Download Chapter 7 Practice Problems

Chapter 7 Practice Problems
1. If the real output of an economy were to increase from $3000 billion to $3100 billion over a year, the rate of
growth of real output during that year would be:
A)
1.5%. B) 3.3%. C) 4.1%. D) 6.6%.
2. Real GDP was $9,950 billion in Year 1 and $10,270 billion in Year 2. The population rose from 270 million in Year
1 to 275 million in Year 2. What was the approximate increase in real GDP per capita rate from Year 1 to Year 2?
A)
1.3 percent B) 2.1 percent C) 3.3 percent D) 4.2 percent
3. Nominal GDP was $9,500 billion in Year 1 and $10,000 billion in Year 2. The GDP price index was 170 in Year 1
and 175 in Year 2. Between Years 1 and 2, the rate of growth in real GDP was approximately:
A)
1.6 percent. B) 2.3 percent. C) 4.4 percent. D) 5.3 percent.
The following data show prices, outputs, and population growth for three countries; A, B, and C between years 1
and 2.
Country
A
B
C
Gross domestic product
at current prices
Year 1
Year 2
$100
$115
200
105
500
450
Price index
year 2
(Year 1 = 100)
120
210
90
Population
year 2
(Year 1 = 100)
102
100
99
4. Between Years 1 and 2, real per capita gross domestic product has:
A)
increased in A, decreased in C, and remained constant in B.
B)
decreased in A, increased in C, and remained constant in B.
C)
decreased in A, increased in B, and remained constant in C.
D)
increased in A, and decreased in B and C.
5. If a nation's real GDP is growing by 3 percent per year, its real domestic output will double in approximately:
A)
21 years. B) 23 years. C) 29 years. D) 42 years.
6. Refer to the above diagram. The phases of the business cycle from points A to D are, respectively:
A)
peak, recession, expansion, trough. C)
expansion, recession, trough, peak.
B)
trough, recovery, expansion, peak. D)
peak, recession, trough, expansion.
7. Refer to the above diagram. The straight line E drawn through the wavy lines would provide an estimate of the:
A)
recession fluctuation. B) growth trend. C) natural rate of unemployment. D) recovery
trend.
8. A recession is defined as:
A)
a fall in the natural rate of unemployment.
B)
a rise in the natural rate of unemployment.
C)
a fall in real GDP that lasts six months or longer.
D)
the minimum point in the business cycle before the recovery phase.
9. Which is the correct way to calculate the unemployment rate?
A)
[(unemployed)/(population)] x 100 C)
[(labor force)/(population)] x 100
B)
[(unemployed)/(labor force)] x 100 D)
[(labor force)/(unemployed)] x 100
10. 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?
A)
4 percent B) 6 percent C) 9 percent D) 27 percent
11. 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:
A)
6 million. B) 9 million. C) 12 million. D) 24 million.
12. Official unemployment rate statistics may:
A)
overstate the amount of unemployment by including part-time workers in the calculations.
B)
understate the amount of unemployment by excluding part-time workers in the calculations.
C)
overstate the amount of unemployment because of the presence of "discouraged" workers who
are not actively seeking employment.
D)
understate the amount of unemployment because of the presence of "discouraged" workers
who are not actively seeking employment.
13. The best example of a "frictionally unemployed" worker is one who:
A)
reduces productivity by causing frictions in a business.
B)
is laid off during a recessionary period in the economy.
C)
is in the process of voluntarily switching jobs.
D)
is discouraged and not actively seeking work.
14. A worker who loses a job at a call center because business firms switch the call center to another country is an
example of:
A)
frictional unemployment. C)
cyclical unemployment.
B)
structural unemployment. D)
disguised unemployment.
15. 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:
A)
cyclical. B) frictional. C) structural. D) natural.
16. A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what
type of unemployment?
A)
structural B) cyclical C) frictional D) natural
17. Working as an elevator operator used to be a common job in the workforce four decades ago, but today few
jobs remain. The unemployment created by the introduction of automatic elevators would be considered:
A)
wait. B) cyclical. C) frictional. D) structural.
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.
2. George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He
expects to return to work in several 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.
18. Refer to the above information. Which individual is frictionally unemployed?
A)
1 B) 2 C) 3 D) 4
19. Refer to the above information. Which individual is structurally unemployed?
A)
1 B) 2 C) 3 D) 4
20.
Refer to the above information. Which individual is cyclically unemployed?
A)
1 B) 2 C) 3 D) 4
21. Refer to the above information. Which individual would be classified as a discouraged worker?
A)
1 B) 2 C) 3 D) 4
22. The rate of unemployment when the economy is at its potential output is called the:
A)
full-employment rate of unemployment.
C)
structural rate of unemployment.
B)
natural rate of unemployment.
D)
frictional rate of unemployment.
23. The full-employment unemployment rate for the United States economy is now generally considered to be:
A)
2 percent of the labor force.
C)
4 to 5 percent of the labor force.
B)
3 percent of the labor force.
D)
6 to 7 percent of the labor force.
24. 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 was:
A)
3.4%. B) 4.1%. C) 5.4%. D) 6.0%.
25. Inflation that occurs when total spending is greater than the economy's ability to produce output at the
existing price level is:
A)
anticipated inflation.
C)
cost-push inflation.
B)
demand-pull inflation.
D)
unanticipated inflation.
26. If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real
income would be about:
A)
$18,857. B) $25,143. C) $44,000. D) $77,000.
27. In Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price level was
125 and the average nominal level of income was $32,000. What happened to real income from Year 1 to Year 2?
A)
It fell by $400. B) It rose by $400. C) It rose by $600. D) It rose by $2,000.
28. If a person's nominal income increases by 2% while the price level increases by 6%, the person's real income:
A)
increases by 2%. B) increases by 6%. C) decreases by 4%. D) decreases by 2%.