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标题: Economics 【Reading 18】Sample [打印本页]
作者: prashantsahni    时间: 2012-3-25 11:09     标题: [2012 L1] Economics 【Session 5 - Reading 18】Sample

The expansion phase of a business cycle is least likely characterized by:
A)
increasing inflationary pressures.
B)
increasing unemployment.
C)
a positive rate of economic growth.


Unemployment is typically decreasing during the expansion phase of a business cycle.
作者: prashantsahni    时间: 2012-3-25 11:09

During an economic contraction:
A)
inflation pressures are typically decreasing.
B)
the unemployment rate typically decreases.
C)
real GDP growth is greater than its sustainable long-term rate.


An economic contraction (recession) is typically characterized by decreasing inflationary pressures, increasing unemployment, and low or negative real GDP growth.
作者: prashantsahni    时间: 2012-3-25 11:09

A peak in the business cycle is most likely associated with:
A)
decreasing inflation pressure.
B)
the highest level of economic output during the cycle.
C)
payroll employment turning from positive to negative.


The peak phase of a business cycle represents the highest level of economic output (real GDP) reached during that cycle. Inflation pressure that built during the expansion may continue into the early part of the contraction that follows the peak. Employment typically does not begin to decline until sometime after the peak.
作者: prashantsahni    时间: 2012-3-25 11:10

An economy has been producing at its full-employment level of output and the price level has been stable. Businesses then begin experiencing unintended decreases in their inventory levels. What does this most likely imply about the short-run outlook for economic growth and inflation?
Economic growth Inflation
A)
Increasing Increasing
B)
Increasing Decreasing
C)
Decreasing Increasing


Starting from conditions of long-run equilibrium, unintended decreases in inventory levels suggest that aggregate demand has increased. Producers will respond in the short run by increasing output and prices, so economic growth and inflation will increase.
作者: prashantsahni    时间: 2012-3-25 11:10

As an economic expansion approaches its peak, the economy is most likely to show:
A)
a decrease in inventory levels.
B)
accelerating sales growth.
C)
an increase in the inventory-to-sales ratio.


As the economy approaches its peak, sales growth begins to slow, unsold inventories begin to accumulate, and the inventory-to-sales ratio increases.
作者: prashantsahni    时间: 2012-3-25 11:10

A firm’s most likely initial response to a cyclical increase in the inventory-to-sales ratio is to adjust their utilization of labor by:
A)
reducing overtime.
B)
adding new workers.
C)
laying off employees.


As a cyclical indicator, an increase in the inventory-to-sales ratio is a sign of slowing economic growth. When decreasing their utilization of labor in response to a slowing economy, firms typically first reduce overtime. Firms tend to be slow to lay off workers until it is clear that an economic contraction is underway.
作者: prashantsahni    时间: 2012-3-25 11:11

At a recent symposium, “The Great Economic Debate of the Decade” several panelists were asked to state their opinions on aggregate demand and aggregate supply.
Panelist 1 stated that he believed shifts in both aggregate demand and aggregate supply were driven primarily by changes in technology over time.
Panelist 2 stated that she believed the focus of economic policy should be to directly increase aggregate demand by increasing the money supply or through fiscal policy.
The views of Panelist 1 and Panelist 2 would best be described as which economic school of thought?
Panelist 1Panelist 2
A)
NeoclassicalKeynesian
B)
New ClassicalMonetarist
C)
KeynesianNew Keynesian


The neoclassical economists believe that shifts in both aggregate demand and aggregate supply are primarily driven by changes in technology over time. Keynesian economists believe that aggregate demand can be increased through monetary policy (increasing the money supply) or through fiscal policy (increasing government spending, decreasing taxes, or both). They do not focus on aggregate supply. Monetarists believe that the main factor leading to business cycles and deviations from full-employment equilibrium is monetary policy.
作者: prashantsahni    时间: 2012-3-25 11:11

Which of the following statements is most accurate regarding monetarists? Monetarists believe that:
A)
discretionary monetary policy is the best way to moderate fluctuations in prices and output.
B)
steady, predictable money growth is the best monetary policy.
C)
fiscal policy is the most powerful of all government tools used to affect prices and output.


