1.

A period in which the economy is growing at a rate significantly below normal is called a(n):
A. expansion.
B. boom.
C. peak.
D. recession.

2. The natural rate of unemployment is the unemployment rate when there is only:
A. structural unemployment.
B. frictional unemployment.
C. cyclical unemployment.
D. structural and frictional unemployment.

3. Economic activity moves from a period of expansion to a _______ and then moves into a period of
_______until it reaches a _____ .
A. peak; expansion; trough
B. peak, recession; trough
C. trough; expansion; peak
D. trough; recession; peak

4. Workers in durable-goods industries are ____ workers in service industries to lose their jobs during
a recession.
A. much less likely than
B. more likely than
C. less likely than
D. equally likely as

5. The maximum sustainable amount of output produced by an economy is called:

A. a recessionary gap.
B. an expansion.
C. an output gap.
D. potential output.

6. If potential output equals $8 billion and actual output equals $7 billion, then this economy has a(n):
A. budget deficit.
B. trade deficit.
C. expansionary gap.
D. recessionary gap.

7. In an expansion, the cyclical rate of unemployment:

A. is positive.
B. is zero.
C. is negative.
D. equals the natural rate of unemployment.

8. According to Okun's Law, when the output gap is positive, cyclical unemployment:
A. equals structural unemployment.
B. equals frictional unemployment.
C. equals zero.
D. is positive.