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Chapter 10 What Is Macroeconomics?
MULTIPLE CHOICE
1. Macroeconomics is the study of:

a. individual markets. d. the broader economy.
b. the behavior of the firm. e. changes in commodity prices.
c. the behavior of the consumer.
ANS: D DIF: Easy
REF: How Is Macroeconomics Different from Microeconomics?
TOP: I. MSC: Remembering
2. Which of the following is a topic of microeconomics?

a. the level of national income
b. the level of employment in the country
c. the prices of all goods in the country
d. the profit of firms in the banking industry
e. the level of national output
ANS: D DIF: Easy
3. Which of the following is a topic of macroeconomics?

a. the income earned by a person
b. the profit earned by a firm
c. production in the computer industry
d. the price of ice cream
e. the number of people in the economy with no jobs
ANS: E DIF: Easy
4. The Great Depression lasted most of which decade?

a. the 1920s d. the 1910s
b. the 1930s e. the 1950s
c. the 1940s
ANS: B DIF: Easy
REF: What Are the Three Major Topics in Macroeconomics? TOP: II.
MSC: Remembering
5. Official unemployment is identified as when a worker:

a. who is not currently employed is searching for a job unsuccessfully.
b. who is not currently employed stops searching for a job.
c. leaves his or her job to attend school full-time.
d. retires from his or her job.
e. who is not currently employed stops searching for a job because he or she feels there is no
job available for him or her.
ANS: A DIF: Easy REF: Employment TOP: II.A.
MSC: Remembering
6. The main statistic that is used to monitor unemployment in the economy is:
a. real gross domestic product (GDP).
b. the unemployment rate.
c. the unemployed–employed ratio.
d. real GDP per capita.
e. discouraged workers.
ANS: B DIF: Easy REF: Employment TOP: II.A.
MSC: Remembering
7. Which of the following lists the three types of unemployment?

a. frictional, structural, and practical
b. practical, structural, and cyclical
c. frictional, unavailable, and structural
d. cyclical, practical, and unavailable
e. frictional, structural, and cyclical
ANS: E DIF: Easy REF: Employment TOP: II.A.
MSC: Remembering
8. Between 1960 and 2014, the average unemployment rate in the United States was about:
a. 4%. d. 8%.
b. 6%. e. 9%.
c. 0%.
ANS: B DIF: Easy REF: Employment TOP: II.A.
MSC: Remembering
9. Structural, frictional, and cyclical are all types of:

a. jobs. d. unemployment.
b. price levels. e. economic models.
c. firm structures.
ANS: D DIF: Moderate REF: Employment TOP: II.A.
MSC: Remembering
10. Which of the following people would be officially considered unemployed?

a. Mitchell, who is a full-time student working part-time at the bookstore
b. Janice, who is actively seeking a full-time job while currently working at a part-time job
c. Jade, who has stopped looking for a job because she feels there are no jobs available for
her
d. Jenna, who just graduated college and is searching for a job that fits her graphic-design
skills
e. Ralph, who is a stay-at-home father and is not currently looking for a job
ANS: D DIF: Moderate REF: Employment TOP: II.A.
MSC: Understanding
11. Which of the following two types of unemployment occur even when the economy is healthy and
growing?
a. frictional and structural d. frictional and practical
b. cyclical and frictional e. structural and practical
c. structural and cyclical
ANS: A DIF: Moderate REF: Employment TOP: II.A.
MSC: Understanding
12. Natural unemployment is the:

a. average of frictional, structural, and cyclical unemployment.
b. sum of frictional, structural, and cyclical unemployment.
c. sum of frictional and cyclical unemployment.
d. sum of structural and cyclical unemployment.
e. sum of structural and frictional unemployment.
ANS: E DIF: Moderate REF: Employment TOP: II.A.
MSC: Remembering
13. During healthy economic periods, only _________ unemployment exist(s).

a. frictional and structural d. structural
b. cyclical e. structural and cyclical
c. frictional
ANS: A DIF: Moderate REF: Employment TOP: II.A.
MSC: Remembering
14. Which of the following statements about historical unemployment rate is true?
a. Since 1960 the average unemployment rate in the United States has been about 2%.
b. Since 1960 the average unemployment rate in the United States has been about 10%.
c. Since 1960 the average unemployment rate in the United States has been about 6%.
d. The unemployment rate in the United States has never fallen below 6%.
e. The unemployment rate in the United States is always above 5%.
ANS: C DIF: Moderate REF: Employment TOP: II.A.
MSC: Applying
15. Which of the following questions does the official unemployment rate answer?
a. How many people in the economy are underemployed?
b. What percentage of the labor force is classified as unemployed?
c. What is the overall health of the economy?
d. How many workers are discouraged?
e. Are people unemployed for short-term or long-term spells?
ANS: B DIF: Moderate REF: Employment TOP: II.A.
MSC: Remembering
16. One misconception that people often have about unemployment is that:
a. unemployment is a macroeconomic topic.
b. unemployment is important to the economy.
c. as a nation, we should aim for zero unemployment.
d. the unemployment rate does not tell the whole story about the employment situation.
e. discouraged workers are not included in the official unemployment rate.
ANS: C DIF: Easy REF: Structural Unemployment
TOP: II.A.1. MSC: Understanding
17. Structural unemployment is:

a. unemployment caused by time delays in matching available jobs with workers.
b. unemployment caused by changes in the industrial makeup of an economy.
c. unemployment caused by economic downturns.
d. when a worker stops looking for a job because he or she feels no job is available for him
or her.
e. not one of the three types of unemployment.
ANS: B DIF: Easy REF: Structural Unemployment
TOP: II.A.1. MSC: Remembering
18. All three types of unemployment:

a. are bad for the economy.
b. create a shortage of workers in the workforce.
c. are good for the economy.
d. are difficult on households.
e. are always the same level.
ANS: D DIF: Moderate REF: Structural Unemployment
19. Workers who lose their jobs because the skill sets they possess are no longer required in the
economy are considered to be:
a. discouraged workers. d. overemployed.
b. cyclically unemployed. e. structurally unemployed.
c. frictionally unemployed.
ANS: E DIF: Moderate REF: Structural Unemployment
20. Workers who lose their jobs because of market innovations are considered:
a. discouraged workers. d. structurally unemployed.
b. cyclically unemployed. e. employed.
ANS: D DIF: Moderate REF: Structural Unemployment
21. Some jobs in the economy are no longer needed after an advancement in technology. A person
who loses his or her job this way would be considered:
a. frictionally unemployed. d. overemployed.
b. cyclically unemployed. e. a discouraged worker.
c. structurally unemployed.
ANS: C DIF: Moderate REF: Structural Unemployment
22. Which of the following is an example of structural unemployment?

a. Raymond loses his job as a steelworker because the economy is in a downturn.
b. Chad graduates with his master’s degree in economics and is searching for an analyst job
in Oklahoma.
c. Edith has decided to retire after 35 years of working at the state prison.
d. Cameron quits his job because he wants to become an astronaut.
e. Jasmine loses her job as a newspaper editor because the publication has gone digital.
ANS: E DIF: Moderate REF: Structural Unemployment
23. Jamal works in a factory in Lake Zurich, Illinois, assembling toy trains. The factory owner updates
the current equipment and installs new robots that can do Jamal’s job. As a result, Jamal is laid off
and is now unemployed. Jamal would be considered:
a. structurally unemployed. d. overemployed.
ANS: A DIF: Moderate REF: Structural Unemployment
TOP: II.A.1. MSC: Applying
24. Between 1980 and 2010, steel industry employment in the United States has:
a. stayed constant. d. risen by almost 90%.
b. fallen by around 70%. e. fallen by only 10%.
c. fallen by around 55%.
ANS: B DIF: Moderate REF: Structural Unemployment
25. The government has decided to give governmental grants to community colleges that offer job
training for individuals who have recently been laid off due to their outmoded skills. The
government is trying to reduce the level of:
a. structural unemployment.
b. frictional unemployment.
c. cyclical unemployment.
d. real gross domestic product (GDP).
e. household consumption.
ANS: A DIF: Moderate REF: Structural Unemployment
26. Which of the following statements about structural unemployment is true?

