1. Which type of unemployment is most likely to fall as a result of government policies that stimulate aggregate demand?

a. frictional unemployment

b. structural unemployment

c. natural unemployment

d. cyclical unemployment

2. The Humphrey-Hawkins Act set a 1983 annual inflation rate target of 3 percent.

True or False

3. Most of the unemployment experienced during the Great Depression was

a. cyclical

b. structural

c. seasonal

d. unctiona

4. The natural rate of unemployment never changes

True or False

5. Out-of-control inflation that creates severe economic distortions is known as

a. stagflation

b. disinflation

c. hyperinflation

d. deflation

6. Changing the discount rate is a tool of fiscal policy.

True False

7. Compared to its position during the late 1970s, the Phillips curve for the U.S. economy in the 1980s appeared to

a. shift to the left

b. shift to the right

c. shift upward

d. remain unchanged

8. Government demand-management policies included

a. monetary policies only

b. fiscal policies only

c. both monetary and fiscal policies

d. neither monetary nor fiscal policies

9. An advantage of transfer payments over public works as a means of reducing unemployment is that transfer payments

a. provide more direct aid to those suffering most from unemployment

b. are unlikely to decrease unintended excess inventories of consumer goods

c. generate more secondary and tertiary employment

d. tend to have a larger multiplier effect

10. Fiscal policy is likely to be more effective than monetary policy when used to increase aggregate demand during periods of serious unemployment.

True or False