chapter 7 pretest eco201

Which of the following problems is not one of the central concerns of macroeconomics?
Answer:  Income Distribution

Feedback: The four central macroeconomic problems are growth, business cycles, unemployment, and inflation.


The range of growth rates across countries:
Answer:  has narrowed in recent years.

During a recessionary phase of the business cycle, the macroeconomy is:
Answer:  In between the peak and trough

Feedback: A recession occurs between a peak and a trough.

Edward has quit his job because he has become dissatisfied with the work that he has been asked to do. Because he has highly marketable skills, he expects to find a new job soon. What type of unemployment describes Edward's situation?
Answer:  Frictional Unemployment

Feedback: Frictional unemployment is unemployment caused by new entrants into the job market and people quitting a job just long enough to look for and find another one.

Which of the following people would be included as a member of the labor force?
Answer:  A recent high school graduate looking for a first job

Feedback: Only those people actively seeking work and those who are currently employed are counted in the labor force.


When an economy is experiencing accelerating inflation, it is most likely operating:
Answer:  Above potential output

Feedback: When the economy operates beyond potential output, it tends to experience accelerating inflation.


When output is at its potential:
Answer:  Unemployment and capacity utilization rates are equal to target levels

Feedback: Potential output is the output that would materialize at the target rate of unemployment. At potential output, the capacity utilization rate also equals its target rate.


Inflation is generally defined as:
Answer:  A sustained increase in the price level.

Real output is best defined as the total amount of goods and services produced adjusted for changes in:
Answer: the price level

Feedback: Any "real" concept is inflation-adjusted.

A cost of inflation is that it:
Answer:  tends to lower real interest rates, and therefore creates an incentive for undertaking poor investments

Feedback: Inflation redistributes income from those who do not raise their prices to those who do raise their prices