1. In a business cycle, a period in which the level of economic activity declines is known as:

A) trough.

B)peak.

C) expansion.

D)recession.

E)none of the above.

2. Bombolinia has working-age population of 200 million.Out of these people, 140 million are working, 10 million are currently not working but are actively looking for jobs and are available to take a job if one is offered.There are also 5 million individuals who are not working but have given up and are no longer actively seek employment.The participation rate in Bombolinia is:

A)50%

B)100%

C) 75%

D) 25%

E)none of the above.

3. Bombolinia has working-age population of 200 million.Out of these people, 140 million are working, 10 million are currently not working but are actively looking for jobs and are available to take a job if one is offered.There are also 5 million individuals who are not working but have given up and are no longer actively seek employment.The approximate rate of unemployment in Bombolinia is:

A)6.67%

B)7.14%

C) 5%

D) 10%

E)none of the above.

4.The short run ups and downs in the level of economic activities is referred to as:

A)Phillips curve.

B)peak and trough.

C) business trend.

D)business cycle.

E)political cycle.

5. A floating exchange rate is:

A) determined by the market.

B) set by government.

C) set by the International Monetary fund.

D) determined by the UN.

E)all of the above.

6.The official unemployment rate reported by the government tends to understate the amount of unemployment by:

A) including discouraged workers in the calculations.

B)excluding discouraged workers from the labor force.

C)including part-time workers in the calculations.

D)excluding part-time workers in the calculations.

E)none of the above.

7. A county's trade balance is:

A)international movements of financial assets.

B) the value of goods and services it sells to other countries less the value of goods and services it buys from other countries.

C) the relative value of the currency of one country to the currency of another country.

D)the balance of consumption and investment in the composition of GDP.

E)(A) and (B) above.

8. In the country of Sildavia, a market basket of goods and services cost $130 in 2005, and $160 in 2006. Based on this information and taking 2005 as the base year, the price index in 2006 was:

A) 100.

B) 130

C) 81.25

D)123.07

E)none of the above.

9. Anna recently moved to Boston in order for her husband, Jack, to begin a new job as an economics professor. Anna is an experienced dermatologist who will certainly find a job very soon.She is currently interviewing with several hospitals.Anna is currently:

A) cyclically unemployed.

B) structurally unemployed.

C) seasonally unemployed.

D) frictionally unemployed.

E)She is not counted as unemployed.

10. Sam, who is 55 years old and has been a steel worker for 30 years.Last year he was laid off because his works is now performed by robots and his skills are no longer needed by steel mills.Sam is classified as:

A) cyclically unemployed.

B) permanently unemployed.

C) frictionally unemployed.

D) structurally unemployed.

E)no longer in the labor force.

11. The natural rate of unemployment refers to:

A) the unemployment of natural resources.

B) summation of frictional and structural unemployment.

C) summation of cyclical and structural unemployment.

D) the unemployment of resources.

E)none of the above.

12. The Phillips curve shows:

A) a direct relationship between the rate of unemployment and the rate of inflation.

B) an inverse relationship between the rate of unemployment and the rate of inflation.

C) the consequences of fiscal policy.

D) the optimum level of employment.

E)none of the above.

13. According to the Classical economists, the aggregate supply curve is:

A)horizontal.

B) vertical.

C) upwardly sloped.

D) downwardly sloped.

E)any of the above is possible.

14. An increase in aggregate demand in the long run can lead to:

A) cost push inflation.

B) structural inflation.

C) expectational inflation.

D) demand pul inflation.

E)none of the above.

15. The short-run aggregate supply curve in the Keynesian range is:

A) vertical.

B) horizontal.

C) upward sloping.

D) downward sloping.

E)none of the above.

16. Unexpected inflation:

A) Adversely affects the creditors.

B) Adversely affects the debtors.

C) Positively affects the creditors.

D) (B) and (C) above.

E)none of the above.

17. Because classical economists stressed mostly the long run, they believe that:

A) the economy will be self-correcting.

B) fiscal policy is better than monetary policy.

C) the government should fix the system.

D) monetary policy is not useful.

E)all of the above.

18. The main consequence of Keynesian economics is that:

A) economic activism should not be employed.

B) economic activism should be employed.

C) fiscal policy is ineffective.

D) monetary policy is ineffective.

E)(A) and (C) above.

19. Rational expectations theory suggests people and firms:

A) form their expectations by correcting their past mistakes.

B) form their expectations by taking chances.

C) form their expectations by ignoring the past.

D) form their expectations by taking all available information into account.

E)all of the above.

20. Using government spending and tax cuts to fight a recession is a policy set favored by which of the following schools of thought?

A) Classical

B) Activists.

C) Keynesians.

D) (A) and (B) above.

E)(B) and (C) above.

21. The belief that neither monetary nor fiscal policy can reduce unemployment and therefore should not be used is consistent with which of the following schools of thought?

A) Keynesian.

B) Classical.

C) Adaptive expectations.

D) modern economists.

E)all of the above.

22. Japan's comparative advantage in automobiles can be attributed to:

A) climate.

B)factor endowments.

C)technology.

D)all of the above.

E)none of the above.

23. An example of a import quota is a:

A)limit on the total number of Honda automobiles imported from Japan.

B)regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines.

C) tax of $500 on each Honda automobile produced in the United States.

D) tax of 10 percent of the value of each Honda automobile imported from Japan.

E)all of the above.

24. If the European Euro appreciates against the US dollar this will make:

A) American imports from Europe and American exports to Europe more expensive.

B) American exports to Europe and American Imports from Europe less expensive.

C) American exports to Europe more expensive and American Imports from Europe less expensive.

D) American imports from Europe more expensive and American export to Europe less expensive.

E)none of the above.

25. The length of a business cycle may be measured from:

A) peak to trough.

B) peak to peak.

C) trough to peak.

D) trough to trend line.

E) peak to trend line