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# Quiz 5: Business Cycles, Unemployment, and Inflation

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. 2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. 4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work. Refer to the above information.

1)Which individual(s) would be included in the calculation of the natural unemployment rate?

2. A person’s real income will increase by 3% if her nominal income:

3 A recession is a decline in:

4 The rate of unemployment when the economy is at its potential output is called the:

5 Over a ten-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately:

6 The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is:

7 The Consumer Price index was 170 in one year and 180 in the next year, then the rate of inflation is approximately:

8 If year 2 is the base year, the price index for year 3 is:

9 During the Great Depression of the 1930s, U.S. real GDP fell by about                      percent, in comparison to the                                                       percent decline during the Great Recession of 2007-09.

10 The Consumer Price index for a certain year is 120, this means that the average price of consumer items in that year was:

11 Okun’s law indicates that for:

12 For a person to keep his real income steady at a certain level from one year to the next, his nominal income must:

13 Which of the following is the correct way to calculate the unemployment rate?

14 Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

15 If the price index in year A is 130, this means that:

16 In Year 1, the price level was 120 and the average nominal income was \$30,000. In Year 2, the price level was 125 and the average nominal level of income was \$32,000. What happened to real income from Year 1 to Year 2?

17 A statement that is often used to describe demand-pull inflation is:

18 The unemployment rate is interpreted as the percentage of the:

19 The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

20 If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:

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