Business cycles fluctuate over time around the linear trend of gross domestic product (GDP)..
1. Business cycles occur when outputHint: Business cycles fluctuate over time around the linear trend of gross domestic product (GDP).A. falls below its potentialB. rises above its potentialC. is fixed at its potentialD. fluctuates around its growth trend ]2. Which of these statements best describes a complete individual business cycle?Hint : A complete business cycle is measured from the initial peak to the next peak.A. Movement from peak to trough to peakB. Movement from recession to expansionC. Movement from peak to recession to troughD. Movement from trough to expansion then to peak3. During the business cycle, the period between the point at which output reaches a high and the point at which it reaches a low is calledHint : After a period of economic expansion, the economy usually contracts. This contraction would be characterized by higher unemployment and a declining GDP.A. a peakB. a troughC. an expansionD. a recession4. Which of the following equals the market value of all final goods and services produced in an economy, stated in the prices of a specific base year?A. Nominal GNPB. Nominal GDPC. Real GDPD. Real GNP5. Imagine a country has a population of 210 million. Within the country there are 95 million people who are employed workers, 50 million people incapable of working, and 60 million people capable of working, but not actively looking. Based on this information, what is the unemployment rate?Hint : Begin by looking at the labor force, then find the number of unemployed people. Some division and multiplication will be necessary after this point to find the unemployment rate.A. 3%B. 5%]C. 7%D. 9%6. The unemployment produced by fluctuations in economic activity is calledHint X Unemployment often changes with the business cycles. As the economy expands, the level of unemployment decreases. The unemployment level decreases as the economy expands.A. frictional unemploymentB. cyclical unemployment]C. natural unemploymentD. structural unemployment7. New college graduates are most likely to experienceHint X New college graduates often are people who are just entering the labor force or are in the process of changing jobs.A. frictional unemployment]B. cyclical unemploymentC. natural unemploymentD. structural unemployment8. The natural rate of unemployment is defined as theHint X The natural rate of unemployment occurs when the economy is considered stable.A. highest sustainable rate of unemployment achievable under existing conditionsB. unemployment rate that is consistent with the economy operating at its potential output]C. unemployment rate at which there is no cyclical unemploymentD. the rate of unemployment that should exist according to policy makers9. The Consumer Price Index (CPI) is based onHint X The CPI serves as an indicator for consumer inflation.A. surveys of retail store salesB. a broad index of all items in GDPC. surveys of the prices of items in a market basketD. Bureau of Labor Statistics estimates of price changes10. Unanticipated inflation is a problem for society because itHint X Unanticipated inflation leads to inefficiencies, as people make better investment and consumption-spending decisions when they know accurate levels of future inflation.A. rewards lenders at the expense of borrowersB. increases real profits in the short termC. rewards savers at the expense of spendersD. benefits borrowers at the expense of lenders