college and starts to look for a job. Tommy is
A) frictionally unemployed.
B) structurally unemployed.
C) cyclically unemployed.
D) unnecessarily unemployed.
E) employed because he is looking for work.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
79) Which of the following people is frictionally unemployed?
A) Cara, an executive who lost her job because her company could not compete with
foreign competition and whose skills are not wanted by other companies
B) Tran, a building construction supervisor who was ired because of a downturn in the
building industry that is the result of a general downturn in the economy
C) Eugene, a pharmaceutical drug salesman who was laid of when his company lost a large
contract with an HMO
D) Amanda, a sales associate at J.C. Penney who quit her job to attend school full time
E) Samantha, who worked part-time in J.C. Penney to help with the Christmas rush but was
laid of in January
Skill: Level 3: Using models
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
84
80) If an entire industry relocates to a foreign country, the relocation leads to a higher rate
of ________ unemployment.
A) frictional
B) structural
C) structural and frictional
D) cyclical
E) structural and cyclical
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
81) An increase in unemployment beneits ________ and an increase in international
competition that changes the location of jobs ________.
A) increases structural unemployment; decreases frictional unemployment
B) decreases structural unemployment; decreases cyclical unemployment
C) decreases cyclical unemployment; decreases cyclical unemployment
D) increases frictional unemployment; increases structural unemployment
E) decreases cyclical unemployment; increases cyclical unemployment
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
82) Who is cyclically unemployed?
A) Casey, who lost his job because the technology changed so he was no longer needed
B) Katrina, an assistant manager who quit her job to search for a better job closer to home
C) Kathy, a steelworker who was laid of but has stopped looking for a new job because she
can't ind a new job
D) David, a new car salesman who lost his job because the economy went into a recession
E) Samantha, who quit her job to return to college to earn her MBA
Skill: Level 3: Using models
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
85
83) At full employment, there is no
A) unemployment.
B) frictional unemployment.
C) structural and seasonal unemployment.
D) cyclical unemployment.
E) structural unemployment.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
84) When the economy is at full employment,
A) the natural unemployment rate equals zero.
B) the amount of cyclical unemployment equals zero.
C) the amount of structural unemployment equals zero.
D) there is no unemployment.
E) the amount of frictional unemployment equals zero.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
85) Which of the following lowers frictional unemployment?
A) more young people in the economy
B) decreasing unemployment beneits
C) increasing the pace of technological change
D) increasing the minimum wage
E) None of the above answers are correct because all of the answers raise frictional
unemployment.
Skill: Level 3: Using models
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
86
86) When the unemployment rate is less than the natural unemployment rate, real GDP is
________ potential GDP.
A) greater than
B) less than
C) unrelated to
D) equal to
E) not comparable to
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
87) If real GDP exceeds potential GDP, then the unemployment rate ________ the natural
unemployment rate.
A) equals
B) is greater than
C) is less than
D) The premise of the question is incorrect because the relationship between real GDP and
potential GDP has nothing to do with the relationship between the unemployment rate and
the natural unemployment rate.
E) The premise of the question is incorrect because real GDP can never exceed potential
GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
88) When the unemployment rate is ________ the natural unemployment rate, real GDP is
________.
A) above; increasing
B) above; above potential GDP
C) below; above potential GDP
D) below; increasing
E) equal to; either equal to potential GDP or above potential GDP
Skill: Level 2: Using deinitions
Section: Checkpoint 6.3
Status: Old
AACSB: Relective thinking
87
6.4 Integrative Questions
Consider the following people:
• Chris quits his job as an automobile mechanic to pursue his college education full-time.
• Arrelo is temporarily laid of from her technical support job because of a strike by
production workers.
• Schurita graduated from college in May and is currently looking for a job.
• Bo quit his job on September 1 and then, after looking for a new job, will begin his new
job
on October 1.
• Terri retired from his job on May 1.
• Vicki works part-time at Bainen Press to help pay her college tuition.
1) Bo's actions would
A) have no impact on the September unemployment rate or the October unemployment
rate.
B) raise the September unemployment rate and lower the October unemployment rate.
C) raise the September unemployment rate and not change the October unemployment
rate.
D) classify him as out of the labor force in September.
E) raise the September unemployment rate and the October unemployment rate.
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
2) Vicki would be classiied as
A) a voluntary part-time worker.
B) unemployed.
C) an involuntary part-time work.
D) not in the labor force because she is a full-time student.
E) a discouraged worker.
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
88
3) When the unemployment rate equals the natural unemployment rate, most likely the
economy is producing
A) on the production possibilities frontier.
B) within the production possibilities frontier.
C) beyond the production possibilities frontier.
D) either on or within the production possibilities frontier.
E) either on or beyond the production possibilities frontier.
Skill: Level 2: Using deinitions
Section: Integrative
Status: Old
AACSB: Relective thinking
4) Producing an amount of GDP equal to potential GDP is most consistent with the economy
producing
A) on the production possibilities frontier.
B) within the production possibilities frontier.
C) beyond the production possibilities frontier.
D) either on or within the production possibilities frontier.
E) either on or beyond the production possibilities frontier.
Skill: Level 2: Using deinitions
Section: Integrative
Status: Old
AACSB: Relective thinking
5) After the passage of the North American Free Trade Agreement, which made it less
expensive to import goods from Mexico, workers in some industries found their factories
being relocated to Mexico to take advantage of lower labor costs. These workers
experienced what type of unemployment?
A) cyclical
B) trade
C) structural
D) frictional
E) foreign
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Relective thinking
89
6) If the Federal government expands its support of education and retraining of workers
who have been unemployed for a relatively long length of time, which type of
unemployment would the education and retraining most likely be targeted?
A) cyclical
B) government
C) structural
D) frictional
E) discouraged
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Relective thinking
7) During the Great Depression of the 1930s when the unemployment rate was
exceptionally high due to the Great Depression, the government had employment
programs, such as the Civilian Conservation Corps, which built campsites and planted
trees. These programs were aimed at reducing which type of unemployment?
A) cyclical
B) avoidable
C) structural
D) frictional
E) discouraged
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Relective thinking
8) Suppose people decide to buy fewer GE stoves. If General Electric reduces the number
of its employees to reduce its costs but no other stove company does so, which type of
unemployment results?
A) cyclical
B) marginal
C) structural
D) frictional
E) discouraged
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Relective thinking
90
