Chapter 9 Econ Quiz

Refer to the above diagram, the phase of the business cycle from points A to D are, respectively:

• peak, recession, expansion, trough.

• expansion, recession, trough, peak.

• peak, recession, trough, expansion.

• trough, recovery, expansion, peak

If the GDP gap is negative, then:

• the unemployment rate is falling

• potential GDP is less than actual GDP.

• the inflation rate is rising.

• actual GDP is less than potential GDP

Inflation is a rise in:

• real GDP

• industrial production

• the standard of living

• the general level of prices over time

If the Consumer Price Index was 166.6 in one year and 172.2 in the next year, then the rate of inflation from one year to the next year was:

• 5.4 percent.

• 4.1 percent

• 6.0 percent

• 3.4 percent

A statement that is often used to describe demand-pull inflation is:

• "Too much money chasing too few goods"

• "Money is easily earned, but not easily saved"

• "A rising tide lifts all boats"

• "It is important to have some skin in the game"

Inflation caused by a rise in per-unit production costs is referred to as:

• demand-pull inflation

• cost-push inflation

• unanticipated inflation.

• hyperinflation.

A peak in the business cycle:

• occurs when the inflation rate is its lowest.

• is a temporary maximum point

• is a temporary minimum point

• occurs when the unemployment rate is its greatest.

Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:

• both lenders and borrowers are hurt.

• borrowers are hurt, but lenders benefit

• lenders are hurt, but borrowers benefit

• both lenders and borrowers benefit.

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, the official unemployment rate would:

• be unchanged.

• decline

• increase in the short run but eventually decline

• increase

Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is:

• 8%

• 10%

• 6%

• 4%