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59. The top of the business cycle is called:
A. a growth trend.
B. a recession.
C. an upturn.
D. a peak.
60. During the business cycle, an economic upturn occurs:
A. at the peak of the business cycle.
B. at the trough of the business cycle.
C. in between the peak and trough of the business cycle
D. in between the trough and peak of the business cycle
61. In order of their occurrence, the phases of the business cycle are:
A. peak, downturn, upturn, trough.
B. peak, upturn, downturn, trough.
C. peak, downturn, trough, upturn.
D. peak, upturn, trough, downturn.
62. The business cycle consists of several stages or phases. Which is the accurate sequence?
A. Recession, peak, upturn, trough
B. Recession, peak, trough, upturn
C. Recession, upturn, peak, trough
D. Recession, trough, upturn, peak
63. A recession is often considered to be:
A. an economic downturn that persists for more than two consecutive quarters of the year.
B. an economic downturn that persists for more than four consecutive quarters of the year.
C. any period of more than six months in which unemployment is rising.
D. any period when the unemployment rate exceeds 6 percent.
64. Refer to the graph shown.
A movement from points B to C represents a(n):
A. trough.
B. peak.
C. recession.
D. upturn.
65. Refer to the graph shown.
Time
Output
B
D
A
C
E
A movement from points A to B represents a(n):
A. trough.
B. trough.
C. peak.
D. upturn.
66. Refer to the graph shown.
Time
Output
B
D
A
C
E
A peak occurs when the economy is at point:
A. A.
B. B.
C. C.
D. D.
67. Refer to the graph shown.
Time
Output
B
D
A
C
E
A trough occurs when the economy moves from point:
A. C to point D.
B. B to point C.
C. B to point D.
D. A to point B.
68. The longest business-cycle expansion in U.S. history occurred during the ten years from:
A. 1919 until 1929.
B. 1938 until 1948.
C. 1959 until 1969.
D. 1991 until 2001.
69. A structural stagnation is:
A. a business cycle with greater fluctuations around the trend.
B. a slow expansion that involves slower growth than the previous long run trend.
C. a business cycle in which unemployment rises during the downturn and rises during the expansion.
D. a business cycle with smaller fluctuations around the trend.
Time
Output
B
D
A
C
E
70. Keynesians tend to agree that during a depression:
A. decreasing government spending is likely to improve economic conditions.
B. increasing taxes is likely to improve economic conditions
C. increasing government spending is likely to improve economic conditions
D. governments should not do anything because anything they do will likely make the situation worse.
71. After the Great Depression, until 2008, economic downturns:
A. disappeared.
B. became longer.
C. became shorter.
D. continued more or less as they had prior to the Depression.
72. Prior to the Industrial Revolution, unemployment was not generally considered a social problem because:
A. there were no fluctuations in how much people spent so there was nothing similar to recessions.
B. a reduction in spending would cause wages and income to fall rather than unemployment to rise.
C. governments, influenced by religious values, provided jobs to anyone unfortunate to be unemployed.
D. employers before the Industrial Revolution generally offered workers lifetime contracts and rarely dismissed
them.
73. Unemployment caused by people entering the job market and people quitting a job just long enough to look for
and find another one is called:
A. structural unemployment.
B. frictional unemployment.
C. cyclical unemployment.
D. are not counted in the unemployment rate.
74. In contrast to a recession in industrialized nations, a recession in pre-industrial nations:
A. is more visible in its effects on the unemployment rate but it has a smaller effect on wage rates.
B. is less visible in its effects on the unemployment rate but it has a larger effect on wage rates.
C. has larger effects on both unemployment and wage rates.
D. has smaller effects on both unemployment and wage rates.
75. Another term for what the text calls the "target rate of unemployment" is:
A. Keynesian unemployment.
B. nominal unemployment.
C. real unemployment.
D. the natural rate of unemployment.
76. Some economists talk about a non-accelerating inflation rate of unemployment (NAIRU). The term the text uses
for this concept is:
A. the natural rate of unemployment.
B. cyclical unemployment.
C. structural unemployment.
D. the target rate of unemployment.
77. The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions
is:
A. zero.
B. called the target rate of unemployment.
C. called the optimal rate of unemployment.
D. called cyclical unemployment.
78. Which of the following contributes to structural unemployment?
A. A general short-run downturn in the economy.
B. People quitting a job just long enough to look for and find another one.
C. People over 65 who don't really want to work.
D. People losing a job when their skills become obsolete due to technological innovations.
79. Cyclical unemployment is defined as unemployment that results from:
A. fluctuations in economic activity.
B. structural changes in the economy.
C. changes in technology.
D. the aging of the population.
80. Technological change is most likely to affect:
A. structural unemployment.
B. frictional unemployment.
C. cyclical unemployment.
D. seasonal unemployment.
81. Unemployment caused by a recession, assuming the time it takes to find a job constant, is called:
A. frictional unemployment.
B. cyclical unemployment.
C. natural unemployment.
D. structural unemployment.
82. The unemployment rate is the number of people without a job:
A. divided by the population.
B. and looking divided by the population.
C. divided by the labor force.
D. and looking for work divided by the labor force.
83. In the standard unemployment rate, discouraged workers are counted as:
A. part of the population over 16.
B. employed.
C. unemployed.
D. part of the labor force.
84. What is one reason the government collects data about discouraged workers?
A. Some people argue that the unemployment rate underestimates true unemployment because it does not include
discouraged workers.