a. Structural unemployment can be eliminated through government intervention.
b. Structural unemployment is equal to zero when the economy is in an expansion.
c. Structural unemployment cannot be eliminated.
d. Structural unemployment is not a burden on household incomes.
e. Structural unemployment is unhealthy for the long-run growth of an economy.
ANS: C DIF: Difficult REF: Structural Unemployment
27. Even in years when unemployment is high and millions of Americans are looking for work,
thousands of jobs every year go unfilled by Americans in the farm industry. Which is the best
explanation for this phenomenon?
a. Large farm employment states discourage migration into their states.
b. Regulations prevent farmers from hiring Americans to work on farms.
c. Farmers do not advertise the availability of farm jobs.
d. Americans appear to be unwilling or unable to work on farms.
e. Americans do not have the educational skills required for farm work.
ANS: D DIF: Moderate REF: Americans Don’t Appear to Want Farm Work
TOP: II.A.1.a. MSC: Understanding
28. Some people complain that immigrants are taking farm jobs away from American workers. Which
is the best explanation for this claim?
a. The claim is true: millions of immigrants displace American farmworkers.
b. The claim is true: immigrants are better educated than American farmworkers.
c. The claim is false: across the country, American farms employ more domestic workers
than immigrant workers.
d. The claim is false: Americans appear to be unwilling or unable to work on farms.
e. The claim is false: Americans can always get better work than on a farm.
ANS: D DIF: Moderate REF: Americans Don’t Appear to Want Farm Work
TOP: II.A.1.a. MSC: Understanding
29. Frictional unemployment is:

a. unemployment caused by time delays in matching available jobs and workers.
d. when a worker stops looking for a job because he or she feels no job is available for him
or her.
ANS: A DIF: Easy REF: Frictional Unemployment
30. Unemployment caused by delays in matching available jobs and workers is called _________
unemployment.
a. structural d. frictional
b. cyclical e. seasonal
c. discouraged
ANS: D DIF: Easy REF: Frictional Unemployment
31. A government program that reduces the hardship of being out of work by guaranteeing that
unemployed workers receive a percentage of their former incomes while they are unemployed is
referred to as:
a. employment insurance. d. frictional unemployment.
b. unemployment insurance. e. structural unemployment.
c. natural unemployment.
ANS: B DIF: Easy REF: Frictional Unemployment
32. Some individuals are unemployed because it takes time for them to find jobs that fit their skill sets.
These individuals would be considered to be:
b. cyclically unemployed. e. discouraged workers.
ANS: A DIF: Moderate REF: Frictional Unemployment
33. Nina has a part-time job as she finishes her degree in fashion design. After obtaining her degree
she decides to quit her part-time job to search for a job that better fits her now-improved skill set.
Nina has a few interviews, but it is taking time to find the job that suits her best. Nina would be
considered:
a. structurally unemployed. d. overemployed.
ANS: C DIF: Moderate REF: Frictional Unemployment
34. Which of the following is an example of frictional unemployment?
a. Raymond loses his job as a steelworker because the economy is in a downturn.
b. Chad graduates with his master’s degree in economics and is searching for an analyst job.
c. Edith has decided to retire after 35 years of working at the state prison.
d. Cameron quits his job at the circus to volunteer for the Red Cross.
e. Jasmine loses her job as a newspaper editor because the publication has gone digital.
ANS: B DIF: Moderate REF: Frictional Unemployment
35. The invention of the Internet has reduced ____________ unemployment because it allows for
workers and employers to find each other more quickly.
a. structural d. frictional
b. cyclical e. seasonal
c. discouraged
ANS: D DIF: Moderate REF: Frictional Unemployment
36. Brian Murphy is a political consultant for a candidate in Massachusetts. Mr. Murphy’s candidate is
defeated in the November election, and as a result, Mr. Murphy finds himself unemployed. Mr.
Murphy’s unemployment is classified as ___________ unemployment.
a. discouraged d. cyclical
b. structural e. long-term
c. frictional
37. Anything that lengthens the job search process _________ unemployment.
a. increases structural d. increases cyclical
b. increases frictional e. decreases structural
c. decreases frictional
ANS: B DIF: Moderate REF: Frictional Unemployment
38. When it is difficult to hire employees, firms take ____________ to hire, which increases
____________ unemployment.
a. less time; frictional d. longer; cyclical
b. less time; structural e. longer; structural
c. longer; frictional
39. Frictional unemployment is present in an economy because:

a. workers often need to update their skills.
b. workers take time to decide which jobs are best for them.
c. firms often lay off workers due to economic recession.
d. the unemployment rate is too low.
e. there are often changes in the industrial makeup of an economy.
ANS: B DIF: Difficult REF: Frictional Unemployment
40. JTKB is an accounting firm in South Orange County, Florida. Company policy is that whenever
JTKB decides to open up a new accounting position, the hiring manager must conduct at least five
interviews over a two-week span. Because of this process, JTKB is increasing ____________ in
South Orange County, Florida.
a. the number of discouraged workers
b. structural unemployment
c. cyclical unemployment
d. frictional unemployment
e. labor-force participation
ANS: D DIF: Difficult REF: Frictional Unemployment
41. The Internet has enabled workers and companies to find each other more quickly and to make
better matches with substantially lower costs. The result is ___________ unemployment.
a. lower frictional d. lower cyclical
b. lower structural e. higher structural
c. higher frictional
ANS: A DIF: Difficult REF: Frictional Unemployment
42. Government policies such as unemployment compensation and government regulations related to
hiring and firing employees result in _________ unemployment.
a. lower frictional d. lower cyclical
b. lower structural e. higher structural
c. higher frictional
ANS: C DIF: Moderate
REF: Unemployment, Government Policies, and Incentives TOP: II.A.3.
MSC: Understanding
43. In November 2009, the United States was in a deep recession. To help keep the economy afloat,
the government extended the period of time one could receive unemployment insurance to 99
weeks. This policy had an unintended consequence because:
a. workers searched for jobs for longer, which reduced the unemployment rate.
b. many workers quit their jobs so they could receive unemployment insurance.
c. workers spent more time searching for the perfect job, which increased frictional
unemployment.
d. employers were more hesitant to fire workers, which reduced the unemployment rate.
e. employers were more hesitant to fire workers, which increased the unemployment rate.
ANS: C DIF: Moderate
MSC: Understanding
44. The government can assist in reducing the level of structural unemployment by:
a. providing unemployment insurance.
b. establishing government regulations on firing employees.
c. taxing employers who hire low-skilled workers.
d. providing job-training programs.
e. incentivizing companies to update their current technology.
ANS: D DIF: Difficult
MSC: Applying
45. The government can assist in reducing the level of structural unemployment by:
a. providing unemployment benefits.
b. establishing government regulations on hiring employees.
c. subsidizing the relocation of workers who lose their jobs.
d. instituting a minimum-wage law.
e. incentivizing companies to move their production overseas.
ANS: C DIF: Difficult
MSC: Applying
46. One argument against unemployment insurance is that it:

a. limits the effects of a recession.
b. is only available during recessions.
c. creates an indirect incentive that can make it less attractive for workers to stay
unemployed.
d. can be extended by the government during times of recession.
e. creates an indirect incentive that can make it more attractive for workers to stay
unemployed.
ANS: E DIF: Difficult
MSC: Understanding
47. During normal economic times, unemployment in Italy tends to be ____________ than in the
United States mainly because of ____________.
a. higher; labor market regulations d. longer; exchange rates
b. lower; labor market regulations e. higher; cyclical unemployment
c. higher; exchange rates
ANS: A DIF: Difficult REF: Employment, Italian Style
TOP: II.A.3.a. MSC: Applying
48. Cyclical unemployment is:

a. unemployment caused by time delays in matching available jobs and workers.
d. when workers stop looking for jobs because they feel no jobs are available for them.
ANS: C DIF: Easy REF: Cyclical Unemployment
49. An economic downturn can lead to mainly which type of unemployment?

a. cyclical d. structural
b. frictional e. practical
c. seasonal
ANS: A DIF: Easy REF: Cyclical Unemployment
50. During economic downturns:

a. the unemployment rate declines.
b. the unemployment rate rises.
c. household income rises.
d. output rises.
e. real gross domestic product (GDP) rises.
ANS: B DIF: Easy REF: Cyclical Unemployment
51. The recession of 2007–2009 has been dubbed the:

a. Great Depression. d. Big Recession.
b. Grand Recession. e. Great Recession.
c. Grand Depression.
ANS: E DIF: Easy REF: Cyclical Unemployment
52. The 2007–2009 recession lasted for ________ months.

a. 12 d. 6
b. 18 e. 24
c. 36
ANS: B DIF: Moderate REF: Cyclical Unemployment
53. Some individuals are unemployed because they are laid off from their jobs when the economy is
sluggish. These individuals would be considered:
b. cyclically unemployed. e. discouraged workers.
ANS: B DIF: Moderate REF: Cyclical Unemployment
54. During healthy economic periods, cyclical unemployment:

a. rises.
b. will equal structural unemployment.
c. falls toward zero.
d. will equal frictional unemployment.
e. will equal the natural rate of unemployment.
ANS: C DIF: Moderate REF: Cyclical Unemployment
55. During a recession, fewer individuals fly across the country for vacations. As a result, many pilots
and flight attendants lose their jobs. The pilots and flight attendants would be classified as:
b. discouraged workers. e. cyclically unemployed.
ANS: E DIF: Moderate REF: Cyclical Unemployment
56. An unemployment rate that is above the natural rate indicates ________ unemployment, and we
say that the economy is producing ________ the full employment output level.
a. cyclical; at more than d. frictional; at more than
b. cyclical; at e. frictional; at
c. cyclical; at less than
ANS: C DIF: Difficult REF: Cyclical Unemployment
57. In macroeconomics:
a. output and income are very different concepts.
b. output and income are essentially identical.
c. output is less than income.
d. output is greater than income.
e. income is measured in dollars but output is not.
ANS: B DIF: Easy REF: Production Equals Income
TOP: II.B.1. MSC: Remembering
58. GDP is best defined as the total market value of all ___________ produced within a country within
a given time.
a. goods and services d. goods
b. final goods and services e. final goods
c. services
59. When GDP increases, national income ________ and national output __________.
a. is unaffected; is unaffected d. increases; is unaffected
b. increases; increases e. is unaffected; decreases
c. decreases; decreases
TOP: II.B.1. MSC: Understanding
60. Joe owns a crab shack. When he produces and sells ________ meals in a given day, his income
earned will ________.
a. more; stay the same d. fewer; stay the same
b. more; increase e. fewer; increase
c. more; decrease
TOP: II.B.1. MSC: Applying
Consider the following data, which shows the quantities and prices of two goods produced in the
economy, to answer the three questions that follow.
61. The market value of cell phones is:

a. $5 million. d. $20 million.
b. $100 million. e. $750 million.
c. $500 million.
ANS: C DIF: Easy REF: Production Equals Income
62. The market value of pizza is:

a. $25 million. d. $250 million.
b. $10 million. e. $750 million.
c. $2.5 million.
ANS: D DIF: Easy REF: Production Equals Income
63. Assuming these are the only two goods produced in the economy, what is the value of the GDP?
a. $110 million d. $250 million
b. $750 million e. $500 million
c. $2 million
64. GDP is a good, but not the best, measure of:

a. the percentage change in the overall level of prices.
b. income inequality.
c. average living standards.
d. environmental quality.
e. the cost of living.
ANS: C DIF: Easy REF: Two Additional Uses of GDP Data
65. To determine living standards for the average person, we calculate:

a. GDP.
b. per capita GDP.
c. the average level of prices in the country.
d. the length of time the average person is unemployed.
e. the growth rate of GDP.
ANS: B DIF: Easy REF: Two Additional Uses of GDP Data
66. To evaluate the change in average living standards over time, it is best to use:
a. the inflation rate. d. real GDP per capita.
b. GDP. e. real GDP.
c. GDP per capita.
ANS: D DIF: Easy REF: Two Additional Uses of GDP Data
67. The best measure of the average living standards of people in the country is the:
a. dollar value of final goods and services produced.
b. dollar value of final goods and services produced per person.
c. amount of final goods and services produced.
d. amount of final goods and services produced per person.
e. average price of final goods and services produced.
68. Country A has a GDP of $200,000 and a population of 1,000. Country B has a GDP of $400,000
and a population of 4,000. Which of the following is true?
a. The value of output is higher in country A.
b. The value of income is higher in country A.
c. The value of GDP per capita is higher in country A.
d. The value of GDP per capita is higher in country B.
e. The average living standard is higher in country B.
ANS: C DIF: Easy REF: Two Additional Uses of GDP Data
69. Economic growth is best measured by changes in:

a. non-adjusted GDP. d. the unemployment rate.
b. real GDP. e. the number of jobs.
c. the inflation rate.
70. Real GDP is GDP adjusted for changes in:

a. overall employment levels. d. the level of the interest rate.
b. overall price levels. e. the level of unemployment.
c. overall output levels.
71. The difference between non-adjusted GDP and real GDP is:
a. real output growth. d. long-run trend GDP.
b. the price level. e. average output growth.
c. nominal output growth.
Consider the following data to answer the five questions that follow.
72. Which country has the lowest average living standard?

a. A d. D
b. B e. E
c. C
ANS: D DIF: Moderate REF: Two Additional Uses of GDP Data
73. Which country has the highest level of GDP per capita?
a. A d. D
b. B e. E
c. C
ANS: A DIF: Moderate REF: Two Additional Uses of GDP Data
74. Although countries C and D have the same level of GDP, country C has a level of per capita GDP
that is ________ times that of country D.
a. 2 d. 5
b. 3 e. 10
c. 4
ANS: C DIF: Moderate REF: Two Additional Uses of GDP Data
75. Which two countries have the same average living standard?
a. B and C d. C and E
b. C and D e. A and E
c. A and B
76. If these are the only five countries in the world, then country B produces _______ of world GDP.
a. 50% d. 62.5%
b. 25% e. 30%
c. 20%
ANS: B DIF: Moderate REF: Two Additional Uses of GDP Data
77. In a given year, if real GDP equals non-adjusted GDP, then:

a. output did not grow.
b. there was no inflation.
c. output was over-adjusted for inflation.
d. the growth in output was equal to the growth in the price level.
e. the growth in output was greater than the growth in the price level.
ANS: B DIF: Moderate REF: Two Additional Uses of GDP Data
78. GDP increases if prices decrease by ________ and quantities produced increase by ________.
a. 2%; 4% d. 3%; 1%
b. 2%; 2% e. 3%; 3%
c. 4%; 2%
TOP: II.B.2. MSC: Analyzing
79. A shortcoming of non-adjusted GDP is that:

a. an increase in non-adjusted GDP can be caused by changes in either price or quantity.
b. it does not measure changes in employment.
c. it does not measure changes in price.
d. it does not include net exports.
e. it does not include the value obtained through purchases of stocks and bonds.
80. Between two given years, if real GDP and non-adjusted GDP grow at the same rate, then:
a. the price level increased.
b. prices must have remained constant between the two years.
c. quantities must have remained constant between the two years.
d. prices and quantities must have remained constant between the two years.
e. prices and quantities must have grown at the same rate between the two years.
ANS: B DIF: Difficult REF: Two Additional Uses of GDP Data
81. If non-adjusted GDP is increasing, which of the following is true?

a. More final goods and services are being produced.
b. Prices on average are rising at a slower rate than the decline in the quantity of final goods
and services produced.
c. Less is being produced, and prices on average are falling.
d. Production of final goods and services is increasing at a faster rate than prices are falling.
e. Prices and the amount of final goods and services produced on average are constant.
ANS: D DIF: Difficult REF: Two Additional Uses of GDP Data
82. If non-adjusted GDP is declining, then it must be the case that:

a. fewer goods and services are being produced.
b. prices must be lower on average.
c. prices must be increasing more rapidly than production.
d. prices are falling at a greater rate than production is rising.
e. production is rising at a greater rate than prices are falling.
ANS: D DIF: Difficult REF: Two Additional Uses of GDP Data
83. The increase in the overall level of prices in the economy is called:
a. the inflation rate. d. GDP per capita.
b. the growth rate of GDP. e. the interest rate.
c. GDP.
ANS: A DIF: Easy REF: Inflation TOP: II.C.
MSC: Remembering
84. Inflation occurs when:

a. all prices in the economy rise.
b. the prices of some goods rise and prices of some goods fall, but more goods have price
increases than decreases.
c. the prices of some goods rise and prices of some goods fall, but fewer goods have price
increases than decreases.
d. the overall level of prices rises.
e. all prices in the economy fall.
ANS: D DIF: Easy REF: Inflation TOP: II.C.
MSC: Remembering
85. Inflation necessarily occurs when:
a. the price of gasoline rises.
b. a greater number of goods increase in price compared to the number of goods that undergo
a price decrease.
c. the overall price level rises.
d. there is an increase in the rate of change in the price level.
e. the price of at least one good, but possibly more than one good, in the economy increases.
ANS: C DIF: Easy REF: Inflation TOP: II.C.
MSC: Remembering
86. A primary cause of inflation is:

a. businesses’ quest for higher profits via higher prices.
b. workers’ need for higher wages to cover higher prices.
c. the government central bank printing excess money.
d. the government borrowing money to distribute for entitlements.
e. a growing economy influencing purchasing power.
ANS: C DIF: Easy REF: The Cause of Inflation
TOP: II.C.1. MSC: Understanding
87. It has been shown that increases in the money supply are directly related to the rate of inflation. If
the previous statement is true, then:
a. nations that increase their money supplies most rapidly will be the most prosperous.
b. high inflation will normally be associated with large increases in the money supply.
c. high inflation will normally be associated with large decreases in the money supply.
d. costs to print money will rise when the money supply falls.
e. real GDP rises whenever the money supply increases.
ANS: B DIF: Moderate REF: The Cause of Inflation
TOP: II.C.1. MSC: Applying
88. A school of thought is a:

a. cohesive way of thinking about a subject.
b. university where creativity in thinking is of primary focus.
c. branch of psychology dedicated to mental processes.
d. trend of new educational programs.
e. large, single-concept focus at a university.
ANS: A DIF: Easy REF: Schools of Thought in Macroeconomics
TOP: III. MSC: Remembering
89. Precepts of the classical school of economics include all of the following EXCEPT:
a. by adjusting to varying levels of demand and supply, markets are usually efficient in
organizing economic activity.
b. general non-intervention by government, that is, “laissez faire” (allow to do).
c. regular government intervention to assure stability and growth in the economy.
d. if government intervention is necessary, it should be with the goal of increasing economic
activity.
e. money is important as a medium of exchange, but printing excess money will lead to
inflation.
ANS: C DIF: Easy REF: Schools of Thought in Macroeconomics
90. Keynesian economics include all of the following EXCEPT:
a. by not being able to adjust to varying levels of demand and supply, markets are rarely
efficient in organizing economic activity.
b. general non-intervention by government, that is, “laissez faire” (allow to do).
c. regular government intervention to assure stability and growth in the economy.
d. if government intervention is necessary, it should be with the goal of increasing economic
activity, mainly by the government spending money it does not have.
e. money is important as a medium of exchange, but printing excess money will not lead to
inflation, at least in the short run.
ANS: B DIF: Easy REF: Schools of Thought in Macroeconomics
91. If asked about the basic functioning of the economy, a classical economist would claim that:
a. the market tends toward stability and full employment.
b. the market tends toward instability and cyclical unemployment.
c. prices are slow to adjust.
d. the economy needs help in moving back to full employment.
e. the short run is more significant than the long run.
ANS: A DIF: Easy REF: Classical Economics
TOP: III.A. MSC: Understanding
92. Based on the belief that prices are very flexible, classical economists conclude that:
a. the economy can become stuck at high levels of unemployment for long periods of time.
b. government intervention in the economy is unnecessary.
c. the economy will experience wild swings in output and employment.
d. the best type of economy is centrally planned and run by the state.
e. government intervention in the economy is very necessary.
ANS: B DIF: Moderate REF: Classical Economics
TOP: III.A. MSC: Analyzing
93. Which of the following policy statements would a classical economist tend to support?
a. The government should be prepared to intervene when the economy changes in any way.
b. The government should only intervene in the economy when total output decreases.
c. The government should allow the economy to adjust to changes in demand on its own,
without interference.
d. The government should frequently change taxes and spending levels to manipulate the
economy.
e. The government should only intervene in the economy when total output increases.
ANS: C DIF: Moderate REF: Classical Economics
TOP: III.A. MSC: Analyzing
94. In regard to describing how the economy functions, Keynesian economists claim that:
a. more focus should be placed on the long run than the short run.
b. markets, especially prices, are able to change only slowly.
c. savings is crucial to growth.
d. the market tends toward stability and full employment.
e. the economy does not need help in moving back to full employment.
ANS: B DIF: Easy REF: Keynesian Economics
TOP: III.B. MSC: Remembering
95. If asked about the basic functioning of the economy, a Keynesian economist would state that:
a. markets, especially prices, are able to change quickly.
b. the market tends toward stability and full employment.
c. the market tends toward instability and cyclical unemployment.
d. savings is crucial to growth.
e. the long run is more important than the short run.
ANS: C DIF: Easy REF: Keynesian Economics
TOP: III.B. MSC: Remembering
96. Which of the following policy statements would a Keynesian economist tend to support?
a. The government should encourage savings as a means of promoting economic growth.
b. The government should never intervene in the economy.
c. The government should intervene in the economy to promote employment.
d. The government should intervene in the economy only when total output changes.
e. The government should focus on long-run supply, not demand.
ANS: C DIF: Moderate REF: Keynesian Economics
TOP: III.B. MSC: Analyzing
97. Keynesian economists believe that more focus should be placed on aggregate demand than
aggregate supply because:
a. savings is a crucial part of economic growth and investment.
b. prices are flexible and allow the economy to quickly return to full employment.
c. governments can promote full employment by stimulating aggregate demand.
d. the long run is more important than the short run, and economic policy works only in the
long run.
e. the economy tends to be stable and at full employment.
ANS: C DIF: Difficult REF: Keynesian Economics
TOP: III.B. MSC: Analyzing
SHORT ANSWER
1. List and define the three different types of unemployment.
ANS:
The three different types of unemployment are frictional unemployment, structural unemployment,
and cyclical unemployment. Frictional unemployment is caused by time delays in matching
available jobs and workers. Structural unemployment is caused by changes in the industrial
makeup (structure) of the economy. Cyclical unemployment is caused by recessions or economic
downturns.
DIF: Easy REF: Employment TOP: II.A. MSC: Remembering
2. Why does the unemployment rate remain above 0% during economic expansions? Is this a good or
bad thing for the economy? Explain.
ANS:
Even during economic expansions structural and frictional unemployment exist. Frictional
unemployment is caused by time delays in matching available jobs and workers. Structural
unemployment is caused by changes in the industrial makeup (structure) of the economy. Both of
these types of unemployment are good for an advancing economy because they make the economy
more efficient and allow for growth in the long run.
DIF: Moderate REF: Employment TOP: II.A. MSC: Understanding
3. Joe Jones is running for governor of your home state. He has hired you to help him run his
campaign. Mr. Jones has decided to make his campaign slogan “Vote for Joe! I’ll make the
unemployment rate zero!” Would you advise Mr. Jones to use this slogan? Why or why not?
ANS:
Mr. Jones should not use this slogan. A proposal to make unemployment equal to zero is
essentially a proposal to stall the economy. An unemployment rate of zero indicates that there is
absolutely no structural or frictional unemployment. No structural unemployment means that the
economy is not advancing. Structural unemployment is good for the economy because it means
new technologies are taking the place of old technologies. No frictional unemployment means that
individuals and firms are not searching for the most efficient match between jobs and workers.
Frictional unemployment is good for the economy because it means that firms and individuals are
taking the time to ensure that open jobs are filled with the best-qualified and efficient workers.
DIF: Moderate REF: Employment TOP: II.A. MSC: Evaluating
4. You are given the following statistics about the economy:

Employed: 228 million
Unemployed: 19 million
Answer the following questions to one decimal point:
a. What is the unemployment rate?
b. What is the labor force?
ANS:
a. 7.7%
b. 247 million
DIF: Moderate REF: Employment TOP: II.A. MSC: Applying

NOT: a. The unemployment rate is calculated as: (number of unemployed / labor force) x 100. b.
The labor force is calculated as: the total number of unemployed + the number of employed.
5. You are given the following statistics about the economy:

Unemployment rate: 5.7%
Number of unemployed: 10 million
a. How many people are in the labor force?
b. How many people are employed?
ANS:
a. 175 million
b. 165 million
DIF: Difficult REF: Employment TOP: II.A. MSC: Applying

NOT: a. The labor force is calculated as: (number of unemployed / unemployment rate) x 100.
Thus, the labor force can be calculated as: (number of unemployed) x 100 / (unemployment rate).
b. Once you have determined the answer for part a, you can calculate the number of people who
are employed by: the labor force - number of unemployed.
6. In NBC’s hit TV show 30 Rock, actor Dean Winters plays Dennis Duffy who works as a beeper
salesman in New York City. Because beepers are an old technology that has been taken over by
cell phones, Dennis loses his job.
a. What type of unemployment is Dennis experiencing?
b. What is something the government can do to limit this type of unemployment?
ANS:
a. Dennis is experiencing structural unemployment because his skills are no longer needed. The
economy is going through a structural change.
b. To help limit structural unemployment, the government can provide job training and/or
relocation subsidies.
DIF: Moderate REF: Structural Unemployment TOP: II.A.1.

MSC: Applying
7. Wes recently graduated from Penn State University and is in the process of finding a full-time job
to start his career. He is currently considered to be unemployed because he is actively seeking
employment.
a. What type of unemployment is Wes experiencing?
b. What is something the government can do to help limit this type of unemployment?
ANS:
a. Wes is experiencing frictional unemployment because there is a delay in matching his skills to a
job. Wes’s skills are needed, and there is a job available for him, he just needs to find the right one.
b. To help limit frictional unemployment, the government can provide information about job
openings and provide assistance in matching unemployed individuals looking for a job with jobs
available through job fairs or assigning unemployment specialists to groups of unemployed
persons.
DIF: Moderate
REF: Frictional Unemployment | Unemployment, Government Policies, and Incentives
TOP: II.A.2. | II.A.3. MSC: Applying
8. Give two examples of government regulations regarding hiring and firing that can contribute to
frictional unemployment.
ANS:
Government hiring regulations include restrictions on who can and must be interviewed,
paperwork that must be completed for new hires, and additional tax documents that must be filed
for employees. Regulations on firing include mandatory severance pay, written justification, and
government fines. And though these labor market regulations may be instituted to help workers by
giving them greater job security, they create unintended consequences. When there are restrictions
put in place to hiring employees, firms take longer to do so, which increases frictional
unemployment. If there are restrictions on firing employees, firms take greater care in hiring
employees, to ensure they get just the right ones. This longer search time also increases frictional
unemployment.
DIF: Moderate REF: Unemployment, Government Policies, and Incentives

9. Analyze the following statement: “Unemployment insurance can cause unemployment.”
ANS:
Unemployment insurance can cause unemployment because these jobless benefits may increase
the time that a person spends searching for a job. Unemployment benefits can make it less
attractive to search for and take a job. Workers may spend more time unemployed when they have
insurance; without unemployment insurance, workers are much more motivated to seek immediate
employment, which reduces the time spent unemployed.
DIF: Moderate REF: Unemployment, Government Policies, and Incentives
TOP: II.A.3. MSC: Analyzing
10. Explain why Italy experiences higher rates of unemployment during normal economic times than
the United States does.
ANS:
The United States has relatively few labor market regulations. On the other hand, Italy has
especially stringent labor market regulations. For instance, if an Italian employer employs 11
workers, the employer must submit a health and safety assessment, outlining every possible health
and safety hazard, including stress. Even more stringent regulations apply for higher levels of
employment, including allowing unions and paying for full-time union employees. Thus, the
unemployment rate ends up being higher in Italy. Much of this can be attributed to frictional
unemployment as the result of labor market regulations. With more market regulations, firms are
hesitant to hire, which can lead to more time for the job-matching process.
DIF: Difficult REF: Employment, Italian Style TOP: II.A.3.a.

