Question 1

According to Okun's Law, when the output gap is positive, cyclical unemployment:

Accepted Answer

A)   equals structural unemployment.
B)   equals frictional unemployment.
C)   equals zero.
D)   is negative.E) C) and D)
F) A) and B)

Question 2

The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap, measured in relation to potential output, is known as:

Accepted Answer

A)   the recessionary gap.
B)   the expansionary gap.
C)   the Fisher effect.
D)   Okun's law.E) A) and C)
F) C) and D)

Question 3

If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:

Accepted Answer

A)   -7 percent.
B)   9 percent.
C)   12.5 percent.
D)   7 percent.E) A) and B)
F) None of the above

Question 4

According to Okun's Law, each extra percentage point of ______ unemployment is associated with a ______ percentage point increase in the output gap.

Accepted Answer

A)   frictional; 2
B)   frictional; 4
C)   cyclical; 2
D)   cyclical; 4E) A) and C)
F) A) and B)

Question 5

The longest expansion of the United States economy since 1925 began in _____.

Accepted Answer

A)   1991
B)   1945
C)   1961
D)   1982E) A) and C)
F) None of the above

Question 6

The duration of a recession is from:

Accepted Answer

A)   peak to trough.
B)   trough to peak.
C)   peak to peak.
D)   trough to trough.E) A) and B)
F) None of the above

Question 7

Typically unemployment ______ during a recession and ______ during an expansion.

Accepted Answer

A)   rises; rises even more
B)   rises; falls
C)   rises; does not change
D)   falls; risesE) A) and C)
F) A) and B)

Question 8

In determining the beginning of recessions, the NBER Business Cycle Dating Committee looks for evidence of decline in:

Accepted Answer

A)   specific sectors of the economy.
B)   the rate of inflation.
C)   the entire economy.
D)   the stock market.E) B) and C)
F) C) and D)

Question 9

The economy of Alpha operates according to Okun's law. In Alpha, potential GDP equals $500 billion, actual GDP equals $520 billion, and the natural rate of unemployment is 5 percent. What is the actual rate of unemployment in Alpha?

Accepted Answer

A)   1 percent
B)   3 percent
C)   4 percent
D)   7 percentE) A) and C)
F) B) and C)

Question 10

Economic activity moves from a period of expansion to a ______ and then moves into a period of ______ until it reaches a _____.

Accepted Answer

A)   peak; expansion; trough
B)   peak, recession; trough
C)   trough; expansion; peak
D)   trough; recession; peakE) C) and D)
F) A) and B)

Question 11

In Macroland potential GDP equals $20 billion and real GDP equals $19.2 billion. Macroland has a(n)  ______ gap equal to ______ percent of potential GDP.

Accepted Answer

A)   expansionary; 8
B)   expansionary; 4
C)   recessionary; -8
D)   recessionary; -4E) B) and D)
F) C) and D)

Question 12

In the long-run total spending affects ______, and output is determined by _______.

Accepted Answer

A)   inputs and productivity; prices
B)   inputs and productivity; total spending
C)   prices; inputs and productivity
D)   prices; meeting demand at preset pricesE) A) and D)
F) All of the above

Question 13

Okun's law expresses the relationship between:

Accepted Answer

A)   unemployment and inflation.
B)   frictional unemployment and structural unemployment.
C)   money and velocity.
D)   cyclical unemployment and the output gap.E) A) and C)
F) A) and D)

Question 14

In Macroland, potential output equals $100 trillion and the natural rate of unemployment is 4 percent. If the actual unemployment rate is 5 percent, then real GDP must be:

Accepted Answer

A)   $98 trillion.
B)   $99 trillion.
C)   $101 trillion.
D)   $102 trillion.E) All of the above
F) C) and D)

Question 15

A recession occurs when either ______ or _______, or both.

Accepted Answer

A)   potential output grows slowly; actual output falls below potential output
B)   potential output grows slowly; actual output rises above potential output
C)   potential output grows rapidly; actual output equals potential output
D)   potential output grows rapidly; actual output falls below potential outputE) B) and C)
F) All of the above

Question 16

According to Okun's Law, when cyclical unemployment increases from 1 to 2 percent, the recessionary gap increases from ______ percent.

Accepted Answer

A)   -2 to -4
B)   -1 to -2
C)   2 to 4
D)   1 to 2E) All of the above
F) A) and B)

Question 17

Since 1925, the longest expansion in the United States lasted:

Accepted Answer

A)   10 years.
B)   24 months.
C)   43 months.
D)   5 years.E) B) and C)
F) A) and D)

Question 18

The economy of Omega operates according to Okun's law. In Omega, the actual and the natural rates of unemployment equal 5 percent, and potential GDP equals $10 trillion. What is real GDP in Omega?

Accepted Answer

A)   $9.0 trillion
B)   $9.5 trillion
C)   $10.0 trillion
D)   $10.5 trillionE) B) and C)
F) B) and D)

Exam 10: Money, Prices, and the Federal Reserve

Typically unemployment during a recession and during an expansion.