Monetarists believe that the Fed’s tools are powerful and should not be used to moderate fluctuations in prices and outputs. Thus, steady, predictable growth is the best monetary policy. They believe in the power of the money supply, not fiscal policy, to affect prices and outputs.
作者: prashantsahni    时间: 2012-3-25 11:11

Which of the following most accurately describes the Monetarist school of macroeconomic thought in relation to aggregate demand and aggregate supply? Monetarists believe that the money supply should be:
A)
increased by a predictable rate annually.
B)
reduced during inflationary periods and increased during recessionary periods.
C)
increased during inflationary periods and reduced during recessionary periods.


Monetarists believe that to keep aggregate demand stable and growing, the central bank should follow a policy of steady and predictable increases in the money supply. Furthermore, monetarists believe that recessions are caused by inappropriate decreases in the money supply and that recessions can be persistent because money wage rates are downward sticky.
作者: prashantsahni    时间: 2012-3-25 11:11

According to Austrian school theory, business cycles are caused by:
A)
long-run structural changes in real economic variables.
B)
excessive optimism or pessimism among business managers.
C)
government intervention in the economy.


In Austrian school business cycle theory, cycles are caused by government intervention that reduces interest rates below what they would be without government intervention, which leads to an artificial economic boom that must eventually collapse because the economy lacks the physical capital to support it.
作者: prashantsahni    时间: 2012-3-25 11:12

According to Keynesian school theory, business cycles are caused by:
A)
changes in technology over time.
B)
inappropriate variations in the growth of the money supply.
C)
excessive optimism or pessimism among business managers.


In Keynesian business cycle theory, business cycles are caused primarily by changes in expectations about economic growth. Business managers overinvest when they are excessively optimistic and underinvest when they are excessively pessimistic.
作者: prashantsahni    时间: 2012-3-25 11:12

When economists are speaking of the labor-force participation rate, they are referring to which of the following? The labor-force participation rate is the percentage of the:
A)
working-age population who are working.
B)
labor force who are new entrants (less than one year of work experience).
C)
working-age population who are either working or actively looking for work.


The labor-force participation rate is the percentage of the working-age population who are employed or actively seeking employment. The labor-force participation rate can be calculated as: (the labor force / working-age population) × 100.
作者: prashantsahni    时间: 2012-3-25 11:12

Bradley works a 14-hour-per-week job as a bartender at McQuigley’s Pub. Maddeline left her position at a commercial bank to raise her two-year old daughter. How would these individuals be classified from the viewpoint of employment statistics?
[td=1,1,120]Bradley Maddeline
A)
Employed Employed
B)
Not in labor force Not in labor force
C)
Employed Not in labor force


The labor force includes all people who are either employed or actively seeking employment. As such, Bradley is considered employed from the viewpoint of employment statistics whereas Maddeline is not counted in the labor force.
作者: prashantsahni    时间: 2012-3-25 11:13

Unemployment can be divided into the following three categories:
A)
Frictional, seasonal, cyclical.
B)
Technical, frictional, seasonal.
C)
Frictional, cyclical, structural.


Unemployment can be divided into frictional, cyclical, or structural unemployment.
作者: prashantsahni    时间: 2012-3-25 11:13

Steve Walker, CFA, is attending an economics lecture, during which the lecturer makes the following two statements about consumer price inflation:
Statement 1: High-definition televisions are considerably more expensive than traditional models. This means consumers are spending more money per television unit, which represents a form of inflation.
Statement 2: Employment contracts with automatic increases based on the Consumer Price Index fail to increase wages in line with the cost of living because of biases in the price index.
Should Walker agree or disagree with these statements?
Statement 1Statement 2
A)
AgreeAgree
B)
DisagreeDisagree
C)
DisagreeAgree


Walker should disagree with both statements. Price changes resulting from increases in the quality of goods, do not represent inflation. However, the Consumer Price Index is affected by biases from product quality, as well as new goods and substitution, causing it to overstate the rate of inflation. As a result, increases in wages that are based on CPI will more than compensate for actual increases in the cost of living.
作者: prashantsahni    时间: 2012-3-25 11:13

Which of the following is the most accurate definition of the labor force?
A)
All people of working age.
B)
Those people of working age who are not retired or in prison.
C)
Those people of working age who are either employed or seeking employment.


