Macroeconomics Ch. 10 Flashcard Example #38423

“Smart” vending machines, which adjust prices automatically according to changes in demand factors (like time of day or outside temperature), are examples of:
meeting demand at preset prices.
skill-biased technological change.
flexible price setting.
capital equipment that is less expensive than standard equipment.
flexible price setting.
In the long run, total spending only influences:
actual output.
potential output.
productive capacity.
inflation.
inflation.
In the long run, output gaps are eliminated by:
reducing potential output.
increasing potential output.
price changes.
increased efficiency in labor markets.
price changes.
Contrary to the behavior that would be required to eliminate output gaps, many firms in the economy:
intentionally set prices below equilibrium prices in order to create shortages.
adjust their prices only periodically.
have fully-flexible prices that change constantly.
only change the amount of output they produce in the long run, not in the short run.
adjust their prices only periodically.
If all prices adjusted immediately to balance the quantities supplied and demanded for all goods and services:
output gaps would not exist.
output gaps would be positive more often than they would be negative.
cyclical unemployment would be positive.
potential GDP would rise much more quickly.
output gaps would not exist.
According to Okun’s Law, when the output gap is positive, cyclical unemployment:
equals structural unemployment.
equals frictional unemployment.
equals zero.
is negative.
is negative.
If real GDP is greater than potential GDP, then:
the actual unemployment rate is greater than the natural unemployment rate.
the actual unemployment rate equals zero.
the output gap is negative.
the actual unemployment rate is lower than the natural unemployment rate.
the actual unemployment rate is lower than the natural unemployment rate.
If actual GDP equals potential GDP, then:
the actual unemployment rate is greater than the natural rate of unemployment.
the actual unemployment rate equals the natural rate of unemployment.
the actual unemployment rate is less than the natural rate of unemployment.
there is a recessionary gap.
the actual unemployment rate equals the natural rate of unemployment.
If the natural rate of unemployment is 4 percent, what is the actual rate of unemployment if output is 2 percent below potential?
3 percent
5 percent
6 percent
8 percent
5%
According to Okun’s Law, when cyclical unemployment increases from 1 to 2 percent, the recessionary gap increases from ______ percent.
-2 to -4
-1 to -2
2 to 4
1 to 2
-2 to -4
According to Okun’s Law, each extra percentage point of ______ unemployment is associated with a ______ percentage point increase in the output gap.
frictional; 2
frictional; 4
cyclical; 2
cyclical; 4
cyclical; 2
Okun’s law expresses the relationship between:
unemployment and inflation.
frictional unemployment and structural unemployment.
money and velocity.
cyclical unemployment and the output gap.
cyclical unemployment and the output gap.
Compared to older workers, younger workers change jobs more frequently, so they are more prone to ______ unemployment and have fewer skills, so they are more prone to ______ unemployment.
cyclical; frictional
frictional; structural
structural; frictional
frictional; cyclical
frictional; structural
Two possible explanations for the decline in the natural rate of unemployment in the United States over the past twenty years are:
the changing age structure of the population and more efficient labor markets.
advances in computer technology and globalization.
increasing wage inequality and skill-biased technological change.
greater quantities of human capital and increased average labor productivity.
the changing age structure of the population and more efficient labor markets.
According to the Congressional Budget Office, over the past twenty years, the natural rate of unemployment in the United States has:
increased.
remained constant.
fallen.
fallen to zero, and is now becoming negative.
fallen.
If the frictional rate of unemployment equals 2 percent, the structural rate of unemployment equals 3 percent, and the cyclical rate of unemployment equals 1 percent, then the natural rate of unemployment equals:
6%.
1%.
3%.
5%.
5%
The cyclical unemployment rate is zero when:
there is not a recessionary gap.
there is not an expansionary gap.
actual GDP and potential GDP are equal.
frictional unemployment equals structural unemployment.
actual GDP and potential GDP are equal.