Correct Answer
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The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap, measured in relation to potential output, is known as:

Correct Answer
verified

The duration of a recession is from:

Correct Answer
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Okun's law expresses the relationship between:

Correct Answer
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Since 1925, the longest expansion in the United States lasted:

Correct Answer
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If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:

Correct Answer
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According to Okun's Law, when cyclical unemployment increases from 1 to 2 percent, the recessionary gap increases from ______ percent.

Correct Answer
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According to Okun's Law, when the output gap is positive, cyclical unemployment:

Correct Answer
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The economy of Omega operates according to Okun's law. In Omega, the actual and the natural rates of unemployment equal 5 percent, and potential GDP equals $10 trillion. What is real GDP in Omega?

Correct Answer
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The economy of Alpha operates according to Okun's law. In Alpha, potential GDP equals $500 billion, actual GDP equals $520 billion, and the natural rate of unemployment is 5 percent. What is the actual rate of unemployment in Alpha?

Correct Answer
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In Macroland potential GDP equals $20 billion and real GDP equals $19.2 billion. Macroland has a(n) gap equal to percent of potential GDP.

Correct Answer
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According to Okun's Law, each extra percentage point of unemployment is associated with a percentage point increase in the output gap.

Correct Answer
verified

Economic activity moves from a period of expansion to a and then moves into a period of until it reaches a _.

Correct Answer
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A recession occurs when either or _, or both.

Correct Answer
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In Macroland, potential output equals $100 trillion and the natural rate of unemployment is 4 percent. If the actual unemployment rate is 5 percent, then real GDP must be:

Correct Answer
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In determining the beginning of recessions, the NBER Business Cycle Dating Committee looks for evidence of decline in:

Correct Answer
verified

The longest expansion of the United States economy since 1925 began in _____.

Correct Answer
verified

In the long-run total spending affects , and output is determined by _.

Correct Answer
verified

Exam 10: Money, Prices, and the Federal Reserve

Typically unemployment ______ during a recession and ______ during an expansion.

Correct AnswerverifiedShow Answer

The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap, measured in relation to potential output, is known as:

Correct AnswerverifiedShow Answer

The duration of a recession is from:

Correct AnswerverifiedShow Answer

Okun's law expresses the relationship between:

Correct AnswerverifiedShow Answer

Since 1925, the longest expansion in the United States lasted:

Correct AnswerverifiedShow Answer

If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:

Correct AnswerverifiedShow Answer

According to Okun's Law, when cyclical unemployment increases from 1 to 2 percent, the recessionary gap increases from ______ percent.

Correct AnswerverifiedShow Answer

According to Okun's Law, when the output gap is positive, cyclical unemployment:

Correct AnswerverifiedShow Answer

The economy of Omega operates according to Okun's law. In Omega, the actual and the natural rates of unemployment equal 5 percent, and potential GDP equals $10 trillion. What is real GDP in Omega?

Correct AnswerverifiedShow Answer

The economy of Alpha operates according to Okun's law. In Alpha, potential GDP equals $500 billion, actual GDP equals $520 billion, and the natural rate of unemployment is 5 percent. What is the actual rate of unemployment in Alpha?

Correct AnswerverifiedShow Answer

In Macroland potential GDP equals $20 billion and real GDP equals $19.2 billion. Macroland has a(n) ______ gap equal to ______ percent of potential GDP.

Correct AnswerverifiedShow Answer

According to Okun's Law, each extra percentage point of ______ unemployment is associated with a ______ percentage point increase in the output gap.

Correct AnswerverifiedShow Answer

Economic activity moves from a period of expansion to a ______ and then moves into a period of ______ until it reaches a _____.

Correct AnswerverifiedShow Answer

A recession occurs when either ______ or _______, or both.

Correct AnswerverifiedShow Answer

In Macroland, potential output equals $100 trillion and the natural rate of unemployment is 4 percent. If the actual unemployment rate is 5 percent, then real GDP must be:

Correct AnswerverifiedShow Answer

In determining the beginning of recessions, the NBER Business Cycle Dating Committee looks for evidence of decline in:

Correct AnswerverifiedShow Answer

The longest expansion of the United States economy since 1925 began in _____.

Correct AnswerverifiedShow Answer

In the long-run total spending affects ______, and output is determined by _______.

Correct AnswerverifiedShow Answer

Typically unemployment during a recession and during an expansion.

Correct Answer
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In Macroland potential GDP equals $20 billion and real GDP equals $19.2 billion. Macroland has a(n) gap equal to percent of potential GDP.

Correct Answer
verified

According to Okun's Law, each extra percentage point of unemployment is associated with a percentage point increase in the output gap.

Correct Answer
verified

Economic activity moves from a period of expansion to a and then moves into a period of until it reaches a _.

Correct Answer
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A recession occurs when either or _, or both.

Correct Answer
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Correct Answer
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In the long-run total spending affects , and output is determined by _.

Correct Answer
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