The labor force includes people of working age (16+) who are either employed or seeking employment. People who are not employed or seeking employment (e.g., homemakers, full-time students, "discouraged" workers) are not counted as part of the labor force.
作者: prashantsahni    时间: 2012-3-25 11:13

Which of the following is the most accurate definition of the unemployment rate? The unemployment rate is the number of:
A)
unemployed individuals divided by the number of employed individuals.
B)
individuals employed divided by the number of people who are unemployed and retired.
C)
unemployed individuals divided by the total labor force.


The unemployment rate of a country is the percentage of people in the labor force who are unemployed. It is calculated as: unemployment rate = (number of unemployed / labor force) × 100. The labor force includes those individuals who are employed or are actively seeking employment.
作者: prashantsahni    时间: 2012-3-25 11:14

When individuals are unemployed because they do not have perfect information concerning available jobs, this is:
A)
structural unemployment.
B)
frictional unemployment.
C)
natural unemployment.


Frictional unemployment exists because workers and employers do not have perfect information and must expend time and resources on search activities.
作者: prashantsahni    时间: 2012-3-25 11:14

Which of the following is the least likely one of the types of unemployment?
A)
Frictional.
B)
Structural.
C)
Temporal.


There are three types of unemployment: frictional, cyclical, and structural.
作者: prashantsahni    时间: 2012-3-25 11:14

Which type of unemployment describes situations where qualified workers are not immediately matched with existing job openings?
A)
Frictional.
B)
Structural.
C)
Cyclical.


Frictional unemployment will prevent qualified workers from being immediately matched with existing job openings. Two causes are imperfect information and the job search conducted by both employers and employees.
作者: prashantsahni    时间: 2012-3-25 11:15

Which type of unemployment describes a situation where workers who have been laid off due to economic changes and they are unable to find work due to a lack of education or the necessary skills to move into another available job?
A)
Frictional.
B)
Cyclical.
C)
Structural.


Structural unemployment is due to structural changes in the economy that eliminate some jobs while generating job openings for which unemployed workers are not qualified. Cyclical unemployment is when the economy is operating at less than full capacity.
作者: prashantsahni    时间: 2012-3-25 11:15

Which of the following is best described as an example of structural unemployment?
A)
Smith was laid off due to negative growth of GDP, and did not seek other employment until he was recalled to his job.
B)
Although there were jobs available, Johnson was unable to find an employer with a satisfactory opening.
C)
When the plant was modernized, Jones lost her job because she did not have the skill needed to operate the new equipment.


Structural unemployment exists when changes in the economy eliminate some jobs while generating new job openings for which unemployed workers are not qualified.
作者: prashantsahni    时间: 2012-3-25 11:15

Which one of the following is most likely to experience loss of wealth from an increase in the inflation rate?
A)
An individual investor who recently purchased a substantial amount of variable rate bonds.
B)
A commercial bank that has a large quantity of fixed-rate mortgages in its loan portfolio.
C)
An individual investor who financed the purchase of a home with a 30-year fixed rate mortgage.


If an economy experiences inflation, the losers are those who hold long-term contracts in which they are to receive fixed payments. A bank that has a large quantity of fixed-rate mortgages in its loan portfolio (i.e., they are investments for the bank) is receiving fixed-rate payments. Both remaining choices are investors who are either making fixed rate payments (the homeowner) or receiving floating-rate payments (the investor in variable rate bonds).
作者: prashantsahni    时间: 2012-3-25 11:16

Which of the following statements regarding inflation is most accurate?
A)
As a result of inflation, all borrowers gain at the expense of lenders.
B)
The purchasing power of money increases as a result of inflation.
C)
Inflation is a persistent increase in the general price level of goods and services.