In an expansion, the cyclical rate of unemployment is most often:
positive.
zero.
negative.
equal to the natural rate of unemployment.
negative.
If the natural rate of unemployment equals 5 percent and the actual rate of unemployment equals 6 percent, then cyclical unemployment equals:
11 percent
3 percent
1 percent
0.3 percent
1%
The natural rate of unemployment is the unemployment rate when there is only:
structural unemployment.
frictional unemployment.
cyclical unemployment.
structural and frictional unemployment.
structural and frictional unemployment.
If potential output equals $8 billion and actual output equals $9 billion, then this economy has a(n):
budget deficit.
trade deficit.
expansionary gap.
recessionary gap.
expansionary gap.
When actual output is less than potential output there is a(n):
budget deficit.
budget surplus.
trade deficit.
recessionary gap.
recessionary gap.
The difference between the economy’s potential output and its actual output relative to its potential output at a point in time is called the:
budget deficit.
trade deficit.
output gap.
full-employment rate.
output gap.
Recessionary gaps are:
efficient.
inefficient.
periods when actual output exceeds potential output.
the result a decrease in the growth rate of potential output.
inefficient.
Changes in the growth rate of potential output and deviations of actual output from potential output are two logical explanations for:
the decline in the natural rate of unemployment.
short-term economic fluctuations.
increasing wage inequality.
skill-biased technological change.
short-term economic fluctuations.
If actual output equals potential output, but potential is growing unusually slowly, then an economy:
is in a recession.
is in an expansion.
has an output gap.
has a recessionary gap.
is in a recession.
A country’s actual output ______ potential output.
can never exceed
can never be below
can temporarily exceed
will always be approximately equal to
can temporarily exceed.
Potential output is:
the same as actual output.
the same as the output gap.
the same as the natural rate of unemployment.
the maximum sustainable amount of output.
the maximum sustainable amount of output.
Workers in durable-goods industries are ______ workers in service industries to lose their jobs during a recession.
much less likely than
more likely than
less likely than
equally likely as
more likely than.
Which of the following workers is most likely to lose his/her job during a recession?
construction worker
baker
farmer
barber
construction worker
The increase in unemployment during a recession is associated with which type of unemployment?
Frictional unemployment
Cyclical unemployment
Structural unemployment
Nominal unemployment
cyclical unemployment
Typically unemployment ______ during a recession and ______ during an expansion.
rises; rises even more
rises; falls
rises; does not change
falls; rises
rises; falls
The dates of the “official” peaks and troughs of business cycles in the United States are determined by the:
Federal Reserve.
Congressional Budget Office.
National Bureau of Economic Research.
Council of Economic Advisers.
National Bureau of Economic Research.
The longest expansion of the United States economy since 1925 began in _____.
1991
1945
1961
1982
1991
A period in which the economy is growing at a rate significantly above normal is called a(n):
depression.
expansion.
peak.
recession.
expansion
The duration of a recession is from:
peak to trough.
trough to peak.
peak to peak.
trough to trough.
peak to trough
In reference to short-term economic fluctuations, the “peak” refers to:
a period in which the economy is growing at a rate significantly above normal.
the high point of economic activity prior to a downturn.
the low point of economic activity prior to a recovery.
a particularly strong and protracted expansion.
the high point of economic activity prior to a downturn.
A depression is:
a particularly severe and protracted recession.
the high point of economic activity prior to a downturn.
the low point of economic activity prior to a recovery.
a particularly strong and protracted expansion.
a particularly severe and protracted recession.
During recessions, the change in real GDP is:
always positive.
always negative.
usually positive, but can be negative.
usually negative, but can be positive.
usually negative, but can be positive.
An informal definition of a recession is at least ______ consecutive quarters of declining real GDP.
2
4
6
8
2
A period in which the economy is growing at a rate significantly below normal is called a(n):
expansion.
boom.
peak.
recession.
recession.

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