Question 1

There are no costs to inflation if it is fully anticipated.

Accepted Answer

A) True 
 B)False

Question 2

In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?

Accepted Answer

A)  new product bias 
B)  increase in quality bias 
C)  substitution bias 
D)  outlet bias 
A)  new product bias 
B)  increase in quality bias 
C)  substitution bias 
D)  outlet bias

Question 3

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment.

Question 4

An increase in unemployment insurance payments would, in effect, ________ the amount of time spent searching for a job, which would increase ________ unemployment.

Accepted Answer

A)  increase; cyclical 
B)  increase; frictional 
C)  decrease; cyclical 
D)  decrease; frictional 
A)  increase; cyclical 
B)  increase; frictional 
C)  decrease; cyclical 
D)  decrease; frictional

Question 5

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?

Accepted Answer

A)  A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. 
B)  A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation. 
C)  Firms have to hire an extra worker to change prices in its store because of inflation. 
D)  A bank collects a lower amount of interest from a loan because inflation was under-predicted. 
A)  A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. 
B)  A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation. 
C)  Firms have to hire an extra worker to change prices in its store because of inflation. 
D)  A bank collects a lower amount of interest from a loan because inflation was under-predicted.

Question 6

The United States has ________ social insurance programs, and generally has a ________ unemployment rate, as compared to Canada and Western Europe.

Accepted Answer

A)  less generous; lower 
B)  less generous; greater 
C)  more generous; lower 
D)  more generous; greater 
A)  less generous; lower 
B)  less generous; greater 
C)  more generous; lower 
D)  more generous; greater

Question 7

The real interest rate equals the nominal interest rate ________ the inflation rate.

Accepted Answer

A)  times 
B)  divided by 
C)  plus 
D)  minus 
A)  times 
B)  divided by 
C)  plus 
D)  minus

Question 8

Housing is the largest component of the U.S. CPI market basket.

Accepted Answer

A) True 
 B)False

Question 9

If inflation expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.

Accepted Answer

A) True 
 B)False

Question 10

List three different price indices and explain how they differ in terms of the market basket on which they are based.

Accepted Answer

Three examples of price indices are the

Question 11

Fill in the missing values in the table of data collected in the household survey for December, 1996. The working-age population, employment, unemployment, and labor force are measured in thousands. Show your work.

Accepted Answer

@#IMG-DLM& Unemployment rate = @#IMG-DLM& × 100.
Unemployed

Question 12

A central concept in macroeconomics is the idea of the natural rate of unemployment. Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment, instead of when the unemployment rate equals zero? Elaborate and explain carefully.

Accepted Answer

With a growing, dynamic economy where bu

Question 13

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

Accepted Answer

A)  4%. 
B)  5.2%. 
C)  60%. 
D)  76%. 
E)  80%. 
A)  4%. 
B)  5.2%. 
C)  60%. 
D)  76%. 
E)  80%.

Question 14

The natural rate of unemployment is the amount of unemployment

Accepted Answer

A)  associated with the business cycle. 
B)  equal to frictional plus structural unemployment. 
C)  that exists when the economy goes into recession. 
D)  that exists when the economy is in an expansion. 
A)  associated with the business cycle. 
B)  equal to frictional plus structural unemployment. 
C)  that exists when the economy goes into recession. 
D)  that exists when the economy is in an expansion.

Question 15

Efficiency wage is another name for the minimum wage.

Accepted Answer

A) True 
 B)False

Question 16

If inflation is positive and is perfectly anticipated

Accepted Answer

A)  those that borrow money lose. 
B)  those that lend money lose. 
C)  those that hold paper money lose. 
D)  no one in the economy loses. 
A)  those that borrow money lose. 
B)  those that lend money lose. 
C)  those that hold paper money lose. 
D)  no one in the economy loses.

Question 17

The advice to "retrain" would be most appropriate for which of the following types of unemployment?

Accepted Answer

A)  frictional unemployment 
B)  structural unemployment 
C)  cyclical unemployment 
D)  core unemployment 
A)  frictional unemployment 
B)  structural unemployment 
C)  cyclical unemployment 
D)  core unemployment

Question 18

What does the PPI measure?

Accepted Answer

A)  the average change in the prices paid for all goods produced in the economy over a given year 
B)  the average of the prices received by producers of goods and services at all stages of the production process 
C)  the level of production of goods and services generated in the economy in a given year 
D)  the difference between the prices consumers pay for goods and services and the prices producers pay for goods and services 
A)  the average change in the prices paid for all goods produced in the economy over a given year 
B)  the average of the prices received by producers of goods and services at all stages of the production process 
C)  the level of production of goods and services generated in the economy in a given year 
D)  the difference between the prices consumers pay for goods and services and the prices producers pay for goods and services

Question 19

Which of the following is not a cost imposed by inflation?

Accepted Answer

A)  Inflation reduces the affordability of goods and services to the average consumer. 
B)  The money that consumers and firms hold loses its purchasing power. 
C)  Firms must pay for changing prices on products and printing new catalogs. 
D)  Banks can lose if they under predict inflation and charge an interest rate that does not completely compensate for inflation. 
A)  Inflation reduces the affordability of goods and services to the average consumer. 
B)  The money that consumers and firms hold loses its purchasing power. 
C)  Firms must pay for changing prices on products and printing new catalogs. 
D)  Banks can lose if they under predict inflation and charge an interest rate that does not completely compensate for inflation.

Question 20

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are

Accepted Answer

A)  frictionally unemployed. 
B)  structurally unemployed. 
C)  cyclically unemployed. 
D)  seasonally unemployed. 
A)  frictionally unemployed. 
B)  structurally unemployed. 
C)  cyclically unemployed. 
D)  seasonally unemployed.

Exam 20: Unemployment and Inflation

There are no costs to inflation if it is fully anticipated.

In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

An increase in unemployment insurance payments would, in effect, ________ the amount of time spent searching for a job, which would increase ________ unemployment.

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?

The United States has ________ social insurance programs, and generally has a ________ unemployment rate, as compared to Canada and Western Europe.

The real interest rate equals the nominal interest rate ________ the inflation rate.

Housing is the largest component of the U.S. CPI market basket.

If inflation expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.

List three different price indices and explain how they differ in terms of the market basket on which they are based.

Fill in the missing values in the table of data collected in the household survey for December, 1996. The working-age population, employment, unemployment, and labor force are measured in thousands. Show your work.

A central concept in macroeconomics is the idea of the natural rate of unemployment. Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment, instead of when the unemployment rate equals zero? Elaborate and explain carefully.

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

The natural rate of unemployment is the amount of unemployment

Efficiency wage is another name for the minimum wage.

If inflation is positive and is perfectly anticipated

The advice to "retrain" would be most appropriate for which of the following types of unemployment?

What does the PPI measure?

Which of the following is not a cost imposed by inflation?

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

An increase in unemployment insurance payments would, in effect, the amount of time spent searching for a job, which would increase unemployment.

The United States has social insurance programs, and generally has a unemployment rate, as compared to Canada and Western Europe.