QUESTION 1

According to the U.S. Bureau of Labor Statistics, the term "employed" includes all full time workers and part-time workers.

True

False

QUESTION 2

An economy could produce above its potential GDP for a short period of time by

	a.	reducing the size of the labor force.
	b.	increasing the money supply.
	c.	adding extra shifts of work, such as overtime or night shifts.
	d.	increasing the price of final goods and services.

QUESTION 3

As capital goods depreciate, potential output falls.

True

False

QUESTION 4

As the unemployment rate rises,

	a.	the employment rate rises.
	b.	lost national output rises.
	c.	real GDP also rises.
	d.	nominal GDP rises.

QUESTION 5

Compared to the unemployed during the Great Depression, persons unemployed in today's economy are

	a.	better off due to unemployment insurance.
	b.	better off due to lower price levels.
	c.	worse off due to higher price levels.
	d.	worse off due to higher rates of unemployment in the 1990s.

QUESTION 6

Cyclical unemployment occurs when real GDP falls below potential GDP.

True

False

QUESTION 7

Discouraged workers are included in the

	a.	unemployed category.
	b.	not in the labor force category.
	c.	employed category.
	d.	labor force category.

QUESTION 8

Economists feel that taxing nominal capital gains imposes costs on the economy due to

	a.	reduced consumption.
	b.	increased investment.
	c.	increased consumption.
	d.	reduced investment.

QUESTION 9

Faster economic growth imposes an opportunity cost in the form of

	a.	increased investment.
	b.	increased future income.
	c.	reduced current consumption.
	d.	a larger capital stock.

QUESTION 10

Full employment is defined by most economists as the minimization of

	a.	frictional unemployment.
	b.	cyclical unemployment.
	c.	structural unemployment.
	d.	seasonal unemployment.

QUESTION 11

If borrowers and lenders expect a higher rate of inflation,

	a.	nominal interest rates should remain constant.
	b.	nominal interest rates should decrease.
	c.	nominal interest rates should increase.
	d.	real interest rates should increase.

QUESTION 12

If prices rise, then persons living on fixed incomes will

	a.	see the value of their savings accounts increase.
	b.	see the purchasing power of their dollars go further.
	c.	see their real incomes rising.
	d.	need to spend more to maintain their standard of living.

QUESTION 13

If the rate of technical progress decreases, then the growth

	a.	of the capital stock will decrease.
	b.	rate of unemployment will decrease.
	c.	of the labor force will decrease.
	d.	rate of potential GDP will decrease.

QUESTION 14

Negative inflation rates benefit lenders because

	a.	the real interest rate is negative.
	b.	the real interest rate is positive.
	c.	the nominal interest rate is negative.
	d.	the nominal interest rate is positive.

QUESTION 15

Potential GDP is an estimate of the economy's ability to produce goods and services if the

	a.	federal budget is balanced.
	b.	price level is stable.
	c.	labor force is fully employed.
	d.	trade balance is zero.

QUESTION 16

Someone unemployed for a long period of time due to technological change would be described as structurally unemployed.

True

False

QUESTION 17

The United States has never suffered through periods of hyperinflation in its history.

True

False

QUESTION 18

The growth rates of actual and potential GDP

	a.	are similar in the long run but not the short run.
	b.	are similar in the short run but not the long run.
	c.	are different in both the short and long run.
	d.	are similar in both the short and long run.

QUESTION 19

The incentive to lend increases as the real rate of interest decreases.

True

False

QUESTION 20

The most likely group of the following that would be eligible for unemployment insurance benefits is

	a.	workers who quit their jobs.
	b.	mothers returning to the labor force after caring for young children.
	c.	experienced workers recently laid off.
	d.	new college graduates looking for their first job.