ECON 2020 SARA SEALS NEWEST
EXAM WITH DETAILED QUESTIONS
AND CORRECT SOLUTIONS
Question-Some economists prefer to use the term business fluctuations rather than business
cycles to describe the historical growth record in the United States because: - Answer-Cycles
imply regularity while fluctuations do not
Question-In which industry or sector of the economy is output least likely to be affected by the
business cycle? - Answer-Agricultural Commodities
Question-The phases of a business cycle from points A to D are, respectively: - Answer-Peak,
recession, trough, expansion
Question-Which statement is correct? - Answer-The production of nondurable consumer goods
is more stable than the production of durable consumer goods over the business cycle
Question-A nation has a population of 260 million people. Of these, 60 million are retired, in the
military, in institutions, or under 16 years old. There are 188 million who are employed and 12
million who are unemployed. What is the unemployment rate? - Answer-6 percent
Question-The total adult population of an economy is 175 million, the number of employed is
122 million, and the number of unemployed is 17 million. The percent of adults who are not in
the labor force is: - Answer-20.6 percent
,Question-A worker who loses a job at a call center because business firms switch the call center
to another country is an example of: - Answer-Structural Unemployment
Question-Kevin has lost his job in an automobile plant because of the use of robots for welding
on the assembly line. Kevin plans to go to technical school to learn how to repair
microcomputers. The type of unemployment Kevin is face with is: - Answer-Structural
Question-If the unemployment rate for the United States economy rises from 7 to 11 percent
during a year, we can conclude that: - Answer-Actual GDP is less than potential GDP
Question-If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests
that the actual unemployment rate would exceed the natural rate of unemployment by: - Answer-
Two percentage points
Question-If the natural rate of unemployment is 4.5 percent and the actual rate is 6.5 percent,
then Okun's law indicates that the GDP gap is: - Answer-4 percent
Question-If the Consumer Price Index was 125 in one year and 120 in the following year, then
the rate of inflation is approximately: - Answer--4.0 percent
Question-The economy has an annual inflation rate of 3.5%. It will take approximately how
many years for the price level to double? - Answer-20 years
Question-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? - Answer-It rose by $600
, Question-A person's real income will increase by 3% if her nominal income: - Answer-Increases
by 5% while the price index rise by 2%
Question-If the price level increase by 15 percent while nominal income increases by 8 percent,
then in percentage terms real income would: - Answer-Fall by about 7 percent
Question-A worker would be hurt least by inflation when the: - Answer-Worker is protected by a
cost-of-living adjustment clause in an employment contract
Question-With no inflation, a bank would be willing to lend a business firm $5 million at an
annual interest rate of 6%. But, if the rate of inflation was anticipated to be 4%, the bank would
most likely charge the firm an annual interest rate of: - Answer-10 percent
Question-If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal
interest rate is: - Answer-7%
Question-Which of the following statements is correct? - Answer-For a given real interest rate,
the nominal interest must increase if expected inflation increases
Question-At income level 3, the amount of consumption is represent by the line segment: -
Answer-GH
Question-If the slope of a linear consumption schedule increases in a private, closed economy,
then it can be concluded that the: - Answer-MPC has increased
EXAM WITH DETAILED QUESTIONS
AND CORRECT SOLUTIONS
Question-Some economists prefer to use the term business fluctuations rather than business
cycles to describe the historical growth record in the United States because: - Answer-Cycles
imply regularity while fluctuations do not
Question-In which industry or sector of the economy is output least likely to be affected by the
business cycle? - Answer-Agricultural Commodities
Question-The phases of a business cycle from points A to D are, respectively: - Answer-Peak,
recession, trough, expansion
Question-Which statement is correct? - Answer-The production of nondurable consumer goods
is more stable than the production of durable consumer goods over the business cycle
Question-A nation has a population of 260 million people. Of these, 60 million are retired, in the
military, in institutions, or under 16 years old. There are 188 million who are employed and 12
million who are unemployed. What is the unemployment rate? - Answer-6 percent
Question-The total adult population of an economy is 175 million, the number of employed is
122 million, and the number of unemployed is 17 million. The percent of adults who are not in
the labor force is: - Answer-20.6 percent
,Question-A worker who loses a job at a call center because business firms switch the call center
to another country is an example of: - Answer-Structural Unemployment
Question-Kevin has lost his job in an automobile plant because of the use of robots for welding
on the assembly line. Kevin plans to go to technical school to learn how to repair
microcomputers. The type of unemployment Kevin is face with is: - Answer-Structural
Question-If the unemployment rate for the United States economy rises from 7 to 11 percent
during a year, we can conclude that: - Answer-Actual GDP is less than potential GDP
Question-If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests
that the actual unemployment rate would exceed the natural rate of unemployment by: - Answer-
Two percentage points
Question-If the natural rate of unemployment is 4.5 percent and the actual rate is 6.5 percent,
then Okun's law indicates that the GDP gap is: - Answer-4 percent
Question-If the Consumer Price Index was 125 in one year and 120 in the following year, then
the rate of inflation is approximately: - Answer--4.0 percent
Question-The economy has an annual inflation rate of 3.5%. It will take approximately how
many years for the price level to double? - Answer-20 years
Question-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? - Answer-It rose by $600
, Question-A person's real income will increase by 3% if her nominal income: - Answer-Increases
by 5% while the price index rise by 2%
Question-If the price level increase by 15 percent while nominal income increases by 8 percent,
then in percentage terms real income would: - Answer-Fall by about 7 percent
Question-A worker would be hurt least by inflation when the: - Answer-Worker is protected by a
cost-of-living adjustment clause in an employment contract
Question-With no inflation, a bank would be willing to lend a business firm $5 million at an
annual interest rate of 6%. But, if the rate of inflation was anticipated to be 4%, the bank would
most likely charge the firm an annual interest rate of: - Answer-10 percent
Question-If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal
interest rate is: - Answer-7%
Question-Which of the following statements is correct? - Answer-For a given real interest rate,
the nominal interest must increase if expected inflation increases
Question-At income level 3, the amount of consumption is represent by the line segment: -
Answer-GH
Question-If the slope of a linear consumption schedule increases in a private, closed economy,
then it can be concluded that the: - Answer-MPC has increased