Inflation is defined as a persistent increase in the price level over time. Inflation indicates that there has been a general decline in the purchasing power of a currency. Fixed-rate borrowers gain at the expense of lenders when inflation is greater than expected.
作者: prashantsahni    时间: 2012-3-25 11:16

Which of the following statements regarding inflation is most accurate?
A)
Inflation occurs when there is a steady increase in the relative prices of key commodities.
B)
Inflation is present if the prices of some goods and services are increasing.
C)
An economy experiences inflation when there is a persistent increase in the prices of almost all goods and services.


Inflation is a persistent increase in the price level over time. Inflation occurs when there is a sustained increase in the prices of almost all goods and services. Inflation indicates a decline in the purchasing power of a currency.
作者: prashantsahni    时间: 2012-3-25 11:16

Joe Lebow, an analyst, is discussing the difference between inflation and price level. Lebow states: "The higher the price level in the current year compared to the price level in the previous year, the higher is the inflation rate of a country. Any increase in the price level is evidence of positive inflation." Lebow's statement is:
A)
correct.
B)
incorrect because it inaccurately describes the calculation of an inflation rate.
C)
incorrect because not all increases in the price level indicate inflation.


Lebow is incorrect because a one-time increase in the price level is not necessarily inflation. Inflation is an on-going process, not a one-time increase in the price level.
作者: prashantsahni    时间: 2012-3-25 11:17

An economy with a consistently negative inflation rate is best described as experiencing:
A)
disinflation.
B)
deflation.
C)
hyperinflation.


Deflation is a sustained decline in the price level, which is reflected in a negative inflation rate. Disinflation refers to a decrease in the inflation rate over time but does not imply a negative inflation rate. Hyperinflation is an extremely high and accelerating inflation rate.
作者: prashantsahni    时间: 2012-3-25 11:17

The current annual inflation rate, as measured by using the Consumer Price Index (CPI), is best defined as:
A)
percentage change in the CPI from a year ago.
B)
percentage change in the CPI from its base period.
C)
increase in the CPI from a year ago.


The inflation rate is the percentage change in the price index from a year earlier.
作者: prashantsahni    时间: 2012-3-25 11:17

Which of the following statements most accurately describes the difference between headline inflation and core inflation?
A)
Headline inflation is a better measure of the underlying trend in prices.
B)
Core inflation does not include food and energy prices.
C)
Core inflation refers to producer prices.


Core inflation excludes food and energy and is thus a better measure of the underlying trend in prices.
作者: prashantsahni    时间: 2012-3-25 11:17

Consumer price indexes are least likely to:
A)
be calculated for stages of processing.
B)
reflect the typical purchasing patterns of consumers.
C)
compare current prices to prices in a base year.


Stages of processing are components of producer price indexes. Consumer price indexes compare the current prices of a typical consumption basket to prices in a base year.
作者: prashantsahni    时间: 2012-3-25 11:18

Which of the following types of price index is most likely to include a sub-index for raw materials?
A)
GDP deflator.
B)
Wholesale price index.
C)
Consumer price index.


Wholesale or producer price indexes typically include sub-indexes for finished goods, intermediate goods, and raw materials or crude goods.
作者: prashantsahni    时间: 2012-3-25 11:18

Which of the following statements about biases that affect the consumer price index (CPI) is least accurate?
A)
The basket of goods on which the CPI is based becomes a less accurate measure of household costs as new goods appear on the market.
B)
The net effect of built-in biases in the CPI is to underestimate inflation.
C)
Price increases that result from quality improvements are reflected as increases in the CPI.


The CPI is generally believed to overestimate inflation by about 1% per year. Upward biases include quality improvements (price increases due to improving quality do not represent inflation but are reflected in the CPI), new and more expensive goods replacing older and less expensive goods, and commodity substitution (consumers substitute less expensive goods for more expensive ones, rather than continuing to consume a fixed basket of goods).
作者: prashantsahni    时间: 2012-3-25 11:18

Which of the following is least likely a source of bias in CPI data?
A)
Sample selection
B)
Quality changes
C)
Substitution


The three sources of bias associated with CPI data are: new goods, quality changes, and substitution.
作者: prashantsahni    时间: 2012-3-25 11:19

A Laspeyres price index tends to:
A)
overstate the inflation rate, because its market basket is fixed.
B)
understate the inflation rate because its market basket is fixed.
C)
overstate the inflation rate because its market basket is variable.