MSC: Understanding
11. Describe two different uses of GDP, or give two different reasons to explain why it might be useful
to calculate GDP.
ANS:
GDP is used to measure living standards. Countries with a higher level of GDP have a higher level
of income and a higher average standard of living. Changes in the value of real GDP over time are
used to measure economic growth, or the percent change in the real value of production.
DIF: Easy REF: Two Additional Uses of GDP Data TOP: II.B.2.
MSC: Remembering
12. If GDP is increasing, is the country necessarily producing a larger quantity of goods and services?
Explain.
ANS:
No, the country is not necessarily producing a larger quantity of goods and services. The country
could be producing the same amount of goods and services, but the average price level could be
rising. Thus, non-adjusted GDP rises, while real GDP falls.
DIF: Moderate REF: Two Additional Uses of GDP Data TOP: II.B.2.
MSC: Evaluating
13. Explain why real GDP is preferred to non-adjusted GDP as a measure of economic growth.
ANS:
Non-adjusted GDP can increase as a result of increases in price or quantity or both. It is possible to
produce the same amount of goods and services (or even a smaller amount), but at the same time
have prices increase so that non-adjusted GDP increases. In such a case, there has been no growth.
Real GDP is constant.
DIF: Moderate REF: Two Additional Uses of GDP Data TOP: II.B.2.
MSC: Applying
14. A country’s non-adjusted GDP has declined over the last year. Are the people in the country
necessarily worse off, on average? Please explain.
ANS:
The people are not necessarily worse off. If the price level has fallen, then in real terms, GDP
could have actually risen. If population has declined, then per capita GDP could have actually
increased. A third possibility is that people are working fewer hours and choosing to take more
leisure time. The reduction in work hours will reduce the value of GDP. The value of extra leisure
hours does not count in GDP.
DIF: Difficult REF: Two Additional Uses of GDP Data TOP: II.B.2.
MSC: Evaluating
15. Define “inflation.” List and discuss two views of inflation.
ANS:
Inflation is an increase in the overall price level. One of the usual views is that the increase must be
sustained in the general price level to be considered inflation. Prices in general must be rising to
have inflation. Inflation can also be viewed as the inverse of purchasing power: the more prices are
rising, the less purchasing power. But if all prices, including wages (the price of labor) are rising,
then purchasing power is not affected.
DIF: Moderate REF: Inflation TOP: II.C. MSC: Understanding

