41. In which of the following periods was total factor productivity growth the slowest in the U.S. economy?
a. Long boom
b. Economic liftoff period
c. 1995−2005
d. Reorganization period
42. Business cycle refers to the
a. rise and fall of firms in a particular industry.
b. rise and fall of industries in the economy.
c. short–run fluctuation of international trade as a proportion of GDP.
d. short-term movement of output and other key economic variables around their long-term trends.
43. Which of the following statements is true?
a. Recessions occur at regular intervals.
b. Each phase of the business cycle is of equal length.
c. Several economic variables move together during recessions.
d. The length of each phase of the business cycle can be predicted in advance.
44. A period when output, income, and employment are rising is known as
a. a recession.
b. an expansion.
c. a deflationary period.
d. a trough.
45. A period when output, income, and employment are falling is known as
a. a recession.
b. an expansion.
c. a peak.
d. a trough.
46. The end of an expansion when output, income, and employment begin to decline is referred to as
a. a depression.
b. an inflationary period.
c. a peak.
d. a trough.
47. Which of the following happens after an economy reaches a peak?
a. Output begins to decline.
b. The growth rate of population begins to rise.
c. Income begins to rise.
d. Unemployment begins to fall.
48. The growth rate of output and employment in a country started declining after rising sharply for three years. In
which stage of the business cycle is the country currently operating?
a. Peak
b. Trough
c. Expansion
d. Depression
49. A period when a recession ends and an expansion begins is known as
a. a depression.
b. an inflationary period.
c. a peak.
d. a trough.
50. Which of the following happens when an economy is in a trough?
a. Income begins to rise.
b. Output begins to fall.
c. Employment begins to fall.
d. Population growth rate begins to rise.
51. A particularly bad recession (in which output declines much more than usual for a recession) is called
a. an inflationary period.
b. a downturn.
c. a peak.
d. a depression.
52. The last depression in the United States occurred in
a. the 1900s.
b. the 1930s.
c. the 1960s.
d. the 1990s.
53. The group that determines the peaks and troughs of business cycles is a part of the
a. Department of Commerce.
b. Bureau of Labor Statistics.
c. National Bureau of Economic Research.
d. Center for International Business Cycle Research.
54. In the long boom period in the U.S., there have been recessions.
a. 0
b. 3
c. 4
d. 6
55. The longest economic expansion in U.S. history occurred in the
a. 1960s.
b. 1970s.
c. 1980s.
d. 1990s.
56. The shortest economic expansion in U.S. history occurred in the
a. 1960s.
b. 1970s.
c. 1980s.
d. 1990s.
57. According to monetarists, the main source of fluctuations in economic activity is
a. changes in the amount of money in the economy.
b. waves of optimism and pessimism that cause business investment in capital goods to fluctuate.
c. changes in the prices of oil and other resources.
d. changes in productivity.
58. Which of the following is likely to happen according to monetarists if money supply increases?
a. Unemployment will increase
b. Output will increase
c. Consumption will fall
d. Investment will fall
59. According to Keynesians, the main source of the business cycle is
a. changes in the amount of money in the economy.
b. waves of optimism and pessimism.
c. changes in the prices of oil and other resources.
d. changes in productivity.
60. Which of the following is likely to happen according to monetarists if money supply in an economy decreases
suddenly?
a. Output and employment falls
b. The interest rate falls
c. Investment rises
d. Consumption rises
61. Country Z is passing through a recession. Which group of economists is likely to believe that a shift of the aggregate
demand curve has caused the recession?
a. Keynesians
b. Monetarists
c. Real Business Cycle theorists
d. Neoclassicists
62. Which of the following is likely to lead to a recession according to Keynesian economists?
a. An decrease in money supply
b. An increase in the price of oil
c. A decrease in the rate of inflation
d. A fall in spending by consumers
63. Which of the following causes an upward shift in aggregate demand?
a. An increase in the aggregate price level
b. An increase in government spending
c. A sudden fall in productivity
d. A rise in the demand for money
64. According to real business cycle (RBC) theory, the main source of the business cycle is
a. changes in the amount of money in the economy.
b. waves of optimism and pessimism that cause business investment in capital goods to fluctuate.
c. changes in the prices of oil and other resources.
d. changes in productivity.