A Laspeyres price index tends to overstate the inflation rate because it uses fixed market basket weights from a base period. This does not consider that consumers will substitute away from goods that have risen dramatically in price.
作者: prashantsahni    时间: 2012-3-25 11:19

A price index that is calculated using the current weights of the index’s basket of goods and services is known as a:
A)
chained price index.
B)
Laspeyres price index.
C)
hedonic price index.


A chained or chain-weighted price index uses updated weights for each good and service in its market basket. A price index that is not chain-weighted, such as a Laspeyres index, is calculated using weights for each good and service in the market basket as of the index’s base period. Hedonic pricing is a technique used to adjust a price index for upward bias from quality changes of goods in its market basket.
作者: kim226    时间: 2012-3-25 11:20

Which of the following factors would least likely result in demand-pull inflation? An increase in:
A)
exports.
B)
the quantity of money.
C)
energy prices.


Demand-pull inflation can result from any factor that increases aggregate demand, including increases in the money supply, increases in exports, and increases in government purchases. Increases in the prices of productive inputs would result in cost-push inflation as aggregate supply decreases.
作者: kim226    时间: 2012-3-25 11:21

Which of the following statements is most accurate? Cost-push inflation:
A)
often occurs because of an increase in short-run aggregate supply.
B)
results from excess short-run aggregate demand.
C)
typically results from a significant price increase in a production input.


Cost-push inflation typically results from a significant price increase in a production input that causes a decrease in short-run aggregate supply.
作者: kim226    时间: 2012-3-25 11:21

The inventory-to-sales ratio for manufacturing and trade is classified as a:
A)
leading indicator.
B)
lagging indicator.
C)
coincident indicator.


The inventory-to-sales ratio for manufacturing and trade is considered a lagging indicator because it peaks after the economy does, even though it is sometimes used in forecasting economic activity.
作者: kim226    时间: 2012-3-25 11:21

Average weekly initial claims for unemployment insurance are classified as a:
A)
lagging indicator.
B)
coincident indicator.
C)
leading indicator.


Initial claims for unemployment insurance are considered a leading indicator.
作者: kim226    时间: 2012-3-25 11:22

Manufacturing and trade sales are best described as a:
A)
lagging indicator.
B)
leading indicator.
C)
coincident indicator.


Manufacturing and trade sales are a coincident indicator that generally reflects the current phase of the business cycle.
作者: kim226    时间: 2012-3-25 11:22

Which of the following economic indicators is classified as a leading indicator for the United States economy?
A)
Industrial production.
B)
Index of consumer expectations.
C)
Average duration of unemployment.


Consumer expectations are a leading indicator. Industrial production is a coincident indicator. Average duration of unemployment is a lagging indicator.
作者: kim226    时间: 2012-3-25 11:22

At a recent board meeting of Pembroke Financial Inc., members of the board were discussing recent fiscal and monetary policy changes in the U.S. It became a heated discussion when each member expressed their opinions on what will be happening to long-run aggregate supply (LAS), aggregate demand, and the overall economy as a result of policy shifts. Joe Frankel and Martin Bentz, two vocal members of the board, made the following statements during the meeting:
Frankel: LAS can be thought of as the potential GDP of the economy. Potential GDP is positively related to the quantity of labor in the economy and the technology level of the economy, but is inversely related to the quantity of capital in the economy. So, potential GDP will rise if the quantity of labor increases, the level of technology increases, or the quantity of capital decreases.
Bentz: The level of real output on the LAS curve is the economy’s level of production when it is operating at zero unemployment. A zero unemployment rate is referred to as full employment.
With respect to these statements:
A)
only Bentz is incorrect.
B)
only Frankel is incorrect.
C)
both are incorrect.


