Midterm 3 - Midterm 3 1.Economic activity moves from a...

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.
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?
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:
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:
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:
T u r n i n g P o i n t D a t e R e a l G D P
( 1 9 9 6 $ b i l l i o n s )
( A ) J a n . 1 9 8 0 4 9 5 8 . 9
( B ) J u l y 1 9 8 0 4 8 5 0 . 3
( C ) J u l y 1 9 8 1 5 0 5 6 . 8
( D ) N o v . 1 9 8 2 4 9 1 2 . 1
( E ) J u l y 1 9 9 0 6 7 3 1 . 7
Which of the turning points are peaks?
(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.