Cycles of Economic Activity.
Unemployment

REVIEW QUESTIONS

1. Which of the following is correct?
a) Short run fluctuations in economic activity happen only in developing countries.
b) During economic contractions most firms experience rising sales.
c) Recessions come at regular intervals and are easy to predict.
d) When real GDP falls, the rate of unemployment rises.

2. During a recession the economy experiences
a) rising employment and income.
b) rising employment and falling income.
c) rising income and falling employment.
d) falling employment and income.

3. Which of the following is correct?
a) Over the business cycle consumption fluctuates more than investment.
b) Economic fluctuations are easy to predict.
c) During recessions sales and profits tend to fall.
d) Because of government policy the U.S. has suffered no recessions in the last 25 years.

4. Investment is a
a) small part of real GDP, so it accounts for a small share of the fluctuation in real GDP.
b) small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
c) large part of real GDP, so it accounts for a large share of the fluctuation in real GDP.
d) large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

5. When a country is in a recession, which of the following things would you expect not to happen?
a) increased layoffs and firings
b) a higher rate of bankruptcy
c) increased claims for unemployment insurance
d) increased investment spending

6. Which of the following are considered employed by the Bureau of Labor Statistics ?
a) People who are without a job, but are available for work and have tried to find a job during the previous 4 weeks.
b) People who work without pay in a family member's business.
c) People who are waiting to be recalled to a job from which they had been laid off.
d) All of the above are correct.

7. Who is included in the labor force by the Bureau of Labor Statistics?
a) Aibne, who works most of the week in a steel factory
b) Modlen, who is waiting for her new job at the bank to start
c) Wyclef, who does not have a job, but is looking for work
d) All of the above are included in the labor force.

8. The deviation of unemployment from its natural rate is called
a) the unnatural rate of unemployment.
b) structural unemployment.
c) frictional unemployment.
d) cyclical unemployment.

9. The unemployment rate measures
a) the percentage of the labor force that can be laid off.
b) the percentage of the labor force that is not employed.
c) the percentage of the total population that is employed.
d) the total number of people looking for jobs.

10. The labor-force participation rate measures the percentage of the
a) total adult population that is in the labor force.
b) total adult population that is employed.
c) labor force that is employed.
d) labor force that is either employed or unemployed.

11. If the labor force consists of 1 million people, and employment is 900,000, what is the unemployment rate?
a) 1 million
b) 100,000
c) 90 percent
d) 10 percent

12. An automobile worker is laid off and remains unemployed because his skills do not qualify him for all the new job openings in the computer industry. What type of unemployment is this worker suffering from?
a) Cyclical
b) Structural
c) Frictional
d) Natural


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