1. Business cycles occur when output
A. falls below its potential
B. rises above its potential
C. fluctuates around its growth trend
D. is fixed at its potential
2. Which of these statements best describes a complete individualbusiness cycle?
A. Movement from peak to trough to peak
B. Movement from recession to expansion
C. Movement from peak to recession totrough
D. Movement from trough to expansion thento peak
3. During the business cycle, the period between the point at whichoutput reaches a high anthepoint at which it reaches a low iscalled
A. a peak
B. a trough
C. an expansion
D. a recession
4. Which of the following equals the market value of all final goodsand services produced in an economy, stated in the prices of aspecific base year?
A. Nominal GNP
B. Nominal GDP
C. Real GNP
D. Real GDP
5. Imagine a country has a population of 210 million. Within thecountry there are 95 million people who are employed workers, 50million people incapable of working, and 60 million people capable ofworking, but not actively looking. Based on this information, what isthe unemployment rate?
A. 5%
B. 3%
C. 7%
D. 9%
6. The unemployment produced by fluctuations in economic activity is called
A. cyclical unemployment
B. frictional unemployment
C. natural unemployment
D. structural unemployment
7. New college graduates are most likely to experience
A. frictional unemployment
B. cyclical unemployment
C. natural unemployment
D. structural unemployment
8. The natural rate of unemployment is defined as the
A. highest sustainable rate of unemployment achievable under existing conditions
B. unemployment rate that is consistent with the economy operating at its potential output
C. unemployment rate at which there is no cyclical unemployment
D. the rate of unemployment that should exist according to policy makers
9. The Consumer Price Index (CPI) is based on
A. surveys of retail store sales
B. a broad index of all items in GDP surveys of the prices of items in a market basket
C. surveys of the prices of items in a market basket
D. Bureau of Labor Statistics estimates of price changes
10. Unanticipated inflation is a problem for society because it rewards lenders at the expense of borrowers
A. rewards lenders at the expense of borrowers
B. increases real profits in the short term rewards savers at the expense of spenders
C. benefits borrowers at the expense of lenders
D. benefits borrowers at the expense of lenders