Final Chapter 12

Term
1 / 19
Contrary to behavior that would be required to eliminate output gaps, many firms in the economy:

A) have fully-flexible prices that change constantly.
B) intentionally set prices below equilibrium prices in order to create shortages.
C) adjust their prices only periodically.
D) only change the amount of output they produce in the long run, not in the short run.
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Terms in this set (19)
Contrary to behavior that would be required to eliminate output gaps, many firms in the economy:

A) have fully-flexible prices that change constantly.
B) intentionally set prices below equilibrium prices in order to create shortages.
C) adjust their prices only periodically.
D) only change the amount of output they produce in the long run, not in the short run.
C) adjust their prices only periodically.
Indicators of economic activity that move at the same time as the overall economy are called ______ indicators.

A) coincident
B) long-term
C) real
D) short-term
A) coincident
Which of the following workers is least likely to lose his/her job during a recession?

A) An automobile assembly worker
B) A police officer
C) A roofer
D) A carpenter
B) A police officer
A recession occurs when ______, when _______, or when both of these occur.

A) potential output grows rapidly; actual output falls below potential output
B) potential output grows rapidly; actual output equals potential output
C) potential output grows slowly; actual output falls below potential output
D) potential output grows slowly; actual output rises above potential output
C) potential output grows slowly; actual output falls below potential output
A boom is:

A) a particularly strong and protracted expansion.
B) the high point of economic activity prior to a downturn.
C) a particularly severe and protracted recession.
D) a period in which the economy is growing at a rate significantly below normal.
A) a particularly strong and protracted expansion.
In reference to short-term economic fluctuations, the "peak" refers to:

A) the high point of economic activity prior to a recovery.
B) a period in which the economy is growing at a rate significantly above normal.
C) the high point of economic activity prior to a downturn.
D) a particularly strong and protracted expansion.
C) the high point of economic activity prior to a downturn.
Recessions tend to be ______ by ______ the rate of inflation.

A) neither preceded nor followed; any change in
B) followed; a decrease in
C) followed; an increase in
D) preceded; a decrease in the stability of
B) followed; a decrease in
The natural rate of unemployment is equal to the unemployment rate when there is only:

A) structural and cyclical unemployment.
B) frictional unemployment.
C) structural and frictional unemployment.
D) cyclical unemployment.
C) structural and frictional unemployment.
Compared to older workers, younger workers change jobs more frequently, so they are more prone to ________ unemployment; also, younger workers have fewer skills, so they are more prone to ________ unemployment.

A) frictional; structural
B) structural; frictional
C) frictional; cyclical
D) cyclical; frictional
A) frictional; structural
For policymakers, the problem with a recessionary gap is ________ and the problem with an expansionary gap is ________.

A) an increase in structural unemployment; an increase in cyclical unemployment
B) wasted resources; a tendency for inflation to increase
C) an increase in cyclical unemployment; an increase in structural unemployment
D) a tendency for inflation to increase; wasted resources
B) wasted resources; a tendency for inflation to increase
If real GDP is greater than potential GDP, then: A) the actual unemployment rate is greater than the natural rate of unemployment. B) the actual unemployment rate equals zero. C) The actual unemployment rate is lower than the natural rate of unemployment. D) The output gap is negative.C) the actual unemployment rate is lower than the natural rate of unemployment.Which of the following does not describe a characteristic of short-term economic fluctuations? A) Expansions and recessions are felt in only a few sectors of the economy. B) The unemployment rate rises during recessions. C) Durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries. D) Expansions and recessions are irregular in length and severity.C) Durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries.In the long run, output gaps are eliminated by: A) increased efficiency in labor markets. B) price changes. C) educing potential output. D) increasing potential output.B) price changes.Economic activity moves from a period of expansion to a ______ and then moves into a period of ______ until it reaches a _____. A) peak; expansion; trough B) trough; expansion; peak C) trough; recession; peak D) peak, recession; troughD) peak, recession; troughThe decline in the natural rate of unemployment between the 1979 and the 2000s might be the result of: A) increasing wage inequality and skill-biased technological change. B) advances in computer technology and globalization. C) greater quantities of human capital and increased average labor productivity. D) the changing age structure of the population and more efficient labor markets.D) the changing age structure of the population and more efficient labor markets.If there is 2 percent frictional unemployment, 3 percent structural unemployment, and 1 percent cyclical unemployment, then the natural rate of unemployment equals: A) 4 percent. B) 6 percent. C) 3 percent. D) 5 percent.D) 5 percent.In the long run, total spending affects ______, and output is determined by _______. A) prices; meeting demand at preset prices B) inputs and productivity; total spending C) prices; inputs and productivity D) inputs and productivity; pricesC) prices; inputs and productivityAn informal definition of a recession is at least ______ consecutive quarters of declining real GDP. A) six B) two C) four D) eightB) twoPotential output is: A) the maximum sustainable amount of output. B) also known as the output gap. C) equal to actual output. D) the same as the natural rate of unemployment.A) the maximum sustainable amount of output.