Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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The
natural rate of unemployment does NOT include which of the following? a. | seasonal
unemployment | c. | frictional
unemployment | b. | structural unemployment | d. | cyclical unemployment | | | | |
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2.
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Real
GDP is not changing at all, unemployment is about 8%, and inflation is steady. Where in the business
cycle is the economy? a. | peak | c. | expansion | b. | trough | d. | recession | | | | |
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3.
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Unemployment
that is directly related to swings in the business cycle is a. | frictional
unemployment. | c. | cyclical
unemployment. | b. | structural unemployment. | d. | seasonal unemployment. | | | | |
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4.
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According to
the demand-pull theory, inflation is caused by a. | higher wages | c. | higher resource costs. | b. | less government
spending | d. | higher consumer
spending. | | | | |
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5.
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Real
GDP is rising at a 5% rate, unemployment is at 6% and falling, and inflation is rising at about 2%
per year. Where in the business cycle is the economy? a. | expansion | c. | trough | b. | recession | d. | peak | | | | |
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6.
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Business investment, a leading economic indicator, is falling. What is the likely
prospect for the future economy? a. | the economy will slow down | c. | the economy will remain stable | b. | the economy will
speed up | d. | the economy
cannot be predicted | | | | |
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7.
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Which
of the following is characteristic of a "good" economy? a. | unemployment of
about 8% | c. | real GDP growth
of about 4% annually | b. | inflation of about 5% annually | d. | tax rates of about 80% | | | | |
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8.
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What
is the most likely result of an increase in interest rates? a. | Investment
spending rises. | c. | The economy
speeds up. | b. | Investment spending falls. | d. | Unemployment falls. | | | | |
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9.
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According to
the cost-push theory, inflation is caused by a. | higher wages | c. | higher consumer spending | b. | less government
spending | d. | lower resource
costs. | | | | |
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10.
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What
is the likely result of deflation? a. | economic growth | c. | rising prices | b. | high
unemployment | d. | high tax
rates | | | | |
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