Chapter 09 – Business Cycles, Unemployment, and Inflation
1. The recurrent ups and downs in the level of economic activity extending over several years
are referred to as:
Chapter 09 – Business Cycles, Unemployment, and Inflation
2. The above diagram is best described as an idealized:
3. Refer to the above diagram. The phases of the business cycle from points A to D are,
respectively:
4. Refer to the above diagram. The straight line E drawn through the wavy lines would
provide an estimate of the:
Chapter 09 – Business Cycles, Unemployment, and Inflation
5. Which phase of the business cycle would be most closely associated with an economic
contraction?
6. A peak in the business cycle:
7. A trough in the business cycle occurs when:
Chapter 09 – Business Cycles, Unemployment, and Inflation
8. In the expansion phase of a business cycle:
9. A recession is a decline in:
10. What has been the range of the decline in real output during recessions in the U.S.
between 1950 and 2001?
Chapter 09 – Business Cycles, Unemployment, and Inflation
11. What has been the range for the duration in months of U.S. recessions between 1950 and
2001?
12. Which of the following groups declares the start and end of recessions in the U.S.?
13. Some economists prefer to use the term business fluctuations rather than business cycles
to describe the historical growth record in the United States because:
Chapter 09 – Business Cycles, Unemployment, and Inflation
14. Most economists agree that the immediate cause of the majority of cyclical changes in the
level of real output is unexpected changes in the:
15. The Great Recession that started in 2007 was triggered by shocks in which of the
following economic sectors?
16. In which industry or sector of the economy is output least likely to be affected by the
business cycle?
Chapter 09 – Business Cycles, Unemployment, and Inflation
17. Which statement is correct?
18. The unemployment rate is interpreted as the percentage of the:
19. The full-time homemakers and retirees are classified in the BLS data as:
Chapter 09 – Business Cycles, Unemployment, and Inflation
20. The unemployed are those people who:
21. Which of the following is the correct way to calculate the unemployment rate?
22. Assuming the total population is 200 million, the labor force is 100 million, and 92
million workers are employed, the unemployment rate is:
Chapter 09 – Business Cycles, Unemployment, and Inflation
23. A nation has a population of 260 million people. Of these, 60 million are retired, in the
military, in institutions, or under 16 years old. There are 188 million who are employed and
12 million who are unemployed. What is the unemployment rate?
24. The unemployment rate in an economy is 6%. The total population of the economy is 290
million, and the size of the civilian labor force is 150 million. The number of unemployed
workers in this economy is:
25. The total population of an economy is 175 million, the labor force is 125 million, and the
number of employed workers is 117 million. The unemployment rate for this economy is:
Chapter 09 – Business Cycles, Unemployment, and Inflation
26. The total adult population of an economy is 175 million, the number of employed is 122
million, and the number of unemployed is 17 million. The percent of adults who are not in the
labor force is:
27. The unemployment rate in an economy is 7.5 percent. The total population of the
economy is 250 million and the size of the civilian labor force is 180 million. The number of
employed workers in this economy is:
28. In calculating the unemployment rate, “discouraged” workers who are not actively seeking
employment are:
Chapter 09 – Business Cycles, Unemployment, and Inflation
29. In calculating the unemployment rate, part-time workers are:
30. Official unemployment rate statistics may:
31. The best example of a “frictionally unemployed” worker is one who:
Chapter 09 – Business Cycles, Unemployment, and Inflation
32. A worker who loses a job at a call center because business firms switch the call center to
another country is an example of:
33. Kevin has lost his job in an automobile plant because of the use of robots for welding on
the assembly line. Kevin plans to go to technical school to learn how to repair
microcomputers. The type of unemployment Kevin is faced with is:
34. New college graduates still looking for their first jobs would be classified in the BLS data
as:
Chapter 09 – Business Cycles, Unemployment, and Inflation
35. A headline states: “Real GDP falls again as the economy slumps.” This condition is most
likely to produce what type of unemployment?
36. Unemployment that occurs when there is deficient demand for the goods and services of
an economy is called:
37. Which of the following statements is correct?
Chapter 09 – Business Cycles, Unemployment, and Inflation
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38. A mismatch between the geographic location of workers and the location of job openings
would result in what type of unemployment?
39. Search and wait unemployment is another way to describe:
The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS)
survey of employment.
1. Mollie just graduated from college and is now looking for work. She has had three job
interviews in the past month, but still has not gotten a job offer.
2. George used to work in an automotive assembly plant. He was laid off six months ago as
the economy weakened. He expects to return to work in a few months when national
economic conditions improve.
3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft
until she lost her job last year when the Federal government cut defense spending. She has
been looking for similar work for a year but no company seems interested in her aircraft
design skills.
4. Ricardo lost his job last year when his company downsized and laid off middle-level
managers. He tried to find another job for a year, but was unsuccessful and quit looking for
work.
Chapter 09 – Business Cycles, Unemployment, and Inflation
40. Refer to the above information. Which individual is frictionally unemployed?
41. Refer to the above information. Which individual is structurally unemployed?
42. Refer to the above information. Which individual is cyclically unemployed?
Chapter 09 – Business Cycles, Unemployment, and Inflation
43. Refer to the above information. Which individual would be classified as a discouraged
worker?
44. Refer to the above information. Which individual would be included in the calculation of
the full-employment unemployment rate?
45. “Full employment” refers to the situation when there is:
Chapter 09 – Business Cycles, Unemployment, and Inflation
46. The full-employment rate of unemployment is also called the:
47. The natural rate of unemployment:
48. The rate of unemployment when the economy is at its potential output is called the:
Chapter 09 – Business Cycles, Unemployment, and Inflation
49. The full-employment unemployment rate for the United States economy is now generally
considered to be:
50. Potential GDP is the output that would be produced if the economy was experiencing:
51. The GDP gap measures the amount by which:
Chapter 09 – Business Cycles, Unemployment, and Inflation
52. The amount by which actual GDP falls short of potential GDP is one measure of the:
53. If the GDP gap is positive, then:
54. If unemployment is above the natural rate of unemployment, then potential GDP is:
Chapter 09 – Business Cycles, Unemployment, and Inflation
55. The higher the rate of unemployment:
56. If the unemployment rate for the United States economy rises from 7 to 11 percent during
a year, we can conclude that:
57. If the negative GDP gap were equal to 4% of the potential GDP, Okun’s law suggests that
the actual unemployment rate would exceed the natural rate of unemployment by: