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Unformatted text preview: Midterm 3 1.Economic activity moves from a period of expansion to a _______ and then moves into a period of _______until it reaches a _____ . A) peak; expansion; trough D) trough; recession; peak B) peak, recession; trough E) peak; recession; peak C) trough; expansion; peak 2.According to Okun's Law, when cyclical unemployment decreases by one percentage point, the recessionary gap ______ by ____ percentage point(s), measured in relation to potential output. A) increases; one B) increases; two C) decreases; one D) decreases; two E) decreases; three 3. The economy of Omega operates according to Okun's law. In Omega potential GDP and real GDP equal $7 trillion, and the natural rate of unemployment equals 6%. What is the actual rate of unemployment in Omega? A) 4% B) 5% C) 6% D) 7% E) 8% 4. If the frictional rate of unemployment equals 2 percent, the structural rate of unemployment equals 3 percent, and the cyclical rate of unemployment equals 1 percent, then the natural rate of unemployment equals: A) 0%. B) 1%. C) 3%. D) 5%. E) 6%. 5. The cyclical unemployment rate is negative when: A) there is a recessionary gap. B) there is an expansionary gap. C) the output gap equals zero. D) frictional unemployment equals structural unemployment. E) the sum of frictional and structural unemployment equals zero. 6.A boom is: A) a period in which the economy is growing at a rate significantly below normal. B) the high point of economic activity prior to a downturn. C) the low point of economic activity prior to a recovery. D) a particularly strong and protracted expansion. E) a particularly severe and protracted recession. 7.The following data give the dates of successive turning points in U.S. economic activity and the corresponding levels of real GDP at the time: Turning Point Date Real GDP (1996 $ billions) (A) Jan. 1980 4958.9 (B) July 1980 4850.3 (C) July 1981 5056.8 (D) Nov. 1982 4912.1 (E) July 1990 6731.7 Which of the turning points are peaks? A) (A), (B), and (C) B) (C), (D), and (E) C) (A), (C), and (E) D) (B) and (D) E) (A) and (E) 8.At least _____ consecutive quarters of declining _____ is an informal definition of a recession. A) 2; inflation B) 4; inflation C) 2; real GDP D) 4; real GDP E) 2: unemployment 9.In the short run, total spending affects ____ and in the long run total spending affects ______. A) prices; output D) output; unemployment B) prices; unemployment E) output; output C) output; prices 10.Short-term economic fluctuations are _____ in length and severity and ____ to predict. A) regular; difficult B) regular; easy C) constant; easy D) irregular; difficult E) irregular; easy 11.When the Fed engages in an open market sale, the money supply ____ and the nominal interest rate ______....
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This note was uploaded on 05/02/2009 for the course ECON 2010 taught by Professor Roussel during the Spring '08 term at LSU.
- Spring '08