1			When an economy is growing at a rate significantly lower than normal, it is said to be in a:
			A)	Recession
			B)	Depression
			C)	Peak
			D)	Trough
2			Which of the following statements is/are true about business cycles? Recessions and expansions have a regular pattern in terms of length and severity Contractions and expansions affect the entire economy Recessions and expansions have a local, not a global effect Contractions and expansions are irregular in length and severity
			A)	Statement I and II
			B)	Statements II and IV
			C)	Statements II, III, and IV
			D)	Statements III and IV
3			Which of the following types of unemployment is known to rise sharply during recessions?
			A)	Frictional unemployment
			B)	Structural unemployment
			C)	Cyclical unemployment
			D)	Natural rate of unemployment
4			The maximum sustainable amount of real GDP that an economy can produce is known as:
			A)	Potential output
			B)	Actual output
			C)	Output gap
			D)	Expansionary output
5			<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007712961x/946389/20_5.JPG','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a> Based on the graph above, Egypt experienced a recession during which of the following periods?
			A)	1968 to 1969
			B)	1972 to 1975
			C)	1994 to 1995
			D)	None of the above

Use the following information about a hypothetical economy to answer questions 6 and 7:

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6			Based on the table above, the natural rate of unemployment is:
			A)	430
			B)	725
			C)	975
			D)	1,405
7			Based on the table above, the economy has a:
			A)	Recessionary gap
			B)	Expansionary gap
			C)	Output gap
			D)	None of the above
8			According to Okun's law, if an economy starts with a 1% cyclical unemployment and a 1.5% recessionary gap, then an increase in cyclical unemployment to 3% results in the recessionary gap:
			A)	Increasing by 2% to 3.5%
			B)	Decreasing by 2% to -0.5%
			C)	Decreasing by 4% to -2.5%
			D)	Increasing by 4% to 5.5%
9			The primary cause of output gaps is:
			A)	Markets require time to reach equilibrium
			B)	Changes in total spending at preset prices
			C)	Changes in potential output
			D)	None of the above
10			For an economy to adjust for an output gap in the long run, and if spending is more than the potential output, the firm will:
			A)	Decrease prices
			B)	Increase prices
			C)	Keep prices unchanged
			D)	None of the above