Economics (2) Chapter 16 Name: ______________

1. Economists use the phrase "business cycle" when referring to fluctuations in:
A) real GDP.
B) the chain price index.
C) the consumer price index.
D) the general level of prices.
2. The period of growth in real GDP between the trough of the business cycle and the next peak is called
the:
A) recessionary phase.
B) recovery phase.
C) contractionary phase.
D) cyclical phase.
3. Economic indicators, like unemployment claims and the average workweek, which change before real
GDP changes, are called:
A) leading.
B) lagging.
C) coincident.
D) structural.
4. The civilian labor force consists of:
A) all civilians over the age of 16.
B) the employed plus the unemployed who are not in the military.
C) only individuals who are actually at work during a given week.
D) civilians who are not in prisons or mental hospitals.
5. One problem with the unemployment rate is that:
A) discouraged workers are included in the calculation.
B) the data includes part-time workers as fully employed.
C) underemployment is measured in the calculation.
D) teen workers are excluded from the statistics.

Exhibit 1 Unemployment categories

# of
Category Individuals
Frictional unemployment 20
Structural unemployment 35
Cyclical unemployment 60
Discouraged workers 5
Underemployed workers 10
Fully employed workers 410
Population 900
6. The unemployment rate for the economy in Exhibit 6-2 is:
A) 12.8 percent.
B) 21.5 percent.
C) 22.2 percent.
D) 30.5 percent.
7. The primary cause of frictional unemployment is:
A) discouraged workers who give up looking for work.
B) fluctuations in aggregate demand.
C) the lack of training and marketable qualifications in job seekers.
D) inaccurate information about job opportunities.
8. Which of the following offers an example of structural unemployment?
A) The rise in unemployment for stable workers after the development of gasoline-powered
automobiles and the resulting long-term decline in horse-and- buggy transportation.
B) The rise in unemployment among farm workers after harvest.
C) The unemployment associated with workers changing jobs.
D) The increase in unemployment during recessions.
9. The type of unemployment that occurs because of a recession is called:
A) frictional unemployment.
B) seasonal unemployment.
C) natural unemployment.
D) cyclical unemployment.
10. Eric lost his job because a recession caused his employer's sales to fall. This is an example of:
A) involuntary unemployment.
B) frictional unemployment.
C) structural unemployment.
D) cyclical unemployment.
11. When macroeconomists refers to “full employment,” what do they mean?
A) Full employment occurs when the unemployment rate equals zero.
B) Full employment occurs when there is only cyclical unemployment, and all other types of
unemployment have been eliminated.
C) Full employment occurs when there is only structural unemployment, and all other types of
unemployment have been eliminated.
D) Full employment occurs when there is only frictional unemployment; structural and cyclical
unemployment has been eliminated.
E) Full employment occurs when there are only frictional and structural unemployment; cyclical
unemployment has been eliminated.
12. When an economy is operating at its full employment rate of output:
A) the rate of unemployment will be zero.
B) output will exceed the economy's maximum sustainable rate.
C) the actual rate of unemployment will equal the natural rate.
D) the economy's potential rate of output will exceed actual GDP.
 Exhibit 2 Unemployment categories

# of
Category Individuals
Frictional unemployment 20
Structural unemployment 35
Cyclical unemployment 60
Discouraged workers 5
Underemployed workers 10
Fully employed workers 410
Population 900

13. Using the information in Exhibit 2, the number of individuals included in the natural rate of
unemployment is
A) 20.
B) 35.
C) 55.
D) 60.
14. Which of the following is true?
A) Frictional unemployment implies a lack of available jobs.
B) During a recession, cyclical unemployment will be low.
C) When an economy is at full employment, actual unemployment will be less than the natural rate of
unemployment.
D) When actual GDP equals potential GDP, the actual unemployment rate will equal the
economy's natural rate of unemployment.
15. Of the four groups listed below, the highest unemployment rate is typically experienced by:
A) females as a group.
B) males as a group.
C) teenagers.
D) persons who completed 1-3 years of high school.