B. Some people argue that the unemployment rate overestimates true unemployment because it includes
discouraged workers.
C. The number of discouraged workers is a better indicator of unemployment.
D. To include them in the standard measure of unemployment because they can’t find jobs.
85. The number of people over age 16 in an economy willing and able to work, is known as the:
A. labor force participation rate.
B. unemployment rate.
C. labor force.
D. employment force.
86. When people stop looking for work, because they feel they didn’t have a chance of finding on, they’re called:
A. unemployed.
B. structural unemployment.
C. underemployed.
D. discouraged workers.
87. The total labor force is 100,000 out of a possible working age population of 160,000. The total number of
unemployed is 8,000. What is the unemployment rate?
A. 5 percent.
B. 6 percent.
C. 7 percent.
D. 8 percent.
88. What effect will including discouraged workers have on the unemployment rate?
A. Lower it
B. Raise it
C. Have no impact on it
D. The impact is unclear
89. Keynesians are most likely to:
A. include discouraged workers in their calculation of the unemployment rate.
B. exclude discouraged workers in their calculation of the unemployment rate.
C. believe unemployment is not a problem.
D. believe actual unemployment equals target unemployment.
90. Suppose there are 81.0 million people not in the labor force, 154.0 million in the civilian labor force, and 140.9
million employed. Based on these numbers, how many people are counted as unemployed?
A. 81.0 million
B. 73.0 million
C. 59.9 million
D. 13.1 million
91. Suppose there are 81.0 million people not in the labor force, 154.0 million in the civilian labor force, and 140.9
million employed. Based on these numbers, what is the unemployment rate?
A. 13.1
B. 9.3
C. 8.5
D. 5.5
92. What two numbers do you need to compute the unemployment rate?
A. The number of unemployed persons and the size of the population
B. The number of unemployed persons and the number of discouraged workers
C. The number of employed persons and the number of unemployed persons
D. The number of persons in the labor force and the size of the population
93. If the labor force is 90 million and the number of people who are looking for jobs but cannot find them is 9
million, the unemployment rate is:
A. 9 percent.
B. 10 percent.
C. 81 percent.
D. 91 percent.
94. Use the following table to calculate the unemployment rate. Select the correct answer from the options below.
In millions
Civilian population
270
People incapable of working
70
People not looking for work
60
Employed workers
133
A. 3 percent
B. 5 percent
C. 7 percent
D. 9 percent
95. Which of the following people would be considered unemployed?
A. A 55-year-old steel worker who was laid off 18 months ago and has given up trying to find a job
B. A woman who has quit college to move to New York where she is looking for a modeling job
C. A young man who has recently received his Ph.D. but who is driving a taxi because of an inability to find a
teaching job
D. A student who plans to look for a job after graduation
96. Classical economists contend that official measures of unemployment:
A. understate the problem due to the existence of discouraged workers.
B. understate the problem due to involuntary part-time employment.
C. overstate the problem because most unemployment is voluntary.
D. overstate the problem because most unemployment is cyclical.
97. The unemployment that occurs when people first enter the labor force or when they are in the process of
changing jobs, is called:
A. frictional unemployment.
B. cyclical unemployment.
C. natural unemployment.
D. structural unemployment.
98. Frictional unemployment:
A. refers to unemployment caused by friction between labor and management.
B. comes from people entering the labor force and changing jobs.
C. refers mainly to unemployment resulting from fluctuations in output.
D. is undesirable and should be eliminated at all costs.
99. Workers at a car-manufacturing plant are replaced by automated machinery. What type of unemployment best
describes the workers' situation?
A. Cyclical unemployment
B. Full unemployment
C. Structural unemployment
D. Frictional unemployment
100. Workers at a car-manufacturing plant in Flint, Michigan are laid off because the economy is weak and GM cars
aren't selling well. GM isn't sure when the plant will reopen. What type of unemployment best describes the
workers' situation?
A. Cyclical unemployment
B. Full unemployment
C. Structural unemployment
D. Frictional unemployment
101. Mexico can produce vine-ripened tomatoes at a lower opportunity cost than firms in the United States.
Through trade negotiations, the United States lifted quotas limiting the import of tomatoes from Mexico. Some firms
in Florida, in the face of this new competition, had to close their farms and their workers lost their jobs. Many of the
workers could not find new jobs right away. What type of unemployment describes the workers' situation?
A. Cyclical unemployment
B. Full unemployment
C. Structural unemployment
D. Target unemployment
102. The target rate of unemployment is defined as the:
A. highest sustainable rate of unemployment achievable under existing conditions.
B. lowest sustainable rate of unemployment achievable under existing conditions.
C. highest unemployment rate at which there is no cyclical or structural unemployment.
D. lowest rate of unemployment that will eliminate the business cycle.
103. Which of the following is associated with an increase in potential output?
A. An increase in the target rate of unemployment
B. A decrease in the target rate of unemployment
C. An increase in the target inflation rate
D. A decrease in the target rate of capacity utilization
