Question 1

Efficiency wages cause unemployment because

Accepted Answer

A)  firms pay wages that are below the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
B)  firms pay wages that are below the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. 
C)  firms pay wages that are above the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
D)  firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. 
A)  firms pay wages that are below the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
B)  firms pay wages that are below the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. 
C)  firms pay wages that are above the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
D)  firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.

Question 2

If the number of unemployed workers is 200 million, and the number in the labor force is 500 million, what is the unemployment rate?

Accepted Answer

A)  0.4% 
B)  4% 
C)  14% 
D)  40% 
A)  0.4% 
B)  4% 
C)  14% 
D)  40%

Question 3

Which of the following would be the best measure of the cost of living?

Accepted Answer

A)  real GDP 
B)  real GDP per person 
C)  GDP deflator 
D)  consumer price index 
A)  real GDP 
B)  real GDP per person 
C)  GDP deflator 
D)  consumer price index

Question 4

Which of the following would decrease the unemployment rate?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in the efficiency wage 
C)  an increase in labor union membership 
D)  government aid to retrain unemployed workers 
A)  an increase in the minimum wage 
B)  an increase in the efficiency wage 
C)  an increase in labor union membership 
D)  government aid to retrain unemployed workers

Question 5

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?

Accepted Answer

A)  -9.5% 
B)  -3.5% 
C)  1.5% 
D)  3.5% 
E)  9.5% 
A)  -9.5% 
B)  -3.5% 
C)  1.5% 
D)  3.5% 
E)  9.5%

Question 6

Table 20-1
   Consider the data above for a simple economy.
-Refer to Table 20-1. The unemployment rate for this simple economy equals

Accepted Answer

A)  (100/1,000) × 100. 
B)  (100/1,100) × 100. 
C)  (100/15,000) × 100. 
D)  (100/20,000) × 100. 
A)  (100/1,000) × 100. 
B)  (100/1,100) × 100. 
C)  (100/15,000) × 100. 
D)  (100/20,000) × 100.

Question 7

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

Accepted Answer

A)  inflation 
B)  discouraged workers 
C)  people employed in the underground economy 
D)  unemployed persons falsely report themselves to be actively looking for a job 
A)  inflation 
B)  discouraged workers 
C)  people employed in the underground economy 
D)  unemployed persons falsely report themselves to be actively looking for a job

Question 8

Table 20-10
  
-Refer to Table 20-10. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2013 is the base year, then what is the CPI for 2018?

Accepted Answer

A)  14.3 
B)  87.5 
C)  114.3 
D)  160 
A)  14.3 
B)  87.5 
C)  114.3 
D)  160

Question 9

According to the text, economists consider full employment to occur when

Accepted Answer

A)  everyone who wants a job has a job. 
B)  frictional unemployment equals zero. 
C)  the sum of frictional unemployment and structural unemployment equals zero. 
D)  the unemployment rate consists of only frictional and structural unemployment. 
A)  everyone who wants a job has a job. 
B)  frictional unemployment equals zero. 
C)  the sum of frictional unemployment and structural unemployment equals zero. 
D)  the unemployment rate consists of only frictional and structural unemployment.

Question 10

The unemployment rate is higher with a minimum wage law than it would be without a minimum wage law.

Accepted Answer

A) True 
 B)False

Question 11

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Accepted Answer

A) True 
 B)False

Question 12

The cost to firms of changing prices

Accepted Answer

A)  is small even when there is rapid inflation. 
B)  is called a menu cost. 
C)  does not exist if inflation is perfectly anticipated. 
D)  all of the above 
A)  is small even when there is rapid inflation. 
B)  is called a menu cost. 
C)  does not exist if inflation is perfectly anticipated. 
D)  all of the above

Question 13

Upon your graduation from college, you find that the economy is in recession and the unemployment rate is relatively high. Nonetheless, most Americans in this situation would continue along their career paths looking for a new job because

Accepted Answer

A)  the cost of additional education is always higher during recession. 
B)  high unemployment rates do not usually last for very long. 
C)  looking for work is their only option. 
D)  the wages of college graduates do not fall during recession. 
A)  the cost of additional education is always higher during recession. 
B)  high unemployment rates do not usually last for very long. 
C)  looking for work is their only option. 
D)  the wages of college graduates do not fall during recession.

Question 14

Cyclical unemployment is the result of

Accepted Answer

A)  a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B)  the search process of matching workers with jobs. 
C)  the ups and downs in inflation. 
D)  a slowdown in the economy. 
A)  a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B)  the search process of matching workers with jobs. 
C)  the ups and downs in inflation. 
D)  a slowdown in the economy.

Question 15

Discouraged workers are classified by the BLS as

Accepted Answer

A)  part of the labor force. 
B)  not in the labor force. 
C)  unemployed. 
D)  employed. 
E)  part-time employees. 
A)  part of the labor force. 
B)  not in the labor force. 
C)  unemployed. 
D)  employed. 
E)  part-time employees.

Question 16

Nominal income is equal to real income if the CPI is less than 100.

Accepted Answer

A) True 
 B)False

Question 17

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

Accepted Answer

A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal. 
A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal.

Question 18

The inflation rate measures the percentage increase in the price level from one year to the next.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following policies would reduce frictional unemployment?

Accepted Answer

A)  a decrease in the minimum wage 
B)  a job retraining program 
C)  implementing an unemployment insurance policy 
D)  building an online job database that helps workers find jobs 
A)  a decrease in the minimum wage 
B)  a job retraining program 
C)  implementing an unemployment insurance policy 
D)  building an online job database that helps workers find jobs

Question 20

Which of the following would be a consequence of substitution bias in the CPI?

Accepted Answer

A)  Social Security payments would not adequately compensate retired workers for inflation. 
B)  Businesses would overcompensate employees for inflation when giving cost of living raises. 
C)  The inflation rate based on the CPI would underestimate the true level of inflation. 
D)  Judges would award child support payments that would not adequately keep up with the true cost of inflation. 
A)  Social Security payments would not adequately compensate retired workers for inflation. 
B)  Businesses would overcompensate employees for inflation when giving cost of living raises. 
C)  The inflation rate based on the CPI would underestimate the true level of inflation. 
D)  Judges would award child support payments that would not adequately keep up with the true cost of inflation.

Exam 20: Unemployment and Inflation

Efficiency wages cause unemployment because

If the number of unemployed workers is 200 million, and the number in the labor force is 500 million, what is the unemployment rate?

Which of the following would be the best measure of the cost of living?

Which of the following would decrease the unemployment rate?

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?

Table 20-1 Consider the data above for a simple economy. -Refer to Table 20-1. The unemployment rate for this simple economy equals

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

Table 20-10 -Refer to Table 20-10. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2013 is the base year, then what is the CPI for 2018?

According to the text, economists consider full employment to occur when

The unemployment rate is higher with a minimum wage law than it would be without a minimum wage law.

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

The cost to firms of changing prices

Upon your graduation from college, you find that the economy is in recession and the unemployment rate is relatively high. Nonetheless, most Americans in this situation would continue along their career paths looking for a new job because

Cyclical unemployment is the result of

Discouraged workers are classified by the BLS as

Nominal income is equal to real income if the CPI is less than 100.

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

The inflation rate measures the percentage increase in the price level from one year to the next.

Which of the following policies would reduce frictional unemployment?

Which of the following would be a consequence of substitution bias in the CPI?

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

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