LAS can be thought of as the potential real output of the economy. The potential real output of an economy is positively related to: the quantity of labor in the economy; the quantity of capital (productive resources) in the economy, and the technology that the economy possesses.
The level of real output (real GDP) on the LAS curve is the economy’s level of production when the economy is operating at full employment. However, full employment does not mean zero unemployment. There will always be some unemployment. Therefore, there is a natural rate of unemployment corresponding to the level of real GDP along the LAS curve, and that level is referred to as full employment GDP.
作者: kim226    时间: 2012-3-25 11:23

The most recent economic indicators show rising stock prices, an increase in average weekly hours in manufacturing, and lengthening periods of unemployment. Which phase of the business cycle is most consistent with these changes?
A)
Expansion.
B)
Peak.
C)
Contraction.


Increases in stock prices and average hours predict expansion. The fact that unemployment is still lengthening suggests the economy has been in recession since unemployment is a lagging indicator, but does not preclude the beginnings of an expansion.
作者: kim226    时间: 2012-3-25 11:23

The spread between the yield on 10-year government bonds and the overnight bank lending rate has decreased from 300 basis points to 200 basis points. As an economic indicator, this most likely suggests that the business cycle:
A)
has passed a trough.
B)
has entered a contraction.
C)
is approaching a peak.


The slope of the yield curve, as measured by the spread between long-term and short-term interest rates, is considered a leading indicator of the business cycle. A decline in the yield spread is consistent with expectations that an expansion is near its peak.
作者: kim226    时间: 2012-3-25 11:23

An analyst obtains the following monthly economic data (at annual rates, except stock prices and duration of unemployment):
MarchFebruaryJanuary
Stock prices+4%+8%−6%
Average duration of employment45 weeks42 weeks40 weeks
M2 money supply+7%+8%+3%
Industrial production+1%−3%−6%
Commercial & industrial loans−8%−4%−6%

These indicators are most consistent with economic activity that is currently:
A)
at a peak.
B)
in a contraction.
C)
at a trough.


The stock market and M2 are both leading indicators, suggesting that a recovery is coming. Duration of unemployment and C&I loans are both lagging indicators, suggesting that a recession has occurred. Industrial production is a coincident indicator and the fact that it has stopped declining suggests that the economy has reached a trough and is beginning the recovery.
作者: kim226    时间: 2012-3-25 11:23

An economic forecaster points to declining stock prices, money supply, and building permits, along with improving vendor performance and a narrowing of the spread between 10-year Treasuries and the federal funds rate in order to justify her economic viewpoint. She is most likely:
A)
stating that the economy is currently at a trough.
B)
predicting a recession.
C)
expecting an economic recovery.


All the indicators she cites are leading indicators that show deteriorating economic conditions, consistent with a forecast of recession.
作者: kim226    时间: 2012-3-25 11:24

Lily Olsen, CFA, obtains the following monthly economic data for the United States (at annual rates, except duration of unemployment):
AprilMayJune
M2 money supply+4%+8%−6%
Average duration of unemployment35 weeks32 weeks30 weeks
Payroll employment+7%+4%0%
Manufacturers' new orders – capital goods+4%−2%−7%
Industrial production+6%+3%+1%
Average weekly hours+1%−3%−5%
Manufacturers' new orders – consumer+3%+1%−1%

These indicators are most consistent with economic activity that is currently:
A)
at a peak.
B)
at a trough.
C)
in recession.


Manufacturers’ orders and M2 are leading indicators, suggesting that a recession is coming. Duration of unemployment is a lagging indicator, suggesting that an expansion has occurred. Payroll employment, industrial production, and weekly hours are coincident indicators. The fact that employment growth and industrial production have slowed dramatically and weekly hours are already falling suggests that the economy has reached a peak and is beginning to contract. It would be premature to suggest that it is in recession, however, when production and employment growth are still positive.
作者: terpsichorefan    时间: 2013-3-9 20:56

thanks for sharing. the part of identifying the business cycle phase is very useful.
作者: mirabelle9042    时间: 2014-7-16 12:15

thanks , i think it's hard for me to tell current business cycle phase based on those data of different indicators.



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