65. Which of the following is likely to cause a recession according to real business cycle theorists?
a. A fall in fuel prices
b. A fall in aggregate demand
c. A sudden fall in productivity
d. A fall in money supply
66. Classical economists believe that the economy
a. is unable to return to equilibrium because wages and prices are sticky and do not adjust right away.
b. will not return to equilibrium without government intervention.
c. is unable to return to equilibrium because wages and prices are flexible.
d. will return to equilibrium quickly without the need for government intervention.
67. Output and employment in Country Y has fallen below its equilibrium level. Which of the following groups of
economists is likely to believe that output and employment will return to its equilibrium level without government
intervention?
a. Keynesian economists
b. Post-modern economists
c. Monetarists
d. Classical economists
68. Research by Stock and Watson on the cause of the increased stability of output growth in the long boom suggests
that the main cause of the stability
a. was improved monetary policy.
b. was efficient financial markets.
c. was unknown.
d. was better inventory management by firms.
69. Compensation of workers is defined as
a. wages and salaries plus benefits earned by the workers.
b. wages and salaries earned by the worker.
c. non-monetary benefits earned by the workers.
d. the tax rates which are applicable on the wages earned by the workers.
70. Compensation of workers per hour in the U.S. grew the fastest in the
a. long boom.
b. economic liftoff period.
c. Great Depression.
d. reorganization period.
71. The growth rate of compensation per hour was slowest during the
a. long boom period.
b. economic liftoff period.
c. Great Depression.
d. reorganization period.
72. The difference between labor productivity growth and growth in compensation per hour has been the greatest in the
a. long boom period.
b. economic liftoff period.
c. Great Depression period.
d. reorganization period.
73. Suppose a country has a population of 122 million, of which 71 million are in the working–age population. Of those, 16
million are not in the labor force and 50 million are employed.
a. Calculate the number of people who are in the labor force.
b. Calculate the number of people who are unemployed.
c. Calculate the labor-force participation rate.
d. Calculate the unemployment rate.
74. Suppose a country has a population of 76 million, of which 53 million are in the working-age population. Of those, 3
million are unemployed and 46 million are employed.
a. Calculate the number of people who are in the labor force.
b. Calculate the number of people who are not in the labor force.
c. Calculate the labor-force participation rate.
d. Calculate the unemployment rate.
75. In the United States the number of people not in the labor force, employed, and unemployed is shown in the table
below for years 1973, 1974, and 1975. All numbers are in millions.
1973 1974 1975
Not in labor force 57.7 58.2 59.4
Employed 85.1 86.8 85.8
Unemployed 4.4 5.2 7.9
a. For each year, calculate the number of people who are in the labor force.
b. For each year, calculate the number of people who are in the working-age population.
c. Calculate the labor-force participation rate.
d. Calculate the unemployment rate.
e. By how much did the labor-force participation rate change from 1973 to 1974 and from 1974
to 1975?
f. By how much did the unemployment rate change from 1973 to 1974 and from 1974 to 1975?
76. In the country of Aargh, in the equation for TFP,
Y = A × Ka × L1
−
a,
the coefficient is a = 0.2. The capital stock is growing 6 percent per year, employment is growing 1 percent per year,
and output is growing 4 percent per year. In the country of Blargh, the coefficient is a = 0.25, the capital stock is
growing 10 percent per year, employment is growing 2 percent per year, and output is growing 5 percent per year. In
which country is TFP growing the fastest? In which country is output per worker growing the fastest? Explain your
answer and show all your calculations.
77. Describe classical economists.
78. Explain the four major theories of the causes of the business cycle.
79. Explain how a sudden change in productivity could lead to a change in economic output. Give an example.
80. Explain how compensation per hour has changed in the periods of economic liftoff, reorganization, and the long
boom. What explanations can you offer for the changes?