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lips moved without words.
“Do you hear?” he repeated sternly. “What have you been doing to-
night?”
“I sang, you know I sang,” she replied at last, but her eyes quivered
and shrank away from his, and there was something about her like a
child expecting a blow.
But William did not heed it; he was still white with passion.
“You did more than sing,” he rejoined coldly. “You danced me into an
insult!”
Her eyes dilated.
“An insult—you?”
“Yes, an insult. Father saw you. He came home and told me what he
thought of you, and of me for letting you do it!”
Fanchon put her hand to her throat. She felt choked again, but her
beautiful, wild, fawn-like eyes clung to his face.
“You danced,” he went on bitterly. “What did you dance? One of
those—those fandangoes?”
Her face changed; a glimmer of light, of mischief, shot across it, and
she let her jeweled hands drop in her lap.
“Oui, I danced! Mais que voulez vous? Am I not a dancer? You—it is
you who are ashamed, mon ami!” she added bitterly. “Why you
marry me, then?”
He threw himself back in his chair, his clenched hand falling on the
table with a gesture as poignant as it was desperate.
“You’ve let the cat out of the bag! This place—these provincials!
Why, this place is full of it by now. Did you think you were in Paris?”
“In Paris?” she laughed wildly. “Mon Dieu, non! ‘O Paris, c’est chez
toi qu’il est doux de vivre, c’est chez toi que je veux mourir!’”
“Drop that chatter!” he said harshly. “You speak English as well as I
do.”
She did not answer for a moment; then she leaned across the table,
looking at him, her face white and her eyes sparkling.
“You’re ashamed that you married me, a dancer—n’est-ce-pas?”
He averted his face. She caught only the haggard whiteness of the
profile, and she saw his hand, stretched on the table, clench and
unclench nervously. She drew a long breath.
“You’re ashamed of me,” she said in a low, quivering voice, recoiling
from him. “I—I see it!”
“I loved you,” said William passionately. “I loved you, I asked you to
consider me, and—you do this!”
“You loved me!” she repeated the words slowly. “You—loved—me!”
She let the accent fall on the past tense, but he was deaf to the
implied appeal.
“Fanchon, you knew what they’d think of it here—you must have
known. Why did you do it?” he cried impatiently. “It’s like your
cigarette in the streets—you like to do these things!”
“Mais oui, I like to do them!” she replied softly. She laughed lightly.
“I’m naughty, William, but”—she leaned toward him again, looking at
him with her fawn-like eyes—“I’m sorry!”
Her look, her voice, her very attitude expressed surrender, and the
softness of her tone appeased him. He turned his head reluctantly
and looked at her. The light was behind her, making a nimbus behind
her lovely head, her soft, dark hair, and her white forehead, and the
beauty of her eyes. Her dress, too, the dancer’s silky, shimmering,
clinging robe, seemed to reveal just enough of her white neck and
arms. She was a thing so young, so exquisite, and so subtly
charming that he caught his breath. She looked as she had looked
the first time he saw her, when he lost his heart and his head. Her
dark eyes clung to his. “Et toi?” she murmured softly, exquisitely, her
lips trembling a little.
Involuntarily he put out his hand and touched hers as it lay on the
table, and the tenderness of that touch was a caress. For the
moment he forgot his father and his own anger. She was bewitching,
and she was his own! What did it matter if these narrow-minded
provincials were shocked at her dancing?
Yet he was aware that while she accepted his caress, accepted his
forgiveness, and gave him a soft and caressing smile, she was
changed. Something had come between them—something so
subtle, so immaterial, that he could not grasp it; but he felt ill at ease.
He said nothing, he did not know what to say, he felt that the
grievance was honestly his, and yet, in some mysterious,
unfathomable way, she had put him in the wrong.
He laughed uneasily and began to move the glasses about
awkwardly, jingling the ice in them like a child. He was glad, too, that
the waiter returned at that moment, with the supper. He changed his
order again and called for wine.
“I’m tired,” he explained to Fanchon. “I feel as if I needed it.”
She shrugged, elevating her brows and glancing around the room,
aware that necks were craned here and there, and that some
newcomers were staring steadily at her. One of them—a short, stout,
bald-headed man in a dress-suit with a wide expanse of shirt-front—
kept gazing at her, and after a while at William. He gazed and
rubbed the top of his bald head, and then ate—taking large
mouthfuls and gulping them down—while he still gazed at her.
Fanchon, seeing it, looked demurely at her plate, toying with her
fork. She wanted to laugh, but she remembered her husband’s
horror of the sensation she had just made, and she was aware, too,
of another figure farther away. She flushed a little, saying nothing,
and William, still feeling that little rift in the lute, busied himself filling
his wine-glass again.
Fanchon, who had never seen him drink wine, lifted her heavy eyes
from her plate to watch him. She knew he had already filled his glass
four times.
“He’s not a drinking man,” she thought shrewdly. “He’s unhappy
because he’s married me, a dancer!”
William lifted his fifth glass slowly to his lips.
“It’s not bad wine, Fanchon,” he said lightly; “but we had better in
Paris.”
She shook her head.
“In Paris you didn’t drink wine, mon ami.”
He reddened.
“Didn’t I? I——” He stopped short.
The stout, bald-headed gentleman had risen abruptly from his table
and was approaching theirs. He did not look at William, but bowed to
Fanchon.
“Mrs. Carter, I believe?” he said suavely. “Mrs. William Carter?”
Fanchon smiled.
“Mais oui, and—Mr. William Carter,” she added archly, looking at the
astonished William.
The fat man bowed again, then he produced a card-case and laid his
card on the table.
“I’m Samuel Bernstein,” he said proudly, “president of the Unlimited
Film Company. Perhaps you’ve heard of me, Mr. Carter?”
“No!” said William shortly, frowning. “I haven’t had the pleasure.”
Mr. Bernstein gave him a pitying glance.
“Go to the movies?” he asked mildly.
William nodded.
“Sometimes.”
Mr. Bernstein elevated his brows. He looked at Fanchon, and his
face changed and glowed with appreciation.
“Guess you go, madam,” he said in a confident tone, “a lady of your
talent! Excuse me”—he bowed first to one and then the other—“if
you’ll permit me, I’ll sit down. I’ve got a word to say—business, you
know, strictly business.”
Fanchon’s eyes danced. She threw a mocking look at William’s
stiffening face.
“Sit down, Mr. Bernstein,” she said sweetly. “Voilà! I love the movies!”
“There!” Bernstein beamed, drawing up a chair. “I knew a lady of
your talent must love ’em.” He waved his hand gracefully, speaking
to William now, but including William’s wife. “I want to say, sir, that I
witnessed that dance to-night, and—well, sir, it hit me straight in the
bull’s-eye! Never saw it better done—never! I congratulate Mrs.
Carter, sir, and I congratulate you. It was a gem!”
William, very red, inclined his head stiffly, but Fanchon was radiant
with smiles.
“Merci du compliment!” she murmured.
“Eh? Oh, you’re French, ain’t you?” Mr. Bernstein returned her smile
genially. “Corwin was telling me you were Mamselle Fonchon lay
Fare. That would sound a top-liner, too, on a bill-board. Corwin—you
know him? Yes? Well, he’s running a vaudeville show somewhere
now, besides that hairy piano man, and he wants you in his show. I
suspicioned that right off.”
“My wife isn’t a show-woman!” thundered William, his brow black.
“No offense, no offense, Mr. Carter!” Mr. Bernstein waved a fat hand
on which a diamond flashed magnificently. “I don’t cotton to these
cheap shows myself. Now, madam, I’m a business man, and I’ve got
a proposition to make to you, a gilt-edged proposition.” He edged his
chair nearer, looking from Fanchon to William and back again, with
the air of a benefactor. “It’ll appeal to you, sir. It’s dignified, it’s fine,
and it’s money, sir, good money! Now, I saw that dance to-night and I
says to myself, ‘Sammy Bernstein, if you’re a man you’ll beat it after
that first thing,’ and I’m beating it. Madam, I’d offer you, as a starter,
five hundred dollars a week to give that dance in a picture, a high-
class, six-reel picture, for the Unlimited Film Company!” Mr.
Bernstein flung himself back in his chair, thrust his thumbs into the
armholes of his white waistcoat, and beamed upon them. “Five
hundred dollars a week, madam, and your expenses—for one
picture. You can’t beat that—Corwin ain’t going to beat that!”
“My wife won’t go into the movies!” said William, white with anger.
Mr. Bernstein reddened.
“I reckon you don’t understand, sir. The Unlimited Film Company is a
star company, sir; it does the finest pictures in the country; we’ve got
more stars than any other company this side of the Rockies. We got
’em, and we treat ’em right.”
William rose furiously.
“My wife isn’t looking for an engagement, sir, so we bid you good
evening!”
Mr. Bernstein rose hastily.
“I say—no offense——”
“You’re very good,” said Fanchon softly, lingering an instant as
William strode away; “I’m not in it—not now! My husband doesn’t like
it, you know. Adieu, monsieur, et merci!”
She was smiling, a little flushed, altogether charming, as she lifted
her fawn-like countenance to his red face. Mr. Bernstein relaxed and
grinned knowingly.
“I see! I’m sorry, madam. Put my foot in it, eh?” He lowered his voice.
“I’ll make it eight hundred a week—see?”
She nodded, but William had turned a white face toward them, and
she fled lightly, following him in his hasty stride through the now
crowded dining-room. She had caught her wraps up hastily and
thrown them about her shoulders, and the chiffon frills framed her
small, pointed chin.
The diners—belated motorists and traveling salesmen—stared
delightedly. The scene was as plain as a charade, the angry young
husband and the lovely, coquettish, frivolous young wife. Fanchon
caught whispers of admiration and glances of sympathy. At another
moment they would have pleased her, would have appealed to every
instinct of her light, admiration-loving nature, but to-night she saw
some one ahead, some one whom she must pass, and she was
thinking, thinking hard and fast, her heart beating pitifully under the
splendor of her dancing dress.
Meanwhile William stalked ahead, with his square jaw set and his
eyes stormy. He wanted to wring Bernstein’s neck and he could not.
It made his hands clench and unclench nervously at his sides.
As they neared the door, a tall man rose from a crowded table and
greeted Fanchon in French with an effusion that made William halt.
Corwin caught his eye and bowed.
“Present me to your husband,” he said to Fanchon.
She turned with that delicate grace which made her small figure
seem so light and buoyant. She had rallied all her forces, all her will.
She smiled, her eyes shining dangerously.
“William, this is my old friend, Mr. Corwin.”
William shook hands stiffly.
“We’re just going,” he said shortly. “Good night!”
Fanchon laughed, half-apologetic, half-coquettish; but she found
herself hurried out into the hall.
“Who’s that fellow?” asked William sharply. She was still laughing,
half hysterical.
“Caraffi’s manager, Aristide Corwin—I’ve known him for ages.”
William grunted.
“Looks like a Monte Carlo gambler,” he said, and signaled for a taxi.
X
Virginia bade Lucas stop the horses. The old wagonette was on its
way out to Denbigh Crossing, and Daniel Carter had just come in
sight. Virginia thought she had never seen him look so pale.
“He looks ill, and his limp is bad, too, poor fellow!” she breathed to
herself; but she smiled, leaning over the back of the seat to shake
hands.
“Where have you kept yourself, Dan?” she asked kindly, with the
sweetness in her tone that Daniel had come to recognize as pity.
“Grandfather has been asking for you.”
“I’m afraid he wants the book he lent me,” said Daniel, looking up at
her and aware of the softness of her glance. She looked lovely, that
same old shade hat looped down and the knot of pink under her
chin; but the muslin dress was dotted white Swiss this time, with a
little opening at the neck that showed a lovely throat. “I’ll bring it back
this week.”
“Fie! As if he wanted the old book! We’ve missed you, Dan.”
He flushed boyishly and let his eyes dwell upon her. And, for the first
time in her life, Virginia blushed consciously under Daniel’s look.
“Have you really?” he asked eagerly.
“Really and truly!” She nodded at him, smiling. “I should have written
you a note about it—invited you to dinner, in fact, if it had not been
for our—our concert—” She blushed this time, remembering
suddenly that there must have been an earthquake in the Carter
house. “I’ve just finished settling up the accounts with Mrs. Payson,”
she added hurriedly. “I’m glad it’s over!”
There was a ghost of laughter in Daniel’s eyes, but he kept a sober
face.
“It was a success, then, Virginia?”
“Oh, yes! We paid in our full share; no one out of pocket except Mr.
Payson. You know, he paid Caraffi. Dan, did you hear Caraffi play?”
He shook his head.
“I’d rather hear you.”
“Mercy! Don’t say that out loud.” She laughed, but her blush
deepened. It seemed to-day as if there was something new in
Daniel, something she did not understand. “Come and hear me play,
though, and I’ll believe you.”
Daniel glanced at the very conscious but decorous back of Lucas,
and smiled. No one was ever worried about what Daniel said!
“I’m coming. I’ve been wanting to come all along,” he said gravely;
“but—I’m afraid of wearing out my welcome.”
She looked surprised, then, catching his eye, realized that Daniel
had been afraid that William’s brother was unwelcome. She blushed
gloriously this time.
“You couldn’t—you couldn’t if you tried,” she said softly. Then to the
coachman: “Go on, Lucas. I mustn’t keep you, Dan, but be sure you
come soon.”
He stood bare-headed in the sunshine, watching the old wagonette
disappear; then he put on his hat and walked haltingly and slowly
toward the court-house. He was to address the jury in the afternoon,
and in some way the sight of Virginia always helped him. He seemed
to carry her smile, like sunshine, into the old dim court-room. He
always spoke well afterward, so well that he was getting the name of
an orator without being aware of it.
Plato had just served a light lunch for Colonel Denbigh on the lawn.
The old man, sitting under his favorite horse-chestnut-tree, ate
sparingly and drank one iced julep, made in the old Virginia style. He
had finished, and Plato was holding the lighter for his cigar.
“Go to the concert the other night, Plato? Miss Virginia says you
carried her bundles, and she thinks you heard it all.”
Plato held the lighter dexterously.
“Yessuh, I went ’long wid Miss Jinny. Didn’t pay no ’mission fee, jus’
walked righ’ in, same as Miz Payson an’ de quality. Yessuh, de
music mighty fine, but I was lookin’ at young Miz Carter when she
was dancin’. Dat’s what done took dis yere nigger!”
The colonel puffed at his cigar, a twinkle in his eye.
“Like it, Plato?”
“Yessuh! It was de mos’ circumspecklar dancin’ I ever see, suh, it
sho was. I ain’t seen nuffin like it since de circus. But Mirandy
Parsons, de collud girl dat works at Miz Carter’s, she says dere was
terr’ble goings-on dere ’bout dis yere dance. She ’lowed Mist’ Carter
mos’ throw a fit.”
Colonel Denbigh took off his hat and ran his fingers through his white
hair.
“It was a great dance, Plato, a great dance.” He shook with silent
laughter. “Some of the weaker brethren had to leave, though.”
“Dey sho did, suh! I met de Baptist minister comin’ out, an’ de ladies
was wid him. Dey was sayin’ something ’bout dat dance in de Bible,
an’ ’bout John de Baptist’s head on a charger. Seems like he took it
hard—I don’t mean John de Baptist, but de minister. Done paid five
dollahs fo’ his sittin’, an’ couldn’t set out no five dollahs’ worth. Dat’s
what got him mad, suh, it sho was.”
The colonel shouted with laughter.
