chap 28 (1)

Which of the following is correct?

• The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

• The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and a complex economy can achieve zero unemployment.

• The amount of unemployment that a country typically experiences is not a determinant of that country's standard of living, and a complex economy can achieve zero unemployment.

• The amount of unemployment that a country typically experiences is not a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

The amount of unemployment varies

• little over time and across countries.

• little over time but substantially across countries.

• substantially over time but little across countries.

• substantially over time and across countries.

An economy's natural rate of unemployment is the

• economy's long-run target level of unemployment.

• amount of unemployment that the economy normally experiences.

• lowest rate of unemployment the economy can achieve.

• All of the above are correct.

The natural rate of unemployment is the

• unemployment rate that would prevail with zero inflation.

• rate associated with the highest possible level of GDP.

• difference between the long-run and short-run unemployment rates.

• amount of unemployment that the economy normally experiences.

In the long run the unemployment rate equals

• zero.

• the cyclical rate of unemployment.

• the natural rate of unemployment.

• the sum of the cyclical and natural rate of unemployment.

Cyclical unemployment

• has a different explanation than does the natural rate of unemployment.

• refers to the year-to-year fluctuation in unemployment around an economy's natural rate of unemployment.

• is closely associated with short-run ups and downs of economic activity.

• All of the above are correct.

The designation 'natural' implies that the natural rate of unemployment

• is desirable.

• is constant over time.

• is impervious to economic policy.

• does not go away on its own even in the long run.

The natural rate of unemployment (i) is the economy's desirable level of unemployment. (ii) cannot be affected by economic policy. (iii) is typically constant over time.

• (i) and (ii) only

• (iii) only

• (i), (ii), and (iii)

• None of the above is correct.

The natural rate of unemployment (i) is the economy's desirable level of unemployment. (ii) arises from a single problem that has a single solution. (iii) is the amount of unemployment that does not go away on its own.

• (i) and (ii) only

• (iii) only

• (i), (ii), and (iii)

• None of the above is correct.

The natural rate of unemployment

• arises from a single problem that has a single solution.

• is easy for policymakers to reduce.

• Both a and b are correct.

• None of the above is correct.