ECON Test 4

The total labor force includes all persons in the noninstitutional population who are either working or seeking work.

True

False

Question 21
2 points
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The amount of unemployment that arises because workers are temporarily between jobs or new entrants to the labor force is known as

structural unemployment

cyclical unemployment

frictional unemployment

induced unemployment

Question 22
2 points
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Today, the U.S. unemployment rate among black teenagers is

lower than the rate for all teenagers

lower than the rate of black adults

the highest rate among all U.S. workers

the middle rate among all U.S. workers

Question 23
2 points
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The increase in U.S. population during the past few years has required an increase in the number of agriculture workers to meet food requirements.

True

False

Question 24
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The highest unemployment rate in the United States in recent years has been among adult females.

True

False

Question 25
2 points
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Inventory depletion can lead to increased production.

True

False

Question 26
2 points
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The underinvestment theory is classified as a monetary cause of the business cycle.

True

False

Question 27
2 points
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A recession occurs whenever there’s a decline in real GDP for two or more successive quarters.

True

False

Question 28
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The roughly coincident indicators have their upward and downward turning points prior to the upward and downward turning points of real GDP.

True

False

Question 29
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The innovation theory is classified among the real or physical causes of the business cycle.

True

False

Question 30
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A recession is defined as a period in which real GDP is negative for two consecutive quarters.

True

False

Question 31
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Through 2005, the most serious U.S. trough since the Great Depression was the one that occurred in

1991

2001

1974–1975

1982

Question 32
2 points
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Which of the following is the most valid expression of a theory of underconsumption as a cause of business cycles?

capital goods production encroaches on consumer goods production

income equals production, but not all income is used for current purchasing power

people want more goods than the economy is capable of producing; therefore, they must cut their consumption expectations

the economy provides insufficient purchasing power to buy back the goods it produces

Question 33
2 points
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A noticeable drop in the level of business activity is known as a

recession

collapse

lagging indicator

contraction

Question 34
2 points
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According to monetary theories of the business cycle, fluctuations are

independent of the banking system

more prevalent in countries with modern banking systems

more prevalent in agricultural countries

less prevalent in those countries with modern banking systems

c 13) Monetary theorists maintain that to eliminate the business cycle, it is necessary to eliminate

a. money

b. currency

*c. bank creation of checkable deposits

d. bank reserves

Question 35
2 points
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Changes in the level of inventories are an internal force in the economy’s cyclical movements.

True

False

Question 36
2 points
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During the trough of the business cycle,

employment and income are at a low ebb

little investment in plant and equipment occurs

consumers postpone purchases of durable goods

all of the above

Question 37
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In using the GDP as a measure of business cycles, it is best to use real GDP.

True

False

Question 38
2 points
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A drop in the rate of inflation is known as

disinflation

stagflation

deflation

contractionary inflation

Question 39
2 points
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To most effectively combat inflation by raising taxes, the government should

target funds that would otherwise be held idle

also increase government spending

target households with low marginal propensities to consume

target funds that would otherwise be spent on consumption or investment

Question 40
2 points
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Government demand-management policies included

monetary policies only

fiscal policies only

both monetary and fiscal policies

neither monetary nor fiscal policies

Question 41
2 points
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During an inflationary period with full employment or near-full employment,

a progressive income tax structure will worsen inflation

unemployment taxes paid by workers will be low

total unemployment benefits will be maximized

lower disbursements for unemployment compensation will moderate inflation

Question 42
2 points
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In the 1970s, the war in Vietnam caused a fiscal drag on the economy.

True

False

Question 43
2 points
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During the 1990–1991 recession, the U.S. government’s large budget deficits and budget reduction commitments limited its ability to use fiscal policy to stimulate the economy.

True

False

Question 44
2 points
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Fiscal drag refers to the

slowing effect on the economy that results from a government budget deficit

stimulating effect on the economy that results from a government budget deficit

stimulating effect on the economy that results from a government budget surplus

slowing effect on the economy that results from a government budget surplus

c unemployment,

a. monetary and fiscal policies are likely to be equally effective

b. monetary policy is likely to be more effective than fiscal policy

*c. fiscal policy is likely to be more effective than monetary policy

d. laissez-faire policy is likely to be most effective

Question 45
2 points
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The U.S. experience with expansionary measures from 1930 to 1945

repudiated the pump-priming theory

verified the pump-priming theory

repudiated the multiplier theory

repudiated the deficit-spending theory

Question 46
2 points
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The expansionary effect on the economy that results from a government budget deficit is known as a fiscal stimulus.

True

False

Question 47
2 points
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The Phillips curve shows the trade-off between

unemployment and inflation

unemployment and interest rates

inflation and interest rates

interest rates and the government budget

Question 48
2 points
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The higher the economy’s level of capacity utilization, the lower will be the rate of unemployment.

True

False

Question 49
2 points
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The major economic problem faced by President Ford’s administration was stagflation.

True

False

Question 50
2 points
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The Reagan administration’s Economic Recovery Tax Act of 1981

introduced the concept of itemized deductions

reduced the top marginal income tax rate

eliminated tax credits on new investment

raised corporate tax rates by 25 percent over a three-year period