“He got more than five dollars’ worth out of that dance, Plato! There’s
Miss Jinny now,” he added, glancing down the driveway. “You go and
help her out with her packages.”
The old wagonette had entered the gateway, and Plato hurried off
across the lawn; but the horses stopped short, and Virginia got out,
meeting some one who had entered from the opposite direction. The
colonel, well in the shade of his horse-chestnut, removed his cigar
from his mouth. He was startled. The visitor was William Carter.
While Plato was taking a number of small packages from the
wagonette, the pair greeted each other in the sunlit space of the old
driveway. Something in their faces made the colonel rise silently and
deftly beat a retreat. He passed behind the old box hedge and made
his way back to the house.
“I reckon they’d like to have it out by themselves,” he thought.
Virginia, meanwhile, came across the lawn with William Carter. She
stopped as she came near the horse-chestnut.
“Why, I thought grandfather was here!” she exclaimed, and then to
William: “Won’t you sit down? I’ll call him.”
“But I didn’t come to see him,” said William quietly. “I came to see
you, Virginia. I suppose I may sit down just the same?”
She blushed.
“Of course!” She took off her hat and laid it on the rustic table, and
the sunshine seemed to caress the strands of gold in her soft hair.
“We like to sit out here, you know, in summer. It seems so good to be
out-of-doors. Do you notice what a view we have, since they cut that
new street through?”
She was talking hurriedly, a little nervously, not looking at him. It was
their first moment alone together since his return, and Virginia was
not quite sure of herself. She pointed out the view.
William turned and looked at it absently.
“You can see a long way, can’t you?”
“Yes; and there’s such a glimpse now of blooming things. The old
magnolia’s full of buds.”
“Fanchon doesn’t like these things,” said William moodily. “They bore
her. She says she’d rather see one of those electric signs in New
York, flashing Budweiser beer in and out, than sit here and count
lightning-bugs!”
Virginia laughed, blushing again.
“What would we do if we all liked the same thing?” she asked lightly,
and then, very sweetly: “William, I think your wife is beautiful. At first,
one can’t decide, the face is so charming, so piquant; but when she
smiles and those dark eyes of hers dwell on you—she’s beautiful!”
William said nothing for a moment. He was sitting in the colonel’s
chair, his hat on his knees, and Virginia could see new haggard lines
in his face. He did not look at her, but away toward a distant spire
that appeared above the thick foliage, like a finger pointing upward.
“Yes, she’s beautiful,” he admitted at last, almost with reluctance.
Virginia, aware that he was thinking of days long ago, when he had
taken her to church and carried her books home from school, felt her
breath coming short. She was trying hard, but if he would not meet
her half-way, how could she patch it up?
She averted her face, toying with her grandfather’s empty glass. The
ice still jingled in it a little, and William started. He remembered
jingling the ice in the glasses on the inn table, and Fanchon’s eyes
seemed to mock him. He drew a long sigh.
“I hope you don’t mind my sitting here, Virginia,” he said gravely. “It’s
—it’s so homelike. I can’t bear to go. I suppose lost spirits hang
around sometimes outside the gates of paradise.”
Virginia caught her breath this time. She dared not look at him. She
had taken a ring out of her pocket and held it out in the palm of her
hand; but now, looking at his set profile, she hardly dared to speak of
it. Her hand trembled; he was unhappy, and he had come to her!
Something like fear showed in her eyes, but she forced herself to
speak.
“I wish you’d come in and see grandfather. He’d be glad, I know. We
meant to come to see your wife again—some evening when you
would be at home.”
William lifted his head slowly and looked at her.
“Virginia, I got the letters you sent me,” he said in a low voice. “The
reason I didn’t return yours was—I burned them one night in Paris
just before—”
He stopped, unable to go on, red in the face; but she was quite calm.
His very embarrassment steadied her.
“That’s all right,” she said. “I’m glad you spoke, because I wanted to
give you this.” She held out her hand with the ring in her palm. “I
know it belonged to your grandmother. I was afraid to trust it to the
mails. Here it is, William.”
He held out his hand stiffly, without looking at her, and Virginia had to
put the ring into it.
“Thank you,” he said in a low voice.
Then he looked in a dazed way at the ring lying in his hand. The
color slowly receded from his flushed face and left it pale. He
remembered the day he had put it on her finger!
So did she; but Virginia was a brave woman. She could not help
seeing his face, and, being a woman, she knew. She could shape
the whole story easily now. She had heard rumors of Mr. Carter’s
wrath at Fanchon’s dance, and she knew what William must have
felt. The talk must have reached him. This was the recoil. She loved
him, and she understood. It would have tempted another woman; it
frightened Virginia. She tried to think of something to say, but she
could not.
They sat silently, the shade of the horse-chestnut stretching over
them. Beyond them the sun shone on the old lawns and flower-beds.
They were so motionless that a robin, searching for worms, came
almost up to their feet.
“Do you mind my sitting around here?” he asked again in a low
voice. “It’s the most restful place I’ve found.”
She steadied her voice.
“It is a restful place. Once we thought we’d have to give it up, but
some stocks paid in, and we saved it. I’m so glad!”
William straightened himself.
“I didn’t know that.”
She was startled. She had not thought that he would take it in this
way. Everything led them into the shoals, it seemed. She smiled, but
her lips shook.
“I don’t think any one knew it but Dan,” she replied gently. “Dan
helped us save it.”
“Dan?” He turned and looked at her, plainly startled, too, by another
thought. “Dan?”
She met his look steadily this time.
“Yes, Dan. He’s so good to us. I think he’s very noble.”
William stared at her, paling again. A kind of fury came into his look,
and she saw it. He was jealous of Dan! She understood now. That
poor girl, his wife, had been a wild fancy, an episode, no more, and
he was waking up.
She rose slowly to her feet.
“Come,” she said. “I’m going in. Grandpa is there, and you must
come in and see him.”
She turned as she spoke, and William got to his feet, still white and
haggard, his eyes following her. But Virginia stopped abruptly. Before
them on the lawn, unheard and unseen in her approach, stood a
small, white-clad figure in a daring scarlet hat, pale and piquant.
“I don’t think you heard me,” said Fanchon softly, her dark eyes
flashing from one to the other. “You weren’t listening!” And she
laughed shrilly.
William crimsoned, but Virginia was calm.
“No, we didn’t,” she replied simply; “but I’m glad to see you. We were
just going into the house—will you come, too?”
Fanchon lifted her fawn-like eyes slowly to the other girl’s face.
There was something noble in it, too noble for the retort that was on
the end of her sharp tongue. She colored angrily.
“Of course! I came to call,” she said lightly. “William got ahead of me,
I see.”
Virginia did not reply to this. She was already at the piazza steps.
“Please come this way,” she said lightly.
But Fanchon did not answer her. She had approached her husband,
her large eyes mocking him, her lips parted. A strange look, half
elfish, half fond, was on her face.
“You needn’t be in such a hurry to hide that ring,” she said below her
breath. “I know about it. There was one letter you forgot to burn, mon
ami!”
He turned from red to white. His only comfort was Virginia’s noble,
unconscious look as she led the way into the house.
XI
Colonel Denbigh accompanied his guests to the door, and, after
the farewells were sufficiently prolonged to suit his old-fashioned
ways, he stood on the piazza and watched them to the gate.
Fanchon turned there, a small, graceful creature, and kissed her
hand to him. The colonel waved. William raised his hat, and the two
figures turned off into the street.
As they grew smaller in the distance, Virginia came out and stood
beside her grandfather.
“A pretty creature,” said the colonel thoughtfully. “Claws in velvet!
What do you think of her, Jinny?”
“I don’t know,” Virginia replied honestly. “She’s pretty—but there’s
something I can’t describe. She’s like a wild bird just put in a gilt
cage. It’s a terribly trite simile, but it fits her. She’s beating her
wings.”
“That’s poetry, Jinny,” said the colonel, chuckling. “It’s because she’s
young and pretty. If she’d been a man, with that kind of an eye, we
would have said something about beating his hoofs—I mean cloven
ones. She sings like a bird, dances like a fairy, and behaves—well, I
remember that Mrs. Payson called her something in French. What
was it, eh? Maybe it takes French to express her.”
Virginia flushed.
“She called her a little étourdie. Of course she does queer things;
she’s not well-bred, and she seems like a bundle of impulsive whims,
but she’s rather captivating in all of them, and fascinating in some.”
“Humph!” The colonel pulled his mustache thoughtfully. “I see you’re
determined to like her, Jinny.”
“I want to—yes.”
“You can’t,” said the colonel gently, laying his hand on her shoulder.
“It’s a case of sugar and salt, you can’t mix ’em. Don’t try too hard,
Jinny. Leave her alone.”
Something in his tone made Virginia look up quickly.
“Why, sir?”
Colonel Denbigh hesitated; then he blushed like a girl.
“I don’t talk scandal, Jinny, you know that, but I hear some. Let her
alone.”
“Oh, that dance—”
He shook his head.
“No, not the dance. That only unloosed tongues. You spoke of that
man, Caraffi’s manager—what was his name?”
“Corwin. A horrid creature,” said Virginia, suddenly recalling
Fanchon’s face when she saw him in the waiting-room of the hall.
The colonel nodded.
“Corwin—that’s the name. Well, William’s wife knows him, she’s
been seen walking with him. There’s talk about it. It may be all false,
but I’d rather you kept away.”
Virginia had grown very thoughtful.
“I remember now, grandfather. She seemed afraid of him, poor girl.
He’s a terrible creature, I’m sure—I wonder if he isn’t doing it on
purpose? Starting the talk, I mean.”
“Very likely,” said the colonel dryly; “but he’d have to have something
to start on. When there’s so much smoke, there’s some fire. I don’t
like her, and yet”—he smiled—“what a pretty creature!”
“She’s not twenty, I’m sure. I think it’s wicked to talk so about her.”
Virginia flushed generously. “Why are people so cruel?”
The colonel smiled.
“Jinny,” he said gently, “that little woman wouldn’t raise her finger to
save you from the gallows.”
Virginia’s blush deepened.
“That doesn’t matter, grandfather!”
The old man looked at her proudly. She was standing beside him,
her tall young head nearly level with his own, and her charming
profile toward him. She had a look that was better in his eyes than
mere beauty—a look of noble purity. He had never known her, even
in childhood, to tell a falsehood. He patted her shoulder.
“I leave it to you, Jinny. I reckon I can trust you. But there’s one thing
I want to say.” He hesitated, then he finished firmly: “That boy,
William, disappoints me. He’s lost his grip. He’s been keeping gay
company, I reckon, and he looks as if he’d been drinking. If it wasn’t
for his lameness, Daniel’s twice the man!”
Virginia said nothing. She couldn’t; her heart was beating in her
throat. She remembered William’s face when she returned the ring.
The colonel kept his hand on her shoulder, and they stood together,
looking out across the close-cut lawn. Lucas, having put up the
horses, was running a lawn-mower near the gate. It was that hour
when the shadows begin to lengthen and one perceives the
fragrance of the honeysuckle. It seemed to penetrate the late, warm
afternoon, and to gather bees.
“Jinny, who’s that man—the fat man with a bald head?” the colonel
asked presently. “He’s either a real-estate man or a lunatic. He wants
to buy the place, I reckon. See him?”
Virginia, who had been in a trance, roused herself. Her eyes fell on a
stout figure advancing toward the piazza, hat in hand.
“He wants to tune the piano, grandpa, or to varnish the mahogany
tables.” She laughed softly, and fled lightly toward the door. “I’m
going. You can send him away. I refuse to be varnished!”
The colonel heard her flight to the stairs; but he stood his ground and
waited, a twinkle in his eye. The stout man approached steadily, with
an expression of genial politeness. He had an air of feeling his own
importance, but being willing to condescend. He wore a finely-
tailored suit, a sport necktie with a diamond pin, and in the sunshine,
his bald head looked like a piece of polished pink coral set in Florida
moss.
“Colonel Denbigh, I believe?” he said suavely.
The colonel bowed politely.
“That’s my name, sir.”
Mr. Bernstein presented his card.
“I’d like a word with you, colonel. Strictly business—important,
confidential business.”
The colonel regarded him a moment with the same twinkle in his
eyes; then he descended the piazza steps.
“Come this way, Mr. Bernstein. I like to sit out of doors. Have a
cigar?”
Mr. Bernstein accepted. They had reached the back of the house
now, and he stopped short.
“Gee, what a view! Ain’t that about three thousand feet out there?
Finest three-reel picture I ever got in a bird’s-eye view! Only wants a
little life in it, colonel—a cow and a rough-rider, and maybe a couple
of bandits. It’s just the set—with them mountains behind.”
The colonel, who had reached his favorite seat under the horse-
chestnut, looked startled.
“I reckon you’re a movie man, aren’t you?” he inquired mildly.
“Had ’em before?” Mr. Bernstein looked anxious.
“One or two. This place seems to appeal to them. Sit down, Mr.
Bernstein, you’ll find that seat comfortable. I always take this one—
I’m getting old and set in my ways. I suppose it’s the place you’re
interested in?”
Mr. Bernstein edged his chair closer to the wicker table and leaned
across it.
“Say,” he began with a glow of enthusiasm, “this place and that
servant and you! It would be great. I says to Greenfield—he’s my
best director—I says to him before I came up here, ‘Now what we
want is one of them old-time, sort of before-the-war Southern
aristocrats.’ When I saw you, colonel, I—gee, sir, I says to myself:
‘Sammy Bernstein, there’s your man!’ It ain’t your clothes, colonel,
it’s the way you look. Say, I’ve got a fellow at the studio—dress him
up in a silk hat and white tie and patent-leather pumps, and he looks
like a duke. But you put that guy into his every-days, and, bless your
soul, you wouldn’t know him from a tin-peddler! Now, it ain’t so with
you. You’d look the part in your shirt-sleeves. When I saw you, I says
to myself: ‘Sam Bernstein, there’s the real article—ain’t any near-
seal about that, either!’”
“Mr. Bernstein, say no more,” said the colonel. “I’m a modest man!”
Bernstein expanded, smiling.
“Sir, I’ll make it two thousand dollars for this place, that old negro,
and you in one five-reeler. Two thousand dollars down! Isn’t any
work in it. You just stand and look natural.”
This time the colonel’s eyes did more than twinkle; he laughed
heartily.
“Mr. Bernstein, I never looked natural before a camera in my life. I’m
afraid we can’t come to an agreement. I’m too old for the movies, sir.
I’ll have to decline.”
Bernstein’s face fell.
“You don’t mean it, colonel; you can’t mean that!”
The colonel nodded, then he pulled a moment at his cigar.
“I’m afraid I do mean it. Perhaps Plato—that’s my man—might be
interested. I’ll ask him.”
Bernstein held up his hands.
“Not without you, colonel!” He sat and stared for a moment at the old
man opposite, a look of hopeless commiseration on his face. “Say,”
he groaned at last, “you people down here haven’t got any
enterprise! This is my second experience. I’m surprised, colonel; I’m
pained. This town—it’s perfect, sir, for the part, it’s kind of dead-and-

