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Business cycle theories

Question 1

The labor force consists of
Answer those employed plus those on temporary layoff.
Those employed plus those unemployed.
The working-age population minus those who are in the military or institutionalized.
The working-age population plus those who are in the military or institutionalized.

Question 2

Suppose a country has a population of 61 million, of which 37 million are in the working-age population. Of those, 11 million are not in the labor force and 23 million are employed. The labor-force participation rate is
Answer 42.6 percent.
60.7 percent.
70.3 percent.
88.5 percent.

Question 3

If the population is 320 million, the working-age population is 215 million, the labor force is 145 million, and the number employed is 137 million, then the unemployment rate is
Answer 3.7 percent.
5.5 percent.
63.7 percent.
94.5 percent.

Question 4

In 2001, the number of unemployed people increased from 5.7 million to 8.3 million, while the labor force increased from 141.5 million to 142.3 million. By how much did the unemployment rate increase?
Answer 1.8 percentage points
2.6 percentage points
3.25 percentage points
5.8 percentage points

Question 5

In 2004, the number of people in the working-age population increased from 221.2 million to 223.4 million, while the labor force increased from 146.5 million to 147.4 million. By how much did the labor-force participation rate change?
Answer -0.2 percentage point
0.0 percentage point
0.2 percentage point
0.4 percentage point

Question 6

Labor productivity is calculated as
Answer output minus net exports.
The average product of labor minus the marginal product of labor.
Total factor productivity divided by the amount of capital.
Output divided by hours worked.

Question 7

If output grew 3.9 percent last year and hours worked grew 1.3 percent, how much did labor productivity grow?
Answer 0.3 percent
2.6 percent
3.0 percent
5.2 percent

Question 8

The production function is

Y = A ´ Ka ´ L1- a.

If a = 0.3, and over the past year output grew 5 percent, capital grew 2 percent, and labor grew 3 percent, what was the growth rate of total factor productivity (TFP)?
Answer 0 percent
2.3 percent
2.5 percent
2.7 percent

Question 9

The production function is

Y = A ´ Ka ´ L1-a.

If a = 0.4, and over the past year output grew 4 percent, total factor productivity (TFP) grew 2.6 percent, and labor grew 1 percent, what was the growth rate of capital?
Answer 4 percent
3 percent
2 percent
1 percent

Question 10

In which period was total factor productivity growth the slowest?
Answer Long boom
Economic liftoff period
1995-2005
Reorganization period

Question 11

A period when output, income, and employment are rising is
Answer a recession.
An expansion.
A peak.
A trough.

Question 12

A period when an expansion ends and a recession begins is
Answer a recession.
an expansion.
a peak.
a trough.

Question 13

In the long boom up to 2007, there have been ____ recessions.
Answer 0
2
4
6
4 points
Question 14

The longest economic expansion in U.S. history occurred in the decade of the
Answer 1960s.
1970s.
1980s.
1990s.

Question 15

According to monetarists, the main source of the business cycle is
Answer changes in the amount of money in the economy.
Waves of optimism and pessimism that cause business investment in capital goods to fluctuate.
Changes in the prices of oil and other resources.
Changes in productivity.

Question 16

According to Keynesians, the main source of the business cycle is
Answer changes in the amount of money in the economy.
waves of optimism and pessimism that cause business investment in capital goods to fluctuate.
changes in the prices of oil and other resources.
changes in productivity.

Question 17

According to real business cycle (RBC) theory, the main source of the business cycle is
Answer changes in the amount of money in the economy.
waves of optimism and pessimism that cause business investment in capital goods to fluctuate.
changes in the prices of oil and other resources.
changes in productivity.

Question 18

Compensation of workers per hour grew the fastest in the
Answer long boom.
economic liftoff period.
Great Depression.
reorganization period.

Question 19

If you purchase a Dell computer manufactured in Round Rock, TX for $2,000
Answer Investment increases by $2,000.
Consumption increases by $2,000
Government spending increases by $2,000
Net exports increases by $2,000

Question 20

If you purchase a Ford Mondeo manufactured in Germany for $20,000
Answer Consumption and net exports increases by $20,000

Consumption and net exports decrease by $20,000

Consumption increases $20,000, Net Exports decreases $20,000

Consumption decreases $20,000, Net Exports increases $20,000

Question 21

Which is the most volatile component of GDP?
Answer Consumption

Investment
Government Spending
Net Exports

Question 22

Which of the following is the best measure of living standards?
Answer Nominal GDP
Real GDP
Nominal GDP per capita
Real GDP per capita

Question 23

A worker has been laid off from his job due to an economic downturn and is seeking new employment. This worker is
Answer Structurally unemployed
Frictionally unemployed
Cyclically unemployed
Not in the labor force

Question 24

What action today is most likely to increase living standards in the future? All of these answers could be correct, but one of them has a direct effect while the rest propogate through other effects.
Answer Higher levels of consumption
Higher levels of government spending
Higher levels of investment
Lower levels of taxes

Question 25

The country of Examplestan has 100,000,000 citizens. 50,000,000 are adults who are employed or are actively seeking work.

2 million have been laid off due to recession

1 million have quit their jobs to look for work in cities with better climates

1.5 million Have skills that do not match any jobs in their region.

What is the natural rate of unemployment in Examplestan?

Answer 1.0%

2.5%
4.5%
5.0%
9.0%

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Solution Preview

The labor force consists of

Those employed plus those unemployed.

Question 2

Suppose a country has a population of 61 million, of which 37 million are in the working-age population. Of those, 11 million are not in the labor force and 23 million are employed. The labor-force participation rate is

70.3 percent.

workforce = 37million -11 million = 26 million

26/37 = 70.3%

Question 3

If the population is 320 million, the working-age population is 215 million, the labor force is 145 million, and the number employed is 137 million, then the unemployment rate is

5.5 percent.

unemployed = workforce - employed = 8 million
unemployment rate = 8/145 = 5.5 percent.

Question 4

In 2001, the number of unemployed people increased from 5.7 million to 8.3 million, while the labor force increased from 141.5 million to 142.3 million. By how much did the unemployment rate increase?
1.8 percentage points

old unemployment = 5.7/ 141.5 = 4.0%
new unemployment = 8.3/ 142. 3 =5.8%

Question 5

In 2004, the number of people in the working-age population increased from 221.2 million to 223.4 million, while the labor force increased from 146.5 million to 147.4 million. By how much did the labor-force ...

Solution Summary

Multiple choice questions related to RBC, Keynesian, and monetarist business cycle theories.

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