Answer Page--Unit Two
Jake Howard
1. GDP will not include
I) The purchase of items at a grocery store
II) The sale of a couch at a garage sale
III) The purchase of a couch at a store


Jake Howard
2. What may change the natural rate of unemployment?

E) All of the above

Jake Howard
3. The types of unemployment that are always present in an economy are
I) Structural Unemployment
II) Frictional Unemployment
III) Cyclical Unemployment

D) I & II

Jake Howard
4. CPI can be used to calculate

C) Rates of inflation

Jake Howard
5. What point(s) are currently in the recessionary phase of the business cycle?

D) 2 & 3

Jake Howard
6. Given Employed = 600, Unemployed = 300 and not in labor force = 100 which of the following are true?
I) Labor Force = 600
II) Labor Force Participation Rate = 90%
III) Total Population = 1000


Jake Howard
7. This graph is an example of [blank] inflation, as a result prices will [blank] and output will [blank].

B) Cost Push, increase, decrease

Jake Howard
8. Okon’s Law states that for every [blank] % that unemployment exceeds the natural rate of unemployment, a [blank] % gap in GDP occurs.

D) 1, 2

Jake Howard
9. An increase which item will not always increase capital gain
II) Inputs of resources
III) Productivity of resources
IV) Technology

A) I

Jake Howard
10. What is equal to ( (CPI for year 2 – CPI for year 1)/(CPI for year 1)) X 100

C) Inflation rate

Thomas Buscemi
11. Which of the following would GDP include?

e. Going to the movies

Thomas Buscemi
12. Which of these wouldn’t be structural unemployment?
a. GM lays off 5000 workers due to the recession

Thomas Buscemi
13. Nominal Interest Rate=
c. Real interest rate + Expected Inflation

Thomas Buscemi
14. Inflation means
e. Increase in Prices

Thomas Buscemi
15. Which point is operating during an expansionary business cycle
e. E

Thomas Buscemi
16. What is the natural Rate of Unemployment in America
d. 4%

Thomas Buscemi
17. If The Nation of Corinth Produces only Xboxes then what is GDP
$500 Xbox (5)
$600 Xbox 360 (7)
d. $6700

Thomas Buscemi
18. What does X stand for �27�
e. Net exports +consumer spending+ investment + government spending

Thomas Buscemi
19. What is the underground economy
b. Money not recorded in GDP

Thomas Buscemi
20. Higher unemployment does which of the following
I. Reduces long run Aggregate supply
II. Reduces GDP
III. Results in lower Aggregate demand
E. II, III Only

(Mallika Halder)
21) The most frequently used price indexes are:
i. Producer Price Index (PPI)
ii. Consumer Price Index (CPI)
iii. GDP Price Deflator
e) i, ii, and iii

(Mallika Halder)
22) All of the following groups of people are hurt by unanticipated inflation except:
c) borrowers

(Mallika Halder)
23) Which of the following are phases that describe the business cycle?
e) all of the above

(Mallika Halder)
24) Which of the following types of unemployment exist even with zero cyclical unemployment:
i. Frictional unemployment
ii. Structural unemployment
iii. Full Employment
c) i and ii

(Mallika Halder)
25) GDP counts which of the following?
c) profits earned by foreign-owned businesses

(Mallika Halder)
26) Unemployment can be classified in four ways. Which definition matches the correct unemployment type?
e) Frictional Unemployment- unemployment that comes from people moving between jobs, careers, and locations.

(Mallika Halder)
27) There are four phases of a business cycle. Which of the following terms correspond the numbers on the graph?
d) 1. Peak 2. Recession 3. Trough 4. Recovery

(Mallika Halder)
28) During a recession, economic outputs are declining. Respectively, how are unemployment and inflation affected?
d) increasing, decreasing

(Mallika Halder)
29) Large foreign-owned businesses are profitable in the United States. How will this affect GDP on the domestic AS/AD curve?
e) Domestic GDP will not change

(Mallika Halder)
30) The basic measurement of output and production in the U.S changed from GNP to GDP in 1991. Most other nations already used GDP. What does this reflect?
b) increasing interdependence of world economics


31. Which of the following is the largest component of the GDP income approach?

A) Employee compensation

32. Which of the following is not a component of GDP (Gross Domestic Product)?

B) Household expenditures

33. Which of the following is not one of the nine components of GDP income approach?

D) Employer compensation

34. Use the flowing graph to answer the question: What can you conclude about the above graph, as the supply and demand curves relate to GDP?

D) The quantity of GDP has gone up due to an increase in demand for goods

35. What is essential to calculate CPI (Consumer Price Index)?

A) Value of market basket over given years

36. To calculate the rate of inflation you must have?

D) Current year’s CPI; previous year’s CPI

37. Discouraged workers are defined as those who:

E) Both B and D (at some point actively looked for employment; no longer seek employment)

38. An economy is considered “fully employed” when it is experiencing:

D) Both A and B (frictional and structural unemployment)

39. Generally, the Natural Rate of Unemployment (NRU) for the United States is about:

E) 4%

40. Use the following graph and table to answer the question: Based upon the above business cycle graph and table you can conclude that the first trough occurs between what years?

D) 2000-2002

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