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1. Macroeconomics is the study of:

2. Which of the following is a topic of microeconomics?

3. Which of the following is a topic of macroeconomics?

4. The Great Depression lasted most of which decade?

5. Official unemployment is identified as when a worker:

7. Which of the following lists the three types of unemployment?

9. Structural, frictional, and cyclical are all types of:

10. Which of the following people would be officially considered unemployed?

12. Natural unemployment is the:

13. During healthy economic periods, only _________ unemployment exist(s).

17. Structural unemployment is:

18. All three types of unemployment:

22. Which of the following is an example of structural unemployment?

26. Which of the following statements about structural unemployment is true?

29. Frictional unemployment is:

39. Frictional unemployment is present in an economy because:

46. One argument against unemployment insurance is that it:

48. Cyclical unemployment is:

49. An economic downturn can lead to mainly which type of unemployment?

50. During economic downturns:

51. The recession of 2007–2009 has been dubbed the:

52. The 2007–2009 recession lasted for ________ months.

54. During healthy economic periods, cyclical unemployment:

61. The market value of cell phones is:

62. The market value of pizza is:

64. GDP is a good, but not the best, measure of:

65. To determine living standards for the average person, we calculate:

69. Economic growth is best measured by changes in:

70. Real GDP is GDP adjusted for changes in:

72. Which country has the lowest average living standard?

77. In a given year, if real GDP equals non-adjusted GDP, then:

79. A shortcoming of non-adjusted GDP is that:

81. If non-adjusted GDP is increasing, which of the following is true?

82. If non-adjusted GDP is declining, then it must be the case that:

84. Inflation occurs when:

86. A primary cause of inflation is:

88. A school of thought is a:

1. List and define the three different types of unemployment.

DIF: Easy REF: Employment TOP: II.A. MSC: Remembering

DIF: Moderate REF: Employment TOP: II.A. MSC: Evaluating

4. You are given the following statistics about the economy:

DIF: Moderate REF: Employment TOP: II.A. MSC: Applying

5. You are given the following statistics about the economy:

DIF: Difficult REF: Employment TOP: II.A. MSC: Applying

DIF: Moderate REF: Structural Unemployment TOP: II.A.1.

DIF: Moderate REF: Unemployment, Government Policies, and Incentives

9. Analyze the following statement: “Unemployment insurance can cause unemployment.”

DIF: Difficult REF: Employment, Italian Style TOP: II.A.3.a.

15. Define “inflation.” List and discuss two views of inflation.

DIF: Moderate REF: Inflation TOP: II.C. MSC: Understanding

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