Chapter 7 posttest

In macroeconomics, the long-run framework focuses on:
answer:  demand and the issue of growth.
Feedback: In macroeconomics, the long-run framework focuses on supply and the issue of growth. The short-framework focuses on demand.

In the United States, the secular growth trend is about:
answer:  2.5 – 3.5 percent per year.

Classical economists believe:
Answer:  in Laissez-faire policies
Feedback:
Classical economists believe that economic fluctuations are to be expected, but that government policies are largely ineffective and may make the situation worse. Accordingly, they favor laissez-faire policies.

A correct sequence for the four phases of the business cycle is:
Answer:  peak,downturn, trough, upturn
Feedback: Though it doesn't matter where one starts, the correct answer here starts from the top of the business cycle; the correct sequence is: peak, downturn, trough, and then upturn.

An economic downturn is generally characterized by:
Answer:  falling output and rising unemployment.
Feedback: An economic downturn is a decline in output generally accompanied by rising unemployment levels

Karen is a high school dropout, but for 15 years she had a good job making blue jeans at a plant in her hometown. Recently, Karen lost her job when the plant closed down and the company moved the production process to Mexico. Karen is still out of work and looking for a job. Economists would describe her as:
Answer:  structurally unemployed.
Feedback: Karen is structurally unemployed. The skills she has are increasingly becoming obsolete in the United States. It is unlikely that she will be able to find similar work again. Instead, she needs a new set of skills that will be demanded in a modern U.S. labor market.


Bill quit his job so he could stay home and take care of his two small children. His wife has a good job and he likes what he is doing so he is currently not looking for work. Bill is:
Answer:  not unemployed
Feedback: Bill is not in the labor force and is therefore not unemployed. Unemployed people are not employed and are searching for a job.

Potential output:
Answer:  is the level of output the country would have if the unemployment rate were at its target.
Feedback: Potential output is the level of output achieved at the target rate of unemployment and the target level of capacity utilization. The target rate of unemployment is not zero.

Real output is:
Answer:the total amount of goods and services produced, adjusted for inflation.
Feedback: Real values have been adjusted to take into account the distorting effects of inflation. They are measured in constant prices. Nominal values are measured in current prices and have not been adjusted for inflation. Economists generally focus on real values.

Inflation:
Answer: is a continual increase in the price level.
Feedback: Inflation is a continual increase in the price level. Some specific goods can actually become cheaper during times of inflation.